DAYANANND ACADEMY OF MANAGEMENT STUDIES

Affiliated to AKTU

SUMMER TRAINING PROJECT REPORT

Submitted in partial fulfillment of Master of Business

Administration

Session- 2017-2018

TO IDENTIFY COMPETATIVENESS IN INSURANVE MARKET

WITH REFFERENCE TO BAJAJ ALLIIANZ COMPANY LTD

Company Guide Submitted By:

[Mr. Sharad Agarwal ] RITIMA KATIYAR

[Branch Manager]

Internal Guide [1704870058]

[Ms. Stuti Jain]
[Assistant Professor]

1
 DECLARATION

I hereby declare that this submission is my own work. It contains no

material previously published or written by another person, nor has this
material to a substantial extent been accepted for the award of any other
degree or diploma of the university or other institute of higher learning.

[RITIMA KATIYAR]
[17004870058]

2
 ACKNOWLEDGMENT
Summer training Project Report is the one of the important part of
MBA program, which has helped me to gain a lot of experience about
practical application of my theoretical concepts, which will be beneficial
in my succeeding career.
I express my sincere gratitude to my industry guide [MR. SHARAD
AGARWAL], [Branch manager, Kanpur] for their guidance,
continuous support & cooperation throughout my project without which
the present work would not have been possibleI am obliged to staff
members of (BAJAJ ALLIANZ COMPANY LTD) , for the valuable
information provided by them in their respective fields. I am grateful for
their cooperation during the period of my assignment.
.
With an ineffable sense of gratitude I take this opportunity to express
my deep sense of indebtedness and gratitude to Dr. Sadhvi Malhota,
Director DAMS .coe along with , Mr. Anju Srivastava Professor and
Head of Department in Business Administration, for their
encouragement, support and guidance in carrying out the project.
I am very much thankful to, my Project Guide [Ms. STUTI Jain],
[Assistant Professor] for their interest, constructive criticism, persistent
encouragement and untiring Guidance throughout the development of
the project. It has been my great privilege to work under his/her
inspiring guidance.
I am also thankful to my Parents and my friends for their
indelible Co-operation for achieving the Goal of this study.

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TABLE OF CONTENT

Contents
Preface 8
Executive Summary 9
Chapter 1 Project Proposed 10-12
1.1 Objective of the project
1.2 Research Methodology
1.3 Sampling
1.4 Limitations
1.5 Literature Review
Chapter 2 Introduction 13-20
2.1 Definition of insurance
2.2 Functions of insurance
2.3 Definitions of life insurance
2.4 Role of life insurance
2.5 Importance of life insurance
2.6 Stages of Insurance
Chapter 3 Agency business model 21-23
3.1 Insurance agencies
3.2 Functions of agency manager
3.3 Operational work of insurance agency
A brief history of the insurance 24-42
Chapter 4 sector
4.1 How big is the Insurance Market
4.2 Indian Scenario
Trends in Life Insurance business- Unit
4.3 Linked Insurance Plans
Existing Insurance
4.4 Companies/Corporation
Indian Regulatory Development
4.5 Authority(IRDA)
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 Changing perception of Indian
4.6 Consumers
Changing Face of Indian Insurance
4.7 Industry
5. Functioning of insurance industry 43-46
5.1 Insurer’s business model
5.2 Investment management
5.3 Key ratios and terms
5.4 Requirements of an insurance risk
5.5 Various types of insurance products
6 Bajaj Life Insurance Company 47-56
7 Introduction to Research Study 57-60
Distribution of insurance product
Effective marketing strategies for 61-67
8 insurance companies
Bajaj Allianz Investment on
Advertisement
9 Competitors of Bajaj Life Insurance 68-80
10 Comparison of ULIP products 81-85
11 Survey and Results 86
12 Questioner 87-89
13 Conclusions and findings 90-99
14 SWOT Analysis 100
16 Conclusions 102
17 Recommendations 103
18 Reference Section 104
Annexure 1 – Reference and 104
bibliography
Annexure 2 - Questionnaire 105-
108

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 PREFACE

The liberalization of the Indian insurance sector has been the subject
of much heated debate for some years. The policy makers where in the
catch 23 situation wherein for one they wanted competition,
development and growth of this insurance sector which is extremely
essential for channeling the investments in to the infrastructure sector.

At the other end the policy makers had the fears that the insurance
premium, which are substantial, would seep out of the country; and
wanted to have a cautious approach of opening for foreign participation
in the sector.

As one of the rare occurrences the entire debate was put on the back
burner and the IRDA saw the day of the light thanks to the maturing
polity emerging consensus among factions of different political parties.
Though some changes and some restrictive clauses as regards to the
foreign participation were included the IRDA has opened the doors for
the private entry into insurance. Whether the insurer is old or new,
private or public, expanding the market will present multitude of
challenges and opportunities. But the key issues, possible trends,
opportunities and challenges that insurance sector will have still remains
under the realms of the possibilities and speculation. What is the likely
impact of opening up India’s insurance sector.

The large scale of operations, public sector bureaucracies and

cumbersome procedures hampers nationalized insurers. Therefore,
potential private entrants expect to score in the areas of customer
service, speed and flexibility. They point out that their entry will mean
better products and choice for the consumer. The critics counter that the
benefit will be slim, because new players will concentrate on affluent,
urban customers as foreign banks did until recently. This seems to be a
logical strategy. Start-up costs-such as those of setting up a conventional
6
distribution network-are large and high-end niches offer better returns.
However, the middle market segment too has great potential. Since
insurance is volumes game. Therefore, private insurers would be best
served by a middle-market approach, targeting customer segments that
are currently untapped.
Executive Summary

Monopoly of LIC has been broken to make Indian Insurance to

change its face and pace to tap the market and to make the new
challenges in it. Insurance in India is not about India only; it is an open
sector for the private players. The name which you would see in Indian
insurance market is something like: - BAJAJ (Indian company) +
Allianz (foreign player), TATA (Indian company) + Aig (foreign player)
and so many like them. Companies now are tapping a lot of ways to
capture the market and hence adopting different ways to hold the large
portion of the market. My project was to understand the different
marketing strategies adopted by the companies to increase their market
share and along with it meeting their own targets to achieve the position
of no.1 in respective field or segment of the market. My summer training
learning helped me a lot to complete my project in order to learn a lot of
things of the corporate. As a project trainee the first task given to me
was to understand the basic behavior of the Employee of insurance
company in order to influence the market according to the our target
competition. For this we did developed a questionnaire and I did my
survey in important location of Jodhpur city.

Bajaj Group is one of the India's largest and most respected business
groups. Bajaj Allianz Insurance Company is one of the leading insurance
companies that provide both life insurance as well as general insurance.
This pioneer company is a joint collaboration between the Allianz AG,
and Bajaj Auto. They own the company in the ratio of 26:74.Bajaj
Allianz Insurance Company is having different insurance policies. At the
end of the project people will be knowledgeable about various insurance
organizations and different products taking into considerations fifty
sample sizes in Jodhpur city.

7
 Project is Study of insurance sector and competitiveness with the
special reference to Bajaj Allianz Life Insurance Company Ltd. To
get to know a questionnaire has been prepared which contains open
ended and close ended questions. For collecting the data field survey
method, personal interview technique has been used. Secondary data has
been collected from the company. The data collected are represented
into suitable tabular forms for drawing inferences. A quantitative
technique like averages, percentages, range, two-way tables, has been
applied as per the requirement. For the representation of data various
charts and graphs are used as per requirement.
Cha pter 1

Project proposed
Agency business model of different insurance companies-
competitive strategies.
Different agencies of different insurance companies are having some
strategies to survive in the market. Their strategies may be in the form
of:
 How they target their customers.
 How they make their advisors active.
 How they make their operational and sales department effective.
 How they promote their employees.
 How they handle the conflict in agency.

Objective of the project:

Main objective of the project is to find out the strategies of different
insurance agencies and evaluate them. Project is about to penetrate the
competitors of Bajaj Allianz Life Insurance.

Conclusion of this project can give an idea of strategies of different

companies which may be helpful to the company. Now days all the
insurance companies in India are trying to establish themselves in the
competitive market. They are introducing innovative marketing
strategies to survive in the market. Many other private companies are
looking to enter in the Indian insurance market .so it is very essential to
a company to innovate their marketing strategies in terms of

8
  Recruiting their advisors
 To make their advisors active
 Well educated and capable employee in the agency
 Marketing of their products
 Deployment of their products
 Targeting the right and potential customers
 Differentiating from other companies
 Future plan of the company
This study consists of to find out the marketing strategies of different
insurance companies which are the competitors of Bajaj Allianz Life
insurance. This research requires the interview of branch managers of
different insurance companies and find out their branches are working in
terms of above mentioned factors.
Methodology :
Research is totally based on primary data. Secondary data can be used
only for the reference. Research has been done by primary data
collection, and primary data has been collected by meeting with the
branch and agency manager of different insurance agencies and branches
in Jodhpur City. Data collection has been done through by giving
structured questioner. Research has been done after 50 branch managers
or agency manager & agents. This study will be based on judgment
sampling and this research is skewed to organization level. This is an
exploratory type of research. And this research needs further study also
Research is a kind of pilot study.

Sampling :
Sample size has been taken by judgment sampling. Judgment
sampling is a process in which the selection of a unit, from the
population is based on the pre judgment. This research requires the
survey of different insurance agencies in Jodhpur city. So research
concentrates on the branch or agency manager of different insurance
companies. So the selection of unit for this research has been judged by
the researcher. Sample size for this research is 50.

Limitations:
 Time limitation
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  Research has been done only in Jodhpur City.
 Companies did not disclose their secrets data and strategies.
 Possibility of Error in data collection.
 Possibility of Error in analysis of data due to small sample size.

REVIEW OF LITERATURE

The literature on Indian life insurance industry includes books, theses,

dissertations, study reports and articles published by researchers and
academicians in different periodicals. The available literature for the
present study is given below:

Stowe D. John (1978) examined several hypotheses derived from a

simple chance-constrained model of life insurance company portfolio
using a cross-sectional, time series panel of fifteen annual observations
for ninety two large U.S. life insurance companies. Usual yield variables
and non yield variables such as the relative amount of surplus and the
cost of reserve liabilities were significant determinants of the
composition of life insurance company portfolios. It was observed that
portfolio adjustments occurred more rapidly than previously reported i n
the literature.

Buser Stephen A., Smith Michael L. (1983) applied Mean Variance

Model expressing the optimal amount of insurance in terms of two
components: the expected value of the wage claim and the risk return
characteristics of the insurance contract. The model thus offered an
appealing way to formulate the life insurance problem in a portfolio
context. Implications of the model for the functioning of a life insurance
market were examined along with explanation of existing accidental
death contracts. It was summarized that the accidental death contract
appeals to the risk-tolerant policy owner but has characteristics similar

10
to a gambling contract because the amount of coverage does not depend
on the value of the wage claim.

Mary A. Weiss (1986) illustrated a method for measuring

productivity for life insurers. New techniques for measuring output of
life insurers were developed and it was developed using total factor
productivity approach for two sample insurers i.e. stock and mutual
insurer for five year intervals. The applicability of the output and
productivity measurement methodologies developed is not limited to the
specific insurers studied, but rather can be used as a guide in measuring
the productivity of any life insurer or the life insurance industry in
general.

Martin F. Grace and S t e p h e n G. Timme (1992) reported

estimates of overall a n d product specific scale economies using sample
of four hundred and twenty three U . S . life insurers. The study
suggested that the magnitude of scale economies and cost
complementarities may vary with the scale and mix of outputs. In
contrast, previous

studies only provide a single point estimate of industry cost

characteristics u s i n g the sample mean output vector. This study,
therefore, provides a more complete

representation of the industry’s cost characteristic and, in turn, new

insights into decisions related to the optimal scale and mix of outputs.

Duane B. Graddy, Ghassem Homaifar, Kenneth W.

Hollman (1992)

analyzed the market response of stock returns of insurers to the

formulation, debate and enactment of the Tax Reform Act of 1986.
Provisions of the Tax Reform Act showed increases in the effective tax
rates of insurers despite the proposed lowering of marginal rates. The
stock prices of insurers reacted negatively in the formulation. Debate
and Committee mark up phases of the legislative process. Significant
abnormal returns were not evidenced in the enactment phase.
11
 Mayers David and C l i f f o r d W. Smith, Jr. (1992) found that the
compensation of mutual executives and mutual subsidiary executives is
lower than that of stock executives and stock subsidiary executives in
life insurance industry, Moreover, the compensation of mutual
executives is less responsive to firm performance than that of stock
executives. This evidence is consistent with the existence of differences
in corporate investment opportunity sets and resulting differences in
required managerial discretion between mutual and stock life insurance
companies.

Akhigbe Aigbe, Stephen F.Borde, Jeff Madura (1993) measured

the share price response of insurers to increase in the dividend and
matched control samples of banks and industrial firms that are similarly
assessed. It was found that the share price response for insurers is
positive and significant. The magnitude of the response for life insurers
is smaller than that of other types of insurers or industrial companies but
is greater than that of banks. This result may be due to the relatively low
level of capital maintained by life insurers. A cross-sectional analysis
also suggested that the share price responses across insurers are not
related to firm-specific characteristics.

Adams Mike (1997) examined empirically the determinants of audit

committee formulation in life insurance firms. The study tested six
hypotheses, namely whether the existence of audit committees is related
to organizational form, firm size, leverage, asset in place, reinsurance
and total monitoring costs using pooled 1991-1993 data from New
Zealand’s life insurance industry. Fixed effects regression was used to
arrive at parametric estimates. The results indicated that consistent with
expectations, audit committees appear to be positively associated with
large entities, high leverage companies and firms with high total
monitoring expenditures. However, the variables such as organizational
form, assets in place and reinsurance were not found statistically
significant. Thus, the study provides mixed empirical results.

Hirofumi Fukuyama (1997) investigates productive efficiency and

productivity changes of Japanese life insurance companies by focusing
12
primarily on the ownership structures (mutual and stock) and economic
conditions (expansion and recession). The study indicates that mutual
and stock companies possess identical technologies despite differences
in incentives of managers and in legal form, but productive efficiency
and productivity performances differ from time to time across the two
ownership types under different economic conditions.

Adams Mike, Hossain Mahmud (1998) explained differences in the

level of information which is being disclosed voluntarily by life
insurance companies in their annual reports. The study thus specified the
relation between voluntary disclosure and eight explanatory variables
representing major construct of the managerial discretion hypothesis in
the form of fixed effects regression model. The data for the year 1988 to
1993 was drawn from New Zealand’slife insurance industry. It was
found that the organizational form, firm size, product diversity and
distribution system are positively related to the level of voluntary
disclosure as implied by the managerial discretion hypothesis. Non
executive directors and reinsurers are those two independent variables
which were observed to be significant in opposite direction.

13
 .

Ranade and Ahuja (1999 overview insur

Ajit Rajeev presented an of life ance
operatio Ind a identified emerging strategic issues in
ns in ia nd the the light of
Liberali an impen pri se entry insurance. need
zation d the ding vate ctor into The for
Pri se ent h b justifie the basis of enhancing the
vate ctor ry as een d on efficiency of
operations, grea de a penetration of life
achieving a ter nsity nd insurance in the
Co a for mobilizatio l terms savings for gesta
untry nd greater n of ong long tion

infrastructure projects. In the wake of such coming competition, the

LIC, with its 40 years of experience and wide reach, is at an
advantageous position. However, unless it addresses strategic issues
such as changing demography and demand for pensions, demand for a
wider variety of products and having greater freedom in its investments.

LIC may find it difficult to adapt to liberalized scenario.

Pant Niranjan (1999) by considering the impact of liberalization and

Insurance Bill 1999 on insurance sector stated that this would result in
increasing involvement of the large and powerful insurance companies
of the world in the Indian insurance industry. The effect was uncertain as
this could work as an opportunity as well as a challenge for the life
insurers. So

it was stressed that it is essential to take this in an encouraging

manner for turning this involvement of private sector players into a
positive factor of overall growth. It was

also mentioned that such an effort would, however, require the

support of a clearer and more cogent legislation than the Insurance
Regulation and Development Bill 1999.
14
 Rao D. Tripati (1999) developed a proper perspective of the ongoing
debates on the privatisation and globalisation of the insurance sector. A
systematic study of the structure and pattern of growth of the Indian
insurance industry is essential. An analysis of

pattern of growth of life insurance industry since its nationalisation

in 1956 has been carried out indicators a r e compared with the related
macro variables. The analysis reveals that average sum assured per
policy has declined in real terms. The increase in the rural business
might involve higher transaction costs in the absence of adequate
infrastructure facilities in rural areas. But income and outgo has shown
that even with lower sum assured and increase in rural business the LIC
has succeeded in converting a growing amount of annual premium
income in to life insurance fund. The outgo as a proportion of income
declined partly due to the decline in death benefits and expense in
management.

Yates Jo Anne (1999) examined the early adoption and use of

computers by life insurance companies in 1950’s using Anthony
Giddens Structuration Theory as theoretical lens. It helped to know how
pre computer punched card tabulating technology was used in insurance
operations and use of computers in early computer era. Most of the
times, it leads to expect the reinforcement of existing structures. It is
also helpful in understanding the new ways and innovative uses of
computer technology in insurance.

Grosen Anders, Peter Lochte Jorgensen (1999) analyzed one of the

most common life insurance products i.e. participating (or 'with profits')
policy and showed that the typical participating policy can be
decomposed into a risk free bond element, a bonus option and a
surrender option. A dynamic model was constructed in which these
elements can be valued separately using contingent claims analysis. The
impact of various bonus policies and various levels of the guaranteed
interest rate was analyzed numerically and it was found that values of
participating policies were highly sensitive to the bonus policy, that
surrender options can be quite valuable, and that LIC solvency can be
15
quickly jeopardized if earning opportunities deteriorate in a situation
where bonus reserves are low and promised returns are high.

Cummins J. David, Sharon Tennyson and Mary A. Weiss (1999)

examined the relationship between mergers and acquisitions, efficiency
and scale economies in the US life insurance industry. Cost and revenue
efficiency was estimated for the period of 1988-1995 using data
envelopment analysis (DEA). The Malmquist methodology is used to
measure changes in efficiency over time. It was found that acquired
firms achieve greater efficiency gains than firms that have not been
involved in mergers and acquisitions. Firms operating with non
decreasing returns to scale and financially vulnerable firms are more
likely to be acquisition targets. Overall, mergers and acquisitions in the
life insurance industry have had

16
 a beneficial effect on efficiency.

Segal Dan (2000) estimated the acquisition and maintenance costs

associated with life policies as a function of the amount of insurance and
number of policies of an insurer by estimating a cost function. The final
sample consists of 448 firms and the study period includes years from
1995 to 1998. Several statistical characteristics of the costs such as mean
and median of the sample were examined. The data indicates that there
is a large variation among life insurance companies. It was found that
the costs associated with life policies of the largest insurers are much
higher than the corresponding costs of other firms. Comparing the costs
between “branch firms” and non-branch firms” it was revealed that the
costs of branch firms are generally higher than that of non branch firms.

Rao D. Tripati (2000) explained the macroeconomic implications of

privatization and foreign participation in the insurance sector. It was
obtained that the Life Insurance Corporation (LIC) of India is dominant
in the overall industry in two aspects: pooling and redistributing risks
across millions of policyholders and in performance of financial
intermediation. Therefore, the issue of privatization and foreign
participation must be approached cautiously with a step by step
approach and should be preceded by microeconomic institutional and
legal reforms.

Sinha Tapen (2002) examined the institution of insurance in India.

Over the past century, Indian insurance industry has experienced big
changes. It started as a fully private system with no restriction on foreign
participation. After the independence, the industry went to the other
extreme. It became a state owned monopoly. In 1991, when rapid
economic changes took place in many parts of the Indian economy,
nothing happened to the institutional structure of insurance: it remained
a monopoly. Only in 1999, a new legislation came into effect signaling a
change in the insurance industry structure. It was examined that what
might happen in the future when the domestic private insurance
companies are allowed to compete with some foreign participation.
Because of the time dependence of insurance contracts, it is highly
unlikely that these erstwhile monopolies are going to disappear.
17
 Baranoff Etti G., Sager Thomas W, (2002) explained the impact of
life risk based capital (RBC) regulation on relation between capital and
risk in the life insurance industry. To examine this issue, simultaneous
equation partial adjustment model was used. Three equations which
express the interrelations among capital and two measures of risk
(product

18
 risk and asset risk) were used. The asset-risk measure used in this
paper reflects credit or solvency risk as in RBC. Product risk assessment
for life insurance products is rationalized by transaction cost economics
contractual uncertainty. A significant finding is that for life insurers the
relation between capital and asset risk is positive. This agrees with prior
studies for the property/casualty insurance industry and some banking
studies. But the relation between capital and product risk is negative.
This is consistent with the hypothesized impact of guarantee funds in
other studies. The contrast between the positive relation of capital to
asset risk and the negative relation of capital to product risk underscores
the importance of distinguishing these two components of risk.

Adams Mike and Philip Hardwick (2003) stated that the insurance
industry claims tend to constitute the major proportion of total annual
outgoings across almost all product lines. The study develops a cost
function of insurance claims and applies the model to 1988-93 data from
the United Kingdom and New Zealand life insurance industry. It found a
similar set of results for the two countries. In general, the results support
the hypothesis that larger life insurance firms on average face bigger
claims to premium ratios than smaller life insurance firms. The evidence
concerning the relationships between claims, the composition of output,
between claims and the degree of reinsurance is mixed but there is clear
support for the view that stock firms have a less severe claims
experience than mutuals. It was concluded that the model provides
intuitive insights into the determinants of insurance claims, which could
help to stimulate and direct further research.

Hautcoer Pierre Cyrille (2004) revealed that the French life

insurance industry remained underdeveloped in comparison with other
countries of similar financial development during the period between
1870 and 1939. The study explained that the wide fluctuations in the
insurance industry are the outcomes of technical peculiarities and their
interaction with macroeconomic fluctuations. Nevertheless, these
fluctuations are not sufficient to explain the industry’s long term
stagnation. Low returns to clients were mainly due to their conservative
investment strategy. It was suggested to impose regulations and barriers
19
to access of competitors to the market. This will lead to maintaining a
hold on a small but very profitable market.

Paul J. M. Klumpes (2004) applied performance benchmarking to

measure the profit and cost efficiency of UK life insurance products.
These products are required to be

20
 distributed through either independent financial advisers (IFA) or
appointed and/or company representatives (AR/CR) as per polarization
regulations. Relative profit and cost efficiencies are assessed using the
fourier flexible form of econometric procedure and are based on detailed
product level disclosure information. United Kingdom life insurance
firms employing IFA distribution systems are found to be more cost and
profit inefficient than AR/CR firms.

Ennsfellner Karl C., Danielle Lewis, Randy L. Anderson (2004)

examines the developments in the production efficiency of the Austrian
insurance market for the period 1994-1999 using firm-specific data on
life/health and non-life insurers obtained from the Austrian Insurance
Regulatory Authority. The article uses a Bayesian stochastic frontier to
obtain aggregate and firm specific estimates of production efficiency.
The study provides strong evidence that the process of deregulation had
positive effects on the production efficiency of Austrian insurers. The
life/health and non-life firms showed similar patterns of development in
that they were less efficient during the years 1994-1996 and significantly
more efficient in 1997-1999. If the Austrian experience is representative,
similar benefits from deregulation may be expected for the Central and
Eastern European countries that prepare for the accession to the
European Union.

Tone Kaoru, Biresh K. Sahoo (2005) applies a new variant of data

envelopment analysis model to examine the performance of Life
Insurance Corporation (LIC) of India for a period of nineteen years. The
findings show significant heterogeneity in the cost efficiency scores over
the observation period. A decline in performance after 1994–1995 may
be due to the huge initial fixed cost undertaken by LIC in modernizing
its operations. A significant increase in cost efficiency in 2000–2001
may prove to be a cause for optimism that LIC may now be realizing a
benefit from such modernization.

James C.J. Hao, Lin Yhi Chou (2005) estimated the translog cost
function for twenty-six life insurance companies using data for twenty
three years (1977–1999). The distribution free approach (DFA) and
21
Battese and Coelli (DFP) model was employed to estimate inefficiency.
Then the constants or residuals were tested to see the relation of so
called X efficiencies with market share, diversified product strategy,
scale efficiency and market growth ratio and in the results efficiency was
found to be related with the occurrence of market share, diversification
products strategy and scale efficiency.

22
 Palli Madhuka (2006) measured a life assurance security gap to
examine the extent of underinsured people. This gap is computed as the
mean ratio of recommended insurance and actual insurance to household
earnings. The research provides estimates of the life insurance gap to
maintain living standards of dependents after death of the primary wage
earner. It is because, inadequate protected families put burden of their
welfare on public resources. The primary drivers of demand for risk
security are age, income, affordability, wealth and desire to protect
income from inflation. Though aggregate demand is driven by these
factors, various researches have shown that there is little correlation
between a specific family's need for security and its actual purchase of
insurance. According to one estimate mentioned in sigma, in the event of
a spouse's death, nearly one third of secondary earners between the ages
of twenty two to thirty nine would suffer at least a decline of forty
percent in their standard of living.

Sherries Micheal (2006) explains the linkage between solvency,

capital allocation and fair rate of return in insurance. A method to
allocate capital in insurance business is developed based on an economic
definition of solvency and the market value of the insurer balance sheet.
Solvency and its financial impact are determined by the value of the
insolvency exchange option. The allocation of capital is determined
using a complete markets arbitrage free model and consistency in
allocated capital with the economic value of the balance sheet assets and
liabilities is observed as a result.

Yang Zijiang (2006) conducted a study in order to know how to

achieve efficiency systematically for the Canadian life and health
insurance industry. For this purpose an integrated approach of
production and investment performance for the insurers was used which
provided management overall performance evaluation. A two stage data
envelopment analysis model was created to provide valuable managerial
insights when assessing the dual impacts of operating and business
strategies for the industry. The results showed that the Canadian life and
health insurance industry operated fairly efficiently during the period

23
examined (the year 1998). In addition, the scale efficiency was also
found in this study.

Sinha Ram Pratap (2007) compared thirteen life insurance

companies in respect of technical efficiency for the period 2002-2003 to
2005- 2006 using the assurance region approach of DEA. The
comparison of mean technical efficiency scores reveal that mean
technical efficiency has improved in 2003-2004 relative to 2002-2003,
remained on the same level in 2004-2005 and declined in 2005-2006.
This is likely because of divergence in the

24
 performance across the life insurers. In the last two years, most of the
life insurers have exhibited increasing returns to scale. This is indicative
of the wide opportunities that the insurers have for them.

Sinha Ram Pratap (2007) estimated cost efficiency of the life

insurance companies operating in India for the period 2002-03 to 2006-
07 using the new cost efficiency approach suggested by Tone (2002) and
suggested an upward trend in cost efficiency of the observed life insurers
between 2002-03 and 2004-05. However, the trend was reversed for the
next two years i.e. 2005- 06 and 2006-07.This has been so because of
the fact that during the initial years of observation mean cost efficiency
of the private life insurers was rising but the trend was reversed in 2005-
06 and 2006-07.

Vivian Jeng, Gene C. Lai, Michael J. Mcnamara (2007) examined

the efficiency changes of U.S. life insurers before and after
demutualization in the 1980s and 1990s. Two frontier approaches (the
value-added approach and the financial intermediary approach) were
used to measure the efficiency changes. In addition, Malmquist indices
were also used to investigate the efficiency and productivity change of
converted life insurers over time. The results using the value added
approach indicate that demutualized life insurers improve their
efficiency before demutualization. On the other hand, the evidence using
the financial intermediary approach shows the efficiency of the
demutualized life insurers relative to mutual control insurers deteriorates
before demutualization and improves after conversion. The difference in
the results between the two approaches is due to the fact that the
financial intermediary approach considers financial conditions. The
results of both approaches suggest that there is no efficiency
improvement after demutualization relative to stock control insurers.
There is, however, efficiency improvement relative to mutual control
insurers when the financial intermediary approach is used.

Desheng W, Zijiang Yan, Sandra vela, Liang (2007) created a new

data envelopment analysis model to provide valuable managerial
25
insights when assessing the dual impacts of operating and business
strategies for Canadian life and health insurance industry. This problem
oriented new DEA model is different from classical DEA model as it
can simultaneously assess the production and investment performance of
insurers. The mathematical solution is provided for this new model and
the results show that the Canadian

26
 L&H insurance companies operated very efficiently for the examined
three year period (1996–1998). In addition, no scale efficiency in the
Canadian L&H insurance industry is found in this study.

Sinha Tapen (2007) affirmed the journey of life insurance sector in

India. The study pointed out that it was 1956 when life insurance was
nationalized and a monopoly was created. In 1992, a Government
appointed committee recommended that private companies should be
allowed to operate. The private sector was admitted into the insurance
business in 2000. It was cited that the insurance market achieved
nineteenth rank in 2003. Therefore, it was also expected that this strong
economic growth would make this industry one of the potentially largest
markets in the future.

Young Virgiana R (2007) developed a pricing rule for life insurance

under stochastic mortality in an incomplete market. It was assumed that
life insurers are in need of compensation for its risk in the form of a pre
specified instantaneous Sharpe ratio. The results emerging from the
paper were that, as the number of contracts approaches infinity, a linear
partial differential equation is solved by price per contract. Another
important result is that, even if the number of contracts approaches
infinity, the risk adjusted premium is greater than net premium only if
hazard rate is stochastic. Thus, the price reflects the fact that systematic
mortality risk can not be eliminated by selling more life insurance
policies.

Sinha Ram Pratap (2007) stated that subsequent to the passage of

the Insurance Regulatory and Development Authority (IRDA) Act,
1999, the life insurance market in India underwent major structural
changes in recent years. Between March 2000 and March 2005, the
number of life insurance companies operating in India has increased
from one to fifteen. As on March 31, 2005, the private sector life
insurers enjoyed nearly ten percent of the premium income and nearly
twenty-five percent of the new business. In view of the changing
scenario of competition in the life insurance sector, the paper compares
thirteen life insurance companies for the financial years 2002-03, 2003-
27
04 and 2004-05 in respect of technical efficiency and changes in total
factor productivity. For the purpose of computation of technical
efficiency and total factor productivity, the net premium income of the
observed life insurance companies has been taken as the output, and
equity capital and the number of agents of insurance industries have
been taken as the inputs. The results suggest that all the life insurers
exhibit positive total factor productivity growth during the period.

28
 Adams Mike, Philip Hardwick, Hong Zou (2008) tested the two tax
related arguments regarding use of reinsurance for a period of ten year
data from 1992 to 2001 for a sample of United Kingdom (UK) life
insurance firms. These two arguments were the income volatility
reduction and the income level enhancement arguments. It was found
that UK life insurers with low marginal tax rates tend to use more
reinsurance and vice versa. Moreover, the volatility reduction argument
is not supported as tax convexity is found to have no significant impact
on the purchase of reinsurance.

Berry Stolzle Thomas R. (2008) examined liquidation strategies and

asset allocation decisions for property and casualty insurance companies
for different insurance product lines. The study proposed a cash flow
based liquidation model of an insurance company and analyzed selling
strategies for a portfolio with liquid and illiquid assets. Within this
framework, the influence of different bid ask spread models on the
minimum capital requirement, a solution set consisting of an optimal
initial asset allocation and an optimal liquidation strategy is also studied.
It showed that the initial asset allocation, in conjunction with the
appropriate liquidation strategy, is an important tool in minimizing the
capital committed to cover claims for a predetermined ruin probability.
This interdependence is of importance to insurance companies,
stakeholders and regulators.

Zweifel Peter, Christoph Auckenthalert (2008) calls attention to a

difficulty with insurer’s investment policies that seems to have been
overlooked so far. There is the distinct possibility that insurers cannot
satisfy the demands of different stakeholders in terms of expected
returns and volatility. While using the capital asset pricing model as the
benchmark, the study distinguishes two groups of stakeholders that
impose additional constraints. One is "income security" in the interest of
current beneficiaries and older workers; the other is "predictability of
contributions" in the interest of contributing younger workers and
sponsoring employers. It defines the conditions for which the
combination of these constraints results in a lack of feasibility of

29
investment policy. Minimum deviation from the capital market line is
proposed as the performance benchmark in these situations

S. Hun Seog (2008) develops an informational cascade model based

on Bikhchandani, Hirshleifer, and Welch (1992) with applications to the
insurance market. The study investigates the existence of cascades and
the effects of public information on cascades. The result applies to
insurance markets to explain how catastrophic events may lead to
increased

30
 demand, how loss shocks may lead to insurance cycles and how the
heterogeneity of policyholders affects the choice of limited auto
insurance in Pennsylvania.

Lai Gene C., Michael J. McNamara, Tong Yu (2008) examines the

wealth effect of demutualization initial public offerings (IPO’s) by
investigating under pricing and post conversion long run stock
performance. The results suggest that there is more "money left on the
table" for demutualized insurers than for non demutualized insurers and
show that higher under pricing for demutualized firms can be explained
by greater market demand, market sentiment and the size of the offering.
The study presents evidence that the out performance in stock returns is
mainly attributable to improvement in post demutualization operating
performance and demand at the time of the IPO’s. The combined results
of under pricing and long term performance suggest that the wealth of
policyholders who choose stock rather than cash or policy credits is not
harmed by demutualization.

Wen Min Ming, Anna D Martin, Gene Lai, Thomas J. O’Brien

(2008) points out that due to the highly skewed and heavy tailed
distributions associated with the insurance claims process, the study
evaluate the Rubinstein-Leland (RL) model for its ability to improve the
cost of equity estimates of insurance companies because of its
distribution free feature. The implication is that if the insurer is small
(assets size is less than $2,291 million), and/or its returns are not
symmetrical (the value of skewness is greater than 0.509 or less than
−0.509 then it should use the RL model rather than the CAPM to
estimate its cost of capital.

Thomas Gerstner, Michael Griebel, Markus Holtz, Ralf

Goschnick, Marcus Haep (2008) investigated the impact of the most
important product and management parameters on the risk exposure of
the insurance company and for this purpose, the study proposed a
discrete time stochastic asset liability management (ALM) model for the
simulation of simplified balance sheets of life insurance products. The
model incorporates the most important life insurance product
31
characteristics, the surrender of contracts, a reserve dependent bonus
declaration, a dynamic asset allocation and a two factor stochastic
capital market. Furthermore, the model is designed to have a modular
organization which permits straightforward modifications and
extensions to handle specific requirements. The results showed that the
model captures the main behaviour patterns of the balance sheet
development of life insurance products.

32
 Gatzert Nadine, Gudrun Hoermann, Hato Schmeiser (2009)
attempted to quantify the effect of altered surrender behavior, subject to
the health status of an insured, in a portfolio of life insurance contracts
on the surrender profits of primary insurers. The model includes
mortality heterogeneity by applying a stochastic frailty factor to a
mortality table. The study additionally analyzed the impact of the
premium payment method by comparing results for annual and single
premium payments.

Fier G. Stephen, James M Carson (2009) provided an evidence of a

significant relationship between catastrophes and life insurance demand,
both for states directly affected by the event and for neighboring states.
For this purpose, U.S. state level data for the period of 1994 to 2004 was
examined. It was suggested that the occurrence of a catastrophe may
lead to increases in risk perception, risk mitigation and insurance
purchasing behaviour. Similarly, the study posits that the occurrence of
catastrophes also may be associated with an increased demand for
coverage against mortality risk.

Chatterjee Biswajit, Ram Pratap Sinha (2009) estimated cost

efficiency of the life insurance companies operating in India for the
period 2002-03 to 2006-07 using the new cost efficiency approach
suggested by Tone (2002). The results suggest an upward trend in cost
efficiency of the observed life insurers between 2002-03 and 2004-05.
However, the trend was reversed for the next two years i.e. 2005-06 and
2006-07. This has been so because of the fact that during the initial years
of observation, mean cost efficiency of the private life insurers was
rising but the trend was reversed in 2005-06 and 2006-07.

Rao M.V.S. Srinivasa (2009) analyzed the impact of life insurance

business in India and concluded that, India’s insurance industry
accounted for twelve percent of total Gross Domestic Product (GDP) in
2000-01. It was the year in which the insurance sector was liberalized.
The percentage increased to 20.1 percent in 2005-06. The market share
of the private insurers and LIC in terms of policies underwritten was
10.92 percent and 89.08 percent in 2005-06 as against 8.52 percent and
33
91.48 percent respectively in 2004-05. Total pay-out by the life
insurance industry towards commissions in 2005-06 was Rs. 8,643.29
crore as against Rs. 7,104.46 crore in 2004-05. With a population of
more than one billion, sixteen percent of the rural population was
insured at that time whereas average population insured in India was
twenty percent. Since, seventy percent of the Indian population lives in
rural areas, the potential is very attractive.

34
 Mcshane Michael K., Cox Larry A., Butler Richard J. (2009)
delved that the regulatory separation theory indicates that a system with
multiple regulators leads to less forbearance and limits producer gains
while a model of banking regulation developed by Dell’Ariccia and
Marquez in 2006 predicts the opposite. Fragmented regulation of the US
Life insurance industry provides an especially rich environment for
testing the effects of regulatory competition. The study found positive
relations between regulatory competition and profitability measures for
this industry, which is consistent with the Dell’Ariccia and Marquez
model. The results have practical implications for the debate over federal
versus state regulations of insurance and financial services in the US.

Xiaoling Hu, Cuizhen Zhang, Jin-Li Hu, Nong Zhu (2009)

examined the efficiencies of China's foreign and domestic life insurance
providers. The study was conducted with a purpose to explore the
relationship between ownership structure and the efficiencies of insurers
while taking into consideration other firm attributes. The data
envelopment analysis (DEA) method was used to estimate the
efficiencies of the insurers based on a panel data between 1999 and
2004. The results indicate that the average efficiency scores for all the
insurers are cyclical. Both technical and scale efficiency reached their
peaks in 1999 and 2000 and gradually reduced for the rest of the period
under examination until 2004 when average efficiency were improved
again. The regression results showed that the insurers market power, the
distribution channels used and the ownership structures may be
attributed to the variation in the efficiencies. Based on the research
findings and the discussions, the study also provided several
recommendations for policy makers, regulators and senior executives of
insurers.

Debabrata Mitra & Amlan Ghosh (2009) stated that life insurance
is of paramount importance for protecting human lives against accidents,
causalities and other types of risks. Life insurance has been dominated
by public sector in India; however, with the liberalization of Indian
economy, private sector entry in life insurance has got momentum. The
public sector insurance companies, particularly, LIC of India has
35
emphasized on exploiting the potential of rural India as it provides
immense scope even in the post globalised era. Therefore, the paper
highlighted emerging trends and patterns in Indian insurance business
during post globalised era. It also focuses on the role of private partners
in life insurance in India.

36
 Mayer David, Clifford W. Smith (2010) explained that the
monitoring by outside board members and incentive compensation
provisions in executive pay packages are alternative mechanisms for
controlling incentive problems between owners and managers. The
control hypothesis suggested that if incentive conflicts vary materially,
those firms with more outside directors also should implement a higher
degree of pay for performance sensitivity. The evidence of the study is
consistent with this control hypothesis. It documented a relation between
board structure and the extent to which executive compensation is tied to
performance in mutual. Compensation changes are significantly more
sensitive to changes in return on assets when the fraction of outsiders on
the board is high.

David L. Eckles, Martin Halek (2010) investigates incentives of

insurance firm managers to manipulate loss reserves in order to
maximize their compensation. It is found that managers who receive
bonuses are likely capped and those who do not receive bonus tend to
over reserve for current year incurred losses. However, managers who
receive bonuses that are likely not capped tend to be under reserved for
current year incurred losses. It is also found that managers who exercise
stock options tend to under reserve in the current period.

Jiang Cheng, Elyas Elyasian, I, Tzu-Ting Lin(2010) examined the

market's reaction to New York attorney general eliot spitzer's civil suit
against mega broker Marsh for bid rigging and inappropriate use of
contingent commissions within GARCH framework. Effects on the
stock returns of insurance brokers and insurers were tested. The findings
were as follows: GARCH effects proved to be significant in modelling
broker/insurer returns; the suit generated negative effects on the
brokerage industry and individual brokers. It was suggested that
contagion dominates competitive effects; spillover effects from the
brokerage sector to insurance business are significant and mostly
negative, demonstrating industry integration and information based
contagion was supported, as opposed to the pure-panic contagion.

37
 Huang Hong Chih (2010) exhibited the importance of investment
and risk control for financial institutions. Asset allocation provided a
fundamental investing principle to manage the risk and return trade off
in financial markets. The article proposes a general formulation of a first
approximation of multi period asset allocation modelling for those
institutions who invest to meet the target payment structures of a long
term liability. By addressing the shortcomings of both single period
models and the single point forecast of the mean variance

38
 approach, this article derived explicit formulae for optimal asset
allocations, taking into account possible future realizations in a multi
period discrete time model.

Wang Jennifer L., H.C. Huang, Sharon S. Yang, Jeffrey T. Tsai

(2010) conducted a study to examine the dealing of natural hedging
strategy with longevity risks for life insurance companies. The study
proposed an immunization model which incorporated a stochastic
mortality dynamic to calculate the optimal life insurance annuity product
mix ratio to hedge against longevity risks. The study mode the use of the
changes in future mortality using the well known Lee Carter model and
discuss the model risk issue by comparing the results between the Lee
Carter and Cairns Blake Dowd models. On the basis of the mortality
experience and insurance products in the United States, it was
demonstrated that the proposed model can lead to an optimal product
mix and effectively reduce longevity risks for life insurance companies.

Liebenberg Andre P, James M. Carson, Robert E. Hoyt (2010)

stated that the previous research has examined the demand for life
insurance policy loans using aggregate policy loan data. In contrast, the
study uses a detailed household survey data set containing life insurance
and policy loan information. Four hypotheses traditionally associated
with policy loan demand were tested. The research provided the first
U.S. evidence (in the post world war II period) in support of the policy
loan emergency fund hypothesis. In particular, it was found that the
more detailed emergency fund proxies used revealed a significantly
positive relation between loan demand and recent expense or income
shocks.

Corsaro S., Angelis P.L. De, Perla Z. Marino, Znetti P. (2010)

discussed the development of portfolios valuation system of asset
liability management for life insurance policies on advanced
architectures. The first aim of the study was to introduce a change in the
stochastic processes for the risk sources, thus providing estimates under
the forward risk neutral measure which results for gain in accuracy. The
Monte Carlo method was then introduced to speed up the simulation
39
process. According to new rules of solvency II project, numerical
simulations must provide reliable estimates of the relevant quantities
involved in the contracts. Therefore, valuation process has to rely on
accurate algorithms able to provide solutions in a suitable turnaround
time.

Sinha Ram Pratap (2010) compared fifteen life insurance companies

operating in India from 2005-06 to 2008-09 using the old and new
Revenue Maximizing Approach. The

40
 difference between the two approaches lies in the specification of the
production possibility set. In both the approaches, only the Life
Insurance Corporation of India (LIC) was found to be efficient for the
observed years followed by Sahara life very closely. However, since in
the old approach, the technically inefficient firms are penalized very
harshly, the grand mean technical efficiency score is less than fifty
percent to that in the new approach.

Dutta A. and Sengupta P.P. (2010) focused on the important

investment issue. They tried to answer about whether increasing
investment on IT infrastructure (which is resulting into a technological
innovation in business operation of the private companies) has a
favorable impact on efficiency or not. For the purpose, a panel data set
of twelve private life insurance companies over the financial period
2006-2009 was taken. The efficiency was evaluated by applying Data
Envelopment Analysis (DEA) and calculating the scale efficiency. The
results showed that increasing investment on IT infrastructure had a
positive impact on scale and technical efficiency change if constant and
variable returns to scale assumptions were considered.

Rao Ananth, Kashani Hossein and Marie Attiea (2010) analyzed

the efficiency and productivity issues of the insurance sector from the
policymakers as well as investors view point so as to insulate the
business and financial risks of UAE corporate houses. The paper uses
two inputs of administrative & general expenses and equity & change in
legal reserves versus two outputs of rate of return on investments and
liquid assets to total liability ratio to assess the allocative efficiency of
companies using DEA. The data set for nineteen insurers in the region
was considered for the study. To evaluate the performance of the
insurers, the efficiency is broken down in to technical and scale
efficiency by using malmquist productivity index. Considerable degree
of managerial inefficiency among the insurers with least efficiency in
2000 and highest efficiency in 2004 was observed as a result. Further,
the insurers achieved a mere 0.8 percent annual gain in total factor
productivity over the study period.

41
 Alamelu K. (2011) stated that the insurance sector in India was
dominated by the state owned Life Insurance Corporation (LIC) and the
General Insurance Corporation (GIC) along with its four subsidiaries.
But in 1999, the Insurance Regulatory and Development Authority
(IRDA) bill opened it up to private and foreign players whose share in
the insurance market has been rising. The IRDA is the regulatory
authority of the insurance sector, entrusted with

42
 protecting the interests of the insurance policy holders and regulating,
promoting and ensuring orderly growth of the insurance industry in
India. As financial intermediaries, life insurers tap savings of the public
in the form of premium. In order to sustain public confidence, they have
to maintain their financial credibility intact. In other words, a strong
financial background enables insurance companies to augment their
business. The International Monetary Fund (IMF) suggested a number of
indicators to diagnose the health of the insurance sector. This paper
makes an attempt to analyze the financial soundness of Indian Life
Insurance Companies in terms of capital adequacy, asset quality,
reinsurance, management soundness, earnings and profitability, liquidity
and solvency ratios.

Andreas Milidonis, Konstantinos Stathopoulos (2011) tried to find

the relation between executive compensation and market implied default
risk for listed insurance firms from 1992 to 2007. Shareholders are
expected to encourage managerial risk sharing through equity based
incentive compensation. Thus, it was found that long term incentives and
other share based plans do not affect the default risk faced by firms.
However, the extensive use of stock options leads to higher future
default risk for insurance firms. It was argued that this is because option
based incentives induce managerial risk taking behaviour which seeks to
maximize managerial payoff through equity volatility. This could be
detrimental to the interests of shareholders, especially during a financial
crisis.

Dutta Anirban, Sengupta Partha Pratim (2011) stated that

efficiency is the key concern of policymakers to encourage further
development of the insurance industry as well as for the managers of the
insurance companies to exist profitably in the business in the long run
and used a panel dataset of fourteen life insurance companies over the
period 2004–09, to evaluate their efficiency scores by applying Data
Envelopment Analysis and calculating the scale efficiency. The results
render light on policy design and implementations for future
development of the life insurance industry in India.

43
 Neelaveni V. (2012) stated that the evaluation of financial
performance of the life insurance companies is essentially needed to
select the a best life insurance policy. Therefore, five life insurance
companies are randomly selected at the time of 2002-03 and evaluated in
terms of performance. It is because, with reforms of regulations and
opening up of the insurance sector to the private management in the year
1999, tough competition can be seen in the insurance industry. The
number of general insurance and life insurance companies has been

44
 increasing in the 21st century. The ultimate person is an investor or
customer, who has to get the update information, observe keenly the
performance of the companies and their attractive products.

Charumathi B. (2012) tried to model the factors determining the

profitability of life insurers operating in India taking return on asset as
dependent variable. All the twenty three Indian life insurers (including
one public and twenty two private) were included in the sample for
study and the data pertaining to three financial years, viz., 2008-09,
2009-10 and 2010-11 was used. For this purpose, firm specific
characteristics such as leverage, size, premium growth, liquidity,
underwriting risk and equity capital are regressed against return on
assets. This study led to the conclusion that profitability of life insurers
is positively and significantly influenced by the size (as explained by
logarithm of net premium) and liquidity. The leverage, premium growth
and logarithm of equity capital have negatively and significantly
influenced the profitability of Indian life insurers. The study did not find
any evidence for the relationship between underwriting risk and
profitability.

Srivastava Arnika, Tripathi sarika, Kumar Amit (2012) explained

the contribution of insurance industry to the financial sector of an
economy. It was explored that the growth of the insurance sector in India
has been phenomenal. The insurance industry has undergone a massive
change over the last few years. There are numerous private and public
sector insurance companies in India that have become synonymous with
the term insurance over the years. Offering a diversified product
portfolio and excellent services, many of the insurance companies in
India have managed to make their way into almost every Indian
household.

Chakraorty Kalyan, Dutta Anirban and Partha Pratim Sengupta

(2012) investigate technical efficiency and productivity growth in Indian
life insurance industry in the era of deregulation. The empirical study
uses DEA method and Malmquist productivity index to measure and
decompose technical efficiency and productivity growth respectively.
45
The results suggest that the growth in overall productivity is mainly
attributed to improvement in efficiency. Higher pure technical efficiency
and lower scale efficiency indicate the insurance firms have generally
moved away from the optimal scale over the study period. The truncated
regression exploring the main drivers of efficiency in the long run found
that the claims ratio, distribution ratio and firm-size have positively
influenced technical efficiency.

46
 The study also found that, the firms which had both life and non-life
businesses are more efficient than firms that has only life insurance
business.

Padhi Bidyadhar (2013) focused on the role and performance of

private insurance companies for the period from 2001 to 2012. The
study reflected the performance of selected private insurance companies
in the areas like number of policies floated, amount of premium
collected and the annual growth in the respective areas from 2001 to
2012. It was concluded that the overall performances of all the private
insurance companies are very satisfactory and they need to continue this
pace to penetrate their market more and more.

Sharma Vikas, Chowhan Sudhinder Singh (2013) made an attempt

to analyse the performance of public and private life insurance
companies in India. The data used in the paper covers the period from
2006-07 to 2011-12.For the analysis of data, statistical tools like
percentages, ratios, growth rates and coefficient of variation have been
used. The results showed that the LIC continues to dominate the sector.
Private sector insurance companies also tried to increase their market
share. Private life insurers used the new business channels of marketing
to a great extent when compared with LIC. Investment pattern of LIC
and private insurers also showed some differences. Solvency ratio of
private life insurers was much better than LIC in spite of big losses
suffered by them. Lapsation ratio of private insurers was higher than
LIC and servicing of death claims was better in case of LIC as compared
to private life insurers.

Sinha Ram Pratap (2013) estimated cost efficiency of the life

insurance companies operating in India for the period 2005-06 to 2009-
10 using Farrell and Tone's measure. In both the approaches it was
found that the mean cost efficiency exhibit significant fluctuations
during the period under observation implying significant divergence
from the frontier. The study also decomposes the Farrell measure of cost
efficiency into input oriented technical efficiency and allocative
efficiency. Further the cost efficiency estimates were related (through a
47
censored tobit model) to product and channel composition of the in-
sample insurance players.

T. Hymavathi Kumari (2013) aimed at understanding the life

insurance sector in India and flagging issues relating to competition in
this sector. Therefore, an attempt has been made to study the
performance of life insurance industry in India in post liberalization era.
The performance of public as well as private sector in terms of market
share and growth has been

48
 analyzed and it is stated that rapid rate of India’s economic growth
has been one of the most significant developments in the global
economy. This growth has its roots in the introduction of economic
liberalization of the early 1990s which has allowed India to exploit its
economic potential and raise the population’s standard of living.
Opening up of the financial sector is one of the financial reforms which
the government was to implement as an integral part of structural
reforms and stabilization process of the economy. Insurance has a very
important role in this process. Government allowed the entrance of
private players into the industry. As a result, many private insurers also
came into existence.

Nena Sonal (2013) evaluated the performance of Life Insurance

Corporation of India. The major source of income (Premium Earned)
and the significant heads of expenses (Commission & Operating
Expenses) of LIC are analyzed in order to measure the performance
during the period of study. The study period consists of five years i.e.
2005-2010. The performance evaluation showed consistent increase in
the business of LIC. During the period of the study, no major change in
the performance of the LIC is observed. So it clarifies that the
performance is unchanged and LIC has maintained the market value of
their products.

Gulati Neelam (2014) analyzed the productivity in this paper.

Different variables have been used to calculate the productivity, viz-
New Business Procured per Branch, New Business Per Active Agent,
Number of Policies Per Branch, Number of Policies Per Agent, Premium
Income Per Branch, Premium Income Per Agent, Ratio of Expenses to
Premium Income, Complaints per Thousand Mean Number of Policies
in Force, Percentage of outstanding Claims to total Claims Payable. The
study is based on secondary data. The data has been drawn from annual
reports of LIC and IRDA and further have been tabulated and subject to
statistical calculations like t-value and CGR. It is therefore concluded
that LIC has been able to earn higher rate of return as selected variables
49
(except expenses) have increased significantly. The Compound Growth
Rate has been found positive for income values and negative for expense
and claims payable. As a result customer centered approach is going to
be the most compelling agenda for LIC in the coming years.

Chapter 2

Introduction to insurance

50
 INTRODUCTION

Future is always uncertain and full of risk. It is not certain that what is
going to happen tomorrow. Therefore a man is always worried about
security of property and life. Insurance is a means of meeting out loss
caused by future risks and uncertainties.

“Insurance is a contract between two parties whereby one party called

insurer undertakes in exchange for a fixed sum called premiums, to pay
the other party called insured a fixed amount of money on the happening
of a certain event."

According to Patterson – “Insurance is an agreement between two

parties under which one party undertakes specified future risk of another

51
party and compensates the loss from that risk on payment of some
consideration known as premium payable by the later”.

Insurance may be described as a social device to reduce or eliminate

risk of life and property. Under the plan of insurance, a large number of
people associate themselves by sharing risk, attached to individual.

With the help of Insurance, large number of people exposed to a

similar risk makes contributions to a common fund out of which the
losses suffered by the unfortunate few, due to accidental events, are
made good.

Insurance is a tool by which losses of a small number are

compensated out of funds collected from plenteous. Gradually as
competition increased benefits given by industry to its customers
increased by leaps and bounds. Insurance is a basic form of risk
management which provides protection against possible loss to life or
physical assets. Person who seeks protection against such loss is termed
as insured, and company that promises to honor claim, in case such loss
is actually incurred by insured, is termed as Insurer. In order to get
insurance, insured is required to pay to insurance company a certain
amount called premium. Premium is collected by insurance companies
which acts as trustee to pool created through contributions made by
persons seeking to protect themselves from common risk. Any loss to
the insured in case of happening of an uncertain event is paid out of this
pool. .

Insurance provides:
 Protection to investor.
 Accumulation of savings.
 Channeling these savings into sectors needing huge long term
investment

FUNCTION OF INSURANCE:
52
 Provide protection: The primary function of insurance is to provide
protection against future risk, accidents and uncertainty. Insurance
cannot check the happening of the risk, but can certainly provide for the
losses of risk. Insurance is actually a protection against economic loss,
by sharing the risk with others.

 Collective bearing of risk: Insurance is an instrument to share the

financial loss of few among many others. Insurance is a mean by
which few losses are shared among larger number of people. All the
insured contribute the premiums towards a fund and out of which the
persons exposed to a particular risk is paid.

 Measurement of risk: Insurance determines the probable volume of

risk by evaluating various factors that give rise to risk. Risk is the
basis for determining the premium rate also.

 Provide certainty: Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain
risks may be made more certain.
 Small capital to cover larger risk: Insurance relieves the
businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.

 Contributes towards the development of industries: Insurance

provides development opportunity to those larger industries having
more risks in their setting up. Even the financial institutions may be
prepared to give credit to sick industrial units which have insured
their assets including plant and machinery.

 Means of savings and investment: Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts
the unnecessary expenses by the insured's For the purpose of availing
income-tax exemptions also, people invest in insurance.

53
 Source of earning foreign exchange: Insurance is an international
business. The country can earn foreign exchange by way of issue of
marine insurance policies and various ways.

 Risk free trade: Insurance promotes exports insurance, which makes

the foreign trade free with the help of different types of policies under
marine insurance cover

Insurance business is divided into four classes:

 Marine Insurance

 Fire Insurance

 Miscellaneous Insurance

 Life Insurance

MARINE INSURANCE:
In the development of Insurance history Marine Insurance is of the
oldest time. In ancient times trade between tow countries was through
sea routes. During voyage, there I risk of collision of ships, attack by
pirates sinking of the ship etc. Marine Insurance gives protection against
these sea risks.

FIRE INSURANCE:
The Fire Insurance is next important type of insurance. The owner of
the factory or ship or a residential house may purchase a fire insurance
policy on the payment of nominal premium, and if unluckily the

54
property is party or wholly destroyed by fire the insurance company will
makes good such loss. Thus on payment of a very small sum, we are
tremendous safety.

MISCELLLANEOUS INSURANCE:
Besides these fire insurance , marine insurance, & life insurance
several other types of insurance have recently come into being eg. Motor
Insurance, Crop Insurance, Bad Debts Insurance, Sickness Insurance.
The functions of these type of insurances are very clear form their
names.

LIFE INSURANCE:
Life insurance is a contract under which the insurer (Insurance
Company) in Consideration of a premium paid undertakes to pay a fixed
sum of money on the death of the insured or on the expiry of a specified
period of time whichever is earlier.

A person may insure his life or the life of a person in whom he is

financially interested so that a certain sum becomes payable by the
insurance when death takes place or when the insured attains a certain
age according to the terms of agreement In case of life insurance, the
payment for life insurance policy is certain. The Event insured against is
sure to happen only the time of its happening is not known. So life
insurance is known as `Life Assurance`.

55
 The subject matter of insurance is life of human being. Life insurance
provides risk coverage to the life of a person. On death of the person
insurance offers protection against loss of income and compensate the
titleholders of the policy. If the life of the bread winner of the family is
insured his wife or children will be able to tide over the financial
difficulty after his death.

ROLES OF THE LIFE INSURANCE:

 Life insurance as an investment: - Insurance products yield more
than any other investment instruments and it also provides added
incentives or bonus offered by insurance companies.

 Life insurance as risk cover: - Insurance is all about risk cover and
protection of life. Insurance provides a unique sense of security
that no other form of invest can provide.

 Life insurance as tax planning: - Insurance serves as an excellent

tax saving mechanism too.

IMPORTANCE OF THE LIFE INSURANCE:

 Protection against untimely death: - Life insurance provides
protection to the dependents of the life insured and the family of
the assured in case of his untimely death. The dependents or family
members get a fixed sum of money in case of death of the assured.

 Saving for old age: -After retirement the earning capacity of a

person reduces. Life insurance enables a person to enjoy peace of
mind and a sense of security in his/her old age.

 Promotion of savings: - Life insurance encourages people to save

money compulsorily. When life policy is taken, the assured is to
pay premiums regularly to keep the policy in force and he cannot
get back the premiums, only surrender value can be returned to

56
 him. In case of surrender of policy, the policyholder gets the
surrendered value only after the expiry of duration of the policy.

 Initiates investments: - Life Insurance Corporation encourages

and mobilizes the public savings and canalizes the same in various
investments for the economic development of the country. Life
insurance is an important tool for the mobilization and investment
of small savings.

 Credit worthiness: - Life insurance policy can be used as a

security to raise loans. It improves the credit worthiness of
business.

 Social Security: - Life insurance is important for the society as a

whole also. Life insurance enables a person to provide for
education and marriage of children and for construction of house.
It helps a person to make financial base for future.

 Tax Benefit: - Under the Income Tax Act, premium paid is

allowed as a deduction from the total income under section 80C.

57
 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
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) Free look
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 Free look Period.
9) Surrender
When a customer wants to discontinue with the policy.
Agency business model
In India insurance is sold through mainly four channels.
58
  Through branch
 Through agency
 Through financial institution
 Through banks

Independent agency system means of selling and servicing property

and casualty insurance through agents who represent different
companies. The agents own the records of the policies they sell.
Insurance is now governed by a blend of statutes, administrative
agency regulations, and court decisions. State statutes often control
premium rates, prevent unfair practices by insurers, and guard against
the financial insolvency of insurers to protect insured’s.
In most states, an administrative agency created by the state
legislature devises rules to cover procedural details that are missing from
the statutory framework. To do business in a state, an insurer must
obtain a license through a registration process. This process is usually
managed by the state administrative agency. The same state agency may
also be charged with the enforcement of insurance regulations and
statutes.
Administrative agency regulations are many and varied. Insurance
companies must submit to the governing agency yearly financial reports
regarding their economic stability. This requirement allows the agency
to anticipate potential insolvency and to protect the interests of
insured’s. Agency regulations may specify the types of insurance
policies that are acceptable in the state, although many states make these
declarations in statutes. The administrative agency is also responsible for
reviewing the competence and ethics of insurance company employees.

Insurance agencies:
Insurance agency can be defined as a group of insurance agents or
advisor. These agents or advisors create a distribution channel to sell the
different insurance products. These advisors are the strongest
distribution channel for an insurance agency. An advisor or agent works
as a third party or intermediate between insurance company and

59
customers. All the advisors in an agency work as a team. Main work of
insurance advisor or agent is to promote and sell different insurance
products of company.

Functions of agency manager:

A person who governs a group of insurance advisors is known as
agency manager. Success of an agency manager depends on the success
of their advisors. work of agency manager is to control the advisors in an
efficient way. Agency manager is like a creature of two wings. He has to
recruit advisors as well as to give sales to the insurance company.
 To recruit advisors.
 Make them aware of different insurance products.
 To give them training session.
 To motivate them for efficient work.
 To get maximum and efficient work from their advisors.

Operation work of insurance agency:

(Bajaj Allianz Life Insurance):
Every industry has an operational department which supports the
market division.
In the reference to the Bajaj Alliance Life insurance, development of
insurance products, distribution, planning services products and claims
are taken care by the head office. Back office providers are those
persons who take care of the operational part of the organization and
front office providers are the people who brings sell to the organization.
Back office has its own hierarchy which is connected to head office, and
every policy has to be processed to head office. Unit for the operations is
known as processing centre, and processing centre within the city is
known as mini processing centre. Proposal forms come through front
office and the verification of the proposal is done by manually which is
known as scrutiny. After scrutiny the operational staff enters it in
BALIC website, which is done online. the entry of a proposal is done in

60
a sequential order starting with scrutiny, inwards, proposal wise inwards,
cashier entry, cashier entry approval, data entry and finally outwards.
After finishing all these operations policy issues from the head office of
the state.

 Decentralized operations fro quicker response.

 Nationwide network of 1200 + branches.
 Specialized Business channels.
 Bancassurance
 Corporate Agency
 Rural
 Micro Insurance
 Group Business
 Dedicated product teams for:
 Pension
 Health
 Women and child
 Micro finance

Chapter 3

INTRODUCTION OF INDIAN INURANCE INDUSTRY

61
 INDIAN INSURANCE INDUSTRY

The Insurance sector in India governed by Insurance Act, 1938, the

Life Insurance Corporation Act, 1956 and General Insurance Business
(Nationalization) Act, 1972, Insurance Regulatory and Development
Authority (IRDA) Act, 1999 and other related Acts. With such 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 per cent

annually. Together with banking services, it adds about 7 per cent to the
country’s GDP .In spite of all this growth the 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.

62
 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 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 efficient and
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 sea changes .

The competition LIC started facing from these companies were

threatening to the existence of LIC .since the liberalization of the
industry the insurance industry has never looked back and today stand as
the 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.
A BRIEF HISTOR OF THE INSURANCE SECTOR:

The business of life insurance in India in its existing form started in

India in the year 1818 with the establishment of the Oriental Life
Insurance Company in Calcutta.
The story of insurance is probably as old as the story of mankind.
The same instinct that prompts modern businessmen today to secure
themselves against loss and disaster existed in primitive men also. They
too sought to avert the evil consequences of fire and flood and loss of
life and were willing to make some sort of sacrifice in order to achieve
security. Though the concept of insurance is largely a development of
the recent past, particularly after the industrial era – past few centuries –
yet its beginnings date back almost 6000 years.
Life Insurance in its modern form came to India from
England in the year 1818. Oriental Life Insurance Company started by
63
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 these companies were not insuring Indian natives.
However, later with the efforts of eminent people like Babu Muttylal
Seal, the foreign life insurance companies started insuring Indian lives.
But Indian lives were being treated as sub-standard lives and heavy extra
premiums were being charged on them. Bombay Mutual Life Assurance
Society heralded the birth of first Indian life insurance company in the
year 1870, and covered Indian lives at normal rates. Starting as Indian
enterprise with highly patriotic motives, insurance companies came into
existence to carry the message of insurance and social security through
insurance to various sectors of society. Bharat Insurance Company
(1896) was also one of such companies inspired by nationalism.

The Swadeshi movement of 1905-1907 gave rise to more insurance

companies. The United India in Madras, National Indian and National
Insurance in Calcutta and the Co-operative Assurance at Lahore were
established in 1906. In 1907, Hindustan Co-operative Insurance
Company took its birth in one of the rooms of the Jorasanko, house of
the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile,
General Assurance and Swadeshi Life (later Bombay Life) were some of
the companies established during the same period. 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.

The first two decades of the twentieth century saw lot of

growth in insurance business. From 44 companies with total business-in-
force as Rs.22.44 Crore, it rose to 176 companies with total business-in-
force as Rs.298 Crore in 1938. During the mushrooming of insurance
64
companies many financially unsound concerns were also floated which
failed miserably. The Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life insurance to provide
strict state control over insurance business. The demand for
nationalization of life insurance industry was made repeatedly in the past
but it gathered momentum in 1944 when a bill to amend the Life
Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January 1956 that life
insurance in India was nationalized. About 154 Indian insurance
companies, 16 non-Indian companies and 75 provident were operating in
India at the time of nationalization. Nationalization was accomplished in
two stages; initially the management of the companies was taken over by
means of an Ordinance, and later, the ownership too by means of a
comprehensive bill. The Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the Life Insurance
Corporation of India was created on 1st September, 1956, with the
objective of spreading life insurance much more widely and in particular
to the rural areas with a view to reach all insurable persons in the
country, providing them adequate financial cover at a reasonable cost.
LIC had 5 zonal offices, 33 divisional offices and 212 branch
offices, apart from its corporate office in the year 1956. Since life
insurance contracts are long-term contracts and during the currency of
the policy it requires a variety of services need was felt in the later years
to expand the operations and place a branch office at each district
headquarter. Re-organization of LIC took place and large numbers of
new branch offices were opened. As a result of re-organization servicing
functions were transferred to the branches, and branches were made
accounting units. It worked wonders with the performance of the
corporation. It may be seen that from about 200.00 Crore of New
Business in 1957 the corporation crossed 1000.00 Crore only in the year
1969-70, and it took another 10 years for LIC to cross 2000.00 Crore
mark of new business. But with re-organization happening in the early
eighties, by 1985-86 LIC had already crossed 7000.00 Crore Sum
Assured on new policies.

65
 Today LIC functions with 2048 fully computerized branch
offices, 100 divisional offices, 7 zonal offices and the corporate office.
LIC’s Wide Area Network covers 100 divisional offices and connects all
the branches through a Metro Area Network. LIC has tied up with some
Banks and Service providers to offer on-line premium collection facility
in selected cities. LIC’s ECS and ATM premium payment facility is an
addition to customer convenience. Apart from on-line Kiosks and IVRS,
Info Centers have been commissioned at Mumbai, Ahmadabad,
Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many
other cities. With a vision of providing easy access to its policyholders,
LIC has launched its SATELLITE SAMPARK offices. The satellite
offices are smaller, leaner and closer to the customer. The digitalized
records of the satellite offices will facilitate anywhere servicing and
many other conveniences in the future.

From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life insurance
business. The same motives which inspired our forefathers to bring
insurance into existence in this country inspire us at LIC to take this
message of protection to light the lamps of security in as many homes as
possible and to help the people in providing security to their families.

Some of the important milestones in the life insurance business in

India are:

1818 British introduced the life insurance to India with the

establishment of the Oriental Life Insurance Company

1850 Non life insurance debuts with triton insurance company.

1870 Bombay mutual life assurance society is the first Indian

owned life insurer

1912 The Indian Life Assurance Companies Act enacted as the

first statute to regulate the life insurance business.
66
 1928 The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and non-life
insurance businesses.
1938 Earlier legislation consolidated and amended to by the
Insurance Act with the objective of protecting the interests of the
insuring public.
1956 245 Indian and foreign insurers and provident societies taken
over by the central government and nationalized. LIC formed by an Act
of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5
Crore from the Government of India.
1993 Malhotra committee was constituted under the chairmanship
of former RBI chief R. N. Malhotra to draw a blue print for insurance
sector reforms.
1994 Malhotra committee recommended reentry of private players.
1997 IRDA (Insurance Regulatory and Development Authority)
was set up as a regulator of the insurance market in India.
2000 IRDA started giving license to private insurers. ICICI
Prudential ,HDFC were first private players to sell insurance Policies.
2001 Royal Sundaram was the first non-life private player to sell
an insurance policy.
2002 Bank allowed to sell insurance plans as TPAs enter the scene,
insurers start setting non-life claims in the cashless mode.

HOW BIG IS THE INSURANCE MARKET?

The insurance sector was opened up for private participation. For

years now, the private players are active in the liberalized environment.
The insurance market have witnessed dynamic changes which includes
presence of a fairly large number of insurers both life and non-life
segment. Most of the private insurance companies have formed joint
venture partnering well recognized foreign players across the globe.

There are now 29 insurance companies operating in the Indian market

– 14 private life insurers, nine private non-life insurers and six public
sector companies. With many more joint ventures in the offing, the
67
insurance industry in India today stands at a crossroads as competition
intensifies and companies prepare survival strategies in a detariffed
scenario.

There is pressure from both within the country and outside on the
Government to increase the foreign direct investment (FDI) limit from
the current 26% to 49%, which would help JV partners to bring in funds
for expansion.

There are opportunities in the pensions sector where regulations are

being framed. Less than 10 % of Indians above the age of 60 receive
pensions. The IRDA has issued the first license for a standalone health
company in the country as many more players wait to enter. The health
insurance sector has tremendous growth potential, and as it matures and
new players enter, product innovation and enhancement will increase.
The deepening of the health database over time will also allow players to
develop and price products for larger segments of society.

Insurance is a Rs.400 billion business in India, and together with

banking services adds about 7% to India's Gap. Gross premium
collection is about 2% of Gap and has been growing by 15-20% per
annum. India also has the highest number of life insurance policies in
force in the world, and total investible funds with the LIC are almost 8%
of GDP. Yet more than three-fourths of India's insurable population has
no life insurance or pension cover. Health insurance of any kind is
negligible and other forms of non-life insurance are much below
international standards.

INDIAN SCENARIO:

Insurance is a big opportunity in a country like India with a large

population and untapped potential. The life insurance business
(measured in the context of first year premium) registered a growth of
23.88 per cent in 2007-08, (94.96 per cent achieved in 2006-07). The
general insurance business (gross direct premium) has registered a
68
growth of 11.72 per cent in 2007-08 (3.52 per cent achieved in 2006-07).
This has resulted in increasing insurance penetration in the country.
Insurance penetration or premium volume as a ratio of GDP, for the year
2007 stood at 4.00 per cent for life insurance and 0.60 per cent for non-
life insurance. The level of penetration, particularly in life insurance,
tends to rise as income levels increase. India, with its huge middle class
households, has exhibited growth potential for the insurance industry.
Saturation of markets in many developed economies has made the
Indian market even more attractive for global insurance majors. The
insurance market in India has witnessed dynamic changes including
entry of a number of global insurers in both life and non-life segment.

Most of the private insurance companies are joint ventures with

recognized foreign players across the globe. Over the last eight years,
consumer awareness has improved. Competition has brought more
product innovation and better customer servicing. This made a positive
impact on the economy in income generation and creating employment
opportunities in this sector.

Life Insurance
The total capital of the life insurers at end March 2008 stood at
Rs.12296.42 crore. The additional capital brought in by the existing
private insurers during 2007-08 was Rs.3787.01 crore and the two new
entrants, brought in equity of Rs.385 crore making the total additional
capital brought in 2007-08 by the private insurers to Rs. 4172.01 crore.
Of this, the domestic and the foreign joint venture partners added
Rs.3160.12 crore and Rs.1011.88 crore respectively.

69
 There has been no infusion of capital in the case of LIC which stood
at Rs.5 crore.

Source:www.indiaprwire.com

TRENDS IN LIFE INSURANCE BUSINESS—UNIT LINKED

INSURANCE PLANS:

It wasn’t too long back when the good old endowment plan was the
preferred way to insure oneself against an eventuality and to set aside
some savings to meet one’s financial objectives. The traditional
endowment policies were Investing funds mainly in fixed interest
Government securities and other safe investments to ensure the safety of
capital. Thus the traditional emphasis was always on security of capital

70
rather than yield. However, with the inflationary trend witnessed all over
the world, it was observed that savings through life insurance were
becoming unattractive and not meeting the aspirations of the
policyholders.

The policyholder found that the sum assured guaranteed on maturity

had really depreciated in real value because of the depreciation in the
value of money. The investor was no longer content with the so called
security of capital provided under a policy of life insurance and started
showing a preference for higher rate of return on his investments as also
for capital appreciation. It was, therefore found necessary for the
insurance companies to think of a method whereby the expectation of
the policyholders could be satisfied. The object was to provide a hedge
against the inflation through a contract of insurance. Decline of assured
return endowment plans and opening of the insurance sector saw the
advent of ULIPs on the domestic insurance horizon. Today, the Indian
life insurance market is riding high on the unit linked insurance plans.

ULIPs and its Features:

Unit linked insurance plans (ULIPs) are insurance plans that combine
the benefit of investment with insurance. They give the investor an
option to put a part of their premium in various investment portfolios
and derive the benefits depending upon the performance of the funds
chosen by them. ULIPs were launched at an opportune time when stock
markets had just taken off. Being market- linked, they were major
beneficiaries of the secular
rise in stock markets. ULIPs have gained high acceptance due to the
attractive features they offer. These include:

1. Flexibility
1. Flexibility to choose Sum Assured.
2. Flexibility to choose premium amount.
3. Option to change level of Premium even after the plan has started
(Top up facility).
4. Flexibility to change asset allocation by switching between funds.
71
 2. Transparency
1. Changes in the plan & net amount invested are known to the
customer.
2. Convenience of tracking one’s investment performance on a daily
basis.

3. Liquidity
1. Option to withdraw money after few years (comfort required in
case of exigency).
2. Low minimum tenure.
3. Partial / Systematic withdrawal allowed

4. Fund Options
1. A choice of funds (ranging from equity, debt, cash or a
combination).
2. Option to choose fund mix based on desired asset allocation.

Traditionally, endowment plans have invested in government

securities, corporate bonds and the money market. ULIPs however, have
a broader choice. They invest across the board in stocks, government
securities, corporate bonds and money market instruments. Of course,
within a ULIP there are options wherein equity investments are capped.
The common types of funds available in ULIPs are Bond Fund,
Protector Fund, Secure Fund, Balanced Fund, Growth Fund, Index Fund,
and Enhancer Fund. Depending on one’s risk appetite one can choose
the fund. However the investment risk is borne by the investor. The
common type of charges, fees and deductions in ULIPs are Premium
allocation charges, Mortality charges, Fund management charges,
Policy/administration charges, Surrender charges, Fund switching
charges and Service tax.

72
 Insurance companies are required to declare the NAV of various
ULIPs on a daily basis. The movement of NAV enables the policy
holder to assess the performance of his investment and accordingly
make intervention in the form of switches, withdrawal and top-ups.
After opening up of the insurance sector, Unit-linked insurance policies
(ULIPs) have become increasingly popular. Analysis of figures for the
last three years indicates the growth pattern of unit linked business.

Existing Insurance Companies/Corporations

73
 S. Lic. Date of Name of Life Insurance Companies
No NO Inco.
1. 101 23.10.20 HDFC Standard Life Insurance
00 Company Ltd.
2. 104 15.11.20 Max New York Life Insurance Co.
00 Ltd.
3. 105 24.11.20 ICICI Prudential Life Insurance
00 Company Ltd.
4. 107 10.01.20 Kotak Mahindra Old Mutual Life
01 Insurance Limited
5. 109 31.01.20 Birla Sun Life Insurance Company
01 Ltd.
6. 110 12.02.20 Tata AIG Life Insurance Company
01 Ltd.
7. 111 30.03.20 SBI Life Insurance Company
01 Limited .
8. 114 02.08.20 ING Vysya Life Insurance Company
01 Private Limited
9. 116 03.08.20 Bajaj Allianz Life Insurance
01 Company Limited
10. 117 06.08.20 Metlife India Insurance Company
01 Ltd.
11. 133 04.09.20 Future Generali India Life Insurance
07 Company Limited
12. 135 19.12.20 IDBI Fortis Life Insurance Company
07 Ltd.
13. 121 03.01.20 Reliance Life Insurance Company
02 Limited.
14. 122 14.05.20 Aviva Life Insurance Co. India Pvt.
02 Ltd.
15. 127 06.02.20 Sahara India Insurance Company Ltd.
04
16. 128 17.11.20 Shriram Life Insurance Company Ltd.

74
 05
17. 130 14.07.20 Bharti AXA Life Insurance Company
06 Ltd.
18. 133 04.09.20 Future Generali India Life Insurance
07 Company Limited
19. 135 19.12.20 IDBI Fortis Life Insurance Company
07 Ltd.
20. 136 08.05.20 Canara HSBC Oriental Bank of
08 Commerce Life Insurance Company Ltd.
21. 138 27.06.20 Aegon Religare Life Insurance
08 Company Ltd.
22. 140 27.06.20 DLF Pramerica Life Insurance
08 Company Ltd.

23. 142 Star Union Dai-ichi Life Insurance

Co. Ltd.,

In 1999, the Insurance Regulatory and Development Authority

(IRDA) was constituted as an autonomous body to regulate and develop
the insurance industry. The IRDA was incorporated as a statutory body
in April, 2000. The key objectives of the IRDA include promotion of
competition so as to enhance customer satisfaction through increased
consumer choice and lower premiums, while ensuring the financial
security of the insurance market. The IRDA opened up the market in
August 2000 with the invitation for application for registrations. Foreign
companies were allowed ownership of up to 26%. The Authority has the
power to frame regulations under Section 114A of the Insurance Act,
1938 and has from 2000 onwards framed various regulations ranging
from registration of companies for carrying on insurance business to

75
protection of policyholders’ interests. IRDA is regulated or controlled
under the chairmanship of Shri. J.Hari Narayan chairman@irda.gov.in.
Role of IRDA:
 Protecting the interests of policyholders.
 Establishing guidelines for the operations of insurers, and brokers.
 Specifying the code of conduct, qualifications, and training for
insurance intermediaries and agents.
 Promoting efficiency in the conduct of insurance business.
 Regulating the investment of funds by insurance companies.
 Specifying the percentage of business to be written by insurers in
rural sectors.
 Handling disputes between insurers and insurance intermediaries.
Changing Perception of Indian Customers:
Indian Insurance consumers are like Indian Voters, they are soft but
when time is right and ripe, they demand and seek necessary changes.
De-tariff of many Insurance Products are the reflection of changing
aspirations and growing demand of Indian consumers.

For historical years, Indian consumers were at receiving end.

Insurance Product was underwritten and was practically forced onto
consumers on a “Take-it-As-it-basis”. All that got changed with passage
of IRDA act in 1999. New insurance companies have come into
existence leading to open competition and hence better products for
customers.

Indian customers have become very sensitive to Coverage / Premium

as well as the Products (read Risk Solution), that is given to them. There
are not ready to accept any product, no matter even if that is coming
from the market leader, should that product is not serving the purpose. A
case in point is ULIP Product / Group Life and Credit Life in Life
Insurance segment and Travel / Family Floater Health and Liability
Insurance in the Non-life segment are new age Avatar. The new
products are constantly being demanded by Indian consumers, which is

76
putting huge pressures on Insurance companies (Read Risk Under-
writers) and Brokers to respond.

Customers are looking at Insurance for covering Pure Risk now

which I have covered in my next section. Another good reason why we
are seeing quick changes in the buying behavior of Insurance from mere
Investment to risk mitigation is the cost of Replacement of Goods
(ROG) or Cost of Services (COS).

Now Indian customers are aware of insurance industry and insurance

products provided by companies. They have become more sensitive.
They would not accept any type of insurance product unless it fulfills
their requirements and needs. In historic day’s customers looking at
insurance products as a life cover which can provide security against any
unacceptable events, but now customers look at insurance products as an
investment as well as life cover. So today’s customers wants good return
from the insurance companies. The Indian customer’s forms the pivot of
each company’s strategy.

Investment of Indian household savings (as a % in different

sector)
BANK DEPOSITS 39%
CORP. BANKS 2%
SHARES AND 1%
DEBENTURES
MUTUAL FUNDS 2%
NBFC’S 3%
GOVT. BONDS 13%
INSURANCE 13%
PF/ RETIRE FUNDS 21%
CURRENCY 6%

Source: - www.
avivaindia.com

77
 Changing face of Indian insurance industry:
After the Insurance Regulatory and Development Authority Act
have been passed there has been establishment of many private
insurance companies in India. Previously there was a monopoly business
for Life Insurance Corporation of India (L.I.C.) who was the only life-
insurance company for the people till 2000. L.I.C. still holds 71.4% of
the market share in 2006. But after the introduction of private life
insurance companies there is a great competition in Indian market now.
Everyone is trying to capture the fresh market here and penetrate it with
aggressive marketing strategies. Today life-insurance is not only limited
up to just life risk cover and maturity period bonuses but changed to
greater return from the investments. With the introduction of the unit
linked insurance policies these companies are investing the money in
different investment instruments like shares, bonds, debentures,
government and other securities. People are demanding for higher
returns with the life risk cover and private companies are giving 30-40%
average growth per annum. These life-insurance companies have every
kind of policies suiting every need right from financial needs of,
marriage, giving birth and rearing up a child, his education, meeting
daily financial needs of life, pension solutions after retirement. These
companies have every aspects and needs of our life covered along with
the death-benefit.
In India only 25% of the population
has life insurance. So Indian life-insurance market is the target market of
all the companies who either want to extend or diversify their business.
To tap the Indian market there has been tie-ups between the major
Indian companies with other International insurance companies to start
up their business. The government of India has set up rules that no
foreign insurance company can set up their business individually here
and they have to tie up with an Indian company and this foreign
insurance company can have an investment of only 24% of the total
start-up investment.
Indian insurance industry can be featured by:
 Low market penetration.
78
  Ever growing middle class component in population.
 Growth of customer’s interest with an increasing demand for better
insurance products.
 Application of information technology for business.
 Rebate from government in the form of tax incentives to be
insured.
Today, the Indian life insurance industry has a dozen
private players, each of which are making strides in raising awareness
levels, introducing innovative products and increasing the penetration of
life insurance in the vastly underinsured country. Several of private
insurers have introduced attractive products to meet the needs of their
target customers and in line with their business objectives. The success
of their effort is that they have captured over 28% of premium income in
five years.
The biggest beneficiary of the competition among life
insurers has been the customer. A wide range of products, customer
focused service and professional advice has become the mainstay of the
industry, and the Indian customer’s forms the pivot of each company’s
strategy. Penetration of life insurance is beginning to cut across socio-
economic classes and attract people who have never purchased insurance
before.
Life insurance is also now being regarded as a versatile
financial planning tool. Apart from the traditional term and saving
insurance policies, industry has seen the entry and growth of unit linked
products. This provides market linked returns and is among the most
flexible policies available today for investment. Now products are
priced, flexible, and realistic and sustain so people in better position to
understand the risk and benefits of the product and they are accepting
these innovative products.
So it is clear that the face of life insurance in India is
changing, but with the changes come a host of challenges and it is only
the credible players with a long term vision and a robust business
strategy that will survive. Whatever the developments, the future and the
opportunities in this industry will surely be exciting.

79
 There are major 12 private players in Indian life insurance market.
6 bank owned insurers: - HDFC standard life, ICICI prudential,
ING Vysya, MetLife, OM Kotak, SBI life.
6 independent insurers: - Aviva, ANP sanmar, Birla sun life, Bajaj
Allianz, Max New York life, Tata AIG.
Major international insurers are- Allianz
from Germany Prudential and Standard life from UK, Sun life of
Canada, AIG, MetLife and New York life of the US.

Functioning of insurance industry:

Insurer’s business model:

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.
The most difficult aspect of the insurance business is the underwriting
of policies. Using a wide assortment of data, insurers predict the
likelihood that a claim will be made against their policies and price
products accordingly. To this end, insurers use actuarial science to
quantify the risks they are willing to assume and the premium they will
charge to assume them. Data is analyzed to fairly accurately project the
rate of future claims based on a given risk. Actuarial science uses
statistics and probability to analyze the risks associated with the range of
perils covered, and these scientific principles are used to determine an
insurer's overall exposure. Upon termination of a given policy, the
amount of premium collected and the investment gains thereon minus
the amount paid out in claims is the insurer's underwriting profit on that
policy.
An insurer's underwriting performance is measured in its combined
ratio. The loss ratio (incurred losses and loss-adjustment expenses
80
divided by net earned premium) is added to the expense ratio
(underwriting expenses divided by net premium written) to determine
the company's combined ratio. The combined ratio is a reflection of the
company's overall underwriting profitability. A combined ratio of less
than 100 percent indicates underwriting profitability, while anything
over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on “float”. “Float”
or available reserve is the amount of money, at hand at any given
moment that an insurer has collected in insurance premiums but has not
been paid out in claims. Insurers start investing insurance premiums as
soon as they are collected and continue to earn interest on them until
claims are paid out.. Naturally, the “float” method is difficult to carry
out in an economically depressed period. Bear markets do cause insurers
to shift away from investments and to toughen up their underwriting
standards. So a poor economy generally means high insurance
premiums. This tendency to swing between profitable and unprofitable
periods over time is commonly known as the "underwriting" or
insurance cycle.
Finally, claims and loss handling is the materialized utility of
insurance. In managing the claims-handling function, insurers seek to
balance the elements of customer satisfaction, administrative handling
expenses, and claims overpayment leakages.

Investment management:
Investment operations are often considered incidental to the business
of insurance, and have traditionally viewed as secondary to
underwriting. In the past risk management was the most important part
of business, whereas today the focus has shifted to fund management.
Investment income is a large component of insurance revenues, skilful
and careful management of funds. Insurance is a business of large
numbers and generates huge amount of funds over time. These funds
arise out of policyholder funds in the case of life insurance, and
technical and free reserves in the non-life segments. Time lag between
the procurement of premium and the payment of claim provides an
interval during which the funds can be deployed to generate income.
81
Insurance companies are among the largest institutional investors in the
world. Assets managed by insurance companies are estimated to account
for over 40% of the world’s top ten asset managers.

Returns on investments influence the premium

rates and bonuses and hence investment income will continue to be an
important component of insurance company profits. In life insurance,
benefits from insurance profits accrue directly to policy holders when it
is passed on to him in the form of a bonus. In non life insurance the
benefits are indirect and mostly by the creation of an investment
portfolio. Investment income has to compensate for underwriting results
which are increasingly under pressure. In the case of insurance, the
difference between revenue and the expenses is known as operating
surplus.

Revenue =premium.
Expenses =sum of claims + commission payable on procurement
of business + operating expenses.
Operating surplus =revenue-expenses.

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 govt. securities.
Requirements of an insurance risk
Insurance normally insure only pure risks .However, not all pure risk
is insurable .certain requirements usually must be fulfilled before a pure

82
risk can be privately insured .From the view point of the insurer, there
are ideally six requirement of an insurable risk
 There must be a large number of exposure units
 The loss must be accidental and unintentional.
 The loss must be determinable and measurable.
 The loss should not be catastrophic.
 The chance of loss must be calculable.
 The premium must be economically feasible

Various types of life insurance policies:-

 Endowment policies: This type of policy covers risk for a
specified period, and at the end of the maturity sum assured is paid
back to policyholder with the bonuses during the term of the
policy.
 Money back policies: This type of policy is for periodic
payments of partial survival benefits during the term of the policy
as long as the policy holder is alive.
 Group insurance: This type of insurance offers life insurance
protection under group policies to various groups such as
employers-employees, professionals, co-operatives etc it also
provides insurance coverage for people in certain approved
occupations at the lowest possible premium cost.
 Term life insurance policies: This type of insurance covers risk
only during the selected term period. If the policy holder survives
the term, risk cover comes to an end. These types of policies are
for those people who are unable to pay larger premium required for
endowment and whole life policies. No surrender, loan or paid up
values are in such policies.
 Whole life insurance policies: This type of policy runs as long as
the policyholder is alive and is covered for the entire life of the
policyholder. In this policy the insured amount and the bonus is
payable only to nominee on the death of policy holder.
 Joint life insurance policies: These policies are similar to
endowment policies in maturity benefits and risk cover, but joint

83
 life policies cover two lives simultaneously such as married
couples. Sum assured is payable on the first death and again on the
death of survival during the term of the policy.
 Pension plan: a pension plan or annuity is an investment over a
certain number of years but does not provide any life insurance
cover. It offers a guaranteed income either for a life or certain
period.
 Unit linked insurance plan: ULIP is a kind of insurance plan
which provides life cover as well as return on premium paid over a
certain period of time. The investment is denoted as units and
represented by the value called as net asset value (NAV).
CHAPTER 6
INTRODUCTION ABOUT BAJAJ ALLIANZ

COMPANY PROFILE
BAJAJ ALLIANZ LIFE INSURANCE
84
 Bajaj Allianz Life Insurance Company Limited

Bajaj Life Insurance Company Ltd. Is one of India’s leading private

companies, which offers a range of individual and insurance solution? It
is a joint venture between Allianz se Limited and Bajaj auto. Bajaj auto
ltd. is India’s leading automobile company. Bajaj Auto Ltd. is the largest
exporter of two and three wheelers. With Kawasaki Heavy Industries of
Japan, Bajaj manufactures state-of-the-art range of two-wheelers. The
brand, Pulsar is continually dominating the Indian motorcycle market in
the premium segment. Its Discover DTSi is also a successful bike on
Indian roads.

Bajaj auto Ltd.

 One of the largest 2 & 3 wheeler manufacturer in the world
 21 million+ vehicles on the roads across the globe
 Managing funds of over Rs 5,329 cr.
 Bajaj Auto finance one of the largest auto finance cos. in India
Rs. 6,340 Cr. Turnover & Profits after tax of 767 Cr. in 2004-5
Allianz se is the Germany based insurance company. it also
working 70 countries and it Provide the insurance last 119 years
 Incorporated on 12th march 2001.
 Received certificate of Registration (No.116)for IRDA of India on
3th Aug 2001.

Bajaj Finsev
 Associate Company of Bajaj incorporated on 30th April 2007.
 Net profit as on 31-03-2008 Rs 4395 Lakh capital Base as on 31-
03-2008 Rs 7234 lakhs.

ALLIANZ SE
 Headquartered in Munich, Germany, established in 1890 has over
119 years of Insurance experience.
 One of the world's biggest insurers, Allianz SE offers a range of
insurance products and services -- including life, health, and

85
 property/casualty coverage for individuals and businesses --
through some 100 subsidiaries and affiliates operating all over the
globe.
 In addition to selling insurance, Allianz provides retail and
institutional asset management services through Allianz Global
Investors and private equity investment through Allianz Capital
Partners. Other brands include Euler Hermes, Fireman's Fund, and
Mondial, all property insurance subsidiaries. Allianz has
transformed itself into a Societas Europaea, a joint stock company
that operates under European Union rules.
 Worldwide 2nd by Gross Written Premiums – Rs 4,77,930 Cr
(Euro 89 billion)
 3rd largest Assets Under Management (AUM) & largest amongst
Insurance cos. - AUM of Rs 50,096,199 Cr (Euro 764621 million)
 11th largest corporation in the world
 50 % of global business from Life Insurance, close to 60 million
lives insured globally.
 Presence in more than More than 70 countries, 182865 employees
worldwide
 Provide Insurance to almost half of the Fortune 500 cos..

Who`s who @ Allianz Group

Mr. Michael Dickman
(chairman Board Member)
Drives Key projects like f2s, Cfj, Opex worldwide in the Allianz group
driving quality process within the lifeblood of the Allianz Group

Dr. Werner zedelius

(Board Member)
Owns overall idea generation and management at group level. Driving
global rollout of i2s and organizes and coordinates global ideal
campaigns.

86
 Allianz Insurance Management Asia
Pacific

Allianz Group’s Worldwide Presence

WORLDW ASIA
IDE: PACIFIC:
Argentina
Austria Australia
Belarus Brunei
Belgium Greece
Hungary China
Bermuda Hong Kong
Brazil Ireland
Italy India
Bulgaria Indonesia
Burkina Lebanon
Liechten Japan
Faso Laos
stein Slovenia
Cameroon Malaysia
Luxembo South Africa
Canada New Zealand
urg Spain
Central Pakistan
Mexico Sweden
African Rep. Philippines
Morocco Switzerland
Chile Singapore
Namibia Tunisia
Croatia South Korea
Netherla Turkey
Cyprus South Pacific
nds Ukraine
Czech Islands
Norway United Arab
Republic Taiwan
Peru Emirates
Denmark Thailand
Poland United
Egypt Vietnam
Portugal Kingdom
Estonia
Russia USA
France
Senegal Uzbekistan
Gabon
Slovakia Venezuela
Germany

Financial Snapshot (first nine months of

2001)
 Worldwide Total Sales at 54.9 billion euros (USD 50.4 billion)*
 Net income in excess of 1.3 billion euros (USD 1.2 billion)*
 One of Europe’s most highly valued stock corporations
 Worldwide Number One by Gross Written Premiums
 Worldwide Number Two by Market Capitalization
 ‘AA+’ rating by Standard & Poor’s
 ‘A++’ rating by A.M Best
 Assets Under Management at approximately 1,120 billion euros
(USD 1,028 billion)*

87
 Bajaj Allianz Life Insurance

About Bajaj Allianz

Bajaj Allianz Life Insurance Company Limited is one of the private
insurance companies in India. Bajaj Allianz Life Insurance is a union
between Allianz SE, one of the largest Insurance Company and Bajaj
Finserv. (Recently demerged from Bajaj Auto.). Bajaj Auto Limited is
74% shared holder in the company with the remaining 26% being held
by Allianz SE.
On 2001, the Bajaj Allianz Life Insurance was given the IRDA
(Insurance Regulatory and Development Authority) certification of
Registration for conducting the Life Insurance business (which also
included the Health Insurance business) in the country. Bajaj Allianz
India is headquartered in Pune. The company has its offices in 200
towns all over India.

Allianz SE is a leading insurance conglomerate globally and one of

the largest asset managers in the world, managing assets worth over a
Trillion (Over INR. 55, 00,000 Crores). Allianz SE has over 115 years
of financial experience and is present in over 70 countries around the
world.

At Bajaj Allianz Life Insurance, customer delight is our guiding

principle. Our business philosophy is to ensure excellent insurance and
investment solutions by offering customized products, supported by the
best technology.
Financial services arm's profit rises to Rs 42 crore
BS Reporter / Mumbai July 16, 2009, 0:40 IST
Bajaj Finserv, the financial services arm of the Bajaj Group, posted a
net profit of Rs 42 crore for the quarter ended June 30, 2009. It had
posted a loss of Rs 36 crore in the corresponding period last year.

88
 The group’s life insurance arm, Bajaj Allianz Life Insurance
Company, was the biggest contributor to the firm’s income. Bajaj
Allianz has posted a profit of Rs 68 crore in the June quarter. In the
year-ago quarter, it had posted a loss of Rs 3 crore.Gross written
premium for the quarter rose 40 per cent to Rs 2,001 crore as against Rs
1,847 crore in the corresponding period last year. Renewal premium,
too, increased to Rs 1,423 crore as against Rs 1,018 crore in the quarter
ended June 30, 2008. However, new business premium fell 42.28 per
cent to Rs 577 crore

Culture @ Bajaj Allainz

 Be a winning team.
 Have a passion for excellence and hate bureaucracy.
 Be empowered, have he confidence to take decisions quickly and
be accountable.
 Make BALIC a “great place to work”
 Have a sense of humor.

Bajaj allianz way

 Invest in people – pay, develop & career planning.
 Dominate the market – Be decisive & communicate clear goals.
 Never sit still – change continuously, change when the going is
good & revolutize.
 Think service – service, service – continuous improvement.
 Make The future – be flexible & be aware of competitors. Manage
the business like a corner shop – customer satisfaction, employee
satisfaction ensuring cash flow.

89
  Bajaj Allianz Head of the Department: Details of the Company

Mr. Kamesh Mr.Sashi Rajesh Mr.

Goyal Krishnan Viswanathan Sanjay Jain
Country CIO C.F.O. Head,
Manager CEO BALIC BALIC Marketing
ORGANISATION STRUCTURE OF
BAJAJ ALLIANZ

90
BOARD OF DIRECTORS:
Mr. Rahul Bajaj (Chairman)
Dr. Werner Zedelius
Mr. Sanjay Asher
Mr. Niraj Bajaj
Mr. Sanjiv Bajaj
Mr. Heinz Dollberg
Mr. Ranjit Gupta
Mr. S. H. Khan
Mr. Suraj Mehta
Mr. Dietmar Raich
Mr. Manu Tandon
Mr. Kamesh Goyal (Alternate Director to Dr. Werner Zedelius)
Branch Address: Bajaj Allianz Life Insurance Co. Ltd.
Shalimar Towers, TC-57N Vibhuti Khand
Gomtinagar, Lucknow-226010.
Telephone: (+91 522) 6450751
Head Office Address:
Bajaj Allianz Life Insurance Company Limited
GE Plaza, Airport Road, Yerawada, Pune-411006 Maharashtra
Telephone: (+91 20) 66026777

CHANNEL PARTNERS OF BAJAJ ALLIANZ

Standard Chartered Bank

Contact Number :
022 2492 8888
E-mail Address:
customer.care@in.standardchartered.com
Syndicate Bank
Contact Number :
020 4026 742
E-mail Address:
91
 insurancediv@syndicatebank.net
Placement Sales and Services Ltd.
Contact Number :
0487-2388666,2385922 Tele Fax -
2388666
E-mail Address:
placementss@rediffmail.com
Address: Regency Centre, Kalavary
Road, West Fort, Thrissur –4 Kerala,
India
Team Life Care Co. (India) Ltd.
Contact Number :
0427 - 2410707; 2420707; Tele Fax -
2421245
Address: 5/118, Yercaud Main Road,
Chinnakollapatti, SALEM - 636008.
Ernestine Consultants Pvt Ltd.
Contact Number :
080- 4034 1999 Fax- 080 - 4034 1920
Address: 1011, Ist Floor 3rd Cross,
13th Main HAL 2nd Stage, Indira Nagar
Bangalore-560038
COSMOS Co-op BANK Ltd.
Contact Number : 020 2488051
E-mail Address :
info@cosmosbank.in

List of products offered by Bajaj Allianz

The life insurance plans are generally divided into two types: (a)
Traditional plans (b) Unit linked insurance plans (ULIP). Traditional
plans are basically insurance plus savings whereas ULIPs are insurance
plus investment. Further they are classified into pure protection, savings,
92
investments, pension and living benefits. The classifications are shown
in the table below

PRODUCTS PORTAL

UNIT PENSION TRADITION TERM

LINKED Annuity AL PLANS
Regular Endowment
Premium Pension
Guarantee Life Time Care New Risk
New Retireme Care
UnitGain nt Super Saver
Money Back
UnitGain Future Term Care
Plus Gold Income CashGain
Generator

Swarna
Vishranti

Single HEALT CHILDREN JUST

Premium H PLAN LAUNCHED
New
UnitGain Plus Family ChildGain Invest Plus
SP CareFirst Group Seva
New Health Care Plan
UnitGain
Premier SP

Customer Care Centre:

93
  Well Networked Customer care centers (CCCs) with state of art IT
systems.
 Highest standard of customer’s service & simplified claims process
in the industry least number of IRDA complaints.
 Website for all kinds of assistance and information or Products and
service. Online buying and renewals.
 Toll free number 1800-233-7272

INCOME GROSS HOW BAJAJ

TAX ANNUAL MUCH TAX ALLIANZ LIFE
SECTION SALARY CAN YOU INSURANCE
SAVE? PLANS
Sec. 80C Across All Upto Rs. All the life
income Slabs 33,990 saved insurance plans.
on investment
of
Rs. 1,00,000.
Sec. 80 Across all Upto Rs. All the pension
CCC income slabs. 33,990 saved plans.
on Investment
of
Rs.1,00,000.
Sec. 80 D* Across all Upto Rs. All the health
income slabs 3,399 saved on insurance riders
Investment of available with the
Rs. 10,000. conventional
plans.
TOTAL
SAVINGS Rs37,389
POSSIBLE **
Rs. 33,990 under Sec. 80C and under Sec. 80
CCC , Rs.3,399 under Sec. 80 D, calculated for a
male with gross annual income

94
 exceeding Rs. 10,00,000.

Chapter 7
INTRODUCTION OF THE RESEARCH
STUDY

95
 Distribution of insurance products
Insurance has to be sold the world over. The Touch point with the
ultimate customer is the distributor or the producer and the role played
by them in insurance markets is critical. It is the distributor who makes
the difference in terms of the quality of advice for choice of product,
servicing of policy post sale and settlement of claims. In the Indian
market, with their distinct cultural and social ethics, these conditions
will play a major role in shaping the distribution channels and their
effectiveness. In today's scenario, insurance companies must move from
selling insurance to marketing an essential financial product. The
distributors have to become trusted financial advisors for the clients and
trusted business associates for the insurance Companies.
Challenges for insurance companies and intermediaries in
India-
 Building faith about company in the mind of clients.
 Building personal credibility with the clients.

Different distribution channels in India:-

A multi-channel strategy is better suited for the Indian market. Indian
insurance market is a combination of multiple markets. Each of the
markets requires a different approach. Apart from geographical spread
the socio-cultural and economic segmentation of the market is very
wide, exhibiting different traits and needs. Different multi-distribution
channels in India are as follows
 Agents: Agents are the primary channel for distribution of
insurance. The public and private sector insurance companies have
their branches in almost all parts of the country and have attracted
local people to become their agents. Today's insurance agent has to
know which product will appeal to the customer, and also know his
competitor's products to be an effective salesman who can sell his
company, the product, and himself to the customer. To the average
customer, every new company is the same. Perceptions about the
public sector companies are also cemented in his mind. So an
insurance agent can play an important role to create a good image
of company.
96
  Banks: Banks in India are all pervasive, especially the public
sector banks. Many insurance companies are selling their products
through banks. Companies which are bank owned, they are selling
their products through their parent bank. The public sector banks,
with their vast branch networks, are helpful to insurance
companies. This channel of selling insurance is known as Banc
assurance.

INSURANCE COMPANY ASSOCIATE BANKS

ICICI prudential ICICI bank, bank of India,
Citibank, Allahabad bank,
Federal bank, south Indian bank,
Punjab and Maharashtra
cooperative bank
SBI life State bank of India
Birla sun life Deutsche bank, Citibank,
bank of Rajasthan, Andhra bank
ING Vysya bank Vysya bank
Aviva life insurance ABN amro bank, Rajasthan
Bank
HDFC standard life Union bank, Indian bank
Met life Karnataka bank, j&k bank
Source: - Hindu Business Line, January 08,
2007

 Brokers: Now a day’s different financial institution are selling

insurance. These financial institutions are known as brokers. They
are taking some underwriting charges from the insurance
companies to sell their insurance products.
 Corporate agents: Corporate agency is a cross selling type of
channel. Insurance companies’ tie-up with business houses in
other industries to sell insurance either to their employees or their
customers. Insurance industry, during the past 2 years has

97
 witnessed a number of such strategic tie-ups and alliances.
Corporate agents have become a major force to reckon with in
distributing insurance products. Such as- Bajaj Allianz tied up with
Maruti Udyog and Ford for auto insurance and Tata AIG life has
tied up with Tata tea, khaitan’s Williamson major and bridge
foundation for selling rural policies.
 Internet: In this technological world internet is also a channel of
selling insurance. This can be as direct marketing.

Effective marketing strategies

A marketing strategy is a process that can allow an organization to
concentrate its (always limited) resources on the greatest opportunities to
increase sales and achieve a sustainable competitive advantage.
Marketing strategy as a key part of the general corporate strategy
marketing strategy is most effective when it is an integral component of
corporate strategy, defining how the organization will engage customers,
prospects and competitors in the market arena for success. It is partially
derived from broader corporate strategies, corporate missions, and
corporate goals. They should flow from the firm's mission statement.
They are also influenced by a range of micro environmental factors
Now the Indian consumer is knowledgeable and sensitive. Consumers
are increasingly more aware and are actively managing their financial
affairs. People are increasingly looking not just at products, but at
integrated financial solutions that can offer stability of returns along
with total protection. In view of this, the insurance managers need to
understand more about the details that go into the introduction of
insurance products to make it attractive in this competitive market. So
now days an insurance manager requires leadership, commitment,
creativity, and flexibility ."Every family in every village in the country
should feel safe and secure". This vision alone will help to bring the new
ideas to the insurance manager.
Financial, marketing and human resource polices of the
corporations influence the unit mangers to make decisions. Performance
98
of insurance company depends on the effectiveness of such policies.
Insurance corporations formulate and revise these policies from time to
time to ensure that the performance of the managers is best for the
organization.
In the competitive market, insurance companies are being forced to
adopt a strictly professional approach in marketing. The insurance
companies face the challenge of changing the uninspiring public image
of the industry. Some of the important marketing elements are-

 Marketing mix.
 The importance of relationship.
 Positioning.
 Value addition.
 Segmentation.
 Branding.
 Insuring service quality.
 Effective pricing.
 Customer satisfaction research.

The growth of insurance sector is governed largely by factors external

to it. The following factors influence the market and demand of product-
 Government policies.
 Growth in population.
 Changing age profile.
 Income wise distribution of the population.
 Level of insurance awareness.
 The pricing of the policies.
 The economic climate of the country.
 The dislike to risk.
 Social and political features of the country.
 Growth scenario in the world.
Different companies adopt different approaches in their marketing
strategies. One approach is focus upon product quality which can give
confidence in the mind of customers that they are offered by best
99
featured products. And other approach is focusing on customer’s needs,
which involve a heavy investment in developing relationships with
policyholders. Under this approach customer can expect a range of
products and service offered to him. Third approach is market
segmentation under which the population can be divided into several
homogeneous products and groups, the effort should be tie clients to the
company by customized combination of coverage, easy payment plans,
risk management advice, and convenient and quick claim handling.
Types of marketing strategies

Every marketing strategy is unique, but if we abstract from the

individualizing details, each can be reduced into a generic marketing
strategy. There are a number of ways of categorizing these generic
strategies. A brief description of the most common categorizing schemes
is presented below:
Strategies based on market dominance - In this scheme, firms are
classified based on their market share or dominance of an industry.
Typically there are three types of market dominance strategies:
 Leader
 Challenger
 Follower
Porter generic strategies - strategy on the dimensions of strategic
scope and strategic strength. Strategic scope refers to the market
penetration while strategic strength refers to the firm’s sustainable
competitive advantage.
 Cost leadership
 Product differentiation
 Market segmentation
Innovation strategies - This deals with the firm's rate of the new
product development and business model innovation. It asks whether the
company is on the cutting edge of technology and business innovation.
There are three types:
 Pioneers
 Close followers

100
  Late followers
Growth strategies - In this scheme we ask the question, “How
should the firm grow?”. There are a number of different ways of
answering that question, but the most common gives four answers:
 Horizontal integration
 Cost leadership
 Product differentiation
 Market segmentation

A more detailed scheme uses the categories:

 Prospector
 Analyzer
 Defender
 Reactor
 Vertical integration
 Diversification
 Intensification

An insurance product can be classified in three phases:

Core product: In insurance industry the core product is the policy
that provides protection to the customers.
Expected product: Because of competition customers start to expect
more from an insurance product. Then insurance companies provide
some tangible attributes in their product to differentiate from
competitors, such as-
 Brand
 Some additional features in existing product
 By providing instruction manual with the policy.
Augmented product: An insurance company can provide different
types of services to differentiate their products-
 Post sales services.
 Branches in different places for customers.
 Customer complaint management.
 Payment option convenient to customers.
101
 The entry of private players and their foreign partners has given
domestic players a tough time, because the opening up of the sector has
not brought in only foreign players, but also professional techniques and
technologies. The present scene in India is such that everyone is trying
to put in the best efforts. There are marketing strategies more for
survival than growth. But the most important gift of privatization is the
introduction of customer-oriented services. Utmost care is being taken to
maximize customer satisfaction.
Success of an insurance company depends on four important
functions:-
 Identification of markets: Identification of markets means need
to understand the trends in culture and businesses constantly,
through conducting research and analysis. Insurance companies
can take this job on their own or assign it to an external agency.
Relying on an external agency can be risky due to the questionable
loyalty of the agents.

 Assessment of risks (of the insured and the insurance

corporation) and estimation of losses: Efficiency of actuaries
and assessors of the insurance policies in fixing premiums and
settling claims is foremost an important area for achieving overall
efficiency in operations. The quality of assessing the risk and
estimation of losses has the largest claim on the performance of an
insurance company. Well trained, experienced and expert hands
are needed for the operations.

 Penetration into and exploitation of markets: Market

penetration or exploitation of a company can be identified with the
growth in number of policies in each type of insurance, growth rate
in earnings or turnover, company’s market share, increase in
number of branches and divisions etc. Efforts of the company as a
whole and that of the divisions and branches are assessed to
measure the effectiveness.

102
 Control over investment and operating costs: Control over
resources such as men, machines, and materials at each level of the
organization provides measures of efficiency of a unit as well as
the organization. Investment control and expense control are dealt
separately and the effectiveness of management’s’ decisions at
various levels is to be assessed separately

To find best prospects:

 Allocating marketing strategies against market potential.
 Estimating potential for specific products within local markets.
 Identifying high opportunity areas.
 Measuring agency performance relative to market potential.
 Optimizing your agency network against market potential.

Attributes to develop marketing strategies:

 Channel data: - Useful to know future buying preferences, learning
about products and purchase channels.
 Consumer attitudes.
 Consumption data: - Useful to evaluate annual premiums, number
of annuities owned, value of annuities, and with which company
the current policy is held.
Effective strategies for insurance agents:
 Learn how to construct a mental image for success.
 Learn how to find a proper perspective and how to turn off all the
signals that cause people not to buy from you.
 Learn how to get and set more appointments.
 Learn how to convert a new lead into sales.
 Learn how to act when you meet a client for the first time.
 Learn how the order in which you explain the types of policies can
double your income.
 Take Easy steps to avoid delays in issuing policies.

103
 Bajaj Allianz Investment on Advertisement
In the modern business world, advertising pays to companies or
producers. It plays a vital role in pushing up the sales because it is
psychological weapon which is exploited by the business to meet purely
commercial ends. It is a mass selling technique. Its fundamental purpose
is to bring the product, its features and uses to the knowledge of
customer and persuade them to purchase the product of the producers. In
this way, it widens the market of the product.
Bajaj Allianz through better advertisement increases sales and
demand of the product day by day. Their are as follows various popular
advertisement.

LOVE AAJ KAL association with Bajaj Alliaz

Gajini popularity using in Bajaj Allianz ad for tax saving plans

104
 Vijender Singh Olympic gold medalist winner feature on bajaj
allianz adverstiment for safe plans.

Kungu panda advertisment for safety plans through comic way.

Competitors of Bajaj Life Insurance
ICICI prudential: ICICI prudential insurance is a joint venture of
ICICI bank and prudential plc a leading financial service group in the
UK. Total capital stands for Rs. 37.72 billion, with ICICI Bank holding
a stake of 74% and Prudential plc holding 26%. ICICI begin their
operations in December 2000 after receiving approval from IRDA. Now
ICICI prudential is having over 1000 offices, over 270000 advisors and
21bancassurance partners. ICICI Prudential was the first life insurer in
India to receive a National Insurer Financial Strength rating of AAA
from Fitch ratings. ICICI prudential is working on the base of five core
values-
 Integrity
 Customer first
 Boundary less
 Ownership
 Passion
Key features:
 Understanding the needs of customers and offering them
superior products and service.
 Leveraging technology to service customers quickly, efficiently
and conveniently.

105
  Developing and implementing superior risk management and
investment strategies to offer sustainable and stable returns to
policyholders.
 Providing an enabling environment to foster growth and
learning for employees.
HDFC standard life insurance: HDFC Standard Life Insurance
Company Ltd. is one of India's leading private insurance companies. It is
a joint venture of Housing Development Finance Corporation Limited,
India's leading housing finance institution and a Group Company of the
Standard Life in UK. HDFC as on March 31, 2007 holds 81.9 per cent of
equity venture. Gross premium income of the HDFC for the year ending
March 31, 2007 was Rs. 2, 856 crores and new business premium
income was Rs. 1,624 crores. The company has covered over 8, 77,000
lives year ending March 31, 2007. HDFC standard is having 1000
advisors in 11 towns.
Key features:
 Creating corporate agents through HDFC bank in India.
 Creating agents to provide total financial consultancy.
 Introducing low cost group schemes for companies and NGOs.
Reliance life insurance: Reliance Life Insurance Company Limited
is a part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai
Ambani Group. Reliance Capital is one of India’s leading private sector
financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth.
Reliance Capital has interests in asset management and mutual funds,
stock broking, life and general insurance, proprietary investments,
private equity and other activities in financial services. Reliance Capital
Limited (RCL) is a Non-Banking Financial Company (NBFC) registered
with the Reserve Bank of India under section 45-IA of the Reserve Bank
of India Act, 1934.
Aviva life insurance: Aviva is UK’s largest and the world’s fifth
largest insurance Group. It is one of the leading providers of life and
pensions products to Europe and has substantial businesses elsewhere
around the world. Aviva has a joint venture of Dabur, one of India's

106
oldest, and largest Group of companies. And country's leading producer
of traditional healthcare products. In accordance with the government
regulations Aviva holds a 26 per cent stake in the joint venture and the
Dabur group holds the balance 74 per cent share. Aviva has 193
Branches in India (including rural branches) supporting its distribution
network. Through its Banc assurance partner locations, Aviva products
are available in more than 2,795 locations across India. Aviva has a sales
force of over 30000 financial planning advisors.
Key features:
 Through the “Financial Health Check” (FHC) Aviva’s sales force
has been able to establish its credibility in the market. The FHC is
a free service administered by the FPAs for a need-based analysis
of the customer’s long-term savings and insurance needs.
Depending on the life stage and earnings of the customer, the FHC
assesses and recommends the right insurance product for them.
 Introduced the concept of Banc assurance in India.
 Products to provide customers flexibility, transparency and value
for money.
 Differentiation in fund management operations.

MetLife insurance: MetLife India Insurance Company Limited is an

affiliate of MetLife, Inc. and was incorporated as a joint venture between
MetLife International Holdings, Inc. and The Jammu and Kashmir Bank,
M. Pallonji and Co. Private Limited and other private investors. MetLife
is one of the fastest growing life insurance companies in the country. It
offers a range of innovative products to individuals and group customers
at more than 600 locations through its bank partners and company-
owned offices. MetLife has more than 32,000 Financial Advisors. It has
approximately 70 million customers all over world. MetLife is working
on the base of six core values-
 Innovation
 Long term relationship
 Customer centered and result focused vision
 Creating high performance organization

107
  Working with integrity, fairness and financial prudence
 Partnering with internal and external customers
Max New York life insurance: Max New York Life Insurance
Company Ltd. is a joint venture between New York Life, a Fortune 100
company and Max India Limited, one of India's leading multi-business
corporations The Company's paid up capital is Rs. 907.4 crore. Max
New York life is working on the base of six core values-
 Excellence,
 Honesty,
 Knowledge,
 Caring,
 Integrity
The Company practices a lot of importance on its selection process of
insurance advisors which comprises four stages - screening,
psychometric test, career seminar and final interview. 337 agent
advisors have qualified for the Million Dollar Round Table (MDRT)
membership in 2007 and Max New York Life has moved up to 21st rank
in MDRT global list.
Key features:
 Max New York Life has adopted prudent financial practices to
ensure safety of policyholder's funds.
 Investing significantly in its training programme and each agent is
trained for 152 hours as opposed to the mandatory 100 hours
stipulated by the IRDA before beginning to sell in the marketplace.
 Using a five-pronged strategy to pursue alternative channels of
distribution which include the franchisee model, rural business,
direct sales force involving group insurance and telemarketing
opportunities, banc assurance and corporate alliances.
Bharti Axa life insurance: Bharti Axa life insurance is a joint
venture between Bharti, one of India’s leading business groups with
interests in telecom, agri business and retail, and Axa world leader in
financial protection and wealth management. The joint venture company
has a 74% stake from Bharti and 26% stake of Axa. The company
started its operations in December 2006. Now company is having over

108
5200 employees across over 12 states in the country. Company is
working on the base of five core values-
 Professionalism
 Innovation
 Team Spirit
 Pragmatism
 Integrity
Key features:
 Using multi-distribution, multi product platform techniques.
 Adapting AXA's best practices as a sound platform for
profitable growth.
 Leveraging Bharti's local knowledge, infrastructure and
customer base.
 Delivering high levels of shareholder return.
 Building long term value with business partners by enhancing
the proposition to their customers.
 Retaining the best talent in India.
Tata AIG life insurance: Tata AIG Life Insurance Company
Limited (Tata AIG Life) is a joint venture company of the Tata Group
and American International Group, Inc. (AIG). The Tata Group holds 74
per cent stake in the insurance venture with AIG holding the balance 26
percent. Tata AIG Life provides insurance solutions to individuals and
corporate. Tata AIG Life Insurance Company started to operate its
business in India on April 1, 2001. Tata AIG is having 3000 advisors all
over India.
Key features:
 Establishing direct mailers; call-centers in 60 centers.
 Creating awareness workshops in housing societies.
 15-day trial period with refund, premium payment through credit
card.
ING Vysya life insurance: ING Vysya Life Insurance Company
Limited a part of the ING group the world’s largest financial services
provider entered in the private life insurance industry in India in
September 2001.ING Vysya Life is currently present in 246 cities and
109
has a network of over 300 branches, staffed by 7,000 employees and
over 51,000 advisors, serving over 5.5 lakh customers. ING Vysya Life
has a diversified distribution channels,. While Tied Agency remains the
strongest channel, the Alternate Channels business within ING Vysya
Life is one of the fastest growing distribution channels. ING Vysya Life
has strengthened its position as the unparallel leader in the life insurance
industry in cooperative banks tie ups. The company currently has tie ups
with 130 cooperative banks across the country. The Alternate Channels
division has Banc assurance, ING Vysya Bank, Corporate Agents and
SMINCE. ING Vysya is working on the base of five core values-
 Professionalism
 Entrepreneurial
 Trustworthy
 Approachable
Birla sun life insurance: Birla Sun Life Insurance Company
Limited (BSLI) is a joint venture between the Aditya Birla Group and
the Sun Life Financial Services of Canada. It started operations in March
2001 after receiving its registration license from IRDA in January 2001.
Company is having more than 45 branches across India.
Key features:
 Focus on unit linked insurance products supported with protection
products to maintain leadership in product innovation.
 Use of multi distribution channels- Direct Sales Force, Alternate
Channels and offering convenient channels of purchase to
customers.
 Web-enabled IT systems for superior customer services and
issuing policies on the internet.
 High degree of transparency in all business practices and
procedures.
 Working on operational Business Continuity Plan.

MARKET SHARE OF DIFFERENT PRIVATE PLAYERS:

110
 Fig 3 source: www
freepress.in

If we see market share of different private players in the financial

year 2009 then from the above chart we can understand, the Major 7
insurance company market share are as follows:

1. ICICI Prudential is holding the maximum market share i.e. 21.6%.

2. After that SBI Life is holding 14.8%

3. Bajaj Allianz is holding 13.2% which is good market share,

4. Reliance Life is holding 9.9%,

5. Birla Sun life is holding 8.5%,

111
6. HDFC Standard they are also holding a good market share all over
the India 8.0 %,

7. Max New York Life insurance is holding 5.6%

112
113
114
115
116
117
 Growth in premiums of different insurance companies:-
Companies Premium Premium Growth %
up to oct 07 up to oct 06
(Rs.mill.) (Rs.mill.)
ICICI 31831.8 20808.5 53
Prudential
HDFC 10675.7 6595.7 61.9
Standard
SBI Life 14717.4 8142.4 80.8
Bajaj 26498.1 15208.2 74.2
Allianz
Aviva life 4586.8 3464.2 32.4
insurance
MetLife 2756.0 1162.7 137.0
insurance
Reliance 8571.2 2803.7 205.7
life insurance
Birla sun 7595.4 3844.7 97.6
life insurance
Max new 6942.0 3720.4 86.6
York life
insurance
Bharti 258.7 1.1 22907.8
AXA life
insurance
Tata AIG 4413.0 3264.8 35.2
ING Vysya 3047.7 2086.7 46.1
Kotak 3476.6 2172.6 60.0
Mahindra

Comparison of ULIP products of different insurance companies

ICICI Prudential
Fund options- growth fund, balanced fund, income fund, and
preserver.

118
 allocation to equities- upto 100% in growth fund, upto 40% in
balanced fund, nil in income fund, 50% in preserver.
minimum premium- 20,000.
min/max age at entry- upto 65 years.
sum assured- annual premium*term/2.
fund management charges- 1.5% in growth fund, 1.0% in balanced
fund, .75% in income and preserver fund.
fixed monthly expenses- 60rs.
partial withdrawals- above one partial withdrawal 100 rs. charge per
withdrawal.
charges on top ups- 1%.
switching charges- above 4 switches in a year 100 rs. Per switching.

Birla Sun Life Insurance

fund options- enhancer fund, builder fund, protector fund.
allocation to equities- maximum 35% in enhancer fund, maximum
20% in builder fund, maximum 10% in protector fund.
minimum premium- 20,000 rs.
min/max age at entry- 30 days to 60 years.
sum assured- face amount + policy fund.
fund management charges- 1% for all the fund options.
fixed monthly expenses- 22 rs.+ annual charges as applicable.
partial withdrawals- 2 free partial withdrawals in a year.
charges on top ups- 2%.
switching charges- 2 free switches in a year, and 100 rs. Per
switching.

HDFC Standard Life Insurance

fund options- growth fund, balanced fund, defensive fund, secure
fund, liquid fund.
allocation to equities- 100% in growth fund, 30-60% in balanced
fund, 15-30% in defensive fund, 0% in secure and liquid fund.
minimum premium- 10,000.
min/max age at entry- 18- 65 years.

119
 sum assured- annual premium*term/2, to 40 times the regular
premium amount.
fund management charges- .80%.
fixed monthly expenses- 20 rs.
partial withdrawals allowed- above 6 partial withdrawals 250 rs. per
withdrawal.
charges on top ups- 2.5% for initial 2 years, after 1%.
switching charges- 24 free switching and then 100 rs. per switching.

SBI Life Insurance

fund options- equity fund, bond fund, growth fund, balanced fund.
allocation to equities- upto 100% in equity fund, upto 20% in bond
fund, 40 - 100% in growth fund, 40 – 60% in balanced fund.
minimum premium- 24,000.
min/max age at entry- 7 – 65 years.
sum assured- 5 – 50 times the regular premium amount.
fund management charges- 1.5% for equity fund, 1.35% for growth
fund, 1.25% for balanced fund, 1% for bond fund.
fixed monthly expenses- 60 rs.
partial withdrawals allowed- above 4 partial withdrawals 100 rs. per
withdrawals.
charges on top ups- 1%.
switching charges- above 4 switching 100 rs. per switching.

Max New York Life Insurance

fund options- growth fund, balanced fund, conservative fund, secure
fund.
allocation to equities- 20 – 70% in growth fund, 10 – 40% in
balanced fund, 0 – 15% in conservative fund, 0% in secure fund.
minimum premium- 15,000.
min/max age at entry- 12 – 60 years.
sum assured- minimum sum assured 100,000 rs.
fund management charges- .90% - 1.25% of net assets in the fund.
fixed monthly expenses- 50 rs.
charges on top ups- nil.
120
 switching charges- above 2 switching per year 500 rs. Per switching.

Reliance Life Insurance

fund options- equity fund, growth fund, balanced fund, capital secure
fund.
allocation to equities- upto 100% in equity fund, upto 40% in growth
fund, upto 20% in balanced fund, 0% in capital secure fund.
minimum premium- 10,000.
min/max age at entry- 30 days to 65 years.
sum assured- for age of 12 years 5 times, above 12 years 5 times to
unlimited.
fund management charges- 1.75% in equity and growth fund, 1.5%
in capital secure fund.
fixed monthly expenses- 40 rs.
partial withdrawals allowed- rs. 100 for every withdrawal.
charges on top ups- 2%.
switching charges- above 1 switching 100 rs. Per switching.

Insurer Market Product Distributio Others

view focus n strategy
Bajaj Current Most More Growth
Allianz life industry products focus on and market
insurance growth homogeneous smaller share
sustainable across players, towns, oriented
for next 7 – not much greater strategy,
10 years, price emphasis on detarrifing
target 10% differentiation, agency force would hit
market ULIP sales expansion. non life
share in unlikely to be segment
next 5 years affected by adversely.
recent
regulations,
not much
threat from
mutual funds.
121
 HDFC Expect Focus on Prefer own Breakev
Standard high double regular offices versus en not
life digit premium franchisees, necessarily
insurance market products and higher focus in next 18
growth higher on training months, it
over next persistency agents rather would
few years, levels, group than hard sell, require
steady state focus given rural focus capital even
not flexibility in required but if FDI were
expected equity obstacles raised to
investment, include lack 49%.
competitive of bank
versus mutual infrastructure.
funds for
longer tenure
products given
lower amc
charges

ICICI Market Pension Significant Significa

Prudential growth at and healthy ly diversified nt capital
60%CAGR products likely with 40% requirement
in medium to grow given from non for
term, target aging agency force, maintain
to maintain population and expanding share in a
share at increasing life reach to non high
30% in expectancy. metro areas. growth
private Product market,
segment. awareness is both
slightly partners
behind LIC willing to
despite a contribute
significant
time
disadvantage;
122
 health could
comprise 3 –
5% of product
mix in 5 years.
,
Birla sun Target to Currently Agent It
life be top in 5 only unit productivity believes
insurance years linked is an issue some
products sold given their marginal
but group part time players
linked nature, target could br
products are is 130 bought out.
focus area for branches all
development. over India,
also will
leverage on
group’s
products
distribution
strengths.

123
CHAPTER 12

Questionnaire

124
 The following questionnaire is for the purpose of our research
project as a part of our MBA curriculum on ‘“Study of insurance
sector and competitiveness with the special reference to Bajaj
Allianz Life Insurance Company Ltd.”It is assured from us that any
information given by the company will not be disclosed by any
means. With this assurance I expect accurate data from company to
help me for my project.
________________________________________________________
_____

1. How long you have been in insurance industry?

(a) > 2 years (b) 2-5 years (c) 5-8 years (d) >8 years

2. When did you join your present company?

(a) > 2 years (b) 2-5 years (c) 5-8 years (d) >8 years

3. Your designation while joining this

company……………………….. .............................
................................................................................................................
.....................

4. How many advisors do you have? (For branch Manager only)

(a) >250 (b) 250-400 (c) 400-550 (d) >550

5. How many advisors do you have? (For agency Manager)

(a) >25 (b) 25-50 (c) 50-100 (d) 100-150

6. On what basis do you recruit your advisor?

(a) Through personal reference
(b) Through advertisement
(c) Through walk in interviews
(d) Through placements agencies

7. How do you make them active?

(a)By increasing incentives
125
 (b)By offering higher channel position
(c)By awarding non-cash prizes
(d)By giving training session

8. How many MBAs do you have in your agency?

(a) None (b) 1-3 (c) 4-6 (d) more than 6

9. On what products you are stressing more?

(a) Term insurance
(b) Unit linked products
(c) Money back products
(d) Endowment products

10. What is the basis of your product deployment?

(a) Profit oriented
(b) On customers need and demand
(c) On channel feedback from market
(d) By adding some additional benefits in current product

11. How do you differentiate your product from your competitors?

(a) By advertising and promotional activities
(b) By pricing of the product
(c) Based on the operation of funds
(c) By providing better service quality

12. Your mode of interaction with customers.

(a) Direct marketing
(b) By telephonic contacts (creating database)
(c) Through advertisement
(d) Through references

13. Which kind of strategies should an insurance company use to

compete in the market (in your view)?
(a) Better service quality
(b) Accordingly change in the pricing of product
126
 (c) By increasing periodicity of interaction with advisors and
customers
(d) By providing extra benefits to advisors and customer

14. What is average total premium collection in your branch (in a

month?)
(a) >2 Cr. (b) 2-4 Cr. (c) 4-5 Cr. (d) >5 Cr.

15. How many MDRT are become in your branch.

(a) >3 (b) 4-6 (c) 7-8 (d) 8 - 10

16. Other useful activities which you do in agency (if any, please
mention)…………………………………………………………………
….................................................................................................................
.....................................................................................................................
...................................................................................

17. What are your best products which you think it is a best in
insurance sector?
................................................................................................................
.....................................................................................................................
.....................................

18. What are your future plans (please

define)……………………………………………………..
................................................................................................................
.....................................................................................................................
.....................................

Findings

127
 Primary data has been collected by the survey of branch and agency
manager of different insurance companies in Bajaj Allianz Life
Insurance. sample size for this research is 50
(a) Age-profile:

Table No. I(a) showing age profile of respondents:

S. No Age No .of Percentage
respondents
1. 20-30 15 30.%
2. 30-40 25 50%
3. 40-50 7 14%
4. 50-above 3 6%
Total 50 100

Age-profile
50-above
6% 20-30
40-50
30%
14%
20-30
30-40
40-50
50-above

30-40
50%

INTERPRETATION :

In this survey I found the maximum number of respondents belongs

to the age group of 30-40 years, followed by 20-30 years of age
category.
128
 (b) Gender-wise:

Table No. I(b) showing gender wise profile of respondents:

S. No Gender No. of Percentag
respondents e
1. Male 45 90%
2. Female 5 10%
Total 50 100%

Gender-wise overview

Male I
Female Female NT
ER
PR
ET
AT
Male IO
N:

Table No.I(b) represents the gender ratio of the respondents in this

survey.90% of the covered respondents were male and remaining 10%
were female

Recruitment of advisors:-

In insurance industry advisors play most important role, and these

advisors are recruited through different ways. Mainly four ways for
recruiting the advisors are-
1. Through personal references.
2. Through advertisements.
3. Through walk in interviews.
4. Through placement agencies.

129
 S. No Recruitment of No. of Percentage
advisors responde
nts
1. Personal 35 70%
references.
2. Advertisement 5 10%
3. walk in 10 20%
interviews
4. placement 0 0%
agencies
Total 50 100%

Recruitment of advisors

80%
70%
60%
50%
40% Personal Referneces
30% Advertisement
20%
10% walk in interviews
0%
placement agencies

So most of the companies are recruiting their advisors through

personal reference and through walk in interviews, some companies are
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recruiting their advisors through advertisement also, but none company
is recruiting their advisors through placement agencies.

Making advisors active: To get efficient work from their advisors

companies do some practices to make them active. Some practices are-
1. By increasing incentives.
2. By offering higher channel position.
3. By awarding them non cash prizes.
4. By giving them training session.

S. No Making advisors No. of Percentage

active responde
nts
1. Increasing 5 10%
incentives
2. Offering higher 20 40%
channel position
3. Awarding them 5 10%
non cash prizes.

4. Giving them 20 40%

training session
Total 50 100%

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 40% 40%
40%

35%

30%

25% Increasing incentives

20% awarding non cash prizes

15% giving them training session

10% 10%
Column1
10%

5%

0%
Increasing higher awarding giving them
incentives channel non cash training
position prizes session

So most of the companies are giving training session , offering higher

channel position awarding non cash prizes to make their advisors active,
some of the companies are increasing incentives.

Type of products: Different insurance companies are having

different categories of insurance products. Some product categories are-
1. Term insurance products.
2. Unit linked products.
3. Money back products.
4. Endowment products.

S. No Type of products No. of Percentage

responde
nts
1. Term insurance 7 14%
products
2. Unit linked 30 60%
products
3. Money back 10 20%

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 products
4. Endowment 3 6%
products.

Total 50 100%

Type of Products

70%
60%
60% Term insurance
products
50%
Unit linked products
40%
30%
20% Money back products
20% 14%
10% 6% Endowment products
0%
No. of respondents

So all the companies are promoting their unit linked products and
some companies are promoting rest of the products including unit linked
products.

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 Basis of product use: - All insurance companies are deploying their
products in various categories. Some of the tactics are-
1. Profit oriented.
2. On customers need and demand.
3. On channel feedback from market.
4. By adding some additional benefits in current products.

S. No Basis of product No. of Perce

deployment respondents ntage
1. Profit oriented 10 20%
2. Customers need 30 60%
and demand
3. On channels 5 10%
feedback
4. Adding some 5 10%
additional
Benefit in current
products

Total 100%

So most of the companies are deploying their products based on the

customers need and demand.

Differentiation strategies: To make their products different from

their competitors companies are using some strategies which are-
1. By advertisement and promotional activities.
2. By pricing of the product.
3. Based on the deployment of the funds.
4. By providing better service quality

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 S. No Differentiation No. of Percentage
strategies responde
nts
1. advertisement and 15 30%
promotional
activities
2. pricing of the 15 30%
product
3. Based on the 5 10%
deployment of the
funds
4. providing better 15 30%
service quality
Total 50 100%

So most of the companies are giving better service quality and better
pricing to differentiate their products and better advertisement and
promotional activities from their competitors.

Mode of interaction: There are different types of way to interact

with customers. Some of the important ways are-
1. Direct marketing.
2. By creating database (telephonic contact).
3. Through advertisement.
4. Through online contacts

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 S. No Mode of No. of Percentage
interaction responde
nts
1. Direct marketing 35 70%
2. Creating database 13 26%
(telephonic contact).
3. Advertisement 2 4%
4. online contacts 0 0%
Total 50 100%

Mode of interaction

80% 70%
Direct Marketing
60%
Creating database
40% (telphonic)
26%
Advertisement
20%
4%
0% Online contacts
0%
No. of respondents
So
almost
all the companies are interacting with customers through direct
marketing and by telephonic contacts (creating database).

Strategy to compete in market: Most common strategies to

compete in the market for insurance companies are-
1. Better service quality.
2. Change in pricing of products.

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 3. By increasing periodicity of interaction with advisors and
customers.
4. By providing extra benefits to advisors and customers.

S. No Strategy to No. of Percentage

compete in market respond
ents
1. Better service 10 20%
quality
2. Change in 0 0%
pricing of products
3. Interaction with 35 70%
advisors and
customer
4. Extra benefit 5 10%
Total 50 100%

So most of the insurance companies think that providing better

periodicity of interaction with advisors and customers is most suitable
strategy to compete in the market.

SWOT ANALYSIS
Strength:
 Money Power, which makes them ignorant about the gestation
period
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 Brand image, business experience, and innovative products
 The agents are very selectively chosen have excellent
communication skills
 Service quality, which is core of their mission
 Large network branches which is helped to customer for the
payment
 Strong and popular brand name.

Weaknesses:
 High targets for financial advisors and for the sales departments.
 Many competitors in the market offer same product by the title
difference the premium and offerings.
 Sustainable to twist associated with investment in money market.
 Try to catch middle-lower level people also.
 Lack of awareness about insurance among people
 Less coverage in Rural Areas

Opportunity:
 Huge market is laterally untapped; out of estimated 320 millions
insurable markets only 20% of the population is insured.
 Health insurance and pension schemes, an estimated market
potential of approximately $15 billion
 Bajaj Allianz Life Insurance should give the insurance coverage
both to the parent and child so that their life could be covered in
both cases. The Customer doesn’t mind paying some extra
premium for that.
 Fast growing economy.

Threats:
 Players like icici prudential and birla sun life with low premium
for the similar plans Entry of many other private companies with
equally strong experience and financial strength of foreign partners
making the competition difficult and saturating the urban markets.

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 Current Govt. Policies do not encourages gross domestic saving. If
the tax liability of the services class rises, the customer will have
little money to invest.
 LIC has woken up from sleep and is following competitive
strategies. Its huge surplus in life fund gives a capability to lodge
price war.

Conclusion

 Insurance companies are recruiting their advisors mainly through

personal reference, through advertisement, and through walk in
interviews. None of the company is recruiting their advisors
through placement agencies.

 Those advisors who are recruited through personal references need

more training session and company has to put effort to make them
active. Most of the companies are giving training session to
advisors to make them active. Companies are also providing
higher channel position and increasing incentives to make them
active.

 Most of the insurance companies have started recruiting agency

manager and high posted people from professional colleges to
improve efficiency of the insurance company.

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 Insurance companies have forgotten their traditional products.
Companies are totally concentrating on selling ULIP products.
Now insurance companies are selling their products as an
investment product not as life insurance products.

 Insurance companies are using their products mostly based on

customer needs and demands. Insurance companies are not doing
enough market researches to know the potential of the market.

 Most of the insurance companies are differentiating themselves

from the competitors by providing better service quality, better
pricing of the product, advertisement and promotional activities.

 Sales managers of most of the companies think that providing

better service quality is the best tool to compete in the market.
Better service quality may be in the form-
1. Issuing policy in time, Providing claims in time
2. Making customers aware about their status of policy.
Recommendations

 Bajaj Allianz Life Insurance Company should start recruiting

advisors through placement agencies. By practicing this Bajaj Life
Insurance Company will get more capable advisors who can work
efficiently. Inactive advisors kind of thing would not happen.

 Bajaj Life should also promote the term and endowment insurance
products including ULIP products. Because these are basic
insurance products. Promote products as life insurance products
not an as investment products.

 To increase awareness in rural market Bajaj Life should do some

activities in villages and small towns. This can be done by putting
and festival melas organizing in villages.

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  Bajaj Allianz life insurance should sell their products through head
of the villages or through panchayat in villages. People in villages
believe on the head and panchayat so selling insurance will be
easier in villages.

 Bajaj Allianz can introduce some special policies for the farmers to
tap the rural market, and pricing for these kinds of products should
be less so farmers can easily afford to take policies

Annexure 1-Bibliography

BIBLIOGRAPHY

Books:
Kothari C.R., (1999) Research Methodology, Wishwa Prakashan
Kotler P., (1999 ) Marketing Management Analysis, Planning,
Implementation and Control, New Delhi, Prentice Hall of India
Business today

Web sites
www.bajajallianzlifeinsurance.com
www.freepress.iin
www.licindia.com
www.irda.org
www.lifeinsure.com

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 Annexure 2- Questionnaire

1. How long you have been in insurance industry?

(a) > 2 years (b) 2-5 years (c) 5-8 years (d) >8 years

2. When did you join your present company?

(a) > 2 years (b) 2-5 years (c) 5-8 years (d) >8 years

3. Your designation while joining this

company……………………….. .............................
................................................................................................................
.....................

4. How many advisors do you have? (For branch Manager only)

(a) >250 (b) 250-400 (c) 400-550 (d) >550

5. How many advisors do you have? (For agency Manager)

(a) >25 (b) 25-50 (c) 50-100 (d) 100-150

6. On what basis do you recruit your advisor?

(a) Through personal reference
(b) Through advertisement
(c) Through walk in interviews
(d) Through placements agencies

7. How do you make them active?

(a)By increasing incentives
(b)By offering higher channel position
(c)By awarding non-cash prizes
(d)By giving training session

8. How many MBAs do you have in your agency?

(a) None (b) 1-3 (c) 4-6 (d) more than 6

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 9. On what products you are stressing more?
(a) Term insurance
(b) Unit linked products
(c) Money back products
(d) Endowment products

10. What is the basis of your product deployment?

(a) Profit oriented
(b) On customers need and demand
(c) On channel feedback from market
(d) By adding some additional benefits in current product

11. How do you differentiate your product from your competitors?

(a) By advertising and promotional activities
(b) By pricing of the product
(c) Based on the operation of funds
(c) By providing better service quality

12. Your mode of interaction with customers.

(a) Direct marketing
(b) By telephonic contacts (creating database)
(c) Through advertisement
(d) Through references

13. Which kind of strategies should an insurance company use to

compete in the market (in your view)?
(a) Better service quality
(b) Accordingly change in the pricing of product
(c) By increasing periodicity of interaction with advisors and
customers
(d) By providing extra benefits to advisors and customer

14. What is average total premium collection in your branch (in a

month?)
(a) >2 Cr. (b) 2-4 Cr. (c) 4-5 Cr. (d) >5 Cr.
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 15. How many MDRT are become in your branch.
(a) >3 (b) 4-6 (c) 7-8 (d) 8 - 10

16. Other useful activities which you do in agency (if any, please
mention)…………………………………………………………………
….................................................................................................................
.....................................................................................................................
...................................................................................

17. What are your best products which you think it is a best in
insurance sector?
................................................................................................................
.....................................................................................................................
.....................................

18. What are your future plans (please

define)……………………………………………………..
................................................................................................................
.....................................................................................................................
.....................................

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