INTRODUCTION

Life insurance is a form of insurance that pays monetary proceeds upon the death
of the insured covered in the policy. Essentially, a life insurance policy is a contract
between the named insured and the insurance company wherein the insurance
company agrees to pay an agreed upon sum of money to the insured's named
beneficiary so long as the insured's premiums are current.

With a large population and the untapped market area of this population insurance
happens to be a very big opportunity in India. Today it stands as a business
growing at the rate of 15-20% annually. Together with banking services, it adds
about 7 percent to the country’s GDP. In spite of all this growth statistics of the
penetration of the insurance in the country is very poor. Nearly 80% of Indian
populations are without life insurance cover and the health insurance. This is an
indicator that growth potential for the insurance sector is immense in India.

It was due to this immense growth that the regulations were introduced in the
insurance sector and in continuation “ Malhotra Committee” was constituted by the
government in 1993 to examine the various aspects of the industry. The key
element of the reform process was participation of overseas insurance companies
with 26% capital. Creating a more competitive financial system suitable for the
requirements of the economy was the main idea behind this reform.

Since then the insurance industry has gone through many changes. The
liberalization of the industry the insurance industry has never looked back and
today stand as one of the most competitive and exploring industry in India. The
entry of the private players and the increased use of the new distribution are in the
limelight today. The use of new distribution techniques and the IT tools has
increased the scope of the industry in the longer run.

Insurance is the business of providing protection against financial aspects of risk,

such as those to property, life health and legal liability. It is one method of a greater
concept known as risk management –which is the need to mange
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uncertainty on account of exposure to loss, injury, disadvantage or destruction.

Insurance is the method of spreading and transfer of risk. The fortunate many who
are exposed to some or similar risk shares loss of the unfortunate. Insurance does
not protect the assets but only compensates the economic or financial loss.

In insurance the insured makes payment called “premiums” to an insurer, and in

return is able to claim a payment from the insurer if the insured suffers a defined
type of loss. This relationship is usually drawn up in a formal legal contract.

Insurance companies also earn investment profits, because they have the use of the
premium money from the time they receive it until the time they need it to pay
claims. This money is called the float. When the investments of float are successful
they may earn large profits, even if the insurance company pays out in claims every
penny received as premiums. In fact, most insurance companies pay out more
money than they receive in premiums. The excess amount that they pay to
policyholders is the cost of float. An insurance company will profit if they invest
the money at a greater return than their cost of float.

An insurance contract or policy will set out in detail the exact circumstances under
which a benefit payment will be made and the amount of the premiums.

Classification of insurance

The insurance industry in India can broadly classified in two parts. They are.

1) Life insurance.

2) Non-life (general) insurance.

1) Life insurance:

Life insurance can be defined as “life insurance provides a sum of money if the
person who is insured dies while the policy is in effect”.

In 1818 British introduced to India, with the establishment of the oriental life
insurance company in Calcutta. The first Indian owned Life Insurance Company;
the Bombay mutual life assurance society was set up in 1870.the life insurance act,
1912 was the first statuary measure to regulate the life insurance business in India.

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In 1983, the earlier legislation was consolidated and amended by the insurance act,
1938, with comprehensive provisions for detailed effective control over insurance.
The union government had opened the insurance sector for private participation in
1999, also allowing the private companies to have foreign equity up to 26%.
Following the opening up of the insurance sector, 12 private sector companies have
entered the life insurance business.

Benefits of life insurance

Life insurance encourages saving and forces thrift.

It is superior to a traditional savings vehicle.

It helps to achieve the purpose of life assured.

It can be enchased and facilitates quick borrowing.

It provides valuable tax relief.

Thus insurance is found to be very useful in the lives of the person both in short
term and long term.

Fundamental principles of life insurance contract;

1) Principle of almost good faith:

“A positive duty to voluntary disclose, accurately and fully, all facts, material to
the risk being proposed whether requested or not”.

2) Principle of insurable interest:

“Relationships with the subject matter (a person) which is recognized in law and
gives legal right to insure that person”.

2) Non-life (general) Insurance:

Triton insurance co. ltd was the first general insurance company to be established
in India in 1850, whose shares were mainly held by the British. The first general
insurance company to be set up by an Indian was Indian mercantile insurance co.
Ltd., which was stabilized in 1907 . there emerged many a player on the Indian
scene thereafter.The general insurance business was nationalized after the
promulgation of General Insurance Corporation (GIC) OF India undertook the
post-nationalization general insurance business.
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 THE HISTORY OF INDIAN INSURANCE INDUSTRY

Life Insurance

In 1818 the British established the first insurance company in India in Calcutta, the
Oriental Life Insurance Company. First attempts at regulation of the industry were
made with the introduction of the Indian Life Assurance Companies Act in 1912. A
number of amendments to this Act were made until the Insurance Act was drawn
up in 1938. Noteworthy features in the Act were the power given to the
Government to collect statistical information about the insured and the high level
of protection the Act gave to the public through regulation and control. When the
Act was changed in 1950, this meant far reaching changes in the industry. The
extra requirements included a statutory requirement of a certain level of equity
capital, a ceiling on share holdings in such companies to prevent dominant control
(to protect the public from any adversarial policies from one single party), stricter
control on investments and, generally, much tighter control. In 1956, the market
contained 154 Indian and 16 foreign life insurance companies. Business was
heavily concentrated in urban areas and targeted the higher echelons of society.
“Unethical practices adopted by some of the players against the interests of the
consumers” then led the Indian government to nationalize the industry. In
September 1956, nationalization was completed, merging all these companies into
the so-called Life Insurance Corporation (LIC). It was felt that “nationalization has
lent the industry fairness, solidity, growth and reach.”

Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with
the objective of protecting the interests of the insuring public.

1956: The market contained 154 Indian and 16 foreign life insurance companies.

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 MAJOR PLAYERS IN THE LIFE INSURANCE INDUSTRY IN INDIA

• Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India (LIC) was established on 1 September 1956 to

spread the message of life insurance in the country and mobilise people’s savings
for nation-building activities. LIC with its central office in Mumbai and seven
zonal offices at Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur and
Bhopal, operates through 100 divisional offices in important cities and 2,048
branch offices. LIC has 5.59 lakh active agents spread over the country.

The Corporation also transacts business abroad and has offices in Fiji, Mauritius
and United Kingdom. LIC is associated with joint ventures abroad in the field of
insurance, namely, Ken-India Assurance Company Limited, Nairobi; United
Oriental Assurance Company Limited, Kuala Lumpur; and Life Insurance
Corporation (International), E.C. Bahrain. It has also entered into an agreement
with the Sun Life (UK) for marketing unit linked life insurance and pension
policies in U.K.

In 1995-96, LIC had a total income from premium and investments of $ 5 Billion
while GIC recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC's
income grew at a healthy average of 10 per cent as against the industry's 6.7 per
cent growth in the rest of Asia (3.4 per cent in Europe, 1.4 per cent in the US).

LIC has even provided insurance cover to five million people living below the
poverty line, with 50 per cent subsidy in the premium rates. LIC's claims settlement
ratio at 95 per cent and GIC's at 74 per cent are higher than that of global average
of 40 per cent. Compounded annual growth rate for Life insurance business has
been 19.22 per cent per annum

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IN ADDITION TO ABOVE STATE INSURERS THE FOLLOWING HAVE
BEEN PERMITTED TO ENTER INTO INSURANCE BUSINESS: -

The introduction of private players in the industry has added to the colors in the
dull industry. The initiatives taken by the private players are very competitive and
have given immense competition to the on time monopoly of the market LIC. Since
the advent of the private players in the market the industry has seen new and
innovative steps taken by the players in this sector. The new players have improved
the service quality of the insurance. As a result LIC down the years have seen the
declining phase in its career. The market share was distributed among the private
players. Though LIC still holds the 75% of the insurance sector but the upcoming
natures of these private players are enough to give more competition to LIC in the
near future. LIC market share has decreased from 95% (2002-03) to 70 %( 2007-
08)

Insurance Companies in India (April 2008)

Bajaj Allianz AMP Sanmar Life Birla Sun Life
Life Insurance Insurance Insurance
Aviva Life HDFC Life ICICI
Insurance Insurance Prudential Life
Insurance
Max Newyork Metlife India Reliance Life
Life Insurance Insurance Insurance
Shiram Life Tata AIG Life SBI Life
Insurance Insurance Insurance
Bharti AXA ING Vysya Life Sahara Life
Life Insurance Insurance Insurance
Kotak General Insurance Royal
Mahindra Corporation India Sundaram
Insurance Insurance

1. HDFC Standard Life Insurance Company Ltd.

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HDFC Standard Life Insurance Company Ltd. is one of India’s leading private life
insurance companies, which offers a range of individual and group insurance
solutions. It is a joint venture between Housing Development Finance Corporation
Limited (HDFC Ltd.), India’s leading housing finance institution and The Standard
Life Assurance Company, a leading provider of financial services from the United
Kingdom. Their cumulative premium income, including the first year premiums
and renewal premiums is Rs. 672.3 for the financial year, Apr-Nov 2005. They
have managed to cover over 11,00,000 individuals out of which over 3,40,000 lives
have been covered through our group business tie-ups.

2. Max New York Life Insurance Co. Ltd.

Max New York Life Insurance Company Limited is a joint venture that brings
together two large forces - Max India Limited, a multi-business corporate, together
with New York Life International, a global expert in life insurance. With their
various Products and Riders, there are more than 400 product combinations to
choose from. They have a national presence with a network of 57 offices in 37
cities across India.

3. ICICI Prudential Life Insurance Company 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
amongst the first private sector insurance companies to begin operations in
December 2000 after receiving approval from Insurance Regulatory Development
Authority (IRDA). The company has a network of about 56,000 advisors; as well
as 7 bancassurance and 150 corporate agent tie-ups.

4. Om Kotak Mahindra Life Insurance Co. Ltd.

Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between Kotak
Mahindra Bank Ltd. (KMBL), and Old Mutual plc.

5.Birla Sun Life Insurance Company Ltd.

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Birla Sun Life Insurance Company is a joint venture between Aditya Birla Group
and Sun Life financial Services of Canada.

6.SBI Life Insurance

SBI Life Insurance is a joint venture between the State Bank of India and BNP
Paribas Assurance. SBI Life Insurance is registered with an authorized capital of
Rs 2000 crores and a Paid-up capital of Rs 1000 Crores. SBI owns 74% of the total
capital and BNP Paribas Assurance the remaining 26%.

State Bank of India enjoys the largest banking franchise in India. Along with its 7
Associate Banks, SBI Group has the unrivalled strength of over 14,500 branches
across the country, arguably the largest in the world. BNP Paribas Assurance is the
insurance arm of BNP Paribas - Euro Zone’s leading Bank. BNP Paribas, part of
the world's top 10 group of banks by market value and part of Europe top 3
banking companies, is one of the oldest foreign banks with a presence in India
dating back to 1860. BNP Paribas Assurance is the forth largest life insurance
company in France, and a worldwide leader in Creditor insurance products offering
protection to over 50 million clients. BNP Paribas Assurance operates in 42
countries mainly through the bancassurance and partnership model.

SBI Life has a unique multi-distribution model encompassing Bancassurance,

Agency and Group Corporates.

SBI Life extensively leverages the SBI Group as a platform for cross-selling
insurance products along with its numerous banking product packages such as
housing loans and personal loans. SBI’s access to over 100 million accounts across
the country provides a vibrant base for insurance penetration across every region
and economic strata in the country ensuring true financial inclusion.

7. Allianz Bajaj Life Insurance Company Ltd.

Bajaj Allianz Life Insurance Company Limited is a Union between Allianz SE, one
of the world’s largest Life Insurance companies and Bajaj Auto, one of the biggest
2- &- 3 wheeler manufacturers in the world.

Allianz SE is a leading insurance conglomerate globally and one of the largest asset
managers in the world, managing assets worth over a Trillion Euros (Over R.

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 55,00,000 crores). Allianz SE has over 115 years of financial experience in over 70
countries.

Bajaj Auto is one of the most trusted name is Indian auto for over 55 years. At
Bajaj Allianz customer delight is our guiding principle. Ensuring world-class
solutions by offering customized products with transparent benefits, supported by
best technology is our business philosophy.

DATA ABOUT TOTAL REVENUE COLLECTIONS IN 2007-08

Accelerated Growth
No. of policies sold in New Business in
Fiscal Year
FY FY(Rs. in cr.)
2001-2002(6
21,376 7
mths)
2002-2003 1,15,965 69
2003-2004 1,86,443 180
2004-2005 2,88,189 857
2005-2006 7,81,685 2717
2006-2007 20,79,217 4270

OTHER PLAYERS:

➢ Tata AIG Life Insurance Company Ltd

➢ ING Vysya Life Insurance Company Private Limited

➢ Metlife India Insurance Company Pvt. Ltd.

➢ AMP SANMAR Assurance Company Ltd.

AVIVA LIFE INSURANCE OVERVIEW

Aviva plc is the world's fifth-largest insurance group, the largest insurance group in
the UK and the second-largest insurance group in Canada operating as Aviva
Canada . It is one of the leading providers of life and pension products in Europe

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and has a presence in 28 countries worldwide, notably France and The
Netherlands .

Aviva plc is listed on the London Stock Exchange and is a constituent of the FTSE
100 Index .

History

The Company was formerly called CGNU, and was created by a merger of
Norwich Union and CGU ] (itself created by the 1998 merger of Commercial
Union and General Accident) in 2000. The Aviva name was adopted in July 2002.

In July 2006, Aviva greatly increased its presence in the United States by acquiring
AmerUs Group, a financial services company founded in 1896.

CEO Richard Harvey retired on 11 July 2007 His successor was Andrew Moss, the
former group finance director.

The Company continued to use the Norwich Union name as a trading name until 1
June 2009 when it become formally known as Aviva within the United Kingdom .
The launch was supported by a £9 million advertising campaign to promote the
rebranding (one of the most expensive ever in the UK insurance field), with the
participation of celebrities including Bruce Willis and Alice Cooper

National Australia Bank is to pay 825m Australian dollars ($660m:£401m) for UK

insurer Aviva's Australian wealth management businesses Navigator : NAB beat
off competition from AMP for Navigator and said it expected to complete the
acquisition in the fourth quarter of 2009. The Company's main activities are
general and life insurance as well as long-term savings and fund management. It
has around £316 billion of assets under management.[7] The group has 54,000
employees, including just under 30,000 in the UK, serving 50 million customers
worldwide.

The company has come under severe criticism in recent months over its handling of
a 'reattribution' of its inherited estate, which consists of funds that have been
removed from policyholders' asset shares. The company proposes to offer
policyholders a reattribution 'incentive payment' to give up their rights to a fair
share of the inherited estate. Many commentators have submitted evidence to the
UK House of Commons Treasury Select Committee criticising numerous aspects
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 of the company's practice, including its smoothing practices, its decision to proceed
with reattribution when a simple 90:10 distribution should be made, its phasing
over three years of a partial special distribution instead of distributing it all at once,
and its use of the inherited estate for meeting the costs of its own mis-selling of
policies, for writing hypothetical new business, and for making up shortfalls in its
own staff pension fund.

Aviva was the first insurance company to become carbon neutral globally.

Aviva Life Insurance India is a private insurance company formed from a

collaboration between the Aviva insurance group of UK and the Dabur group,
one of India's oldest and top producer of traditional health care products . Aviva's
products are meant to provide customers flexibility, transparency and value for
money.

Aviva insurance group in UK with a history dating back to 1696, today stands as
one of the leading provider of life and pension products to Europe and other parts
of the world. The history of Aviva Life Insurance India starts at 1834 during
nationalization when Aviva was the largest foreign insurance group in terms of the
compensation paid by the Indian Government. In 1995 Aviva was the first foreign
insurance company to start its representative office in India. At present in Aviva
Life Insurance India, the Aviva group is a 26% share holder and the Dabur group
holds 74% shares in the joint venture.

Programme highlights of today -

• Aviva Life Insurance India has 40 Branches in India, including rural branches
supporting its distribution network. With over 27,000 Financial Planning
Advisers (FPAs) and the Financial Health Check (FHC) programme it has been
successful in setting up its position in the Indian market. The FHC is a free service
administered by the FPAs which analyses the customer's long-term savings and
insurance needs and depending on the life stage and earnings of the customer it
selects the proper insurance product for them.

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• Aviva Life Insurance India initiated the concept of Bancassurance in India and
at present it has Bancassurance tie-ups with ABN Amro Bank, American Express
Bank, Canara Bank, Centurion Bank of Punjab, The Lakshmi Vilas Bank Ltd. and
Punjab & Sind Bank, 11 Co-operative Banks in Gujarat, Rajasthan, Jammu &
Kashmir, Bihar, West Bengal, Andhra Pradesh and Maharashtra and one regional
Bank in Sikkim. This has helped to distribute Aviva products in nearly 378 towns
and cities across India.

• Aviva Life Insurance India offers more modern Unit Linked and Unitized With
Profit money products to the customers. Following the IRDA guidelines, with
effect from 1 July 2006, these unit - linked products have been modified.

The products of Aviva insurance group of India are:

• Life Long

• Life Saver or Easy Life Plus

• Young Achiever

• Life Bond and Life Bond Plus

• Pension Plus

• Life Shield

• Freedom Life Plan

• LifeBond5

• The fund management operations of Aviva Life Insurance India is controlled

from Mumbai and the fund options includes Unitized With-Profits Fund and four
Unit Linked funds:

• Protector Fund - The fund comprises of debt securities in the range of 60-100%,
equities in the range of 0-20% and money market and cash in the range of 0-20%.

• Secure Fund - The fund comprises of debt securities in the range of 50-100%,
equities in the range of 0-20% and money market and cash in the range of 0-20%.

• Balanced Fund - The fund comprises of debt securities in the range of 50-90%,
equities in the range of 0-45% and money market and cash in the range of 0-10%.

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• Growth Fund - The fund will comprise of debt securities in the range of 0-50%,
equities in the range of 0-85% and money market and cash in the range of 0-20%.

These funds provide investment security to the capital of the customers.

Through their association with Basix (a micro financial institution) and other
NGOs, Aviva Life InsuranceIndia have been able to reach out to those
underprivileged who had no access to insurances till day.

RECRUITMENT OF ADVISORS

Advisors are the backbone of any life insurance company. They play the most
important and key role for company to cashing the revenue through selling the
insurance policies.
Some years ago Advisors were known as Agents but now they are known as
Advisors which seems to be more appropriately.

As an AVIVA Advisor, the sky is not the limit—you can go beyond.

In India, ever since the insurance industry has opened up, opportunities for
insurance companies have become limitless. To tap this opportunity, they require
insurance agents because agents are one of the most significant modes of bringing
in much-needed business to the company.

At AVIVA Life Insurance, you will not merely be an Insurance agent—you will be
a Financial Advisor. You will have an important role to play because you have to
give valuable advice to prospective customers about their financial planning.

Opportunities for AVIVA Advisors

Make a good profit without a heavy investment.

Enjoy the benefit of residual income.
Maintain flexible work hours.

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 Earn attractive commissions.
Participate in exciting recognition programs.
Associate with AVIVA - One of the strongest global insurance brand.
Capitalize on the growing Insurance market.
Become a full time sales manager.

Benefits Available for Advisors

Apart from being remunerated well, Advisors get a lot of recognition and can win
awards by participating in the monthly, quarterly, half yearly, yearly business
competition. These business reviews can fetch foreign tours and travel free of cost.
Become an Advisor to really see the benefits. It is told that "seeing is believing '.
We are ahead and we say "experiencing is believing" are you ready to experiment.

Number of Agents

Number of
Agents
Company Name
Dec 07
(Nos)
Aviva Life 31,390
Bajaj Allianz Life 273138
Bharti Axa 10016
Birla Sunlife 86264
Future Generali 0
HDFC Std Life 132662
ICICI Prudential 262893
ING Vysya 48428

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Kotak 34714
Max New York 29,876
MetLife 32389
Reliance Life 157052
Sahara Life 12244
SBI Life 33969
Shriram Life 16521
TATA AIG 32528
LIC 1159586
* The Figures are provisional and unaudited

Stages in Policy Issuance

1) Proposal

A Proposal Stage is the First stage before the policy is issued at COPS. At this
stage, the application form is received by COPS, but it is pending for issuance due
to further clarifications required from the customer.

2) Login

A proposal which is complete i.e., duly filled with all necessary documents
attached to it & accepted by the Branch ops, is called a Login

3) Reject

An Application gets rejected at the Branch Ops level due to necessary details not
filled in the form or necessary documents not submitted is a Reject. It is then sent
back to the Advisor for completion.

4) Issuance

Issuance means a policy that is issued to the Customer by Central Ops.

5) Decline Status

When a customer refuses to take a policy post login but before Issuance is called a
Decline

6) Cancellation

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When the cheque given by the customer bounces, it amounts to cancellation of the
policy.

7) Lapse

A policy for which the Customer fails to pay subsequent premiums is a Lapsed
Policy.

8) Freelook

Post issuance of the policy, the policyholder has the option to turn down the policy
within 15 days

from the date of issuance. This period of 15 days is called Freelook Period.

9) Surrender: When a customer wants to discontinue with the policy

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 47.38%, with premium
income at Rs. 1560.41 billion during the fiscal year 2006-2007.
Though the total volume of LIC's business increased in the last fiscal year (2006-
2007) compared to the previous one, its market share came down from 85.75% to
81.91%.
The 17 private insurers increased their market share from about 15% to about 19%
in a year's time. The figures for the first two months of the fiscal year 2007-08 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.
With the opening up of the insurance industry in India many foreign players have
entered the market. The restriction on these companies is that they are not allowed
to have more than a 26% stake in a company’s ownership.
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 Since the opening up of the insurance sector in 1999, foreign investments of Rs.
8.7 billion have poured into the Indian market and 19 private life insurance
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. Some of these products include investment plans with
insurance and good returns (unit. inked plans),multi-purpose insurance plans,
pension plans, child plans and money back plans.

THEORETICAL BACKGROUND
Life insurance have been recognized as necessary and essential elements in
individuals’ and families’ financial planning. Financial Planning is not some
esoteric concept. It is for everybody who has financial goals to achieve or financial
challenges to meet. The essential element of financial planning concept are the
identification of overall financial goals and then the development and
implementation of an integrated plan to accomplish the objectives taking into
consideration the individual’s circumstances.

Personal Financial Planning is the process of determining whether and

how an individual can meet life goals through proper management of financial
resources. Financial Planning goes beyond advice on investments. It is the
development and implementation of an integrated, co-ordinate plan for achieving
overall financial objectives.

Financial planning in the past was far simpler than today. Planning today is
more complex because of three factors:-

• Greater economic uncertainty

• Constantly changing rules

• A proliferation of new financial instruments

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 Most person use a variety of financial instruments to achieve their financial
objectives and the life insurance is one of the valuable and flexible financial
instruments.

Risk management is the most important element of financial planning. So for an

individual it is good to find out the degree of risk associated with him and the way
to mange that risk. There are four ways to mange the risk.

• Risk avoidance

• Risk reduction

• Risk transfer

• Risk retention

Insurance, in law and economics, is a form of risk management primarily

used to hedge against the risk of a contingent loss. Insurance comes under the risk
transfer technique of risk management. Insurance is defined as the equitable
transfer of the risk of a loss, from one entity to another, in exchange for a premium,
and can be thought of as a guaranteed small loss to prevent a large, possibly
devastating loss. An insurer is a company selling the insurance; an insured or
policyholder is the person or entity buying the insurance. The insurance rate is a
factor used to determine the amount to be charged for a certain amount of
insurance coverage, called the premium. Risk management, the practice of
appraising and controlling risk, has evolved as a discrete field of study and
practice.

Insurance is contract between insurer and policy holder. So it has to fulfill all
the requirements which a contract must have. The simple contract must have
following essentials:-

• Offer and acceptance

• Consideration
• Capacity to contract
• Legality of object or purpose
• Capability of performance
• Intention to create legal relationship
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• Consensus ‘ad idem’( genuine meeting of minds)

As life insurance is special type of contract so it has some additional essential apart
from the usual essential of a valid contract. The additional essential of life
insurance are as follows:-

Utmost good faith (Uberrimae fides):-

Contracts are normally subject to the principle of caveat emptor i.e. let
the buyer beware. But in the life insurance there are certain things which are only
known to the policyholder which insurer cannot identify. So this essential imposes
a greater duty on the parties to an insurance contract to disclose relevant
information. In the absence of utmost good faith the contract can be held as void ab
initio.
Insurable interest:
A person has an insurable interest in something when loss-of or
damage-to that thing would cause the person to suffer a financial loss or other kind
of loss. Without having insurable interest insurance is not possible.

Principles of insurance
Commercially insurable risks typically share seven common characteristics.

1. A large number of homogeneous exposure units. The vast majority of insurance

policies are provided for individual members of very large classes. The existence of
a large number of homogeneous exposure units allows insurers to benefit from the
so-called “law of large numbers,” which in effect states that as the number of
exposure units increases, the actual results are increasingly likely to become close
to expected results.

The law of large numbers (LLN) is a theorem in probability that describes the
long-term stability of the mean of a random variable. Given a random variable with
a finite expected value, if its values are repeatedly sampled, as the number of these
observations increases, the sample mean will tend to approach and stay close to the
expected value (the average for the population).

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2. Definite Loss. The event that gives rise to the loss that is subject to the insured, at
least in principle, take place at a known time, in a known place, and from a known
cause. The classic example is death of an insured person on a life insurance policy.

3. Accidental Loss. The event that constitutes the trigger of a claim should be
fortuitous, or at least outside the control of the beneficiary of the insurance. The
loss should be ‘pure,’ in the sense that it results from an event for which there is
only the opportunity for cost. Events that contain speculative elements, such as
ordinary business risks, are generally not considered insurable.

4. Large Loss. The size of the loss must be meaningful from the perspective of the
insured. Insurance premiums need to cover both the expected cost of losses, plus
the cost of issuing and administering the policy, adjusting losses, and supplying the
capital needed to reasonably assure that the insurer will be able to pay claims. For
small losses these latter costs may be several times the size of the expected cost of
losses. There is little point in paying such costs unless the protection offered has
real value to a buyer.

5. Affordable Premium. If the likelihood of an insured event is so high, or the cost

of the event so large, that the resulting premium is large relative to the amount of
protection offered, it is not likely that anyone will buy insurance, even if on offer.
Further, as the accounting profession formally recognizes in financial accounting
standards, the premium cannot be so large that there is not a reasonable chance of a
significant loss to the insurer. If there is no such chance of loss, the transaction may
have the form of insurance, but not the substance.

6. Calculable Loss. There are two elements that must be at least estimable, if not
formally calculable: the probability of loss, and the attendant cost. Probability of
loss is generally an empirical exercise, while cost has more to do with the ability of
a reasonable person in possession of a copy of the insurance policy and a proof of
loss associated with a claim presented under that policy to make a reasonably
definite and objective evaluation of the amount of the loss recoverable as a result of
the claim.

7. Limited risk of catastrophically large losses. The essential risk is often

aggregation. If the same event can cause losses to numerous policyholders of the
same insurer, the ability of that insurer to issue policies becomes constrained, not

20
 by factors surrounding the individual characteristics of a given policyholder, but by
the factors surrounding the sum of all policyholders so exposed. Typically, insurers
prefer to limit their exposure to a loss from a single event to some small portion of
their capital base, on the order of 5 percent. Where the loss can be aggregated, or
an individual policy could produce exceptionally large claims, the capital constraint
will restrict an insurer's appetite for additional policyholders. In commercial
insurance it is possible to find single properties whose total exposed value is well
in excess of any individual insurer’s capital constraint. Such properties are
generally shared among several insurers, or are insured by a single insurer who
syndicates the risk into the reinsurance market.

Reinsurance: Reinsurance is a means by which an insurance company can

protect itself with other insurance companies against the risk of losses. Individuals
and corporations obtain insurance policies to provide protection for various risks
(hurricanes, earthquakes, lawsuits, collisions, sickness and death, etc.). Reinsurers,
in turn, provide insurance to insurance companies. The company requesting the
cover is called the cedant and the reinsurer can be called the ceded.

Underwriting:
Underwriting is the process by which an insurance company decides whether to
issue requested insurance and, if it decides to issue it, on what terms and conditions
and at what price. They are responsible for assessing the loss potential of each
proposed insured, using information gathered for that purpose.

The underwriting incorporates two elements:-

• Selection: - selection is the process whereby an insurer evaluates individual

applications for insurance to determine the degree of risk represented by the
proposed insured.

• Classification: - classification is the process of assigning a proposed insured to a

group of insured of approximately the same expected loss probabilities as the
proposed.

The purpose of underwriting is to ensure that those applying for insurance are
assessed and appropriately classified.
21
 Factors involved in life insurance underwriting:-

• Age

• Sex

• Medical aspects

• Alcohol and drugs

• Occupation

• Aviation

• Financial status and speculation

Actuary:
An actuary is a financial expert who applies mathematical and statistical methods
for assessment of financial and other risks relating to various contingent events and
for scientific valuation of financial products in the fields of insurance, retirement
and other benefits, investment and other related areas.

Actuaries are skilled in assessing the financial impact of tomorrow’s uncertain

events. They enable financial decision to be made with more confidence by:-

• Analyzing the past

• Modeling the future

• Assessing the risks involved

• Communicating what the results mean in financial terms.

A study of human history reveals a universal desire for security. Insurance

in some form has been a universal response to societies’ quests for security. The
most important insurance element is relief from the potential burden of financial
loss, commonly known as a transfer of risk.

Insurance as known today, did not exist in ancient times although practices
having important elements of insurance existed. The beginnings of personal
insurance are generally attributed to the Greeks. The Greeks societies – religious
group devoted to the observance and performance of prescribed feasts and
sacrifices to their patron gods- practiced elementary insurance around 500 to 200
22
 . The need for mutual protection and security not only continued but increased
B.C.

after Rome fell. The guilds in England provided mutual help to their members
those who witnessed death, illness, the burning of one’s home etc. friendly society
started in England. These societies predate the first mortality tables, the laws of
probability and the mathematics of insurance. These societies were operated on
assessment basis. The first underwriting practice was started by European around
1583. The first insurance company started in the US in the year 1759 in
Philadelphia.

In India insurance began with life insurance and the company name was the
Oriental Insurance Company an English company in 1818. Oriental Life Insurance
Company started by Europeans in Calcutta was the first life insurance company on
Indian Soil. All the insurance companies established during that period were
brought up with the purpose of looking after the needs of European community and
Indian natives were not being insured by these companies. The first Indian
insurance company was the Bombay Mutual Assurance Society Limited in 1870 in
Mumbai. In the year 1956 the life insurance business was nationalized and the Life
Insurance Corporation of India was formed on 1st September, 1956.

Prior to 1912 India had no legislation to regulate insurance business. In the year
1912, the Life Insurance Companies Act, and the Provident Fund Act were passed.
The Life Insurance Companies Act, 1912 made it necessary that the premium rate
tables and periodical valuations of companies should be certified by an actuary. But
the Act discriminated between foreign and Indian companies on many accounts,
putting the Indian companies at a disadvantage as compare to their foreign
counterpart.

Comparison of Insurance Penetration of different countries:-

Penetration of insurance in different countries

Insurance penetration:-it is measured as ratio (in per cent) of premium (in US
Dollars) to GDP (in US Dollars).
23
CONSUMER ANALYSIS
We analyze consumers because; this is the basis for all market strategies like
segmenting, targeting, and positioning. Without an understanding of customer, it
would be impossible for the market to drive the offer. A consumer’s buying
behavior is influenced by cultural, social and personal factor.

Cultural factor:
Culture is fundamental determinant of a person’s needs and behavior. People
acquire a set of value, perception and behaviors through his or her family and other
institution. Indian people want achievement and success, comfortable efficiency
and practicality, freedom and youthfulness. In other word there are multicultural
environment in India.
Indian loves their family and they want to secure their family from unnatural event.
Indian give first preference to his family after than others. They do not want to take
loan and they want to invest their money in long-term investment for child
education and marriage.
When we say about metropolitan city, dependency on old age on son is decreasing.
People want to accumulate some fund for old age so AVIVA should concentrate on
gratuity or pension plan.
Indian people also affected from sub culture. Urban people want to take more
insurance comparison than rural (due to high per capita income, insurance
awareness, social security, investment purpose, tax saving purpose). Religion also
effect on insurance. AVIVA is using this thing very well. They use sinduor and
marriage in their advertisement and show that when you marriage from someone,
her all liabilities is your liabilities and we will help you in this situation. We will
make relation as like as sindur (here means long term stable relationship). In other
word AVIVA want to say that we will cover you at every step in life (sorrow or
happiness). Consumer behavior is also affected from reference group. Firstly,
people see that which insurance is bestseller after that they purchase. They also
influence from agent. People do not concentrate on their need due to agent’s
influence. Social class also affect on consumer behavior. Lower class does not
want insurance. Upper lower class wants insurance for saving purpose. Working
24
and middle class want insurance for protection and saving purpose and lastly,
upper class want to purchase insurance for investment tax benefit and saving
purpose.

Social factor:
Consumers are also influenced by social factor for example; reference group,
family, and social role and status. Consumer behavior is firstly influenced from
membership group such as family, neighbor and co-worker. Insurance is such type
of product where people awareness is very low so people do not very much about
insurance. They think, insurance is only tax saving instrument so they fully
dependent on agent for taking insurance. When agent says about any product, that
time they inquire from neighbor and co-worker about that product. If any body
suggests that, this product and I have also taken this product. Individual think that,
this product also best for him. He does not concentrate on his need and
requirement.
Secondly, he is influenced by information influences. If he goes to purchase
insurance, he makes enquiry about this product from his personal sources. He study
newspaper and search on Internet and gather all information related product. If he
is satisfied from that information, he decides to buy insurance. People also
influence from opinion leader, this opinion leader may be Mukhiya, or Surpanch in
rural area or this may be any leader, actor or cricket player in urban area. If opinion
leader say or advertise about any product, people are influenced from opinion
leader because opinion leader keep good position in society.
Family and household pattern also influence consumer behavior. Due to less
security of individual family, people want to purchase insurance, but in joint family
people give less attention in buying insurance. If all family are well earning, there
are given less attention on insurance in such family. But if earning member is less
and dependent is more in such type of family insurance is very important. Women
want more security so women are taking main role in purchase decision where,
women influence consumer behavior.

Personal factor:

25
A consumer decision is also influenced by personal characteristics for example the
buyer age and stage in life cycle, occupation and economics circumstances,
personality, self-concept, life style and value.
When we say about age and life, first is bachelor stage. They are generally young
independent and they are in early stage of his carrier and earning. They mostly
think that they have no need of insurance because in that time they have no
dependent. However, some people have some dream and dependent also. They are
in such stage where they can take more risk so they mostly prefer to invest in
ULIP.
Second stage is newly married. In that stage people need and buying decision is
influenced from their future plan and earning capability. If they have to plan for
purchase flat that time, they will need term insurance. There after stage is one or
two children after marriage, they will be influenced from future need. They will
accumulate fund for children marriage and education, they can be plan time-to-time
vacation. In forth stage, they want to accumulate for retirement. People want to live
alone after old age or in peaceful place so they are ready to start saving for old age.
Attitude also affect consumer behavior positive attitude (about his life) person will
take pension plan because people think that they will live more. But negative
attitude person will take life insurance because they worry about their life.

26
 OBJECTIVE OF THE STUDY

For every problem there is a research. As all the researches are based on some and
my study is also based upon some objective and these are as follows.

1. To find out the people’s perception about life insurance.

2. To find the reason behind holding life insurance policies.

3. To find according to customer, what should be the moderate return from the
investment in the life insurance policies

4. To find which companies provide better facility in life insurance policy.

5. To understand Consumer buying behavior

6. To find consumer buying potential on the basis of annual income.

27
 RESEARCH METHODOLOGY

Type Of Research: Quantitative Research

Scope Of Study
The area covered under the project study was Pune city. The study was conducted through
questionnaires and interaction with people residing in different parts of the city. The
questionnaires were filled by pepole who were from different parts of the city.

Research Design : The research design constitutes the blueprint for the collection,
measurement and analysis of the data. Basically research design is the plan and structure
of investigation, so conceived as to obtain answers to the research questions.

Research Method: Descriptive Research Method

Sampling Procedure: The basic idea of sampling is that by selecting some of the
elements in a population, we may draw conclusions about the entire population. It is an
essential part of research process.

Sampling Method: Non-Probabilistic Convenience Sampling

Sampling Universe: Users of life insurance in Pune

Sampling Frame: Users of life insurance in areas of Deccan,Kothrud,Wakad,S.B

road.

Sample SIZE: The sample size taken for the research study is 150 (respondents)

Sampling Element: Different People from different parts of the city

There are two types of data collection methods used in the project report.

Primary data
28
 Secondary data.

For the project primary data collection method was used for observing customer
perception towards insurance and approaching customers directly in the field,
comparing and references to know their preference on insurance policies through
questionnaire.

Secondary data collection method was used by referring to various websites,

books, magazines, journals and daily newspapers, internet for collection
information regarding project under study

Primary data collection method was used for the study as the nature of the study does
not permit to apply observational method. In survey approach questionnaire method was
used for taking a customer view because it is feasible from the point of view of the
subject & survey purpose. Total 150 sample was collected in the survey for study.

DATA ANALYSIS AND RESULTS

1. Number of life insurance policies customer holds:

29
 Option Number of Percentage
respondents
0-1 72 48%
2-3 59 39%
4-5 15 10%
5&above 5 3%

Interpretation :- Figure 1 shows that among 150 respondents, 48% are having 0-1
policies, 39% are having 2-3 policies, 10% are having 4-5 policies and 3% are
having 5 or more policies. So, major respondents are 0-1 policy holder.

2. Rationale behind holding the Life insurance policies:-

options Number of Percentage

respondents
Tax saving 111 7%
instrument
Necessity of life 9 6%
Both of the above 11 74%
Safety for loan 19 13%

Figure-2
Interpretation Figure 2 shows that among 150 respondents, 111 i.e. (74%)
consider insurance as tax saving, safety and Security instrument and 19 i.e. (13%)
consider it as for safety for a loan and 11 i.e. (7%) consider it for tax saving and 9
i.e. (6%) consider it as a necessity of life for safety and security. So, most of the
respondents consider it both as tax saving instrument and as necessity of life for
safety and security as rationale behind holding a life insurance policy.

3. Insurance policies preferred by customers:-

30
Options Number of Percentage
respondents
Endowment (long term) 15 10%

Cash back(returns in 20 13%

regular intervals)
Unit linked(equity based) 50 33%
Single premium(short 15 10%
term)

Interpretation :-

Figure 3 Figure 3 shows that among 150 respondents according to Mean taken
most preferred life insurance policy is Unit linked (Mean-50)

4. According to customer, what should be the moderate return from the

investment in the life insurance policies?

Option Number of Percentage

respondents
Less than 5% 19 13%
5-8% 21 14%
8-11 43 29%
11&above 67 45%

Figure-4
Interpretation :-

31
Figure 4 shows that among 150 respondents, 45% preferred a return of 11% and
above, 29% liked to have a return of 8-11% while 14% and 13% respondents
preferred it to be 5-8% and less than 5% respectively. So, most preferred return
from the investment in the life insurance policies is 11% and above.

32
 5. In which Age group customer belongs?

Option Number of Percentage

respondents
20-30 17 11%
30-40 69 46%
40-50 37 25%
50&above 27 18%

Figure-5

Interpretation :-
Figure 5, shows that among 150 respondents, 46% respondents are of the age group 30-
40 years while 25% and 18% of respondents are of age group 40-50 and 50-60 years
respectively and only 11% belong to age group 20-30 years. So, maximum number of
respondents belongs to age group 30-40 years.

6. In which Income group customer belongs?

Option Number of Percentage

respondents
Less than 3lacs 36 24%
3-5lacs 41 27%
5-8lacs 51 34%
8lacs&above 22 15%

Figure-6

33
 Interpretation :-

Figure 6 shows that among 150 respondents, 34% belong to income group of 5-8
lacs while 27% and 24% respondents are from income group 3-5 lacs and less than
3 lacs resp. and only 15% respondents belong to income group 8 lacs and above.
So, maximum no. of respondents belongs to income group of 5-8 lacs

7. Sum total of insurance policies customer holds:

option Number of Percentage

respondents
Less than 50000 13 9%
50000-1lacs 77 51%
1-1.5lacs 29 19%
1.5&above 31 21%

Figure-7
Interpretation :-
. Figure 7 shows that among 150 respondents sum total of amount of insurance
policy premium of 51% policy holders is between 50,000-1 lac while for 21% and
19% policy holders sum total of amount of insurance policy premium is 1.5 lacs
and more and between 1 lac-1.5 lacs resp. and only 9% policy holders sum total of
amount of insurance policy premium is less than 50,000. So, maximum no. of
policy holders are having sum total of amount of insurance policy premium as
50,000-1 lac.

8. Type of life insurance policy customer prefers is recommended by.

34
 Option Number of Percentage
respondents
Family 80 53%
Friends 40 27%
Advisor 20 13%
Others 10 7%

Figure-8

Interpretation :-
Figure -8 shows that among 150 respondents 53% respondents have taken life insurance
policies by the recommendation of family, 27% have taken by the recommendation of
friends, 13% & 7% by the recommendation of advisor &others, so maximum no. of life
insurance policies is recommended by family.

9. The customer has taken the life insurance policy through:

Option Number of Percentage

respondents
Agent 96 64%
Online 14 9%
Self 23 15%
Others 17 11%

Figure-9

Interpretation:-

35
 Figure-9 shows that among 150 respondents, 64% respondents have taken life
insurance policies through agent, 9% have taken through online, 15% & 11% have
taken through self & other means. So , maximum no. of respondents have taken
through agent.

10 .Which companies provide better facility in the life insurance policy:

Option Number of Percentage

respondents
LIC 34 23%
SBI LIFE 21 14%
HDFC 24 16%

AVIVA 12 8%
ICICI 54 36%
OTHERS 5 3%

Figure-10

Interpretation :-

Figure-10 shows that among 150 respondents, 23% respondents thinks that LIC
provides better facilities, 14% & 16% thinks that SBI & HDFC provides better
facilities, 8% & 3% thinks that AVIVA & others provide better facilities. So
maximum no. of respondents preferred ICICI for providing better facilities.

INTERPRETATION OF FINDINGS

• The buying of Life insurance policies is dependent on income.

36
• According to the study most of the respondents consider life insurance both as tax
saving instrument and as necessity of life for safety and security as rationale
behind holding a life insurance policy.

• Most of the life insurance policies holders are influenced by family members in
purchasing the policy.

• Unit linked life insurance policy is preferred most by the customers.

• According to the study maximum number of policy holder belongs to the age
group 30-40 years.
• According, to the study major market player who offer better facilities in the life
insurance policies is ICICI .
• According to the survey most of the respondents have taken life insurance
policies through agents.
• Most policy holders expect return from the investment in the life insurance
policies 11% and above.

37
 RECOMMENDATIONS

• Company should promote more online purchase of policies to save agents

commission.
• Company should give emphasis on building better relationship with the customers
for future business as family members influence the most in purchasing insurance
policy.
• Company should target the age group 20-30 as lesser number of people are insured
in this group.

• Company should introduce products with better return on investments.

• Company should take initiative to improve the brand name of AVIVA by providing
better facilities to customers than the existing leaders like LIC and ICICI.

• Company should target rural market and introduce products for different segments
of the society based on the income.

• Company should give better training to insurance advisors.

38
 LIMITATIONS

Some of the difficulties and limitations experienced by me during my research

work are as follows:

• Bad image of Insurance sector in people’s mind.

• Lack of awareness about the earning opportunity in the Insurance sector

• It was difficult to communicate with the earning members of the family during the
day time.

• Many people were not ready to fill the questionnaire because of lack of time .

39
 CONCLUSIONS

India has enough growth potential and opportunities for insurance sector. Still, in
India very less market is tapped by the insurance companies.

There is a need to grow the industry by spreading awareness about benefits derived
from the life insurance policies

The research also states that still majority of people in India took insurance to have
Tax saving and risk coverage and are unaware of other benefits like investment etc.

40
 BIBILOGRAPHY

TEXT BOOKS

1. PHILIP KOTLER (2001) ‘Marketing Management’, Prentice Hall Pvt.Ltd., New

Delhi, Millennium edition.

2. KOTHARI C.R. (1999) ‘Research Methodology’, Wishwa Prakashan,

New Delhi, 2nd edition.

3. LEON G. SCHFFMAN and LESLIE LAZAR KANUK (2007)

‘Consumer Behavior’, Prentice Hall Pvt .Ltd., New Delhi, 9th edition.

41
 APPENDICES

Questionnaire

Dear respondents,

I am a student of ISBS Pune. As a part of my curriculum I am conducting a study

on “Understanding consumer behavior and increasing sales of ULIP’s ” It
would be a great help if you please spare some of your time to fill this
questionnaire. The responses would be kept strictly confidential & use to data
analysis.

Q .1 Please tick the appropriate option.

Age 20-30 30-40 40-50 50&above

Annual >3lacs 3-5lacs 5-8lacs 8lacs&above

income

Q .2 Number of Life insurance policies you hold?

0-1 2-3

4-5 5& above

42
Q.3 According to you, what is the rationale behind holding the Life insurance
policy? (Please tick one)

As a tax instrument.

As a necessity of life for safety and security.

Both of the above.

As a safety for loan.

Q .4 According to you, what should be the moderate return from the

investment of the life insurance policies?

Less than 5% 3-5%

8-11% 11%&above

Q .5 Which type of life insurance policies do you prefer?

Endowment (long term)

Cash back (returns in regular intervals)

Unit linked (equity based)

Single premium (short term)

43
Q .6 What is the sum total of all life insurance policies you hold?

Less than 50,000 50,000-1lacs

1-1.5lacs 1.5&above

Q .7 How have you taken your life insurance policies?

Agent Online Self Others

Q .8 The life insurance policies you have taken is recommended by:

Family Friends Adviser Others

Q .9 According to you which company provides better facilities in their life

insurance policies?
Please tick any one on the scale given below.

S.NO NAME OF
BANKS
1. LIC

2. HDFC

3. AVIVA

4. SBI LIFE

5. ICICI

6. OTHERS

44