REVIEW OF LITERATURE.

Still today people think that Insurance does not give good returns. They are not aware of the
modern Unit Linked Insurance Plans which are offered by most of the Private sector players.
They are still under the perception that if they take Insurance they will get only 5-6% returns.
Nowadays most of the modern Unit Linked Insurance Plans gives returns which are many
times more than that of bank Fixed deposits, National saving certificate, and PPF.People still
today are not aware about the earning opportunity that the Insurance sector gives. Companies
in order to beat the competition and to increase their Insurance Advisors and increase their
reach to the customers are giving very high commission but people are not aware of that.A
project report titled Buying behavior of Customers in Insurance Sector prepared by Mr.
Shahabas Moidu, a PGDM student of DCSMAT, Wagamon clearly shows with evidence that
most of the people mainly prefer bank deposits as a strong investment option followed by
mutual funds and other financial products. The report also says that majority of prospective
customers are willing to take up insurance policy of LIC rather than any other private
insurance players.A report prepared by Mrs. Meena K an employee of IDBI Federal Life
Insurance Company says With the consent of the company, the agency channel has decided
to promote more guaranteed return products rather than products which are subjected to
market risks. The reason behind such a decision was the customer dissatisfaction rise during
the last year (2011).Abhishek Roy, a student of Sinhgad Institute of Management College,
Pune has mentioned in his report, The main goal of the marketing communication for IDBI
Federal is to bring peoples attention on products and their services by providing them with
the information that encourages a positive or buying response and also marketing
communication tool which target customers at the end to bring sales to the company. The
protection business in India has seen diverse times and is more than 150 years of age. From
the days when there were a few privately owned businesses, to nationalization, and to
privatization, the business has come a full loop. Preceding autonomy, more than two hundred
private insurance agencies were working together especially in life coverage coliseum. A
quick look at the prenationalization period, through the Indian Insurance Year Books and
authentic studies abundantly shows that even with an expanding number of statutory laws and
protection acts breathed easy to time-more than 40 times amid 1938, 1939,1940, 1941, 194,
195 and the Insurance Act 1958 to direct and control the business upwards of 6 out of 215
life coverage organizations died somewhere around 1935 and 195 (Agarwal, 1961 and
Bhave, 1970). The developing business, bungle and misbehavior, control of life stores to
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enjoy speculative exchanging, huge scale liquidation of insurance agencies, between locking
of trusts, and control and impact of extensive business houses prompted open upsetting and
hatred.
A project report on branding influence in market communication summer internship IDBI
Federal Life Insurance Co. by Ms. Sameena Nikhat states that, The key competitors are LIC,
HDFC Standard, ICICI Prudential and Bajaj Allianz The company offers its services
through a vast nationwide network across the branches of IDBI Bank and Federal Bank in
addition to a sizeable network of advisors and partners. As on January 31st 2011, the
company has issued over 2.68 lakh policies with over Rs 14, 230 Cr in Sum Assured.
Various people have studied various aspects of this organization. The reason behind the
change in sales level of insurance products in the past three years in the thrissur branch of the
company is being studied by me.The Indian Life Insurance company act 1912 was the first
statutory body that started to regulate the life insurance business in India. By 1956 about 154
Indian, 16 foreign and 75 provident firms were been established in India. Then the central
government took over these companies and as a result the LIC was formed. Since then LIC
has worked towards spreading life insurance and building a wide network across the length
and the breath of the country. After the liberalization the entrance of foreign players has
added to the competition in the market.
Insurance Sector Reforms In 1993, Malhotra Committee, headed by former Finance
Secretary and RBI Governor was formed to evaluate the Indian insurance industry and give
its recommendations. The committee came up with the following major provisions

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to

enter the industry.

Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.

Only one State Level Life Insurance Company should be allowed to operate in each
state.

It was after this committee came into effect the regulatory body for insurance sector was
formed with the name of IRDA.
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Insurance Regulatory and Development Authority (IRDA):The IRDA since its

incorporation as a statutory body has been framing regulations and registering the private
sector insurance companies. IRDA being an independent statutory body has put a framework
of globally compatible regulations.

IMPACT OF LIBERALIZATION
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 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 63.95 %(2010-11)
and now it is further decreasing.

THE WORKING OF INSURANCE COMPANY

Profit = Earned Premium + Investment Income - Incurred Loss - Underwriting

expenses

Insurers make money in two ways:

1. Through Underwriting, the processes by which insurers select the risks to insure and
decide how much in premiums to charge for accepting those risks, and
2. By investing the premiums they collect from insured.

Revenue = Premium

Expenses = (Sum of Claims + Commission payable on

of business + Operating expenses)

Operating Surplus = (Revenue - Expenses)

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procurement

Net investment income includes income from trading in and holding stock market securities
including government securities, special deposits with the central government, loans to
several public utilities and service providers in state government. Insurance premium
collected is converted in a pool of fund then divided in to four expenses:

To pay the expenses of the management

To pay agency commission

To pay for the claims

Surplus money will be invested in government securities

CURRENT SCENARIO OF THE INDUSTRY

India with about 200 million middle class household shows a huge untapped potential for
players in the insurance industry. Saturation of markets in many developed economies has
made the Indian market even more attractive for global insurance majors. The insurance
sector in India has come to a position of very high potential and competitiveness in the
market. Innovative products and aggressive distribution have become the say of the day.
Indians, have always seen life insurance as a tax saving device, are now suddenly turning to
the private sector that are providing them new products and variety for their choice. Life
insurance industry is waiting for a big growth as many Indian and foreign companies are
waiting in the line for the green signal to start their operations. The Indian consumer should
be ready now because the market is going to give them an array of products, different in
price, features and benefits. How the customer is going to make his choice will determine the
future of the industry. The private insurance players have significantly improving their
market share when compared to 50 years Old Corporation (i.e. LIC).
INVESTMENT IN LIFE INSURANCE
Life insurance policies are "cash value," which means the fees, or premium, initially are
greater at the start of the policy than they would be in a term policy. The excess premium is
then invested in a "separate account," either by the insurer or in an account controlled by the
policy holder, building up cash value. Any investment gains can be used in a few ways: to
increase the death benefit, to borrow against for any use or to keep the policy in effect if
insured stop paying monthly premiums.

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Insurance is a nascent sector in India providing a wide potential for the players worldwide.
The premiums of life insurance accounts to about 2.5 % of India's GDP while the premiums
of the general insurance accounts to about 0.65% GDP. In India the Insurance sector went
through a number of changes when the Indian Government allowed the private companies to
solicit insurance by allowing FDI up to 265%.The Indian Insurance scenario received a boost
up as the global insurance companies are craving for a lion's share. The Insurance Companies
like LIC, Bajaj Alliance, ICICI Prudential are booming in this era. The list below will give
the names of the best Insurance Companies of India.
List of Top Insurance Companies of India
Life Insurance Corporation of India :This leading Insurance Company of India was
established in the year 1956 by the alliance of 16 non-Indian companies, 154 Indian
Insurance Companies and 75 provident. It has 100 divisional offices, 2048 computerized
branches, 7 zonal offices and the company's corporate office. It has introduced new strategies
for the facilitation of the customers like the IVRS,ECS,ATM Premium payment facility and
the company's Info centers in Mumbai, Delhi, Chennai, Kolkata and many others cities.
Bajaj Allianz:This Indian Insurance company is a joint venture of Alliance AG, which is one
among the largest Life Insurance companies and Bajaj Auto, one among the biggest 2- & 3
wheeler producers in the world. The Company has various plans for the customers like the
Pension, Retirement, Life Time Care, Health Care, Life Insurance Online, Life Insurance
Saving Plans, and online services like the Address change, Renewal Premium Payment etc.
Tata AIG Life :This renowned life Insurance company in India offers a wide array of
products related to life insurance for associations, individuals and businesses. The company
offers high quality solutions to its corporate Indian clients. It renders services like the AIG
Health First, AIG Health Life Protector, Tata AIG Life Hospi Cash Back, Tata AIG Life
Maha Gold, Tata AIG Life Assure 10 Years and many others. The company is a joint venture
of America International Group.

Birla Sun Life Insurance:It is one of the major insurance companies in India and a joint
venture of Sun Life Financials and Aditya Birla group. The company provides Life Insurance
Solutions to meet the needs of Protection, Retirement and Saving .It has recently launched the
Money back Plus Plan.

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SBI Life :This renders premium Insurance solutions like SBI Life-Smart ULIP, SBI LifeGroup Criti9, SBI Life-Unit Plus Child Plan etc. It also offers services like the NRI services,
Premium Payment Procedure, ECS Facility, RPI/RFI and many others. SBI Life is a joint
venture of BNP Paribas Assurance and SBI.

Max New York Life:This Life Insurance company in India provides the best solutions
related to life insurance like children's plan, retirement solution, Investment, Protection,
Health, Savings etc. The company has 14 corporate agency tie ups, 33 bankassurance
relationships and direct sales force at 14 locations. It is now covering 36 products related to
life and health insurance.

Kotak Life Insurance:This premier Insurance company in India offers insurance facilities
related to Savings, Investments, Child, Retirement, Protection, Kotak Long Life Secure Plus,
Kotak Long Life Health Plus etc. It opens up services like Insurance Guide, NAV, Premium
Payment Options and many others.

HDFC Standard Life:This is one of the major market leaders in the insurance sector in
India. The company offers Insurance services like the Group Plans, Health Plans, Protection
Plans, Retirement Plans, Savings and Investment Plans etc. The customer base of the
company is about more than 7 million who depend on the company for various needs.
Reliance Life :The company based in India offers the best plans for Life Insurance in India.
Reliance Capital Limited's associate company is Reliance Life which is one of the leading
private sectors in India. The company provides the Protection Plans, Child Plans, Retirement
Plans

and

Investment

plans

and

is

also

the

ultimate

solver

of

solutions.

ICICI Prudential:This major Insurance Company in India provides health Insurance, life
insurance, ULIPs, ULIP, Retirement Plans and many others. Life Insurance Plans of the
company covers Premium Guarantee Plans, Education Insurance Plans etc. Pension Plans
encompass LifeStage Pension, Forever Life. Health Insurance Plans cover Hospital Care,
MediAssure.

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