A SUMMER TRAINING REPORT

MAX NEW YORK LIFE INSURANCE

BOOM IN INSURANCE SECTOR DUE TO PRIVATE PLAYERS

FOR MAX NEW YORK LIFE INSURANCE IN NEW DELHI

Training Supervisor Submitted By:

NITIN GARG SHUKTI NAYAR
(Branch manager)
Enrolment No.:

Session- 2006-2009
GURU NANAK DEV UNIVERSITY, AMRITSAR

1
 PREFACE

This project aims at providing information regarding insurance sector and how
emergence of private players proved to be a boom to this sector.

Chapter 1 explains about the concept of insurance, its purpose and need in contemporary
world. This chapter also includes origination of insurance; its nationalization in India;
benefits; advantages; basic principles that make insurance remain a popular and fair
arrangement; mechanism;

Governing legislation over insurance. IRDA (Insurance Regulatory and Development

authority) governs insurance industry. Its duties, powers and functions are mentioned. In
the next topic we come to know about the collaboration of Max India Ltd. and New York
Life Insurance Co., and then the corporate profile of Max New York Life Insurance Co.
Ltd. The competitive information of MNYL is also explained .Later in the chapter is the
SWOT analysis of the organization.

Chapter 2 is all about the main as well as sub objectives of the organization and what are
their research methodologies.

Chapter 3 is about a brief comparison between private players and LIC.

Chapter 4 includes the analysis of data being collected regarding the Max New York Life
Insurance co. Ltd. over other private players.

In chapter 5 findings are based on data analysis presented in earlier chapter and in the
later half of this chapter recommendations are given.

Chapter 6 is the conclusion made on the basis of this project. New players are leading the
sector due to their strategic management and tailor made projects. People opting for
MAX plans are more as compared to other private players but the latter are gaining
momentum in the market day by day.

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 ACKNOWLEDGEMENT

The success of my research report would not hint at any one individual, but it was a
consolidated effort on the part of all who contributed to this report.

I am thankful to NITIN GARG (BRANCH MANAGER) for providing me an

opportunity to gain both theoretical and practical knowledge in the field of Marketing and
extending their full support.

Last but not the least, I would like to thanks my parents and friends for their moral
support throughout the project.

SHUKTI NAYAR

3
 CONTENTS
PREFACE 1
ACKNOWLEDGEMENT

Chapter 1. INTRODUCTION 5
1.1 Insurance Industry Overview
1.2 Profile of Max New York Life Insurance Co. Ltd.
1.3 Competition Information
1.4 S.W.O.T- Analysis

Chapter 2. OBJECTIVES AND METHODOLOGY 35

2.1 Main Objectives
2.2 Sub Objectives
2.3 Research Methodology

Chapter 3. CONCEPTUAL DISCUSSION 37

Chapter 4. DATA-ANALYSIS 47

Chapter 5. FINDING AND RECOMMENDATIONS 53

Chapter 6. CONCLUSIONS 58

ANNEXURES 61

BIBLIOGRAPHY 79

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CHAPTER 1.0 INTRODUCTION

1.1 An Overview of Insurance Sector

1.2 Organization profile of MNYL

1.3 Competition Information

1.4 S.W.O.T- Analysis

5
 INTRODUCTION TO THE PROJECT

This very project was a part of my final placement. As entering into a new field, the
company felt a strong need to provide me with a good training, which ended with the
completion of this project, so as to have a focused approach towards insurance sector.

This opportunity provided me an insight into the insurance sector and would be help or
input for me entering into an insurance sector.

The project included understanding the customer buying behavior with a focus on market
segmentation to have an overview of customer's perception in Delhi and their buying
behavior, which would be of great insight for better penetration in the Delhi market.

RATIONALE OF THE RESEARCH

Market Research is related with the genuine and objective collection, analysis &
evaluation of information about specific aspects of marketing problems so as to help the
company and its management to make right and effective decisions. Market Research is
not an end in itself; it is a means to an end the important is decision making.

The main rationale behind the study undertaken was to provide information about
customer’s buying behavior. To provide the company with information as to what are the
factors and the reasons that the customer (salaried person) looks upon during a purchase
of an insurance policy and what is the image of private insurance companies in their mind
thru direct interaction with the customers.

The project was strictly confined to the Delhi Region - The people contacted during the
course of this project were from different regions of Delhi. This project is a sincere
compilation of all the data and information collected by each team member.

This report can be a valuable input for the people who are involved with the Insurance
Services, in order to have an overview of customer's perception in Delhi Region.

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INSURANCE- WHAT IS IT?

Man has always been in search of security and protection from the beginning of
civilization. This urge led him to the concept of insurance. The basis of insurance was the
sharing of the losses of a few amongst many. Insurance provides financial stability and
strength to the individuals and organization by the distribution of loss of a few among
many by many by building up over a period of time.

The legal definition of insurance is that, “it is a contract between the insurer and
insured whereby, in consideration of payment of premium by the insured the
insurer agrees to make good any financial loss the insured may suffer due to
consideration of an insurance peril.”

Insurance means Spreading of Losses or Sharing of Risks. Life is full of risks. For
property, there are fire risks; for shipment of goods, there are perils of sea; for human life
there are risks of death or disability; so on and so forth. The risks are uncertain-may or
may not occur. People facing common risks come together and give their small
contribution to the common fund. While it may not be possible to tell before, which
persons will suffer, but it is possible to tell how many persons on an average out of the
group will suffer loss. If any case risk occurs, loss is made good out of common fund. In
this way, all shares common risk. Insurance, thus broadly can be understood as the
process of spreading of losses of an individual, over the group of individuals or the
process of sharing of risk by those who face common risk. People who suffer loss get
relief because their loss is made good out of common fund. People who do not suffer loss
get relief because they are free of any worry of loss. Following 2 e.g. explain the above
concept of insurance.

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Example-1:

In a village, there are 500 houses; each valued at Rs. 25,000. Every year 5 houses get
burnt, resulting into a total loss of Rs. 1250,000. If all the 500 owners come together and
contribute Rs. 250 each, the common fund would be Rs. 125,000. This is enough to pay
Rs. 25,000 to each of the 5 owners whose houses got burnt. Thus the risk of 5 owners is
spread over 500 house-owners of the village.

Example – 2:

There are 1000 persons who are all aged 50 and standard lives. It is expected that 10

persons out of the group die during the year. If the economic value of the loss suffered by

the family of each dying person were taken to be Rs. 20,000, the total loss would work

out to Rs. 20,000/-. If each person of the group contributes Rs. 200 a year, the Common

Fund would be Rs. 2,00,000 this would be enough to pay Rs. 20,000 to the family of each

of the 10 dying persons. Thus 1000 persons are sharing the risks in cases of these 10

persons.

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AN OVERVIEW OF INSURANCE SECTOR

The insurance sector has a long history in India. It began in the early years of the 19 th
century. The 1st legal enactment was made in 1870. The 1st Indian Insurance Act was
passed in 1938 and amended in 1950, when it was nationalized. However, the sector was
once again thrown open to the private sector on December 1999, followed by the
establishment of the Insurance Regulatory and Development Authority (IRDA) in April
2000.

Though the Insurance Sector is now open for private players as a consequence of the new
liberalization policies of the Government, the existing government owned Insurance
companies will, nevertheless, continue to be in the government sector. These existing
companies will, however, have to strive for better realization of their corporate objectives
and goals to meet the demands and expectations of the public.

Quality of service and product that an industry offers must move forward with progress in
the state of the economy. As the quantum and quality of service change over time, the
levels at which customers continue to remain satisfied with the services provided, also
keep on increasing. Ultimately, the success of any industry depends upon its positioning
in the state of economy and on meeting the expectations of the service users.

With competition, the performance level of individual companies is expected to increase.

Segmentation is taking place within the economy with a need for socially responsive
service sector.

Globalization is the new economic reality, which is here to stay, heralding a new era of
insurance in India. With the opening of the insurance industry, India stands to gain with
the following major advantages:

• Globalization will provide improved opportunities to the customer for better

products, with more reasonable and affordable pricing.

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 • The customer will get faster servicing.

• It will enhance the savings rate.

• Long-term funds for infrastructure development will be available to the

Country.

• It will secure for India larger inflows of foreign capital needed to sustain our
GDP growth.

INSURANCE OPPORTUNITIES IN INDIA

• Not even 25% of the insurable population has been extended the insurance
cover. Market penetration is quite low and hence the potential to exploit is very high.

• Insurance premium per capita is very low ($4).

• Lack of a comprehensive social security system/state benefit and welfare

means that demand for pension products should be high.

• There is a huge middle class section of approximately 300 million.

• Existing insurance companies score very low on the customer service front.

• With steadily increasing corporate asset values, need for insurance is on the
rise. Competition can help ensure the best products with best services.
(ref.bibliography)

THE INSURANCE REFORMS ROUTE

So, its clear that the insurance was in private hands before 1971 and was nationalized in

1972 with all private companies merged into General Insurance Corporation of India as

the parent company with 4 subsidiaries as National Insurance Company Ltd. with Head

Office at Calcutta, New India Assurance Company Ltd. with Head Office at Bombay,

Oriental Insurance Company Ltd. with Head Office at New Delhi and United India

Insurance Company Ltd. with Head Office at Madras.

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In 1993 the need for Private Insurance Companies and Multinational Companies was felt

and beginning of liberalization process started. (ref.bibliography)

April 1993 R N Malhotra Committee an Insurance Sector reforms &

deregulation set up.

January ‘94 Malhotra Committee submits report to Finance Ministry.

January ‘96 An interim INSURANCE REGULATORY AUTHORITY

set up thru a resolution.

September ’96 INSURANCE REGULATORY AUTHORITY Bill drafted.

December ’96 The INSURANCE REGULATORY AUTHORITY Bill

introduced in the Parliament and referred to a standing
committee.

August ’97 The INSURANCE REGULATORY AUTHORITY Bill is

withdrawn following opposition to foreign participation in
the domestic insurance sector.

November ‘97 Union government gives greater autonomy to LIC, GIC

and its 4 subsidiaries.

June ‘98 Union Budget announces opening up of the insurance

sector.
January ‘99 Notification of IRA is statutory authority and amendments
LIC & GIC Acts.

March ‘99 INSURANCE REGULATORY AUTHORITY sets the

procedure for filing applications.

April–July ‘99 3 months open window for receipt of application.

December ‘99 In principal approvals to be granted.

2000 Private Insurance products hit the market.

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After a long wait, however, there was light at the end of the tunnel when the Union

Cabinet first gave its nod for 26% direct foreign equity in any insurance JV, and later

allowed foreign institutional investors (FIIs) to hold 14% stake in such ventures

effectively pushing up the foreign equity proportion to 40%.

THE ROADMAP TO PRIVATIZATION

• Insurance Regulatory Authority Bill was placed before Parliament. New act to
grant statutory powers to Insurance Regulatory Authority to issue guidelines and
regulate industry.

• GIC and LIC Acts were amended. Such an amendment was crucial as the Acts
disallows any other entity to issue policies.

• Guidelines for new private insurance companies were announced by Insurance

Regulatory Authority, which would include capital requirement, solvency margins
etc.

• Legislation was framed to permit institution of brokers to operate in the country.

• Guidelines for intermediaries such as surveyors, insurance agents and actuaries

were formulated.

• Invitation of business plans and applications from prospective participants, and

actuaries were formulated.

1.2 PROFILE OF THE ORGANISATION

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Max India Limited

Founded in 1985, Max India Limited is a Public Limited company listed in the NSE and
BSE of India with over 37,000 shareholders.

Today, Max India Limited is a multi-business corporate, driven by the spirit of

Enterprise, focused on Knowledge, People and Service oriented businesses of:

• Healthcare (Max Healthcare)

• Life Insurance (Max New York Life Insurance)

• Clinical Research (Neeman Medical International)

Max also maintains interests in:

• Specialty Plastic Products for the packaging industry (Max Speciality Products)

• Healthcare Staffing (Max Health Staff)

Prominent shareholders are Mr. Analjit Singh and a leading private equity firm, Warburg
Pincus which accounts for 28.7% of the total shareholding. The balance shareholding is
held by the public and Institutional Investors.

Till 1999, the company’s main interests and partnerships were the following:

Business

• Bulk Active Pharmaceuticals

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 • Electronic Component Distribution

• Electronic Component Distribution

• Mobile Telephony

• V-SAT Communications

• Plating Chemicals

• Information Technology

Partners

• DSM Gist Brocades

• Motorola, USA

• Avnet Inc., USA

• Hutchison Telecom Ltd. Hong Kong

• Comsat Investment Inc., USA & Lockheed Martin, USA

• Atotech, Germany

• Mind Crossing, USA

In 2000, the Company reinvented and restructured itself to focus on the businesses of
‘Life’ under the theme, Life…Our Focus.

Max New York Life Insurance, founded as a Joint Venture between Max India Limited
and New York Life, a Fortune 100 company, is one of the leading private life insurers in
India.

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Max Healthcare, a subsidiary of Max India Limited is India’s first provider of
comprehensive, standardized, seamless, and integrated world-class healthcare services.

Neeman Medical International (NMI) is an International Clinical Research provider

operating across three locations spanning North America, Asia and Latin America. Each
location is backed by comprehensive infrastructure and highly skilled and experienced
personnel.

New York Life Insurance Company

A Fortune 100 company founded in 1845 is the largest mutual life insurance company in
the United States and one of the largest life insurers in the world. Headquartered in New
York City, New York Life’s family of companies offer life insurance, annuities and long-
term care insurance. New York Life Investment Management LLC provides institutional
asset management and retirement plan services. Other New York Life affiliates provide
an array of securities products and services, as well as institutional and retail mutual
funds.

The mission of New York Life is to maintain its superior 'financial strength', adhere to
the highest standards of 'integrity' and demonstrate 'humanity' by treating its customers,
agents and employees with compassion, consideration and respect.

New York Life is one of the largest and strongest life insurance companies in the world
with more than USD$215 billion assets under management and has received among the
highest ratings for financial strength from the life insurance industry's principal rating
agencies: A.M. Best (AA+), Standard & Poor's (AA+), Moody's (Aa1), Fitch (AAA).
According to Moody's, "New York Life's rating reflects the company's good quality
investment portfolio, ample liquidity, and sound capitalization, as well as the good
growth potential of its international business.”

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As a leader in the insurance industry, New York Life continues to bring to its operations
new management concepts, advanced technologies, new distribution and training systems
and innovative insurance products.

Max New York Life Insurance Company Ltd.

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 has positioned itself on the quality platform. In line with its
vision to be the most admired life insurance company in India, it has developed a strong
corporate governance model based on the core values of excellence, honesty, knowledge,
caring, integrity and teamwork. The strategy is to establish itself as a trusted life
insurance specialist through a quality approach to business.

In line with its values of financial responsibility, Max New York Life has adopted
prudent financial practices to ensure safety of policyholder's funds. The Company's paid
up capital is Rs. 587 crore, which is more than the norm laid down by IRDA.

Max New York Life has identified individual agents as its primary channel of
distribution. The Company places a lot of emphasis on its selection process, which
comprises four stages - screening, psychometric test, career seminar and final interview.
The agent advisors are trained in-house to ensure optimal control on quality of training.

Max New York Life invests 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. Training is a continuous process for agents at
Max New York Life and ensures development of skills and knowledge through a
structured programme spread over 500 hours in two years. This focus on continuous
quality training has resulted in the company having amongst the highest agent pass rate in
IRDA examinations and the agents have the highest productivity among private life
insurers.

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201 agent advisors have qualified for the Million Dollar Round Table (MDRT)
membership in 2005. MDRT is an exclusive congregation of the world’s top selling
insurance agents and is internationally recognized as the standard of excellence in the life
insurance business.

Having set a best in class agency distribution model in place, the company is
spearheading a major thrust into additional distribution channels to further grow its
business. The company is using a five-pronged strategy to pursue alternative channels of
distribution. These include the franchisee model, rural business, direct sales force
involving group insurance and telemarketing opportunities, bancassurance and corporate
alliances.

Max New York Life offers a suite of flexible products. It now has 22 life insurance
products and 8 riders that can be customized to over 400 combinations enabling
customers to choose the policy that best fits their need.

Why would you need life insurance?

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The most common reason for buying a life insurance is to replace the income lost
when one dies.

For e.g., say that you work, and that your income is used to support yourself and your
family. When you die, and your paychecks stop, the life insurance proceeds can be
used to continue to support the family members you've left behind.

Another common use of life insurance proceeds is to pay off any debts you leave
behind. For e.g., mortgages, car loans, medical bills, and credit card debts are often
left unpaid when someone dies. These obligations must be paid from the assets left
behind. This can deplete the resources that your family needs. Life insurance can be
used to pay off these debts, leaving your other assets intact for your family to use.

Life insurance provides liquidity to your estate. When you die, you may leave some
liquid assets (such as cash, CDs, and savings bonds), and some illiquid assets (such
as real estate, an automobile, and stocks). Your liquid assets may not be enough to
pay all the debts that you leave behind, plus all the expenses that arise because of
your death (such as funeral expenses and estate taxes). Your illiquid assets may have
to be sold in order to meet these obligations when they come due. This may cause a
financial loss if the assets must be sold cheaply in order to get the money on time.
Life insurance can avert this situation, because the proceeds are available almost
immediately upon your death.

Life insurance creates an estate for your heirs. After your debts and expenses are
paid, there may not be much left over for your family. Life insurance can
automatically provide assets for them after your death.

Life insurance is a great way to give to charity when you die. You may have always
had a great philanthropic desire, but not the means to make it a reality. Life insurance
can do that for you.

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Life insurance can be a critical component for specialized business applications, such
as funding a buy-sell agreement. Under a buy-sell agreement, life insurance can be
used to provide cash for the purchase of a deceased owner's interest in the business.

Finally, life insurance can be an investment vehicle. Some types of life insurance
policies may actually make money for you, as well as provide the benefits described
above. This can help you with long-term financial goals.

1.3 COMPETITION INFORMATION

Insurance Companies in India

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Before insurance sector was opened to the private sector Life Insurance Corporation
(LIC) was the only insurance company in India. After the opening up of Insurance sector
in India there has been a glut of insurance companies in India. These companies have
come up with innovative and flexible insurance policies to cater to varying needs of the
individual. Opening up of the Insurance sector has also forced the Lic to tighten up its
belt and deliver better service. All in all it has been a bonanza for the consumer.

Major Life insurance Companies in India are:

• Aviva Life Insurance

• Bajaj Allianz

• Birla S un Life Insurance

• HDFC Standard Life Insurance

• ICICI Prudential

• ING Vysya

• Kotak Mahindra

• LIC

• MetLife India Insurance

• Reliance Life Insurance

• SBI Life Insurance

• Shriram Life Insurance

• Tata AIG Life Insurance

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Aviva Life Insurance, India

Aviva Life Insurance Company India Pvt. Ltd. is a joint venture between Aviva of UK
and Dabur, one of India's leading producer of traditional healthcare products. Aviva holds
a 26 per cent stake in the joint venture and the Dabur group holds the balance 74 per cent
share.

Aviva is UK's largest and the world's sixth 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 pioneered the concept of Banc assurance in India. Currently, Aviva has
Bancassurance tie-ups with ABN Amro Bank, American Express Bank, Canara Bank,
Centurion Bank of Punjab, The Lakshmi Vilas Bank Ltd. and Punjab & Sind Bank, 11
Co-operative Banks in Gujarat, Rajasthan, Jammu & Kashmir and Maharashtra and one
regional Bank in Sikkim.

Aviva has 40 Branches in India (including rural branches) supporting its distribution
network. Through its Bancassurance partner locations, Aviva products are available in
378 towns and cities across India.

Bajaj Allianz

Bajaj Allianz is a joint venture between Allianz AG one of the world's largest insurance
companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the
world. Bajaj Allianz is into both life insurance and general insurance.

Allianz Group is one of the world's leading insurers and financial services providers.
Founded in 1890 in Berlin, Allianz is now present in over 70 countries with almost
174,000 employees. Bajaj group is the largest manufacturer of two-wheelers and three-

21
wheelers in India and one of the largest in the world.

Today, Bajaj Allianz is one of India's leading and fastest growing insurance companies.
Currently, it has presence in more than 550 locations with over 60,000 Insurance
Consultants.

Birla Sun Life Insurance

Birla Sun Life Insurance Company Limited is a joint venture between Aditya Birla Group
and Sun Life Financial of Canada. Aditya Birla Group is an Indian multinational
conglomerate with presence in India, Thailand, Indonesia, Malaysia, Philippines, Egypt,
Canada, Australia and China.

Sun Life Assurance, Sun Life Financial's primary insurance business, is one of the
leading insurance companies of the world and ranks amongst the largest international
financial services organizations in the world. The Group has presence in several countries
such as Canada, United States, Philippines, Japan, Indonesia, India and Bermuda.

HDFC Standard Life Insurance

HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC Ltd., India's
largest housing finance institution and Standard Life Assurance Company, Europe's
largest mutual life company. It was the first life insurance company to be granted a
certificate of registration by the IRDA on the 23rd of October 2000.

Standard Life, UK was founded in 1825 and has experience of over 180 years.
Companies. The company is rated as "very strong" by Standard & Poor's (AA) and
"excellent" by Moody's (Aa2).

HDFC Standard Life's cumulative premium income, including the first year premiums
and renewal premiums is Rs. 672.3 Crores for the financial year, Apr-Nov 2005. So far
the company has covered over 11,00,000 individuals and has declared 5th consecutive
bonus in as many years for its 'with profit' policyholders.

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ICICI Prudential Life Insurance

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a
premier financial powerhouse and Prudential plc, a leading international financial
services group headquartered in the United Kingdom.

ICICI was established in 1955 to lend money for industrial development. Today, it has
diversified into retail banking and is the largest private bank in the country. Prudential plc
was established in 1848 and is presently the largest life insurance company in the UK.

ICICI Prudential is curently the No. 1 private life insurer in the country. For the financial
year ended March 31, 2005, the company garnered Rs 1584 crore of new business
premium for a total sum assured of Rs 13,780 crore and wrote nearly 615,000 policies.

ING Vysya Life Insurance

ING Vysya Life Insurance Company Limited is a joint venture between Vysya Bank and
ING Group of Holland, the world's 4th largest financial services group, with presence
across 50 countries, and a heritage of over 150 years.

ING Vysya Life Insurance Company Private Limited entered the private life insurance
industry in India in September 2001. With in a short span of time ING Vysya Life
Insurance has registered an impressive growth. The company currently has over 10,000
active advisors working from 75 branches (in 30 cities) across the country and over 2300
employees.

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Kotak Mahindra Old Mutual Life Insurance Limited

Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between Kotak
Mahindra Bank Ltd.(KMBL), and Old Mutual plc. Kotak Mahindra is one of India's
leading financial institutions and offers a range of financial services such as commercial
banking, stock broking, mutual funds, life insurance, and investment banking.

Old Mutual was established more than 150 years ago and offers a diverse range of
financial services in South Africa, the United States and the United Kingdom. The
company is listed on the London Stock Exchange with a market capitalization and has its
headquarters in London.

Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India (LIC) is an autonomous body authorized to run the
life insurance business in India with its Head Office at Mumbai. It has been established
by an act of the Parliament and started functioning from 1/9/1956.

LIC is the biggest insurance player in the country. Out of the total premium of Rs 3766
crore generated by the insurance industry through group business in the year 2005-06,
LIC alone accounted for Rs 3051 crore.

In the financial year 2005-06, LIC has grown at 30.68%. In respect of number of lives
insured, LIC has shown a growth of over 152%. In respect of number of schemes, LIC
has a growth of 2%. LIC's market share in number of individuals covered and number of
policies stands at 77% and 81%, respectively.

MetLife India Insurance

MetLife India Insurance Co. Pvt Ltd is a joint venture between MetLife Group and its
Indian partners. The Indian partners include J&K Bank, Dhanalakshmi Bank, Karnataka
Bank, Karvy Consultants, Geojit Securities, Way2Wealth, and Mini Muthoothu.

24
Met Life Group has presence in America and Asia and has an experience of over 137
years in providing financial services. The MetLife companies are the number one life
insurer in the U.S. with approximately US $2.8 trillion of life insurance in force. MetLife
serves 88 of the top one hundred FORTUNE 500 companies. MetLife entered Indian
insurance sector in 2001.

Reliance Life Insurance

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - Anil Dhirubhai Ambani Group. The company acquired 100 per cent
shareholding in AMP Sanmar Life Insurance Company in August 2005. Taking over
AMP Sanmar Life provided Reliance Life Insurance a readymade infrastructure and a
portfolio.

AMP Sanmar Life Insurance was a joint venture between AMP, Australia and the Sanmar
Group. Headquartered in Chennai, AMP Sanmar had over 90 offices across the country,
9,000 agents, and more than 900 employees.

SBI Life Insurance

SBI Life Insurance is a joint venture between the State Bank of India and Cardif SA of
France. SBI Life Insurance is registered with an authorised capital of Rs 500 crore and a
paid up capital of Rs 350 crores.

State Bank of India is the largest banking franchise in India. Along with its 7 Associate
Banks, SBI Group has a network of over 14,000 branches across the country, the largest
in the world.

Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone's leading
Bank. BNP is one of the oldest foreign banks with a presence in India dating back to
1860

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Shriram Life Insurance

Shriram Life Insurance Company Ltd is a joint venture between the Chennai-based
Shriram Group and the South African insurance major Sanlam.

The company launched its operations in India in December 2005.

Shriram Life has set a target of achieving a premium income of Rs 110 crore during the
first year of operations. While focussing largely on the strong network of over 65,000
agents and distribution network of more than 550 branches, Shriram Life is also
contemplating bancassurance alliances with couple of banks.1.3.14 Tata AIG Life
Insurance

Tata AIG Life Insurance Company Limited is a joint venture between Tata Group and
American International Group, Inc. (AIG). Tata Group is one of the oldest and leading
business groups of India. Tata Group has had a long association with India's insurance
sector having been the largest insurance company in India prior to the nationalization of
insurance. The Late Sir Dorab Tata, was the founder Chairman of New India Assurance
Co. Ltd., a group company incorporated way back in 1919.
American International Group, Inc is the leading U.S. based international insurance and
financial services organization and the largest underwriter of commercial and industrial
insurance in the United States. AIG has one of the most extensive life insurance networks
in the world.

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1.4 SWOT ANALYSIS

Both Strengths and Weaknesses are inherent with the company while Opportunities and
Threats are usually outside factors, which affect the existence of the company at large.
Let us make the SWOT Analysis for Life Insurance Corporation:

Strengths

• The early bird advantage

• More penetration in the rural parts of India

• The trust they have created so far

• Established agency network during the last decades

• The incomparable supremacy in the number of agents

• More awareness among the people

Weakness

• The marketing approach is not that much professional

• The sluggishness of the activities has given at times a bad repute

• As a public company lacks sincerity and activeness.

Opportunities

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 • As people become more internet savvy, the Ad. Expenditure will come down as
the prospective clients can be approached through net.

• The high growth rate of Indian Economy

• The penetration of Insurance in rural area is minimal.

• The Government policies are offering more and more rebates on the insured
amount and such a scenario will help more people getting interested in itThe
people are becoming more aware of Insurance and started considering it.

Threats

• Now as India is on the brim of emerging out as an economic power center,

stringent laws can be expected in the coming future.

• As the number of agents are considerably huge, efficient management of all the
field force need greater strain and effort

• The aggressive style of marketing by the private players is a threat to LIC

• More and more companies are coming into the field and the existing ones have to
struggle hard to keep the customers loyal and to get more customers

28
 OBJECTIVES AND METHODOLOGY

MAIN OBJECTIVE:

• To determine customer-buying behavior with a focus on market segmentation.

• To study the reasons of salaried persons taking up Insurance Services

SPECIFIC OBJECTIVES:

• To determine reasons behind opting for an insurance.

• To provide the company with information of customer's Insurance policy if

they have any and reasons for opting for that particular policies.

 To know the most preferred policy.

• To determine customers perception towards private insurance companies and

their expectation form private insurance companies.

• To determine the feedback on services provided by any other insurance

agent.

• To study the types of benefits provided by insurance services.

• To determine the use of Internet for valuable information and decision-

making process.

 To know the impact of privatization of insurance sector on public.

29
SCOPE OF THE STUDY

The initial step was to understand the process of how to go about the project itself. The
aim was to understand better vision, mission objectives & culture of the organization. So
as to ensure that the work done is in the consonance with the main goal of the company.

In this regard various magazines, journals and newspapers were gone through. Various
Internet sites were also looked upon which provide me with valuable input into the
Insurance Sector.

The project was strictly confined to the Delhi Region - The people contacted during the
course of this project were from different regions of Delhi. This project is a sincere
compilation of all the data and information collected by each team member.

This report can be a valuable input for the people who are involved with the Insurance
Services, in order to have an overview of customer's perception in Delhi RegionIN

RESEARCH METHODLOGY

1. Research and Design

a. Explanatory Research

2. Data collection method

a. Primary Research

i. Questionnaire

ii. Focus Group Interview

30
 b. Secondary Research

i. Journal/Brochure of IRDA

ii. Published Reports

iii. Internet

3. Sampling Plan

a. Sampling unit employed people having salary between Rs. 10000 – Rs.
40000 per month.

b. Sampling size – 90-120 people

c. Sampling procedure non – probability judgement sampling

4. Data collection instrument

a. Questionnaire

b. Focus group interview

5. Analysis

a. Though a detailed study was planned but due to time constraint it was
restricted to around 90-120 people only.

STEPS IN THE MARKET RESEARCH

• Identification of the Objective (problem)

• Initial collection of the data from secondary sources.

31
 • Identification of sample size and sampling area.

• Formulation of the questionnaire.

• Collection of the primary data thru fieldwork.

• Analysis and interpretation of the collected data.

Preparation of the research report along with observations & recommendations

32
 CONCEPTUAL DISCUSSION

Private players in the life insurance business are growing at a scorching pace. Within
three years of their inception, they have seized about 14 per cent of the market.

Compare this to new generation private-sector banks, which took nine years for 20 per
cent share in the Indian banking industry. And after seven years in the industry, in 2000,
private mutual funds accounted for just 9 per cent of a market that had been dominated by
the Unit Trust of India.

There's another dimension to the insurance numbers game. While the private insurance
companies have attained 13 to 14 per cent share of the overall insurance market, their
share in the key metros (Mumbai and Delhi) is as high as 30 to 40 per cent.

"We have to struggle to complete a deal in the metros now, because policyholders are
comparing products and asking for better deals," says S B Mathur, chairman of the Life
Insurance Corporation of India.

Private insurance companies are essentially joint ventures with global insurance
companies holding a maximum of 26 per cent stake. The foreign partners are investing
heavily in the Indian market and, thereby, driving sales, because they see India emerging
as one of the biggest markets in the Asian region.

"India will become the biggest market for us in the next three to four years," predicts Dan
Bardin, Prudential Corporation Asia managing director south Asia and greater China.

Private players have certainly done their bit to increase the penetration levels of
insurance, mainly by creating alternative distribution channels--such as associations with
banks, brokers and corporate agents.

"Our banc assurance channel--with tie-ups with four banks--contributes almost 70 per
cent of our total sales," says Aviva CEO Stuart Purdy.

33
What is life insurance?

Life insurance is an agreement or a contract between you (the insured) and an

insurer. Under the terms of a life insurance contract, the insurer promises to pay a
certain sum to someone (a beneficiary) when you die, in exchange for your premium
payments.

Why would you need life insurance?

The most common reason for buying a life insurance is to replace the income lost
when one dies.

For e.g., say that you work, and that your income is used to support yourself and your
family. When you die, and your paychecks stop, the life insurance proceeds can be
used to continue to support the family members you've left behind.

Another common use of life insurance proceeds is to pay off any debts you leave
behind. For e.g., mortgages, car loans, medical bills, and credit card debts are often
left unpaid when someone dies. These obligations must be paid from the assets left
behind. This can deplete the resources that your family needs. Life insurance can be
used to pay off these debts, leaving your other assets intact for your family to use.

Life insurance provides liquidity to your estate. When you die, you may leave some
liquid assets (such as cash, CDs, and savings bonds), and some illiquid assets (such
as real estate, an automobile, and stocks). Your liquid assets may not be enough to
pay all the debts that you leave behind, plus all the expenses that arise because of
your death (such as funeral expenses and estate taxes). Your illiquid assets may have
to be sold in order to meet these obligations when they come due. This may cause a
financial loss if the assets must be sold cheaply in order to get the money on time.
Life insurance can avert this situation, because the proceeds are available almost
immediately upon your death.

34
Life insurance creates an estate for your heirs. After your debts and expenses are
paid, there may not be much left over for your family. Life insurance can
automatically provide assets for them after your death.

Life insurance is a great way to give to charity when you die. You may have always
had a great philanthropic desire, but not the means to make it a reality. Life insurance
can do that for you.

Life insurance can be a critical component for specialized business applications, such
as funding a buy-sell agreement. Under a buy-sell agreement, life insurance can be
used to provide cash for the purchase of a deceased owner's interest in the business.

Finally, life insurance can be an investment vehicle. Some types of life insurance
policies may actually make money for you, as well as provide the benefits described
above. This can help you with long-term financial goals.

LIFE INSURANCE NEEDS AT VARIOUS LIFE STAGES

Your need for life insurance changes, as your life moves ahead. When you're young,
you typically have no need for life insurance, but this changes as you take on more
responsibility, and as your family grows. Then, as your responsibilities once again
begin to diminish, your need for life insurance drops off. Let's look at how your life
insurance needs change throughout your lifetime.

School days

Childhood is typically a time of no worries, no cares, and no responsibilities. A child

depends on others to take care of them, not the other way around. Although it would
be tragic, a child's death would likely have little financial impact on the child's
family. Thus, there is generally no need for life insurance at this point in an
individual's life.

35
A child's death does create one short-term financial problem: funeral expenses. But
buying a life insurance policy just for that purpose doesn't really make sense. Instead,
think about saving the money you would spend on insurance premiums and open a
savings account, or put the money in some type of investment vehicle. That way, the
money can be used for college expenses or a first home, but it will also be available
in case of a tragedy. Alternatively, a burial policy provides enough money for funeral
expenses, at a much lower cost than a typical life insurance policy.

Your growing family

When you have young children, your life insurance needs reach a climax. In most
any situation, life insurance for both parents is appropriate.

Single-income families are completely dependent on the income of the breadwinner.

If he or she dies without life insurance, the consequences could be disastrous. The
death of the stay-at-home spouse would necessitate costly daycare expenses. Both
spouses should carry enough life insurance to cover the expenses that would result
from their death.

Dual-income families need life insurance, too. If one spouse dies, it is unlikely that
the surviving spouse will be able to keep up with the household expenses and pay for
childcare with the remaining income.

Moving up the ladder

For many people, career advancement means starting a new job with a new company.
At some point, you might even decide to be your own boss and start your own
business. It might not be your top priority, but it is important to review your life
insurance coverage any time you leave an employer.

Keep in mind; you probably won't be able to keep any life insurance that was
provided by your employer. If you're going to work for a new company, you might

36
receive a comparable life insurance benefit. But if you're going into business for
yourself, you'll need to purchase an individual life insurance policy.

Make sure the amount of your coverage is up-to-date, as well. The policy you
purchased right after you got married might not be adequate anymore, especially if
you have kids, a mortgage, and college expenses to consider. Business owners may
also have business debt to consider. If you're not incorporated, your family would
have to pay those bills if you die.

Single again

Unfortunately, divorce has become a fact of life in our society. You'll have to make
many financial decisions during this stressful time, including the decision of what to
do about your life insurance. Divorce raises both beneficiary issues and coverage
issues. And if you have children, these issues become even more complex.

If you and your spouse have no children, it may be as simple as changing the
beneficiary on your policy and adjusting your coverage to reflect your newly single
status. However, if you have kids, you'll want to make sure that they are provided for
in the event of your death. This may involve purchasing a new policy and naming
them as beneficiaries. The custodial and no custodial parent will need to work out the
details of this complicated situation. If you can't come to terms, the court may make
the decisions for you.

The golden years

Once your children are grown, your life insurance needs decrease. You'll live off
your retirement savings, and hopefully you have accumulated assets that can be
passed on to your heirs when you die. Not only is life insurance expensive at this
point, but also it's probably unnecessary.

One exception: if you will be leaving a large estate when you die, your heirs may be
stuck paying a hefty estate tax bill. Consider obtaining cash value life insurance

37
policy, because you don't actually know when you're going to die. Your heirs can
then use the death benefit to pay the IRS. If the policy is held by a trust, the proceeds
won't be included in your estate

INDIAN INSURANCE INDUSTRY: A PERSPECTIVE

A. Life Insurance
Life insurance in its existing form came in India from United Kingdom (UK) with the
establishment of a British firm, Oriental Life Insurance Company in 1818 followed by
Bombay Life Assurance Company in 1823, the Madras Equitable Life Insurance Society
in 1829 and Oriental Life Assurance Company in 1874. Prior to 1871, Indian lives were
treated as sub-standard and charged an extra premium of 15% to 20%. Bombay Mutual
Life Assurance Society, an Indian insurer that came into existence in 1871, was the first
to cover Indian lives at normal rates. The Indian Life Assurance Companies Act, 1912
was the first statutory measure to regulate life insurance business. Later, in 1928 the
Indian Insurance Companies Act was enacted, inter alia, to enable the government to
collect statistical information about life and non-life insurance business transacted in
India by Indian and foreign insurers, including the provident insurance societies.

In 1938, with a view to protecting the interest of insuring public, earlier legislation was
consolidated and amended by Insurance Act, 1938 with comprehensive provisions for
detailed and effective control over the activities of insurers. In order to administer the
aforesaid legislation, an insurance wing was established and attached first with the
Ministry of Commerce and then Ministry of Finance. This ministry was administratively
responsible for policy matters pertaining to insurance. The actuarial and operational
matters relating to the insurance industry were looked after by an attached office in
Shimla, headed first by Actuary to the Government of India, then by Superintendent of
Insurance and finally by the Controller of Insurance. The act was amended in 1950,
making far-reaching changes such as requirement of equity capital for companies,
carrying on life insurance business, ceilings on shareholdings I such companies, stricter

38
control on investment of life insurance companies, submission of periodical returns
relating to investments and such other information to the Controller as he may call for,
appointments of administrators for mismanaged companies, ceilings on expenses of
management and agency commission, incorporation of the Insurance Association of India
and formation of councils and committees thereof.

By 1956, 154 Indian insurers, 16 non-Indian insurers and 75 provident societies were
carrying on life insurance business in India. Life insurance business was confirmed
mainly to cities and better off segments of the society.

On 19th January 1956 the management of life insurance business of 245 Indian and
foreign insurers and provident societies, then operating in India, was taken over by the
Central Government and then nationalized on 1st September 1956. An Act of Parliament,
viz. LIC Act, formed LIC in September 1956, with capital contribution of Rs. 5 crore
from the Government of India.

The then Finance Minister, Shri S.D.Deshmukh, while piloting the bill for
nationalization, outlined the objectives of LIC thus: to conduct the business with utmost
economy, in a spirit of trusteeship; to charge premium no higher than warranted by strict
actuarial considerations; to invest the funds for obtaining maximum yield for the policy
holders consistent with safety of the capital; to render prompt and efficient service to
policy-holders, thereby making insurance of recommendations of the Administrative

Reforms Commission as under:

a. To spread life insurance much more widely and in particular to the rural areas and to
the socially and economically backward classes

b. To making mobilization of people’s savings by making insurance linked savings

adequately attractive.

c. To bear in mind, in the investment of funds, the primary obligation to its

policyholders, whose money it holds in trust without losing sight of the interest of the
community as a whole

39
d. To conduct business with utmost economy and with the full realization that money
belongs to the policy- holders.

e. To act as trustees of the insured public in their individual and collective capacities.

f. To meet various life insurance needs of the community that would arise in the
changing social and economic environment.

g. To promote amongst all agents and employees of the Corporation a sense of

participation, pride and job satisfaction through discharge of their duties with
dedication towards achievement of corporate objectives.

B. General Insurance

General Insurance developed in India with industrial revolution in the West and
consequent growth of seafaring trade and commerce in the 17th century. It came to India
from UK. The 1st general insurance company, Triton Insurance Company Ltd. was
established in Calcutta in 1850 whose shares were mainly headed by British. The 1st
general insurance company established by an Indian was Indian Mercantile Insurance
Company Ltd. in Bombay in 1907.

In 1957,the General Insurance Council, a wing of the Insurance Association of India

framed a code of conduct for ensuring fair conduct and sound business practices in the
general insurance industry. An administrative set-up headed by the Controller of
Insurance was set up at Delhi in 1957 with a branch office at Bombay, Calcutta, and
Madras for administrating code of conduct. Further in order to retain the business of
general insurance in India, the insurers started a reinsurance company, viz. India
Reinsurance Corporation Ltd. In 1956 to which they voluntarily ceded 10% of their gross
direct business. In 1961, by arrangement to Insurance Act, this voluntary arrangement
was formalized by notifying the Indian Guaranty and General Insurance Company Ltd., a
government company, along with the Indian Reinsurance Corporation as ‘Indian
Reinsures’. In 1968, the Insurance Act was amended to provide for extension of social
control over insurers transacting general insurance. The amendments provided, inter alia
for regulation of assets, setting up of the Tariff Advisory Committee (TAC) under the

40
chairmanship of Controller of Insurance. Before the amendments of the act could be
implemented, management of non-life insurers was taken over by the Central
Government in 1971 as a prelude to nationalization. The General Insurance Business Act,
1972, nationalized general insurance business with effect from 1.1.73.

Prior to 1973, general insurance was more cities oriented, catering to the needs of trade
and industry.107 insurers including branches of foreign companies operating here were
amalgamated and grouped into 4 companies, viz. the National Insurance Company Ltd.,
the New India Assurance Company Ltd., the Oriental Insurance Company Ltd., and the
United India Assurance Company Ltd. GIC was incorporated as a company in November,
1972 and it commenced business on January 1, 1973.

Government of India and that of 4 companies subscribe the capital of GIC by GIC. All

the 5 entities are Government companies, registered under the Companies Act.

The purpose of establishment of GIC as a holding company of the four operating

companies as stated in General Insurance Business Act is superintending, controlling, and
carrying on the business of general insurance. (ref.bibliography)

LIFE INSURANCE INDUSTRY

Legislative issues
Based on developments over the last couple of years, it would be fair to say that the long-
term outlook for the policy regime for insurance appears positive. In many ways the
IRDA has exhibited transparency and protectiveness in attending to critical issues this has
not only provided a degree of comfort to existing and prospective insurers, but has also
laid the foundation for the orderly development of the insurance market in India. The
most obvious comparison one could make is with the banking sector liberalization that
took place a few years ago. Unlike the RBI, the IRDA has been transparent, efficient and
adequately cautions in its process of granting licenses. The hectic lobbying and 'loophole
exploitation' that firms indulged in have been thankfully absent in the insurance business,
thus far.

41
At a broader level, the government maintains its bullish outlook for insurance reforms,
reflected by its willingness to ensure a level playing field for private insurer vis-à-vis LIC
(e.g. similar tax treatment to all life insurers, similar paid up capital requirement etc) and
to minimize its intervention in operational and commercial issues. Private players in other
recently liberalized sectors (especially telecom and banking where industry regulator and
industry government disputes have severely constrained development) could scarcely
consider themselves as lucky.

Perhaps the only major issue is the cap on foreign investment, which the government is
not keen on increasing in the near future. For the longer term, it may reconsider its stand,
depending among other things, on the Indian partner's ability to continue contributing
financially and technically to the joint venture. (ref.bibliography)

Taxation policy for life insurance firms

After prolonged debate, the Finance Ministry had expressed its desire to accord similar
tax treatment to LIC and private insurers.

Co-operative Banks excluded from Insurance

Based on the strict requirements set out by the RBI for banks entry into insurance,
cooperative banks would be unable to apply for direct insurance at this stage. However,
the norms for participating in non-equity insurance activities (such as marketing and
distribution) are slightly easier and may allow some cooperative banks to enter.

The RBI requires banks to possess a net worth of Rs. 500 crores, a capital adequacy ratio
of 10, a ‘reasonable’ level of non-performing assets (NPAs), continuos net profit for the
last 3 years, and a 'satisfactory' track of subsidiaries. While capital adequacy norms do
not apply to cooperative banks, they are likely to fail on the grounds of net worth and
NPAs.

The Kerala State Cooperative Banks (KSCB) and the Maharashtra State Cooperative
Bank (MSCB) had earlier declared their interest in entering the insurance sector. Based
on RBI guidelines, however, they may have to limit their exposure to marketing and
distribution only.

42
Competitive developments existing insurers

Expectedly, private companies that have commenced operations have done so with a 'soft
launch'. This is presumably in realization of the fact that long term resources are better
spent in consistent and well targeted promotional efforts rather than in 'big-bang' exercise
- especially for non - impulse purchase, long term financial products such as life
insurance. Treading new round carefully by patiently establishing one's credibility and
competence appears to be the preferred strategy over one that involves a head on battle
with LIC.

The other important observation based on industry developments, pertains to the role of
banks. With most banks resigning themselves to the fact that obtaining a license to sell
insurance will be difficult to come by (due to strict RBI norms), they have chosen to
participate in the industry through the banc assurance, route instead. In the Indian
context, this is significant. In the interiors of the country, public sector banks have built
up excellent penetration and enjoy the public's confidence-2 important prerequisites for
selling insurance. On the other hand, in the bigger cities, private banks, which are
constantly looking for ways to enhance customer value and profitability (e.g. through
cross selling), are likely to incorporate insurance in their portfolio of offerings.
(ref.bibliography)

The flip side to selling thru banks is that it raises the risk of channel conflicts for insurers.
In addition, financial stability could become an issue, especially in the context of certain
PSU banks. The manner in which PSU banks are privatized, and the extent to which the
government reduces its stake, will therefore have an important bearing on the success of
banc assurance in

DATA ANALYSIS

4.1 – Data gives figures of ranking of insurance company according to the respondents.

Table 1

Company Name Number of respondents Share (%)

43
MAX 45 45
L.I.C 40 40
ICICI Prudential 10 10
OM Kotak Mahindra 3 3
HDFC 2 2
Total 100 100

3% 2%
10%
MAX

Fig. 9
L.I.C
45%
ICICI Prudential

OM Kotak
Interpretation: Mahindra
40% HDFC
45% of the
people have
MAX policy
and is ranked number one by that percent of respondent.

4.2 – Data gives figures of benefits of insurance cover perceived by respondents.

Table 2

Benefits Number of respondents Share (%)

Cover Future Uncertainty 55 55
Tax Deductions 20 20
Future Investment 25 25
Total 100 100

44
 25%
Cover Future
Uncertanity

Tax
Deductions
55%

Future
20%
Investment

Fig. 10

Interpretation: 55% of the respondents believe that covering future uncertainty is the
biggest benefit of insurance policy. 20% and 25% of them believe that other benefits are
tax deduction and future investment.

45
4.3 – Data provides features of insurance policy which attracted the respondents the most.

Table 3

Features Number of Share (%)

respondents
Money Back Guarantee 15 15

Larger Risk Coverance 37 37

Easy Access to Agents 7 7

Low Premium 30 30
Reputation of Company 11 11

Total 100 100

11% 15%
Money Back
Guarantee
Larger Risk
Coverance
30% Easy Access to
Agents
37% Low Premium

Reputation of
7%
Company

Fig. 11

Interpretation: Majority of the respondent found larger risk conversance as the most
attracted feature of their policy.

46
4.4 – Data provides type of policy respondents are holding

Table 4

Policy Type Number of respondents Share (%)

Life Policy 60 60
Non – Life Policy 25 25
Both 15 15
Total 100 100

15%

Life Policy

Non - Life
25% Policy
60%
Both

Fig. 12

Interpretation: 60% of the respondents have life insurance policy while 15% have both
life and non – life insurance policy.

47
4.5 – Data provides various instruments of Insurance.

Table 5

Instrument Number of respondents Share (%)

Protection 75 75
Investment 10 10
Tax 6 6
Great Returns 5 5
Risk Management 4 4
Total 100 100

5% 4%
6% Protection

Investm ent
10%

Tax

Great Returns

75% Risk
Management

Fig. 13

Interpretation: 75% of the respondents say protection is most important.

48
4.6 – Data provides how many people are aware of Private Participators.

Table 6

Awareness Number of respondents Share (%)

Yes 80 80
No. 20 20
Total 100 100

20%

Yes

No

80%

Fig. 14

Interpretation: 80% of the respondents are aware of private participators.

49
 CHAPTER 5

FINDINGS & RECOMMENDATIONS

5.1 Findings

5.2 Recommendations

50
5.1 FINDINGS

The project study report has the following findings with it:

• Almost 75% of respondents have an insurance policy.

• People have more number of life insurance policies as compared to non – life
insurance.

• Only 80% people are aware that Insurance has been opened for Private
Participators.

• Due to increased in consumerism new product is launched everyday thus non –

life/general insurance business is also going to have boom period.

• Due to the increasing concern of people towards their health/life the life insurance
business has good prospects.

• Majority of the respondent believed that larger risk conversance of their policy
was the main feature of their policy that attracted them to buy that policy. Though
low premium was the next important feature.

• Majority of the respondent preferred to have MAX policies than other private
companies.

• Not many people know about the IRDA Act.

• Majority of the respondents believe that covering future uncertainty is the most
important benefit of an insurance policy.

• Protection is the most important instrument of insurance followed by investment,

tax, greater returns and risk management.

51
Life insurance industry grows 21%. Sources are:

Life insurance industry grew by 21 per cent with LIC and 13 private players mopping up
Rs 4,437 crore in the first three lean months of 2005-06, according to agency reports.

Private players expanded business by 73 per cent while state-owned Life Insurance
Corporation grew by 10.2 per cent.

Fueled by aggressive growth, the private players have now cornered over 25 per cent of
the life insurance market till June 2005 compared to 17.61 per cent a year ago in terms of
premium income from fresh businesses, as per data released by regulator IRDA.

LIC continues to shed ground as its market share came down to 74.87 per cent till June
2005 as against 82.39 per cent during the corresponding period last year.

LIC mopped up Rs 3,322 crore in premium income during April-June this fiscal by
selling 33.86 lakh policies.

To arrest the decline in market share, LIC is planning to engage a large chunk of its
60,000 odd Class-III staff in selling products and is focusing on widening policyholders
base rather than run after a niche segment.

ICICI Prudential topped the chart of private players with a market share of 7.53 per cent
after logging a business growth of 51 per cent at Rs 334 crore.

Bajaj Allianz was second with a market share of 4.18 per cent followed by HDFC
Standard (3.2 per cent), Tata AIG (1.93 per cent), Birla Sun life (1.84 per cent), SBI Life
(1.69 per cent), Max New York (1.44 per cent) and Aviva (1.14 per cent).

52
5.2 RECOMMENDATIONS

There are certain flaws existing in this working of the insurance industry. There are some
of the recommendation I come across while doing this thesis. It will help to make
insurance more important sector in today’s economy.

• The need of the hour is to devise a comprehensive strategy that will help the firms
face the challenges of the future. The financial service industry around the world
over is undergoing a major transformation. It is very important that trained
marketing professionals who are able to communicate specific features of the
policy should sell the policy.

• From the research I could find out that people are not aware about the policies and
features of insurance. Therefore LIC and ICICI are recommended to shed light on
policies and explain the benefits, thus increasing the awareness.

• The penetration of insurance in India is around 22%. This indicates that a vast
majority of rural population is not covered. The market player needs to explore
this untapped potential through their marketing and sales network.

• The returns of the policies are not properly managed and never given in time. So,
these areas must be looked at.

• Pricing of insurance products, as empirically available in India, shows that pricing

is not in consonance with market realities. Life Insurance premium is generally
perceived, as being too high while general insurance (especially motor insurance)
is priced too low.

• Some insurance products, which are not available in India, should, be introduced
in market. There are areas for new product development like Industry all risk
policies; large projects risk cover, Risk beyond a floor level, extended public and
product liability cover.

53
 • Insurance companies will also have to get savvy in distribution. Enhanced
marketing thus will be crucial. Already many companies have full operation
capabilities over a 12-hour period. Facilities such as customer service center are
already into 24-hour mode. These will provide services such as motor vehicle
recovery. Technology will also play an important role on the market.

The lines of distinction between banks insurance companies and brokerages are getting
blurred. The future seems to belong to financial supermarkets that will offer a host of
services and products to the consumer. In the next millennium all these activities would
play a crucial role in the overall development and maturity of the insurance industry.

54
CONCLUSIONS

I have drawn various conclusions from this study. There has been tremendous change in
the insurance history. And with it there has been continuous growth in this sector both in
Indian as well as world context.

The opening up of the insurance sector has changed the whole look of the industry. While
the various companies in order to face the competition is coming with new strategies.
New players are leading the sector due to their strategic management and tailor made
projects.

From the research also I conclude that though the awareness and people opting for MAX
plans are more as compared to other private players but the latter are gaining momentum
in the market day by day.

The primary reasons for buying an insurance policy, whether life or non-life is to protect
us from vagaries of life. We do not invest in insurance for returns; rather we invest in it
for regrettable necessities. Though a large proportion of policies available in the country
provide for returns, but nobody is looking for returns to the inflation rate. So what does
insurance offer, perhaps peace of mind, but even that takes time, due to poor claim
performance.

The demand for insurance is likely to increase with rising per-capita incomes, rising
literacy rates and increase of the service sector, as has been seen from the example of
several other developing countries. In fact, opening up of the insurance sector is an
integral part of the liberalization process being pursued by many developing countries.

Insurance is an Rs.400 billion business in India and yet its spread in the country is
relatively thin. Insurance as a concept has not been able to make headway in India. There
has been a strong fall in insurance business in recent years. Furthermore, it can be
observed that non-life business is not increasing as strongly as life business. On the other
hand, growth fluctuations have been relatively small with growth rates varying between
1% and 5%.

55
Life insurance business by contrast achieved average growth rates of 6%, although the
actual rates ranged from 0% to 13%. This shows on the one hand the increasing
significance of life insurance as an instrument for old age provisions and on the other
hand indicates the sensitivity of life insurance to changes in the institutional and
economic environment.

The current state of insurance distribution in India is still in flux. On one hand, insurers
are awaiting regulations to be approved for brokerages and banc assurance to be truly
launched. On the other hand they are trying the corporate model of intermediaries in
addition to the traditional models in the market.

There is no right and wrong in all this. The success of marketing insurance depends on
understanding the social and cultural needs of the target population, and matching the
market segment with the suitable intermediary segment.

In addition a major segment of the Indian population has low disposable income,
meaning that every penny won will be obtained after a lot of persuasion and the expected
value for money is high.

All intermediaries can't sell all lines of business profitably in all markets. There should be
clear demarcation in the marketing strategies of the company from this perspective.
Clients should also receive price differentials for using different channels. This is not a
new concept, as the Public sector Property & Casualty companies are giving discounts in
lieu of agency commission. The channel composition should not be homogeneous but
should reflect the larger society.

For example:

• Agents from different economic, social strata and different age and gender.

• Banc assurers ranging from multinational banks to micro credit lending agencies.

• Brokers stretching from corporate to NGOs to milk co-operatives.

56
These intermediaries need to be empowered with the right learning, training and sales
tools and technology enablers. Coupled with the right product mix, this will help the
insurers to survive and flourish in this competitive market.

Let us conclude with a story of a retired postal clerk who became a success story for
selling postal savings and insurance in his village in Punjab in Northern India. The person
is the father of my colleague, who is a retired postal employee and took up agency for
postal savings and insurance to supplement his meager retirement earnings.

Today – 10 years later – he is one of the top agents selling postal savings and insurance in
his village, assisted by his illiterate wife and grandson (a seven year old computer
literate) doing all the administrative work from home on a small Personal computer using
a package (developed by our friend who is a programmer) to handle his client portfolio!

The entire village population trusts him with the investment advices that he doles out and
has no qualms in handing over small amounts of cash to him for depositing in the post
office. He is their trusted customer care or financial consultant. This we feel is the
essence of distribution of financial products in India.

So lets conduct this business with utmost economy with the spirit of trusteeship; thereby
making insurance widely popular.

57
2. Board of Directors- Max India Limited

Table 7

Dr Bhai Mohan Singh Lifetime Chairman Emeritus, Max India

Mr. Analjit Singh Chairman, Max India
Dr S S Baijal Former Chairman, ICI Ltd.
Mr N C Singhal Former Vice Chairman & MD, SCICI
Mr N Rangachary Former Chairman, IRDA
Mr Nitin Sibal Vice President, Warburg Pincus India Pvt. Ltd.
Mr Piyush Mankad Former Secy., Ministry of Finance, Govt. of India
Mr Ashwani Windlass Former Managing Director, Hutchison Max Telecom Ltd.
Mr Bharat Sahgal Managing Director, Warburg Pincus India Pvt. Ltd.
Mr B Anantharaman Jt. Managing Director, Max India

Insurance: Good times to continue

The life insurance industry has been a dynamic one since the entry of the private players

58
into the insurance market. Customer focus and product innovation have taken centre
stage, which, one has to say, has been a departure of sorts from the days gone by. Last
year was no different for this sector; it saw a lot of activity in the year.

Budget changes
The most significant event of the year for the insurance sector was the increase in tax
benefits on life insurance plans.

Earlier, the benefits on premium payments stood at Rs 70,000 for the year; these were
brought within the consolidated Section 80C banner to Rs 100,000. This limit includes
Section 80CCC pension plan tax benefits upto a maximum of Rs 10,000.

ULIPs form a major portion of new business

Unit-linked insurance plans (ULIPs) continued to rule the roost; taking off from where
they had left last year. For many life insurance companies, ULIPs accounted for more
than half of new business.

Mis-selling still continues

ULIPs have been aggressively marketed by life insurance companies. ULIPs as a product,
has been a valuable addition for the insurance seeker. But many insurance agents have
'sold' ULIPs without really understanding the individual's needs his risk profile or the
fundamentals of asset allocation.

At Personalfn, we believe that equities are equipped to do better in the long run compare
to their fixed return counterparts like bonds and G-secs. But at the same time, we also
believe that individuals should make investments in ULIPs in tune with their risk profile
and asset allocation.

Recently, the Insurance Regulatory and Development Authority has come out with
certain guidelines for ULIPs. It has proposed a compulsory 3-year lock-in period for
ULIPs.

59
In other words, individuals will not be allowed to withdraw any money from their ULIP
'account' for the first 3 years. The primary intention behind this is to preserve the identity
of life insurance (and therefore ULIPs) as a long-term savings option.

The IRDA has also specified that the minimum tenure for ULIP policies be 5 years and
that a ULIP have a 'sum assured' and not be totally linked to the markets. In addition, the
IRDA has also proposed that life insurance agents be given separate training for selling
ULIPs as ULIPs demanded better understanding than that currently prevalent in the
industry.

The guidelines will be effective from June 2006. These guidelines by way of
'restructuring' the product, will help in protecting the interests of individuals and also go a
long way in curbing the malpractices currently prevalent in the life insurance industry.

Term plans still not being 'sold'

Term plans are the purest form of life insurance available. Despite a term plan being a
must in every individual's portfolio, they continue to remain poor cousins to savings
based plans (life insurance with a maturity benefit).

Blame the many unscrupulous agents for this. Individuals need to ensure that their
financial portfolio consists of a term plan, which will help the overall long-term financial
planning cause.

Endowment plans still being 'bought'

Individuals continue to be 'enticed' by endowment plans for the maturity benefits and the
'safety' that they provide. While such plans do have an insurance element, the returns that
they offer hardly manage to beat inflation, leave alone help individuals plan their finances
effectively.

We do believe that from a long-term perspective, individuals need to look at other more
efficient means of savings like tax saving mutual funds or ULIPs. However, as always,
the same should be in line with their asset allocation and risk appetite.

60
Pension funds on the anvil?
The interest rate offered on EPF has been brought down from 9.50% to 8.50%. The EPF
being long-term savings, the rate cut has made the need for the setting up of pension
funds even more acute.

While the process of putting up the pension fund regulatory and development authority
(PFRDA) has been initialized, the pace needs to pick up so that individuals can park their
pension monies with a body, which will make their money work harder for them as
compared to the earlier scenario.

Strategies for 2006

A term plan is life insurance in its purest form. Individuals should buy a term plan before
considering other types of life insurance. This becomes necessary in light of the fact that
such plans offer the much-needed insurance cover at a low cost.

Come June 2006 and ULIPs will emerge in a more transparent and unambiguous form
due to the changes proposed by the IRDA. Having said that, insurance seekers on their
part need to gain a better understanding of ULIPs and find out how well it fits into their
financial planning exercise.

We could also see more options being introduced in the pension funds segment. This can
give a boost to retirement planning and help individuals plan effectively for their
retirement.

4. Private firms boost insurance sector growth

Led by private players ICICI Lombard, Bajaj Allianz and Iffco-Tokio, general insurance
industry grew by an impressive 15 per cent in the first quarter of 2005-06 even as
National Insurance and Reliance General continued to decline in business.

Except Reliance General, the new players gave a tough fight to the established players in
all departments of business to capture 26 per cent of market share.

61
The non-life insurance industry, consisting of five public and eight private players, grew
by 14.75 per cent at Rs 5,504 crore in premium collection till June 2005, as per figures
released by regulator IRDA.

.
Kolkata-based NIC regained its second slot despite posting 5.85 per cent decline in
premium collection at Rs 935 crore till the first three months of this fiscal and had a
market share of 16.98 per cent. Delhi-based Oriental was at the third spot after logging

11.26 per cent growth in premium income at Rs 933.5 crore and a market share of 16.96
per cent. Chennai-based United India grew by 4.3 per cent at Rs 895 crore till June and
had 16.26 per cent of market share. Export Credit Guarantee Corporation recorded 18.52
per cent growth in premium collection at Rs 134 crore. It had a market share of 2.44 per
cent. Among the private players, ICICI Lombard performed excellently by recording 92
per cent growth in premium at Rs 423 crore while Bajaj Allianz grew by 51.7 per cent at
Rs 319 crore.

ICICI Lombard is well ahead of other private players with a market share of 7.69 per cent
while Bajaj Allianz has 5.8 per cent of the market.

IffcoTokio is in the third spot among new players by collecting Rs 236 crore in premium
income (4.29 per cent).

5. Private insurance comes of age

The numbers tell the story. In five years, private insurers have cornered more than a
fourth of the total life insurance market with a share of 26.18 percent. And it does not end
there.

Swiss Re, one of the world's largest re-insurance firms, estimates that real life premiums
will grow by a staggering 300 per cent or at a 15 per cent compound annual growth rate
in the next 10 years.

62
Moreover, industry watchers believe private life insurers can grow at around 37 per cent
till 2011, and achieve a market share of new business around 55-60 percent by financial
year 2008-09. Premium income in financial year 2004-05 was Rs 18,700 crore (Rs 187
billion).

One of the key factors that has contributed to the success of private players has been the
introduction of the unit linked insurance policy.

Unit Linked Insurance Plans, which marry investment and insurance and account for as
much as 70-80 percent of premium incomes for top players, have attracted the "younger,
affluent Indian" who is keen to dabble in the stock market and at the same time buy an
insurance product. Thus, insurers have cashed in on the increasing participation of
individuals in the stock market.

Says Shikha Sharma, CEO, ICICI Prudential, "Some of the more educated people have
opted for ULIPs because they find it easier to understand than the traditional endowment
products. In that sense, there

is a new customer base."

According to Deepak Satwalekar, managing director, HDFC Standard Life, the company'
growth has been faster after it launched ULIPs. He believes that HDFC Standard Life
will continue to be the best-selling product for some time to come. Ticket sizes, too, are
becoming bigger: the average premium per policy was nudging Rs 11,000 in the first
quarter of 2005-06, up sharply from Rs 6,000 in 2003-04.

The other reason why private life insurers have done well and in some sense scored over
their mutual fund counterparts is the strong distribution network they have built. HDFC is
now present in 480 towns, while Bajaj Allianz is in 400 towns.

Says Sam Ghosh, CEO of Bajaj Allianz, "our strategy has been to penetrate the tier-II
towns where the costs are lower and the mutual funds have virtually no presence.'

63
Satwalekar believes that mutual funds have not focused on expanding their reach as much
as insurers have. Sharma feels that effective use of tied agents -- where an agent is
affiliated with only one insurer, compared with the mutual fund industry where wealth
managers and banks are the main advisers -- has also helped insurers.

Besides, insurers have also used the banking channel -- ICICI Prudential has seven bank
assurance partners. In fact, owing to their strong customer focus, insurers have actually
managed to extract high fees and upfront charges from customers.

Satwalekar, however, contends that the maturity value for an insurance product is
superior to that of a mutual fund over a 25-year period.

Within the private sector, there has been some churn. In the initial years, it was ICICI
Prudential and Birla Sun life which were ahead, the latter having been the first to launch
ULIPs.

Today, ICICI Prudential retains its premier position (7.26 per cent). The company's
strategy is to target volumes, as evident from its aggressive marketing. Bajaj Allianz
(5.94 per cent), the star of 2004-05, which now occupies the second spot, has set its sights
on the the tier-II cities where Life Insurance Corporation is the main competitor.

HDFC Standard Life (3.11 per cent), which started out slowly, has based its strategy on
the 'quality plank' and has moved up steadily to the third place..

Indian Life Insurance Joint Ventures

64
Foreign Entity Local Company/Venture
AIG Tata
Allianz Bajaj
Aviva Life Dabur
Cardiff State Bank of India Life
ING Life Vysya
New York Life Max
Met Life J & K Bank, Pallonji Group & others
Old Mutual Kotak Mahindra
Prudential ICICI
Standard Life HDFC
Sun Life Birla

8. Future Planning and Insurance

Every insurance plan revolves around the financial consequences of a premature death.
Obviously, the consequences are too large to ignore and cannot be totally covered by an
individual's personal resources.

Basically, life insurance is nothing but a contract where the insured party or the purchaser
of insurance pays a premium that protects him against specific losses. When planning
your life insurance portfolio, you must consider your family's recurring needs like
medical expenses, house rent, provision costs for instance as well as long-term needs that
involve reinstating your family's set standard of living and their future such as higher
education and marriages.

Throughout our living existence, we are faced by numerous risks - failing health,
financial losses, accidents and even fatalities. Insurance addresses all these uncertainties
on financial terms.

Change is perhaps, the only static constant within the dynamics of life and risks always
move in tandem within a changing environment. Life insurance is more of a hedging
mechanism rather than a real investment avenue. It is essentially a mechanism that
eliminates risks primarily by transferring the risk from the insured to the insurer.

65
The insurance industry in particular has been subjected to numerous changes in the last
few decades since the need for insurance is more evident now than earlier. People's
spending patterns are changing and more & more resources are needed for immediate
consumption. In fact, we recommend that you review your needs and insurance portfolio
from time to time, say every 2-3 years.

During the days of yore, the Joint family system had provided protection in case any
unfortunate incidents were to occur to any individual of the family. But after the advent
of industrialization, joint families have split into single nuclear families. The support of
the extended family cannot be counted upon anymore. Doesn't this lack of a unified
support system enhance the risks an individual is subjected to and intensify his or her
need for insurance?

66
 ANNEXURES

1. QUESTIONNAIRE

1. Are you employed?

Yes { }
No { }

2. Do you think that Insurance is important?

Yes { }
No { }

3. Do you have any insurance policy?

Yes { }
No { }

4. Which insurance policy do you have?

Life { }
Non – Life { }
Both { }

5. Do you know about MAX?

Yes { }
No { }

6. Do you know about New York Life Insurance?

Yes { }
No { }

67
7. Can you rank these in terms of importance?
(5 Most Important, 4 Important, 3 Necessary, 2 Not Important, 1 Least Important)
Life { }5 { }4 { }3 { }2 { }1
Auto { }5 { }4 { }3 { }2 { }1
Property { }5 { }4 { }3 { }2 { }1
Fire { }5 { }4 { }3 { }2 { }1
Theft { }5 { }4 { }3 { }2 { }1
Any Others { }5 { }4 { }3 { }2 { }1
(Pls. Specify)

8. In your Opinion, Insurance is an instrument for

a. Saving Taxes
{ } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree
b. Safe Investment
{ } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree
c. Risk Management
{ } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree
d. Greater Returns
{ } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree
e. Protection
{ } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree

9. Do you have insurance from any Private Player?

Yes { }
No { }

10. Are you aware as to how many private Life Insurance Companies have set up the
operations in the country?
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________

68
11. Which companies insurance policy you prefer the most (rank them)?
a) MAX { }
b) L.I.C { }
c) ICIC Prudential { }
d) OM Kotak Mahindra { }
e) HDFC Standard Life { }
f) Any Other – ______________________ (Please Specify)

12. Are you aware of any Act Passed for Insurance?

Yes { }
No { }
13. Do you know anything about IRDA (Insurance Regulatory & Development
Authority)?
Yes { }
No { }

14. For how many years do you have insurance policy?

a) <5 years { }
b) 5 – 10 years { }
c) 10 – 15 years { }
d) Any Other – ______________________ (Please Specify)

15. What do you think are the benefits of insurance cover?

a) Cover Future Uncertainty { }
b) Tax Deductions { }
c) Future Investment { }
d) Any Other – ___________________ (Please Specify)

69
16. Which feature of your policy attracts you to buy it (rank them)?
a) Low Premium { }
b) Larger Risk Coverance { }
c) Money Back Guarantee { }
d) Reputation of Company { }
e) Easy Access to Agents { }
f) Any Other – ______________________ (Please Specify)

17. Your monthly house – hold income?

a) <10,000 { }
b) 10,000 – 20,000 { }
c) 20,000 – 30,000 { }
d) 30,000 – 40,000 { }

70
 BIBLIOGRAPHY

BOOKS

• Research Methodology by C.R Kothari.

• Investment Prospects by R. K. Trivedi.

• Principles of Insurance by M. N. Mishra.

• Insurance Theory and Practice by Nalini Trivedi and Paul.

INTERNET

• http://www.irdaindia.org

• http://www.iloveindia.com

• http://www. maxnewyorklife.com

REPORTS/ARTICLES REFFERED

 REPORT: ISSUES & CHALLENGES FACING THE INSURANCE

INDUSTRY…. Dec2003.

 BRIEF PROFILE OF LIC, INDIA…Dec 2003.

 REPORT: COPING WITH COMPETITION…Jan2004

71