BNN COLLEGE

SELF FUNDED

Name: Class:

Akbar Ali Mohd. Shamoon Ansari SYBMS (A)

Roll No: 03 Subject: Research Method in Business Teacher: Mahesh Mahajan

PROJEC T REPORT ON "Study of life Insurance Companies

PREPARED BY AKBAR ALI

STUDENT OF B.M.S. (BACHELOR OF MANAGEMENT STUDIES) 2011-2012

SUBMITED TO UNIVERSITY OF MUMBAI & B.N.N. COLLEGE, BHIWANDI

Declaration
I hereby declare that the work embodied in this project titled "Study of different Life Insurance Companies is my own contribution to project work carried out under the guidance of M r . Mahesh Mahajan This project work has not been submitted for any other degree. Where ever reference have been made it is has been clearly indicated as such and included in references and bibliography.

DatePlaceSignature

Akbar Ali

Prof. Mahesh Mahajan

Student Akbar Ali Ansari

Acknowledgement
It is worthwhile to enclose my sincerest thanks to all the persons who have helped me directly or indirectly during completion of the Project Report in successful manner. Firstly, I express my sincere gratitude to Mr. Mahesh Mahajan for granting me permission to do this project. Then, I am very much thankful to our course cocoordinator, Prof. Parbha Pardesi for his encouragement and full fledge support in the completion of this project. I also express my sincere thanks and sense of gratitude to my project guide Mr. Mahesh Mahajan for her valuable guidance and suggestions at every stage right from choosing the topic to the completion of project. I express my sincere thanks and deep sense of gratitude to CA Paras Shah for arranging our live project at HDFC Standards Life Insurance Company, Bhiwandi branch. I also express my sincere gratitude to the management of HDFC Standard Life Insurance company for the kind permission to undergo on implant visit in their company (Bhiwandi branch).

Executive Summary

Insurance sector in India is booming but not to level comparative with the developed economics such as Japan, Singapore etc. Also liberalization of insurance sector has provided huge self employment opportunities.

While doing a live project at HDFC Standards Life Insurance Company, Bhiwandi branch I observed that sales Development Managers were facing some serious problems regarding retention of their financial consultants. The HDFC Standards Life Insurance Company as well as other life insurance companies is facing this problem.

To find the reasons, the main objective of the study is kept as, to analyses the actual recruitment and retention process in Life Insurance Companies and how far this process confirm to the purpose underlying the operational aspect of the industry.

The study is proposed to find out a process that will help insurance companies to keep its attrition rate minimum. In this study, I analyzed recruitment process of three different companies viz. Life Insurance Corporation of India, HDFC Standards Life Insurance Company and MaxNew York Life Insurance Company. After analysis I came to the conclusion that some defects in recruitment process are the reason of high attrition.

This project work is a sincere attempt to collect the information stating the various reasons for attrition and suggests the useful measures for retention.

Index

Titles of Project Declaration Acknowledgement Executive Summary Introduction The Literature Review Problems Why Insurance Research Method Used Objectives of Research Scope of Study Industrial Analysis IRDA Major Market Player in Major Market Share Reference Institute India

Introducti on
The Insurance sector in India has came a full circle from being an open market to nationalization and back to liberalized market again. Tracking the development in Indian Insurance Sector revels 360 degree turn witnessed over a period of almost two centuries. Ever since the liberalization of life insurance sector is done private companies are facing many problems to create their firm existence in the market. Private companies find it difficult to compete against the dominant LIC of India. But the common problem of LIC as well as private life insurance companies is to retain their Agents IFCsIAAs. Agents IFCsIAAs have the potential to create a good as well as bad image of the company. Agents IFCsIAAs who enthusiastically spurred by dreams of working at ones own hours, getting full reward for the hard work and other such motivational spiel meet reality soon enough. The industry is facing a serious problem regarding the shifting of jobs at top level management as well as at agency force of

company. Special attaint ion needs to be given for their retention in their respective company

Literature Review
Summary of Recent Articles on the Convergence of Insurance and Financial Markets and Services

Despite the adoption of the Gramm-Leach-Bliley Act (also called Financial Services Modernization Act) in November 1999, there have been few strategic attempts in consolidating financial and insurance businesses and some of them (i.e. the Citigroup/Travelers or the General Electric/ Employers Re. mergers) have failed. This, despite the fact that some of the research papers cited in the attached literature review do identify diversifications gains from potential consolidation of banking and insurance firms. However, the inability of banks and insurance companies to merge effectively has not stopped the convergence process from a product offering standpoint. The Insurance Information Institute routinely publishes a chart of financial and insurance products available through major financial services companies from all sectors (financials, securities, P/C insurance, and life insurance). The chart demonstrates that all major financial services companies offer a diversified range of financial and insurance services. This suggests that, although some issues like consumer privacy provisions, data consolidations and other technological differences between both industries need to be ironed out, the convergence process is on its way. Refereed Papers: Carrow Kenneth A. and Heron R. Capital market reactions to the passage of the Financial Services Modernization Act of 1999. The Quarterly Review of Economics and Finance 42 (2002): 465-485.

The authors investigate how the passage of the Financial Services Modernization Act of 1999 (FMA) affected stock prices of banks, thrifts, finance companies and insurance companies. The study looks at stock excess returns across sectors and company size. The idea is that the passage of the FMA opens doors for potential mergers and consolidations across banking, financial and insurance sectors, translating into abnormal positive returns for businesses that are the likely candidate for mergers and consolidation. The results of the study suggest that the largest returns to the FMA passage were realized by large investment banks and insurance companies. The stock prices of banks, both small and large, seemed to be unaffected by the new legislation while thrifts, finance companies and foreign banks lost value. Carrow Kenneth A. Citicorp-Travelers Group merger: Challenging barriers between banking and insurance. Journal of Banking and Finance 25 (2001): 1553-1571. This paper is conceptually similar to the one cited above, in that the author investigates whether the announcement of a merger between Citicorp and Travelers abnormally impacted stock prices of financial and insurance companies. Analysis of abnormal returns surrounding the merger show that life insurance companies and large banks experienced significant stock price increases, while the returns of stocks of smaller banks, health insurers, and property/casualty insurers remain relatively unchanged. Estrella, Arturo. Mixing and matching: Prospective financial sector mergers and market valuation, Journal of Banking and Finance 25 (2001): 2367-2392.

This paper analyses which types of mergers are likely to be most productive for banks and other financial firms in the United States. The author acknowledges that the extent to which different business activities are fundamentally distinct induces a tradeoff between diversification gains and loss of efficiency. The research considers life insurance, property/casualty insurance, securities, and commercial firms as potential matches for firms and concludes that potential diversification gains arise from almost all combinations involving banking and insurance. The paper stands out because it shows, unlike other earlier research, that property and casualty insurance companies offer larger diversification gains to banks than life insurance companies. Johnston, Jarrod and Madura J. Valuing the potential transformation of banks into financial service conglomerates: Evidence from the Citigroup merger The Financial review 35 (2000): 17-36. The authors first summarize previous literature that examined motives for combining bank and other financial services. Diversification benefits and product complementarities (i.e. mortgage and mortgage insurance, auto financing and auto insurance) seem to be the prime motives. However, some earlier research also suggests that there are few linkages between bank services ands underwriting services in terms of customers, outlets, or other characteristics that generate efficiencies. Given the sources of potential gains, it appears that life insurance companies with their limited underwriting risk and wide variety of other products offered to individual customers would

be more attractive targets for banks than other types of insurance companies. Based on these observations, the authors propose to test whether commercial banks, insurance companies, and brokerage firms were favorably affected by the Citigroup/Travelers merger for impending consolidation of financial services firms. They measure the valuation effects resulting from the merger announcement among those commercial banks and financial services firms most likely to be affected and conclude that commercial banks, insurance companies, and brokerage firms have all experienced positive and significant valuation effects upon the announcement of the Citigroup merger. However, the authors find that the valuation effects are more favorable for brokerage firms than for commercial banks and for insurance companies. Finally, the authors perform a cross-sectional analysis which concludes that the largest banks and the largest brokerage firms experience more favorable valuation than the smaller banks or smaller brokerage firms. Size does not seem to be significant for insurance companies

Problems
We are often told by Architects and Owners that we must obtain professional liability insurance in an amount higher than we currently carry if we want to work on a project with them. We always explain why this is not possible and we are sometimes told that they will go elsewhere for consulting services if we will not make an effort to find a higher limit policy. Our current policy has a $1,000,000/$1,000,000 limit. This statement is provided to clarify this situation: 1. While many companies have professional liability insurance, it varies greatly in its coverage. There are several types of policies. Electrical engineers can get policies that cover their work but as soon as the insurer discovers that they are developing a strategy of protection to protect millions of dollars--and sometimes Billions of dollars--in art or other museum collections, they are notified that their coverage does not cover this risk. Some have been cancelled by their insurer. Some consultants have a policy issued through a professional association that they call professional liability insurance but it is not true E &O coverage as required by architects and owners. It simply defends them against you and the policy specifically excludes burglar alarm design and does not cover losses of life, injuries, or losses or damage to property. A third type of professional liability insurance is true E&O but it specifically does not cover museum burglar alarm design or certain other risks.

2. Our coverage is true professional liability insurance at the maximum amount available on the world market today. If we could get more, we would. But we cant. No one can. It covers what we do and we can name the architect and owner as an additional insured if you request it. 3. Higher limits are not available. We will not seek it because the application process takes hundreds of hours and involves providing copies of all current and some past projects to an insurance company to review. We have applied for additional coverage on many occasions in the past and have been told by our insurer not to ask for higher limits again. We have been told that our policy is a one of a kind policy and there is absolutely no chance of it being modified in any way. We dont care who you know, you cant get it for us. We did a project for a famous Seattle billionaire who insisted that he could get higher limits and would pay for it. All we had to do is apply to the insurer who handles all of his personal and corporate insurance. After months of wasted time we were told that no one on the world market would write an higher limit policy. 4. Our policy is a regular architects policy by a reputable insurer. In 24 years of business we have lost only one job because the owner would not believe that higher limits are not available. They subsequently hired a consultant who has no insurance whatsoever because the citys insurance officer was too embarrassed to come back to us after making an ass of himself insisting that we didnt know what we were talking about. My point is that if the owner insists on higher limits it will be necessary to explain that higher limits are not available for security system design and

protection strategy development for museum collections.

Why Insurance
Life Insurance Services are of high importance as they keep you secured throughout your life. Just like other insurance services, Life Insurance services charge you with a premium, but it covers you for your entire life span. Earlier if you wanted to opt for a life insurance policy, then you had to keep paying the premium as long as you lived. This made the policy highly unpopular, so companies altered certain plans of the policy and the insured were asked to pay a premium for 12 years in exchange of being insured throughout their life. Insurance is an important component of any sound financial plan. Different types of insurance protect you and your loved ones in different ways against the cost of accidents, illness, disability, and death. Decisions to be made prior to making an insurance policy should be based on your family, age, and economic situation. There are many forms of insurance and, unfortunately, none covers all the plans that you are on the lookout for. In finance sector there are many companies provides you different

types of life insurance services and plans among them some really provide you sufficient coverage against investment. Because of these entire objective I feel the need of a research study on Insurance Sector and available various companies in market. For this purpose I chose a project on insurance companies.

Research Method Used

Primary research Primary research refers to information that is directly collected from the source. Another simple method of primary research would be to directly talk to your customers and get their feedback. Primary research can be both qualitative and quantitative. So some parts of the project are collected from primary research and hence I use both of two methods are given below:

Qualitative primary research: Qualitative primary research involves gathering information from interviews or focus groups. Quantitative primary research: Quantitative primary research involves the collection of numerical information from surveys. This information is then analyzed. Secondary Research: Secondary research is a type is research which includes pertaining knowledge through interviews and survey etc. 1. Trade associations: From the reports available with trade associations you can get information on the industries served, the standards that they observe and the leaders in their field. You can also get information on the latest trends, issues and competitors. 2. The marketing departments of local colleges: The marketing department of any college can give you access to special research projects and reports prepared by students. 3. Chamber of commerce: The local chamber of commerce in your area can give you information on your local community and local businesses. You can also get access to the maps of the area.

4. Insurance companies, banks and real estate companies: You can information on the statistics of the communities to whom they provide services. 5. Wholesalers and manufacturers: From manufactures and wholesalers you can get information on customers, problems if any, costs, industry standards etc 6. Libraries and other public information centers: In the reference sections of libraries and information centers you can find a lot of resource materials and data.

Objectives
The very first step in all projects: business, home, or education, is to define goals and objectives. This step defines the projects outcome and the steps required to achieve that outcome. People, including project managers, do not spend sufficient time on this step or complete it incorrectly thereby ensuring an unsuccessful project completion.

Research Objectives: The primary objective of this research is to develop and implement an optimal, self-sustained, marketbased insurance system to provide a complete management of the risk factors in European agriculture. Under this primary objective, the sub objectives can be listed as follows: To compare and contrast the effective insurance schemes. To develop an insurance system that will eliminate undesirable outcomes of information asymmetry such as moral hazard and adverse selection. To estimate the model parameters under different constraints. To train the agricultural households in order to familiarize them with agricultural insurance and risk management concepts using innovative techniques. To test the applicability of the developed model by measuring the farmer attitude towards the proposed risk management tools.

Scope of Study
In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (Manusmrithi), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular. Insurance is one of the fastest growing India. Scope of Insurance Project Study is below: sectors in given

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the countrys GDP. All-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

Industry Analysis

Insurance can be defined as, "assurance for uncertainty". Insurance is about something going wrong. It is often about things going right. One of the wonders of human nature is that I never believe anything can actually go wrong. As I know Indian Insurance sector was an open competitive market. Due to several frauds in late 18 th century sullied insurance business in India as a

result one nationalized company viz. 'LIC' came into existence. And after the liberalization of Indian economy the Life Insurance market has now opened for private players. The business of life insurance in its existing form started in India in the year 1818 with the establishment of Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are.

1870: Bombay Mutual Life Insurance Society the first Indian Life insurance Company started its business.

1912: The Indian Life Insurance Act enacted as first statue to regulate the life insurance business.1928: The Indian Insurance Companies Act enacted to enable government to collect statistical information about life and non life insurance business.

1938: Earlier legislation Ire consolidated and amended to the insurance Act.

Insura nce Regulatory and Development Authority (IRDA)

Reforms in the insurance sector were initiated with the passing of the IRDA Bill in parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously such to its schedule of framing regulations and registering private sector Insurance companies. The other decisions taken simultaneously to provide supporting systems to the insurance sector in particular the life insurance companies were the launch of the IRDA online service for issue and renewal of license of agents. Bottlenecks I Government Regulation The IRDA Bill proposes tough solvency margins for private insurance firms, a 26% capital on foreign equity and a minimum capital of 100 corers for life and general insurance and Rs. 200 corers for reinsurance firms. Section 27A of Insurance Act Stipulates that life insurance companies required to invest 75% of its accretions through a controlled

fund in mandated government securities. Life Insurance Company may invest the remaining 25% in private corporate sector, construction and acquisitioning of immovable assets

Major private pla yers in Ind ia

1) ICICI Prudential : ICICI prudential Life Insurance company is a joint venture between ICICI bank a premier financial powerhouse and Prudential, a leading international financial service group head quarter in the United Kingdom. ICICI prudential was amongst the first private sector insurance company that came into existence in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA) ICICI Prudential equity base 74% and 26% stake respectively. The company has a network of over 50,000 advisors as well as 7 bank assurance tie ups. Today ICICI Prudential has emerged as No.1 private life insurer in the country with a wide range of flexible products that meet the needs of the customer at every step in life.

2) Bajaj Allianz : A house hold name in India teams up with a global conglomerate. Bajaj Auto Ltd. The flagship company of Rs. 8000 corers. Bajaj Group is the largest manufactures of two wheelers and three wheelers in India and one of the largest in the world. Bajaj Auto has a strong brand image and locality synonymous with quality and customer focus with over 15,000 employees. It has joined hands with Allianz to provide the Indian consumer with a different option in terms of Life Insurance products.

3) HDFC Standard Life:

HDFC Standard Life Insurance Company is a joint venture between India's largest housing finance provider- HDFC Ltd. And Europes largest mutual life insurance company The Standard Life Assurance Company (U.K.) HDFC standard life insurance company limited is the first private sector life insurance company to be granted a license by IRDA. 4) Birla Sun Life Insurance Company Limited: Birla Sun life Insurance is the joint venture of Aditya Birla group and Sun Life Financial of Canada to enter in Indian Insurance sector. The Aditya Birla group multinational conglomerate has over 75 business units in India and overseas with operations in Canada, USA, UK, Thailand, Indonesia, Philippines, Malaysia and Egypt to name a few. Today the Sun Life Financial Group of companies and partners are represented globally in Canada, The United States, The Philippines, Japan, Indonesia, India and Bermuda

Market Share of Different Players

Even after liberalization and entry of private player in insurance sector, the majority of market is shared LIC of India. The No.1 private life insurance is ICICI prudential with 13.7% of total market share. Bajaj Allianz contributes to 10.3% of total share where as HDFC SLIC has managed to earn only 4.1%. From the above chart, one can say that private companies are still struggling to capture maximum market share. Birla, Sun by

life, Reliance life, and MNYL have 3.4%, 3.4% and 2.4% of market share respectively. The top 5 life insurance companies in India control 85% of market share while the remaining dozen are still struggling to set up their operation.

Reference References derived from a number of sources. All sources are reliable. They are given below: www.irda.gov.in CA Clubindia MBA Clubindia Agent's Sales Journal Chartered Insurance Institute Claims Magazine Insurance & Technology Insurance Networking News

Insurance Institute of India:

Symbols:

Thank You
By Akbar Ali Ansari