HDFC Final Project1

INFORMATION ABOUT ORGANIZATION

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Information about organization

HDFC Standard Life insurance is the oldest life insurance company in the world. It is the

largest insurer in the UK and is the 28th largest company in the world. In India, the

company is marketing life insurance products and unit linked investment plans. From my

research at HDFC SLIC, I found that the company has a lot of competition from other

private insurers like ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition

from LIC. To compete effectively HDFC SLIC could launch cheaper and more

reasonable products with small premiums and short policy terms (the number of year’s

premium is to be paid). The ideal premium would be between Rs. 5000 – Rs. 25000 and

an ideal policy term would be 10 – 20 years.

HDFC must advertise regularly and create brand value for its products and services.

Most of its competitors like Aviva, ICICI, Max, Reliance and LIC use television

advertisements to promote their products. The Indian consumer has a false perception

about insurance – they feel that it would not benefit them if they do not live through the

policy term. Nowadays however, most policies are unit linked plans where a customer is

benefited even if their death does not occur during the policy term. This message should

be conveyed to potential customers so that they readily invest in insurance.

Family responsibilities and high returns are the two main reasons people invest in

insurance. Optimum returns of 16 – 20 % must be provided to consumers to keep them

interested in purchasing insurance.

On the whole HDFC standard life insurance is a good place to work at. Every new recruit

is provided with extensive training on unit linked funds, financial instruments and the

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products of HDFC. This training enables an advisor/sales manager to market the policies

better. HDFC was ranked 13 in the Best Places to Work survey. The company should try

to create awareness about itself in India. In the global market it is already very popular.

With an improvement in the sales techniques used, a fair bit of advertising and

modifications to the existing product portfolio, HDFC would be all set to capture the

insurance market in India as it has around the globe.

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SECTION-1

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BRIEF HISTORY OF ORGANIZATION

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Brief history of organization

INTRODUCTION

HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has

since emerged as the largest residential mortgage finance institution in the

country. The corporation has had a series of share issues raising its capital to

Rs. 119 Crores. The gross premium income for the year ending March 31, 2007

stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624

Crores. The company has covered over 8,77,000 lives year ending March 31,

2007.

HDFC operates through almost 450 locations throughout the country with its

corporate head quarters in Mumbai, India. HDFC also has an International Office

in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the

largest housing company in India for the last 27 years.

Royal HDFC is a joint venture between HDFC bank Ltd. and Royal & Sun

Alliance Plc. The Company was one of the first new companies to be granted a

license by the IRDA (Insurance Regulatory and Development Authority) to

transact business in the non-life insurance sector. The Company was

incorporated in April 2000, received its certificate to commence business on

October 25, 2000 and formally launched in March 2001.

The Values with which Royal Sundaram works are

- Truth

- Trust

- Teamwork

- People commitment

- Customer commitment

- Professionalism

Royal Sundaram inherits the undisputed reputation for trust, built by Sundaram

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Finance and Royal & Sun Alliance, who have stood for reliability and integrity for

years.

At Royal Sundaram the customer is at the center of everything we do. The

reason behind insuring with Royal Sundaram is that we are a professionally

managed customer focused company, toll-free lines for easy access by the

customer, appointing of assessors within 24 hours of the accident and claim

settlement within 5 working days.

Products / Services Offered

Private Motor

Health & Hospital Cash

Travel

Personal Accident

Home & Household - including personal property

The Company was incorporated in 1954, with the object of financing the

purchase of commercial vehicles and passenger cars.

The company was started with a paid-up capital of Rs.2.00 Lakhs and later went

public in 1972.

The Company's shares were listed in the Madras Stock Exchange in 1972 and in

the National Stock Exchange in January 1998.

Subsequently, the equity shares of the Company have been delisted from

Madras Stock Exchange Limited (MSE) with effect from January 27, 2004, in

accordance with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary

delisting

Sundaram Finance Ltd incorporated in 1954 has grown today into one of the

most trusted financial services groups in India.

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Today, the activities of the group span savings products like Deposits and

Mutual Funds, Car and Commercial Vehicle Finance, Insurance, Home Loans,

Software Solutions, Business Process Outsourcing, Tire Finance, Fleet Cards

and In freight.

Royal Sundaram aims to offer customized non-life insurance products for the

individual and high standards of service in the areas of:

Private Motor

Health & Hospital Cash

Travel

Personal Accident

Home & Household - including personal property

SNAPSHOT-I

Incorporated in 1977 as the first specialized Mortgage Company in India.

Almost 90% of initial shareholding in the hands of domestic institutes and

retail investors. Current 77% of shares held by foreign institutional

investors.

Besides the core business of mortgage HDFC has evolved into a financial

conglomerate with holdings In:

HDFC Standard Life insurance Company- HDFC holds 78.07 %.

HDFC Asset Management Company – HDFC holds 50.1%

HDFC Bank- HDFC holds 22.25%.

Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.

HDFC Chubb General Insurance Company – HDFC holds 74%.

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SNAPSHOT-II

Loan Approvals Rs. 805 billion.

(up to Dec 2007) (US $ 18.30 bn.)

Loan Disbursements Rs.669 billion

(up to Dec. 2007) (US $ 15.20 bn)

Housing Units Financed 2.5 million.

Distribution

Offices 181

Outreach Programs 90

KEY PLAYERS

Mr. Deepak S Parekh is the Chairman of the Company. He is also the Executive

Chairman of Housing Development Finance Corporation Limited (HDFC Limited).

He joined HDFC Limited in a senior management position in 1978. He was

inducted as a whole-time director of HDFC Limited in 1985 and was appointed as

its Executive Chairman in 1993. He is the Chief Executive Officer of HDFC

Limited. Mr. Parekh is a Fellow of the Institute of Chartered Accountants

(England & Wales).

Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company

since November, 2000. Prior to this, he was the Managing Director of HDFC

Limited since 1993. Mr. Satwalekar obtained a Bachelors Degree in Technology

from the Indian Institute of Technology, Bombay and a Masters Degree in

Business Administration from The American University, Washington DC.

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GROUP COMPANIES

HDFC Bank: World Class Indian Bank- among the top private banks in India.

HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.

Intelenet Global: BPO services for international customers.

CIBIL: Credit Information Bureau India Limited.

HDFC Chubb: Upcoming Private companies in the field of General Insurance.

HDFC Mutual Fund

HDFC reality.com: Helps to search properties in all major cities in India

HDFC securities

STANDARD LIFEStandard Life is Europe’s largest mutual life assurance company. Standard Life,

which has been in the life insurance business for the past 175 years is a modern

company surviving quite a few changes since selling its first policy in 1825. The

company expanded in the 19th century from kits original Edinburgh premises,

opening offices in other towns and acquitting other similar businesses.

Standard Life Currently has assets exceeding over £ 70 billion under its

management and has the distinction of being accorded “AAA” rating

consequently for the six years by Standard and Poor.

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SNAPSHOT

Founded in 1875, company supporting generation for last 179 years.

Currently over 5 million Policy holders benefiting from the services offered.

Europe’s largest mutual life insurer.

JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first companies

to be granted license by the IRDA to operate in life insurance sector. Reach of

the JV player is highly rated and been conferred with many awards. HDFC is

rated ‘AAA ’ by both CRISIL and ICRA. Similarly, Standard Life is rated ‘AAA’

both by Moody’s and Standard and Poor’s. These reflect the efficiency with which

HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs.

600,000 Cr. respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August

2000. HDFC is the majority stakeholder in the insurance JV with 81.4% staple

and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO

of the venture.

HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private

Life Insurance Companies, which offers a range of individual and group

insurance solutions. It is a joint venture between Housing Development Finance

Corporation Limited (HDFC Ltd.) India’s leading housing finance institution and

the Standard Life Assurance Company, a leading provider of financial services

from the United Kingdom. Both the promoters are will known for their ethical

dealings and financial strength and are thus committed to being a long-term

player in the life insurance industry- all important factors to consider when

choosing your insurer.

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BUSINESS GROWTH

Track Record so farThe gross premium income of HDFC, for the year ending March 31, 2007 stood

at Rs. 2,856 crores and new business premium income at Rs. 1,624 crores.

The company has covered over 8,77,000 lives year ending March 31, 2007.

Company also declared our 5th consecutive bonus in as many years for our ‘with

profit’ policyholders.

KEY STRENGTH

Financial ExpertiseAs a joint venture of leading financial services groups. HDFC standard Life has

the financial expertise required to manage long-term investments safely and

efficiently.

Range of SolutionsHDFC SLIC has a range of individual and group solutions, which can be easily

customized to specific needs. These group solutions have been designed to offer

complete flexibility combined with a low charging structure.

Strong Ethical Values: HDFC SLIC is an ethical and Cultural Organization. False selling or false

commitment with the customers is not allowed.

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Most respected Private Insurance Company HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World

Class Magazine Business World for Integrity, Innovation and Customer Care.

With the largest number of life insurance policies in force in the world, Insurance

happens to be a mega opportunity in India. It’s a business growing at the rate of

15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for the

financial year 2006 – 2007). Together with banking services, it adds about 7% to

the country’s Gross Domestic Product (GDP). The gross premium collection is

nearly 2% of GDP and funds available with LIC for investments are 8% of the

GDP.

Even so nearly 65% of the Indian population is without life insurance cover while

health insurance and non-life insurance continues to be below international

standards. A large part of our population is also subject to weak social security

and pension systems with hardly any old age income security. This in itself is an

indicator that growth potential for the insurance sector in India is immense.

A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and

strengthens the risk taking ability of individuals. It is estimated that over the next

ten years India would require investments of the order of one trillion US dollars.

The Insurance sector, to some extent, can enable investments in infrastructure

development to sustain the economic growth of the country. (Source:

www.indiacore.com)

Life insurance, sometimes referred to as life assurance, provides for a payment

of a sum of money upon the death of the insured. In addition, life insurance can

be used as a means of investment or saving.

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http://www.indiacore.com/

An agreement that guarantees the payment of a stated amount of monetary

benefits upon the death of the insured

Insurance in which the risk insured against is the death of a particular person, the

insured, upon whose death while the policy is in force, the insurance company

agrees to pay a stated sum or income to the beneficiary.

Insurance paid to named beneficiaries when the insured person dies; "in England

they call life insurance life assurance”

Insurance policy that pays a death benefit to beneficiaries if the insured dies. In

return for this protection, the insured pays a premium, usually on an annual

basis. Term insurance pays off upon the insured's death but provides no buildup

of cash value in the policy. Term premiums are cheaper than premiums for cash

value policies such as whole life, variable life, and universal life, which pay death

benefits and also provide for the buildup of cash values in the policy. The cash

builds up tax-deferred in the policy and is invested in stocks, bonds, real estate,

and other investments. Policyholders can take out loans against their policies,

which reduce the death benefit if they are not repaid. Some life insurance

provides benefits to policyholders while they are still living, including income

payments. See also Single Premium Life Insurance.

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HISTORICAL PERSPECTIVE

The history of life insurance in India dates back to 1818 when it was conceived

as a means to provide for English Widows. Interestingly in those days a higher

premium was charged for Indian lives than the non - Indian lives, as Indian lives

were considered more risky to cover. The Bombay Mutual Life Insurance Society

started its business in 1870. It was the first company to charge the same

premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to Triton

Insurance Company Limited, the first general insurance company established in

the year 1850 in Calcutta by the British. Till the end of the nineteenth century

insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several

frauds during the 1920's and 1930's sullied insurance business in India. By 1938

there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of

1938 that provided strict State Control over the insurance business. The

insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was

witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers

and provident societies under one nationalized monopoly corporation and Life

Insurance Corporation (LIC) was born. Nationalization was justified on the

grounds that it would create the much needed funds for rapid industrialization.

This was in conformity with the Government's chosen path of State led planning

and development.

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The non-life insurance business continued to thrive with the private sector till

1972. Their operations were restricted to organized trade and industry in large

cities. The general insurance industry was nationalized in 1972. With this, nearly

107 insurers were amalgamated and grouped into four companies- National

Insurance Company, New India Assurance Company, Oriental Insurance

Company and United India Insurance Company. These were subsidiaries of the

General Insurance Company (GIC).

KEY MILESTONES

1912: The Indian Life Assurance Companies Act enacted as the first statute to

regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to

collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended by the Insurance Act with the

objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were taken

over by the central government and nationalized. LIC was formed by an Act of

Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the

Government of India.

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INDUSTRY REFORMS

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INDUSTRY REFORMS

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill

in Parliament in December 1999. The IRDA since its incorporation as a statutory

body in April 2000 has fastidiously stuck to its schedule of framing regulations

and registering the private sector insurance companies. Since being set up as an

independent statutory body the IRDA has put in a framework of globally

compatible regulations.

The other decision taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies was the launch of

the IRDA online service for issue and renewal of licenses to agents. The

approval of institutions for imparting training to agents has also ensured that the

insurance companies would have a trained workforce of insurance agents in

place to sell their products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 47.38%, with premium

income at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total

volume of LIC's business increased in the last fiscal year (2006-2007) compared

to the previous one, its market share came down from 85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about

19% in a year's time. The figures for the first two months of the fiscal year 2007-

08 also speak of the growing share of the private insurers. The share of LIC for

this period has further come down to 75 percent, while the private players have

grabbed over 24 percent.

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With the opening up of the insurance industry in India many foreign players have

entered the market. The restriction on these companies is that they are not

allowed to have more than a 26% stake in a company’s ownership.

Since the opening up of the insurance sector in 1999, foreign investments of Rs.

8.7 billion have poured into the Indian market and 19 private life insurance

companies have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled

fledgling private insurance companies to sign up Indian customers faster than

anyone expected. Indians, who had always seen life insurance as a tax saving

device, are now suddenly turning to the private sector and snapping up the new

innovative products on offer. Some of these products include investment plans

with insurance and good returns (unit linked plans), multi – purpose insurance

plans, pension plans, child plans and money back plans. (www.wikipedia.com)

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http://www.wikipedia.com/

TYPES OF LIFE INSURANCE POLICIES

TERM INSURANCE

Term life insurance is the simplest and least expensive type, as it pays benefits

only upon the policy holder's death. With annual renewable term insurance, the

policy holder pays a low premium at first, which increases annually as he or she

gets older. With level term insurance, the premium amount is set for a certain

number of years, then increases at the end of each time period. Experts

recommend that people who select term insurance make sure that their policies

are convertible, so they can switch to a cash-value plan later if needed. They

also should purchase a guaranteed renewable policy, so that their coverage

cannot be terminated if they have health problems. Term insurance typically

works best for younger people with children and limited funds who are not

covered through an employer. This type of policy enables such a person's heirs

to cover mortgage and college costs, estate taxes, and funeral expenses upon

his or her death.

WHOLE LIFE INSURANCE

With whole life insurance, the policy holder pays a level premium on an annual

basis. The policy usually covers until the end of the person's life—age 90 or 100.

In most cases, the policy holder is overcharged for the premium, and the extra

amount goes into an interest-bearing dividend account known as a cash value

account. The individual can use the money in this account to pay future

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premiums, or can withdraw it or borrow against it to cover living expenses. With a

variable whole life policy, the individual controls the investments made with his or

her cash value account. Selecting certain types of investments, such as mutual

funds, may allow the policy holder to increase the balance in the account

significantly. Regardless of the performance of the investments, however, the

amount of the insurance benefit can never drop below its original value. When

choosing a whole life policy, experts note, it is important to analyze the fund's

past performance and inquire about commissions and hidden costs. Although

whole life insurance can provide added security upon retirement, it should not be

considered a replacement for retirement savings. In fact, Janecek revealed that,

on the average, whole life policy holders only yielded between 2 and 4.5 percent

on their investments over a twenty-year period.

UNIVERSAL LIFE INSURANCE

Universal life insurance was introduced in the 1980s as a higher-interest

alternative to whole life insurance. Universal life premiums are based not only on

the cost of the insurance, but also on the interest rate offered on investments.

Still, they are usually less expensive than whole life policies. Universal life

policies provide individuals with a wider array of investment choices and higher

projected interest rates. They are essentially similar to a term policy with a fixed

rate of interest guaranteed for a year at a time.

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CURRENT ASSUMPTION LIFE INSURANCE.

Current assumption life insurance features a fixed annual premium for the

duration of the plan. This type of policy pays a set interest rate on premiums

received, less the actual cost of the insurance. They can be useful as a tax-

deferred investment vehicle, since they usually pay 2 to 4 percent more than

banks. Policy holders may elect to overpay their premiums early in the plan

period to accumulate cash value. They can withdraw or borrow from the funds

later for any purpose, including retirement income, or can use the cash value to

pay the premiums for the remainder of the plan period.

RIDERS AND OPTIONS

Most types of life insurance policies give individuals the opportunity to add

optional coverage, or riders. One popular option is accelerated benefits (also

called living benefits),

which pays up to 25 percent of the policy value to the holder prior to their death if

they are struck by a serious illness. Another option, known as a waiver of

premium, allows an individual to continue coverage without paying premiums if

he or she becomes disabled. Many policies also provide an accidental death and

dismemberment option, which pays twice the amount of the policy if the insured

dies or loses the use of limbs as a result of an accident.

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HISTORY OF LIFE INSURANCE

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

1818: Oriental Life Insurance Company, the first life insurance company on

Indian soil started functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance

company started its business.





1938: Earlier legislation consolidated and amended to by the Insurance Act with

the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by

the central government and nationalized. LIC formed by an Act of Parliament, viz.

LIC Act, 1956, with a capital contribution of Rs. 5 crores from the Government of

India.

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THE KEY FEATURES OF LIFE INSURANCE INDUSTRY

Nomination:- When one makes a nomination, as the policyholder you continue

to be the owner of the policy and the nominee does not have any right under the

policy so long as you are alive. The nominee has only the right to receive the

policy monies in case of your death within the term of the policy.

Assignment :- If your intention is that your policy monies should go only to a

particular person, you need to assign the policy in favor of that person

Death Benefit :- The primary feature of a life insurance policy is the death

benefit it provides. Permanent policies provide a death benefit that is guaranteed

for the life of the insured, provided the premiums have been paid and the policy

has not been surrendered.

Cash Value :- The cash value of a permanent life insurance policy is

accumulated throughout the life of the policy. It equals the amount a policy owner

would receive, after any applicable surrender charges, if the policy were

surrendered before the insured's death.

Dividends :- Many life insurance companies issue life insurance policies that

entitle the policy owner to share in the company's divisible surplus.

Paid-Up Additions :- Dividends paid to a policy owner of a participating policy

can be used in numerous ways, one of which is toward the purchase of additional

coverage, called paid-up additions.

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Policy Loans :- Some life insurance policies allow a policy owner to apply for a

loan against the value of their policy. Either a fixed or variable rate of interest is

charged. This feature allows the policy owner an easily accessible loan in times

of need or opportunity.

Conversion from Term to Permanent :- When in need of temporary protection,

individuals often purchase term life insurance. If one owns a term policy,

sometimes a provision is available that will allow her to convert her policy to a

permanent one without providing additional proof of insurability.

Disability Waiver of Premium

Waiver of Premium is an option or benefit that can be attached to a life insurance

policy at an additional cost. It guarantees that coverage will stay in force and

continue to grow.

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THE BENEFITS OF LIFE INSURANCE

Risk cover :- Life Insurance contracts allow an individual to have a risk cover

against any unfortunate event of the future.

Tax Deduction :- Under section 80C of the Income Tax Act of 1961 one can get

tax deduction on premiums up to one lakh rupees. Life Insurance policies thus

decrease the total taxable income of an individual.

Loans :- An individual can easily access loans from different financial institutions

by pledging his insurance policies.

Retirement Planning :- What had provided protection against the financial

consequences of premature death may now be used to help them enjoy their

retirement years. Moreover the cash value can be used as an additional income

in the old age.

Educational Needs :- Similar to retirement planning the cash values that flow

from ones life insurance schemes can be utilized for educational needs of the

insurer or his children.

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ROLE OF LIFE INSURANCE IN THE GROWTH

OF THE ECONOMYThe Life Insurance Industry has an enviable track record among public sector

units. It has a Consistent profit and dividend paying record accompanied by a

steady growth in its financial resources. Through investments in the Government

sector and socially- oriented sectors the Industry has contributed immensely to

the nation's development. The industry is recognized as one of the largest

financial Institutions in the country. The ventures initiated by the industry in the

areas of Mutual Fund, Housing Finance has done exceedingly well in recent

years. To protect the country's foreign exchange reserves, the reinsurance

arrangement are so organized that maximum retention is made possible within

the country while at the same time protecting interests of the policy holders.

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INDIA AGAINST THE GLOBAL MARKETS

India is an under-insured market India’s insurance market is still at an early stage

of development. This is reflected in low penetration rates and low premiums per

capita.

Insurable population – only 10% of India’s population have life insurance

According to ING only 10% of the population is insured, which represents around

30% of the insurable population. This suggests more than 300m people, with the

potential to buy insurance, remain uninsured

Global perspective – India ranks 19th on the global stage

India represents only around 0.66% market share (ranked 19th) of global

insurance premiums. As of 2004 the largest markets in size are the US (50x

bigger than India), Japan and the UK. Out of the Asian countries (ex Japan),

South Korea is the largest insurance market, Comprising 2.12% of global

premiums, followed by China with 1.61%.

While insurance continues to reach out to the masses, India’s insurance

penetration (premiums as a percentage of GDP) still remains very low at 3.2%.

This can be split between life penetration of 2.6% and non-life of 0.6%. On the

world stage, penetration rates are significantly below developed markets such as

the US (9.4%), UK (12.6%) and Australia (8%). Compared with Asian markets,

India still falls well short of its nearest peers with countries such as Japan, South

Korea and Taiwan having some of the highest penetration rates in the world

(between 9% and 14%). Nevertheless, despite current low spend on insurance,

the trends in India remain positive. Since the opening up of the market to foreign

players in 2000, penetration has more than doubled from 1.5%. With foreigners

gaining momentum and building the insurance, coupled with India’s favorable

macro overlay, we expect penetration rates to continue to expand.

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FUTURE OF LIFE INAURANCE SCHEMES

The Indian Life insurance sector will register a high growth rate in the future

years to come says the report prepared by Fitch Ratings. This will be due to the

innovative products, better distribution network, better services coupled with

other never-before changes that have taken place in the insurance sector. The

report laid stress on branding, customer service and tailor made products that will

assume importance besides information technology that will become vital to bring

down costs in the future. Also data warehousing, ensuring effective cross selling

will grown in importance to exploit the largely unexploited market.

In Nov 2005 the Indian Life insurance industry saw a growth of 46 %. This rally is

expected to continue as people realize the importance of risk management. The

private sector players are expected to grow with their innovative and profitable

life insurance schemes

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THE MAJOR DISTRIBUTION CHANNELS

Retail Banks

While a lot of bank relationships with insurance companies have been

established, life insurance sales have been slower than one would expect he

primary bank insurance activities have been the distribution of annuities, credit

life, and direct marketing insurance. Banks are failing to incorporate successful

sales tactics used to sell other financial services like investments.

Full-Service Brokers

Brokerage firms have gained much of the institutional and personal trust

business lost by the banks. These firms have steadily captured assets, primarily

at the expense of the banks. The number of non-bank trust companies has

increased in recent years as independent trust companies have emerged and

more broker/dealers are integrated services. Insurance companies view full-

service brokers as a potentially new distribution channel as well.

Discount Brokers and Online Financial Services

Direct sales of life insurance are growing rapidly, but many of the traditional full-

serve players seem to be letting it go. Across all financial services, consumers

are expressing a willingness to deal with a variety of providers on the web. Web

sites are starting to pop up offering consumer insurance products especially

designed for distribution over the web.

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Independent Advisors

To gain a better understanding of the demand amongst independent advisors for

trust services and to gain a better feel for how independent advisors handle trust

services, a research was performed with independent advisors across several

broker/dealers and custodians. The interviews revealed that demand is greatest

for living trusts among independent advisors, followed by demand for corporate

trustee services.

Life Insurance Agents, CPAs, & Lawyers

Independent insurance agents represent a number of companies and can

research these companies’ products to find the right combination for their clients.

Independent agents & insurance producer groups are growing in prevalence.

Although producer groups are in their infancy, their emergence may potentially

be realignment in the distribution of financial services. Independent shops

realized that by pooling production and funding a central support office, they had

increased buying power.

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PRESENT SITUATION

A robust 36 percent increase in business by country's largest insurer LIC and

strong performance by most of the private players pushed the overall life

insurance growth to 46 per cent in April-November 2005. With competition

intensifying, the 14 life-insurers collected Rs 16,604 crores in new premium in the

first eight months of 2005-06 compared to Rs 11,337 crores in the year ago

period, according to data compiled by regulator IRDA. State-owned Life

Insurance Corporation gave a tough fight to private players, who were fast

increasing their market share, to collect Rs 12,271 crores in new premium by

selling over 1.3 crores policies.

LIC also improved its market share to 73.91 per cent from 73.82 per cent a

month ago as two private players - Birla Sunlife and SBI Life - continue to see fall

in business. As market continues to grow and more new players enter the space,

LIC has rolled out innovative products and doing aggressive marketing to attract

more business.

The 13 private players led by ICICI Prudential and Bajaj Allianz are leaving no

stones unturned to expand business by netting more policyholders to increase

their market share. Among private players, ICICI Prudential ranked at the top by

collecting about Rs 1,180 crores after logging 73 per cent growth, followed by

Bajaj Allianz, which increased business by 264 per cent to collect Rs 1,016

crores in premium. ICICI Prudential had a market share of 7.11 per cent while

Bajaj Allianz increased its market pie to 6.12 per cent.

HDFC Standard Life had a market share of 2.96 per cent, followed by Birla

Sunlife (1.84 per cent), Tata AIG (1.78 per cent), SBI Life (1.52 per cent), Max

New York Life (1.32 per cent) and Aviva (1.12 per cent). Other players -- Kotak

Mahindra Old Mutual, ING Vysya, AMP Sanmar, Met Life and Sahara Life -- each

had less than one per cent of the market.

32

HDFC Standard collected Rs 491 crores in premium income till November,

followed Birla Sunlife (Rs 305 crores), Tata AIG (Rs 296 crores), SBI Life (Rs

252 crores), Max New York Life (Rs 219 crores) and Aviva (Rs 186 crores).

In group insurance, LIC continued to dominate with a market share of about

81.32 per cent by covering 8.638 million lives till November this fiscal. Among the

private insurers, SBI Life was at the top with a market share of 5.27 per cent,

followed by Tata AIG (4.16 per cent), ICICI Prudential (2.34 per cent), Met Life

(1.9 per cent), Aviva (1.16 per cent) and Bajaj Allianz (1.14 per cent).

33

TOP TEN INSURERS (LIFE)

InsurerMarket Share (%)

LIC74.87

ICICI Prudential7.53

Bajaj Allianz4.18

HDFC Standard3.20

Tata AIG1.93

Birla Sun life1.84

SBI Life1.69

Max New York life1.44

Aviva1.14

Kotak Mahindra old mutual0.77

34

STRUCTURE, PERFORMANCE PRODUCTS/SERVICES

AND PROBLEM FACED

The right investment strategies won't just help plan for a more comfortable

tomorrow -- they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life

insurance plans are created keeping in mind the changing needs of family. Its life

insurance plans are designed to provide you with flexible options that meet both

protection and savings needs. It offers a full range of transparent, flexible and

value for money products. HDFC SLIC products are modern and contemporary

unitized products that offer unique customer benefits like flexibility to choose

cover levels, indexation and partial withdrawals. (Source: www.hdfcslic.com)

PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE INSURANCE

TERM PLAN-

Term Plan is a pure risk product that aims to cover your life at a nominal cost.

You may want to take this plan to cover your outstanding debts like a mortgage,

a home loan etc. Since this is a pure risk cover product, there is no maturity

benefits payable on survival. This is a non-participating plan.

Term life insurance is normally the most inexpensive form of life insurance. Term

life insurance provides protection for a specified period of time, or the term of the

policy. A benefit is paid only if the insured dies during the term of the policy. If the

insured is still living at the end of the term, the policy expires without value.

35

ENDOWMENT PLAN-

Form of Life Insurance where the face value is paid out to the insured or a

beneficiary after a specified contract period. For example, an endowment policy

that provides benefits for 20 years until the insured is 65, pays its face value after

20 years whether the insured lives or dies.

Endowment Plan is a protection plan that covers your life and at the same time

ensures that your money does not lie idle. It invests a portion of your premium in

financial instruments and ensures a considerable growth in savings.

ULIP PLAN-

ULIP is life insurance solution that provides for the benefits of protection and

flexibility in investment. The investment is denoted as units and is represented by

the value that it has attained called as Net Asset Value (NAV).

PROTECTION PLAN

Protection Plans help you shield your family from uncertainties in life due to

financial losses in terms of loss of income that may dawn upon them incase of

your untimely demise or critical illness. Securing the future of one’s family is one

of the most important goals of life. Protection Plans go a long way in ensuring

your family’s financial independence in the event of your unfortunate demise or

critical illness. They are all the more important if you are the chief wage earner in

your family. No matter how much you have saved or invested over the years,

sudden eventualities, such as death or critical illness, always tend to affect your

family financially apart from the huge emotional loss.

36

For instance, consider the example of Amit who is a healthy 25 year old guy with

a income of Rs. 1,00,000/- per annum. Let's assume his income increases at a

rate of 10% per annum, while the inflation rate is around 4%; this is how his

income chart will look like, until he retires at the age of 60 years. At 50 years of

age, Amit’s real income would have been around Rs. 10,00,000/- per annum.

However, in case of Amit’s unfortunate demise at an early age of 42 years, the

loss of income to his family would be nearly Rs. 5,00,000/- per annum.

RETIREMENT PLANS

Retirement Plans provide you with financial security so that when your

professional income starts to ebb, you can still live with pride without

compromising on your living standards. By providing you a tool to accumulate

and invest your savings, these plans give you a lump sum on retirement, which is

then used to get regular income through an annuity plan. Given the high cost of

living and rising inflation, employer pensions alone are not sufficient. Pension

planning has therefore become critical today.

India’s average life expectancy is slated to increase to over 75 years by 2050

from the present level of close to 65 years. Life spans have been increasing due

to better health and sanitation conditions in the country. However, the average

number of years of employment has not been rising commensurately. The result

is an increase in the number of post-retirement years. Accordingly, it has become

necessary to ensure regular income for life after retirement, so that you can live

with pride and enjoy your twilight years

37

HDFC Pension Supreme

Today, you are busy climbing the ladder of success and realizing your dreams.

Today, time is with you. Just take a moment and think. Will your income be the

same forever? Will you be able to live life on your own terms even after you

retire? The HDFC Pension Supreme is Unit Linked plan, designed to provide a

post-retirement income for life with the freedom to choose your retirement date.

This plan gives you with an outstanding investment opportunity to maximise your

savings by providing you a choice of thoroughly researched and selected

investments. This plan also gives Bumper Addition to the fund value at vesting

Why do I need Savings & Investment Plans?

You have always given your family the very best. And there is no reason why

they shouldn’t get the very best in the future too. As a judicious family man, your

priority is to secure the well-being of those who depend on you. Not just for

today, but also in the long term. More importantly, you have to ensure that your

family’s future expenses are taken care, even if something unfortunate were to

happen to you.

A big factor that you need to consider while building your wealth is inflation. It has

a dual impact on your hard-earned savings. Inflation not only erodes your current

purchasing power but also magnifies your monetary requirements for the future.

Sample this: An 35 Year individual needs to invest Rs. 36,000/- per year with 8%

returns to build a corpus of Rs. 10,00,000/- by the age of 50 Years.Types of

38

Savings & Investment Plans.

HDFC Endowment Super Suvidha

As a judicious family man, your priority is to secure the well-being of those who

depend on you. Not just for today, but also for the long term. With our HDFC

Endowment Super Suvidha, you can start building your savings today and

ensure that your family remains financially independent, even when you are not

around. It is a convenient plan, which saves you from the need of going for

Medicals. This Unit Linked Plan gives you with an outstanding investment

opportunity to maximise your savings by providing you a choice of thoroughly

researched

Advantages.

1. No need to go for medicals. Just filling a Short Medical Questionnaire will

do .

2. This plan gives you Bumper Addition to the fund value at Maturity.

3. Your fund value will be augmented by addition of Bumper Addition, which

is a percentage of your original annualised premium In the long term, the

key to building great maturity values is a low Fund Management Charge

(FMC). We have a low FMC of only 1.25% per annum (of the fund’s value)

You can choose to pay your premium as either Half Yearly or Annually.

4. You also have a range of convenient auto premium payment options

5. You can change your investment fund choices in two ways:

a. Switching: You can move your accumulated funds from one fund to

another anytime Premium Redirection:

b. You can pay your future premiums into a different selection of

funds, as per your need and selected investments. This plan also

gives Bumper Addition to the fund

39

HDFC Wealth Builder.

HDFC Wealth Builder is an exclusive plan crafted for elite achievers like you. An

investment cum insurance plan that will actively help in building your wealth and

give you twin advantage of exclusive funds (actively managed for you) along with

choice of limited premium payment term. This plan provides the financial

protection to your loved ones and builds up your wealth effortlessly. This plan

also gives Bumper Addition to the fund value at Maturity

Advantages1. This plan gives you Bumper Addition to the fund value at Maturity.

2. Your fund value will be augmented by addition of Bumper Addition, which

is a percentage of your average annualized premium.

3. This plan offers an excellent investment opportunity through choice of

exclusive funds In the long term, the key to building great maturity values

is a low Fund Management Charge (FMC).

4. We have a low FMC of only 1.35% per annum (of the fund’s value).

5. You can choose to pay your premium as either Half Yearly or Annually.

6. You also have a range of convenient auto premium payment options

40

LIMITED PREMIUM PAYMENT

HDFC Wealth Builder HDFC Endowment Super

You have always given your family the very best. And there is no reason why

they should not get the best in future too. With rising costs, ensuring the best got

your family will need some financial planning. With our HDFC Endowment Super,

you can start building your savings today and ensure that your family remains

financially independent, even when you are not around. This Unit Linked Plan

also gives you with an outstanding investment opportunity to maximise your

savings by providing you a choice of thoroughly researched and selected

investments.HDFC SimpliLife

You have always believed in living life on your own terms. So why let the

changing realities of everyday life overwhelm you and make your aspirations take

a back seat? With our HDFC SimpliLife Plan, you can plan now to maximize your

savings and secure your and your family’s future. It is a convenient plan, which

saves you from the need of going for Medicals. This Unit Linked Plan gives you

with an outstanding investment opportunity to maximize your savings by

providing you a choice of thoroughly researched and selected investments

CHILDREN’S PLANS

Children’s Plans helps you save so that you can fulfill your child’s dreams and

aspirations. These plans go a long way in securing your child’s future by

financing the key milestones in their lives even if you are no longer around to

oversee them. As a parent, you wish to provide your child with the very best that

life offers, the best possible education, marriage and life style.

41

Most of these goals have a price tag attached and unless you plan your finances

carefully, you may not be able to provide the required economic support to your

child when you need it the most. For example, with the high and rising costs of

education, if you are not financially prepared, your child may miss an opportunity

of a lifetime.

Today, a 2-year MBA course at a premiere management institute would cost you

nearly Rs. 3,00,000/- At a assumed 6% rate of inflation per annum, 20 years

later, you would need almost Rs. 9,07,680/- to finance your child's MBA degree.

42

Individual Products

Investment Plans

HDFC SLIC’s Single Premium Whole of Life plan is well suited to meet

long term investment needs. This provides attractive long term returns

through regular bonuses.

Pension Plans

Pension Plans help to secure financial independence even after retirement.

Pension range includes Personal Pension Plan, Unit Linked Pension, Unit

Linked Pension Plus.

Savings Plans

Savings Plans offer a flexible option to build savings for future needs such as

buying a dream home or fulfilling your children’s immediate and future needs.

Savings range includes Endowment Assurance Plan, Unit Linked

Endowment, Unit Linked Endowment Plus, Unit Linked Endowment

Plus II, Money Back,

Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked

Young Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus

43

http://www.hdfcinsurance.com/products/indi_ulysplusII.aspx

http://www.hdfcinsurance.com/products/indi_cp.aspx

http://www.hdfcinsurance.com/products/indi_elpII.aspx

http://www.hdfcinsurance.com/products/indi_elpII.aspx

http://www.hdfcinsurance.com/products/indi_mbp.aspx

http://www.hdfcinsurance.com/products/indi_uleplusII.aspx

http://www.hdfcinsurance.com/products/indi_uleplusII.aspx

http://www.hdfcinsurance.com/products/indi_eap.aspx

http://www.hdfcinsurance.com/products/indi_ulpplus.aspx

http://www.hdfcinsurance.com/products/indi_ulpplus.aspx

http://www.hdfcinsurance.com/products/indi_ulpp.aspx

http://www.hdfcinsurance.com/products/indi_ppp.aspx

http://www.hdfcinsurance.com/products/indi_spwlp.aspx

II.

Group Products

One-stop shop for employee-benefit solutions

HDFC Standard Life has the most comprehensive list of products for

progressive employers who wish to provide the best and most innovative

employee benefit solutions to their employees. It offers different products for

different needs of employers ranging from term insurance plans for pure

protection to voluntary plans such as superannuation and leave encashment.

HDFC SLIC offers the following group products to esteemed corporate clients:

Group Term Insurance

Group Variable Term Insurance

Group Unit-Linked Plan

An investment solution that provides funding vehicle to manage corpuses

with Gratuity, Defined Benefit or Defined Contribution Superannuation or

Leave Encashment schemes of your company

Also suitable for other employee benefit schemes such as salary saving

schemes and wealth management schemes

44

http://www.hdfcinsurance.com/products/grp_leaveencash.aspx

http://www.hdfcinsurance.com/products/grp_superannuation.aspx

http://www.hdfcinsurance.com/products/grp_gratuity.aspx

http://www.hdfcinsurance.com/products/grp_gvti.aspx

http://www.hdfcinsurance.com/products/grp_gtistdprop.aspx



Social Product

Development Insurance Plan

Development Insurance plan is an insurance plan which provides life cover to members

of a Development Agency for a term of one year. On the death of any member of the

group insured during the year of cover, a lump sum is paid to those member

beneficiaries to help meet some of the immediate financial needs following their loss.

Eligibility Members of the development agency and their spouses with:

- Minimum age at the start of the policy 18 years last birthday

- Maximum age at the start of policy 50 years last birthday

Employees of the Development Agency are not eligible to join the group. The

group to be covered is only eligible if it contains more than 500 members.

Premium Payments

The premium to be paid will be quoted per member in the group and will be

the same for all members of the group.

The premium can only be paid by the Development Agency as a single lump

sum that includes all premiums for the group to be covered. Cover will not

start until the premium and all the member information in our specified format

has been received.

Benefits On the death of each member covered by the policy during the year of cover

a lump sum equal to the sum assured will be paid to their beneficiaries or

legal heirs. Where the death is as a result of an accident, an additional lump

45

sum will be paid equal to half the sum assured. There are no benefits paid at

the end of the year of cover and there is no surrender value available at any

time.

The role of the Development Agency

Due to the nature of the groups covered, HDFC Standard Life will be passing

certain administrative tasks onto the Development Agency. By passing on

these tasks the premium charged can be lower. These tasks would include:

Submission of member data in a specified computer format

Collection of premiums from group members

Recording changes in the details of group members

Disbursement of claim payments and the mortality rebate (if any) to group

members

These tasks would be in addition to the usual duties of a policyholder such

as:

Payment of premiums

Reporting of claims

Keeping policy holder information up to date

Training and support will be available to give guidance on how to complete

the tasks appropriately. Since these additional tasks will impose a burden on

the Development Agency, the Development Agency may charge a Rs. 10

administration fee to their members.

Prohibition of rebates

Section 41 of the Insurance Act, 1938 states

No person shall allow or offer to allow, either directly or indirectly, as an

inducement to any person to take out or renew or continue an insurance in

respect of any kind of risk relating to lives or property in India, any rebate of

46

the whole or part of the commission payable or any rebate of the premium

shown on the policy, nor shall any person taking out or renewing or

continuing a policy accept any rebate, except such rebate as may be

allowed in accordance with the published prospectus or tables of the insurer

If any person fails to comply with sub regulation (previous point) above, he

shall be liable to payment of a fine which may extend to rupees five hundred

INTROUCTION TO UNIT LINKED FUNDS

Unit linked plans are based on the component of the premium or the

contribution of the customer towards the plan. This contribution can be in

different modes like yearly, half yearly, quarterly and monthly. Unit linked

plans have multiple benefits like life protection, rider protection, savings,

transparency, investment choices, liquidity and planning for taxes. These

plans work like mutual funds.

The premium is collected from the policy holder. He is allotted a certain

number of units based of his contribution. The Net Asset Value is the value

of each unit of the fund. It is found by subtracting the charges and current

liabilities from the current assets and investments and dividing this number

by the total number of outstanding units.

Let us take an example. There are 100 investors and each invests Rs. 10 in

a fund. The total value of the fund is Rs. 1000 and each person is allotted 1

unit of Rs 10. Now the money (Rs. 1000) is invested in the debt or equity

market. Suppose the fund value increased by 20%. As a result the Rs. 1000

invested became Rs. 1200. Hence the value of every investor is now Rs. 12

and not Rs. 10.

47

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS

Parameters RBI Bonds Fixed Deposits

Mutual Funds Unit linked

Safety High High Medium High

Liquidity None High High High

Returns Low Low High High

Life Cover 1 time amount

1 time amount

1 time amount

10 times

Tax benefits Tax free Taxed Taxed Tax free

We find that life insurance unit linked plans is a good area to invest money

in as it provides liquidity, safety, high returns, life cover and tax benefits in a

single plan. HDFC SLIC offers the option of indexation to beat inflation. Risk

is reduced to a large extent as the company invests in a diversified portfolio

of stocks.

48

Tax Benefits

INCOME TAX

SECTION

GROSS ANNUAL

SALARY

HOW MUCH TAX

CAN YOU SAVE?

HDFC STANDARD

LIFE PLANS

Sec. 80C Across All income

Slabs

Upto Rs. 33,990

saved on

investment of

Rs. 1,00,000.

All the life insurance

plans.

Sec. 80 CCC Across all income

slabs.

Upto Rs. 33,990

saved on

Investment of

Rs.1,00,000.

All the pension plans.

Sec. 80 D Across all income

slabs

Upto Rs. 3,399

saved on

Investment of

Rs. 10,000.

All the health insurance

riders available with the

conventional plans.

49

TOTAL SAVINGS

POSSIBLE

Rs37,389

Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399 under Sec. 80 D, calculated for a male with gross annual income exceeding Rs. 10,00,000.

Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are completely tax-

free, subject to the conditions laid down therein.

SECTION -2

50

51

INTRODUCTION TO THE TOPIC

52

INTRODUCTION TO TOPIC

With the largest number of life insurance policies in force in the world, Insurance

happens to be a mega opportunity in India. It’s a business growing at the rate of

15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for the

financial year 2006 – 2007). Together with banking services, it adds about 7% to

the country’s Gross Domestic Product (GDP). The gross premium collection is

nearly 2% of GDP and funds available with LIC for investments are 8% of the

GDP.

Even so nearly 65% of the Indian population is without life insurance cover while

health insurance and non-life insurance continues to be below international

standards. A large part of our population is also subject to weak social security

and pension systems with hardly any old age income security. This in itself is an

indicator that growth potential for the insurance sector in India is immense.

A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and

strengthens the risk taking ability of individuals. It is estimated that over the next

ten years India would require investments of the order of one trillion US dollars.

The Insurance sector, to some extent, can enable investments in infrastructure

development to sustain the economic growth of the country. (Source:

www.indiacore.com)

Life insurance, sometimes referred to as life assurance, provides for a payment

of a sum of money upon the death of the insured. In addition, life insurance can

be used as a means of investment or saving.

An agreement that guarantees the payment of a stated amount of monetary

benefits upon the death of the insured

Insurance in which the risk insured against is the death of a particular person, the

insured, upon whose death while the policy is in force, the insurance company

53

http://www.indiacore.com/

agrees to pay a stated sum or income to the beneficiary.

Insurance paid to named beneficiaries when the insured person dies; "in England

they call life insurance life assurance”

Insurance policy that pays a death benefit to beneficiaries if the insured dies. In

return for this protection, the insured pays a premium, usually on an annual

basis. Term insurance pays off upon the insured's death but provides no buildup

of cash value in the policy. Term premiums are cheaper than premiums for cash

value policies such as whole life, variable life, and universal life, which pay death

benefits and also provide for the buildup of cash values in the policy. The cash

builds up tax-deferred in the policy and is invested in stocks, bonds, real estate,

and other investments. Policyholders can take out loans against their policies,

which reduce the death benefit if they are not repaid. Some life insurance

provides benefits to policyholders while they are still living, including income

payments. See also Single Premium Life Insurance.

HISTORICAL PERSPECTIVE

The history of life insurance in India dates back to 1818 when it was conceived

as a means to provide for English Widows. Interestingly in those days a higher

premium was charged for Indian lives than the non - Indian lives, as Indian lives

were considered more risky to cover. The Bombay Mutual Life Insurance Society

started its business in 1870. It was the first company to charge the same

premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to Triton

Insurance Company Limited, the first general insurance company established in

the year 1850 in Calcutta by the British. Till the end of the nineteenth century

insurance business was almost entirely in the hands of overseas companies.

54

Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several

frauds during the 1920's and 1930's sullied insurance business in India. By 1938

there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of

1938 that provided strict State Control over the insurance business. The

insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was

witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers

and provident societies under one nationalized monopoly corporation and Life

Insurance Corporation (LIC) was born. Nationalization was justified on the

grounds that it would create the much needed funds for rapid industrialization.

This was in conformity with the Government's chosen path of State led planning

and development.

The non-life insurance business continued to thrive with the private sector till

1972. Their operations were restricted to organized trade and industry in large

cities. The general insurance industry was nationalized in 1972. With this, nearly

107 insurers were amalgamated and grouped into four companies- National

Insurance Company, New India Assurance Company, Oriental Insurance

Company and United India Insurance Company. These were subsidiaries of the

General Insurance Company (GIC).

55

KEY MILESTONES





1938: Earlier legislation consolidated and amended by the Insurance Act with the

objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were taken

over by the central government and nationalized. LIC was formed by an Act of

Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the

Government of India.

INDUSTRY REFORMS

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill

in Parliament in December 1999. The IRDA since its incorporation as a statutory

body in April 2000 has fastidiously stuck to its schedule of framing regulations

and registering the private sector insurance companies. Since being set up as an

independent statutory body the IRDA has put in a framework of globally

compatible regulations.

The other decision taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies was the launch of

the IRDA online service for issue and renewal of licenses to agents. The

approval of institutions for imparting training to agents has also ensured that the

insurance companies would have a trained workforce of insurance agents in

place to sell their products.

56

METHODOLOGY

57

METHODOLOGY

TYPE OF DATA COLLECTED

There are two types of data used. They are primary and secondary data. Primary

data is defined as data that is collected from original sources for a specific

purpose. Secondary data is data collected from indirect sources. (Source:

Research Methodology, By C. R. Kothari)

PRIMARY SOURCES

These include the survey or questionnaire method, telephonic interview as well

as the personal interview methods of data collection.

SECONDARY SOURCES

These include books, the internet, company brochures, product brochures, the

company website, competitor’s websites etc, newspaper articles etc.

SAMPLING

Sampling refers to the method of selecting a sample from a given universe with a

view to draw conclusions about that universe. A sample is a representative of the

universe selected for study.

SAMPLE SIZEThe sample size for the survey conducted was 270 respondents. This sample

size was taken on 95% confidence level and 6 significant level. Data universe for

this sample is 10,00,000 which is approx population of Jodhpur excluding people

below age of 18 years.

58

SAMPLING TECHNIQUE

Random sampling technique was used in the survey conducted.

PLAN OF ANALYSIS

Tables were used for the analysis of the collected data. The data is also neatly

presented with the help of statistical tools such as graphs and pie charts.

Percentages and averages have also been used to represent data clearly and

effectively.

STUDY AREA

The samples referred to were residing in Jodhpur City. The areas covered were

Shastri Nagar, Sardarpura, Masuriya, Subhash Nagar, City Area and Kamla

Nehru Nagar.

59

OBJECTIVES

60

OBJECTIVES

To analysis the product details of HDFC Standard life Insurance

Company limited and Tata AIG life Insurance Company Limited.

To find ‘Points of Parity’ and ‘Points of Difference’ of HDFC Standard

Life Insurance Company Limited and Tata AIG Life Insurance

Company Limited.

To find out factors that influence customers to purchase insurance

policies and give suggestions for further improvement.

61

DATA ANALYSIS

&

INTERPRETATION

62

ANALYSIS & INTERPRETATION

“A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA”

AGE GROUP OF SURVEYED RESPONDENTSTABLE 1:

Age group No. of Respondents18 - 25 years 12726 - 35 years 6736 - 49 years 4650 - 60 years 24More than 60 years 6

CHART 1:

63

Analysis:From the chart above we find that 47% of the respondents fall in the age group of

18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age

group of 36 – 49 years.

Therefore most of the respondents are relatively young (below 26 years of age).

These individuals could be induced to purchase insurance plans on the basis of

its tax saving nature and as an investment opportunity with high returns.

Individuals at this age are trying to buy a house or a car. Insurance could help

them with this and this fact has to be conveyed to the consumer. As of now many

consumers have a false perception that insurance is only meant for people above

the age of 50. Contrary to popular belief the younger you are the more insurance

you need as your loss will mean a great financial loss to your family, spouse and

children (in case the individual is married) who are financially dependent on you.

64

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE 2:

Particulars No. of RespondentsMale 193

Female 77

CHART 2:

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 3:

Customer profile No. of respondentsStudent 62Housewife 5Working Professional 116Business 49Self Employed 24Government service employee 14

65

CHART 3:

Analysis:From the chart above it can clearly be seen that 43% of the respondents are

working professionals, 23% are students and 18% are into business. Therefore

the target market would be working individuals in the age group of 18 – 25 years

having surplus income, interested in good returns on their investment and saving

income tax.

NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE POLICY IN THEIR NAMETABLE 4:

Person who have life insurance policyYes 103No 167

66

CHART 4:

ANALYSIS : This graph shows that out of total 270 respondents only 103 or 38% respondents

have life insurance policy in their name. Rest all don’t have a single policy in their

name. So there is a very big scope for life insurance companies to cover these

people. So in future business of life insurace will gro further.

MARKET SHARE OF LIFE INSURANCE COMPANIESTABLE 5:

LIFE INSURER NUMBER OF POLICIESHDFC STANDARD LIFE 4BIRLA SUN LIFE 3AVIVA LIFE INSURANCE 6BAJAJ ALLIANZ 7LIC 55TATA AIG 6ICICI PRUDENTIAL 12ING VYSYA 6BHARTI AXA 2OTHERS 2

CHART 5:

67

Analysis:

In India, the largest life insurance company is Life Insurance Corporation of India.

It has been in existence in India since 1956 and is completely owned by the

Government of India. Today the organization has grown to 2048 offices serving

18 crore policies and has a corpus of over 340000 crore INR.

68

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

TABLE 6:

Premium paid (p.a.) No. of respondents

Rs. 5000 - Rs. 10000 40

Rs. 10001 - Rs. 15000 26

Rs. 15001 - Rs. 24900 18

Rs. 25000 - Rs. 50000 10

Rs. 50001 - Rs. 60000 4

Rs.60001 - Rs. 80000 2

Rs. 80001 - Rs. 100000 3

CHART 6:

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

69

Analysis:

From the chart above we find that, 39% of the respondents surveyed pay an

annual premium less than Rs. 10001 towards life insurance. 25% of the

respondents pay an annual premium less than Rs. 15001 and 17% pay an

annual premium less than Rs. 25000. Hence we can safely say that HDFC SLIC

would be able to capture the market better if it introduced products/plans where

the minimum premium starts at Rs. 5000 per annum.

Only 19% of the respondents pay more than Rs. 25000 as premium and most

products sold by HDFC SLIC have Rs.12000 as the minimum annual premium

amount. They should introduce more products like Easy Life Plus and Safe

Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a.

respectively. This would definitely increase their market share as more

individuals would be able to afford the policies/plans offered.

70

POPULAR LIFE INSURANCE PLANS

TABLE 7:

Type of Plan No. of Respondents

Term Insurance Plans 105

Endowment Plans 122

Pension Plans 16

Child Plans 8

Tax Saving Plans 19

CHART 7:

POPULAR LIFE INSURANCE PLANS

71

Analysis:

From the chart given above we can clearly see that 45% of the respondents hold

endowment plans and 39% of the respondents hold term insurance plans.

Endowment plans are very popular and serve two purposes – life cover and

savings.

If the policy holder dies during the policy term the nominee gets the death benefit

that is, sum assured and accumulated bonus. On survival the policy holder

receives the survival benefit with a bonus.

A term plan is a pure risk cover plan wherein the insured pays a lower premium

for a higher sum assured. Term insurance is the cheapest form of insurance and

helps the policy holder insure himself for a relatively low premium. For the returns

sensitive investor term plans do not find favor as they do not offer a return in

case the individual does not die during the policy term.

72

AWARENESS OF UNIT LINKED INSURANCE PLANS

TABLE 8:

Awareness of Unit Linked Plans No. of RespondentsYes 154No 116

CHART 8:

AWARENESS OF UNIT LINKED INSURANCE PLANS

Analysis:

From the chart given above we find that 57% of the respondents are aware of

unit linked life insurance plans and 43% are not aware of such plans. These

plans should be promoted through advertising. The company can advertise

through television, radio, newspapers, bill boards and pamphlets. This would

increase awareness and arouse curiosity in the minds of the consumer which

would enable the company to market its products more effectively.

Unit – linked plans are those where the benefits are expressed in terms of

number of units and unit price. They can be viewed as a combination of

73

insurance and mutual funds. The number of units a customer would get would

depend on the unit price when they pay the premium.

When the policy matures the individual gets his fund value. The value of his fund

is calculated by multiplying the net asset value and number of units held by them

on that day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

TABLE 9:

Willingness to spend on premium No. of respondents Percentage

Less than Rs. 6,000 41 15%

Rs. 6,001 - Rs. 10,000 73 27%

Rs. 10,001 - Rs. 25,000 110 41%

Rs. 25,001 - Rs. 50,000 41 15%

Rs. 50,001 - Rs. 1,00,000 5 2%

CHART 9:

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

74

Analysis:

From the graph above, we can clearly see that 41% of the respondents would be

willing to spend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would

be willing to spend between Rs. 6001 – Rs. 10000 per annum. Only 15% would

be willing to spend more than Rs. 25000 per annum as life insurance premium.

We could say that the maximum premium payable by most consumers is less

than Rs. 25000 p.a. This is further reduced as most customers have already

invested with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.

HDFC SLIC is faced with a large amount of competition. There are 18 insurance

companies in India inclusive of LIC. Hence to capture a larger part of the market

the company could introduce more reasonable plans with lesser premium

payable per annum.

75

CHART SHOWING IDEAL POLICY TERM

TABLE 10:

Ideal policy term No. of respondents3 - 5 years 516 - 9 years 4110 - 15 years 9516 - 20 years 3821 - 25 years 2426 - 30 years 5More than 30 years 3Whole life Policy 13

CHART 10:

CHART SHOWING IDEAL POLICY TERM

Analysis:

76

From the chart given above it can be seen that 35% of the respondents prefer a

policy term of 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a

term of 6 – 9 years. This means that HDFC SLIC could introduce more plans

wherein the premium paying term is less than 15 years.

The outlook of insurance as a product should be changed from something which

you pay for your whole life (whole life policy) and do not receive any benefit (the

nominee only receives the benefit in case of your death) to an extremely useful

investment opportunity with the prospects of good returns on savings, tax saving

opportunities as well as providing for every milestone in your life like marriage,

education, children and retirement.

FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE

TABLE 11:

Parameter No. of RespondentsAdvertisements 35High returns 84Advice from friends 46Family responsibilities 89Others 16

77

CHART 11:

Analysis:

From the chart above it can be seen that 33% of the respondents purchase life

insurance to secure their families, 33% take life insurance to get high returns,

17% purchase insurance on the advice of their friends and 13% purchase

insurance because of the influence of advertisements.

The main purpose of insurance is to cover the financial or economic loss that

occurs to the family in case of the uncertain death of the policy holder. But now a

days this trend is changing. Along with protection (life cover), a savings element

is being added to insurance.

With the introduction of the new unit linked plans in the market, policy holders get

the option to choose where their money will be invested. They can invest their

money in the equity market, debt market, money market or a combination of

these. The debt and money markets usually have low risk attached whereas the

equity market is a high risk investment option.

78

PREFERRED COMPANY TYPE OF THE RESPONDENTS

TABLE 12:

Type of Company No. of Respondents Percentage

Government Owned Company 127 47%

Public Limited Company 62 23%

Private Company 49 18%

Foreign Company 32 12%

CHART 12:PREFERRED COMPANY TYPE OF THE RESPONDENTS

Analysis:

From the graph above we find that 60% of the respondents preferred to purchase

insurance from a government owned company, 29% of the respondents

preferred to purchase insurance from a public limited company and only 4% of

the respondents preferred a foreign based company. Heavy advertising through

television, newspapers, magazines and radio is required.

MINIMUM EXPECTED RETURN ON INVESTMENT

79

TABLE 13:

Expected Returns No. of respondentsLess than 5% 55% - 10% 3911% - 15% 4616% - 20% 4921% - 25% 4626% - 30% 2731% - 40% 2241% - 50% 14More than 50% 22

CHART 13:

Analysis:

From the chart above it can clearly been seen that 18% of the respondents would

like 16 – 20% returns, 17% would like returns between 21 – 25% and 17% would

like returns of 11 – 15% on their investments. Therefore the average return on

investment should be at least 16 – 20 %.

Most consumers are willing to adapt to some amount of risk but still want some

guaranteed returns. Therefore the bulk of investment should be made in the

80

balanced fund with 50% debt and 50% equity. The returns on the Secure Fund

are guaranteed as these involve investment is government securities and the

debt market. But the returns on these instruments are low (8 – 10%). If the

company invests in shares, returns are higher (39%) but correspondingly risk

borne by the policy holder is also higher. Therefore a good combination of the

two instruments is often a wise choice.

81

PROJECT ANALYSIS

82

ANALYSIS OF THE PROJECT

I collected data from about 100 respondents and from the responses of different

peoples I found the following trend regarding life insurance policies.

Ques) you have any life insurance policy: ˆ YES ˆ NO

INFERENCE: From the following graph it is clearly understood that more than

70% of population are availing life insurance policy.

Ques) If yes, from which company.

INFERENCE: The following graph shows how many no of people have invested

in which company’s life insurance policy

Ques) What kind of plan have you invested in?

ˆ ULIP ˆ Endowment ˆ Term

INFERENCE: Following graph shows the customer preferences for the different

plans eg. Tem plan is most preferred plan and endowment is least preferred

Ques) Where do you invest your money other than life Insurance?

INFERENCE: Following graph shows the no. of people invested their money in

different areas other than life insurance

83

Ques) Will you interested in any other life insurance policy?

INFERENCE: Following chart indicate the percentage of people interested in

taking other life insurance policy in future

Ques) within what time span want new policy?

INFERENCE: Following graph shows that most of the people who are interested

in any life insurance policy want it after 6 months.

Ques ) What is your main aim of having life insurance policy?

ˆ Risk Cover ˆ Investment ˆ Tax Saving

INFERENCE: Following chart indicates the motive of the customers behind

taking any life insurance policy. Risk cover seems to be primary motive of most

of the customers.

84

CONCLUSION

85

CONCLUSION

HDFC standard life insurance is first life insurance company in India. It has

businesses spread out across the globe. It was registered on 23 rd December

2000. It currently ranks number 4 amongst the insurers in India (Source: annual

premium provided by the company)

The company faces a large amount of competition. To sustain itself it must

promote its products through advertising and improve its selling techniques.

Consumers must be aware of the new plans available at HDFC SLIC. The

medium of advertising used could be television since most of its competitors use

this tool to promote their products. The company must be promoted as an Indian

company since consumers seem to have more trust in investing in Indian firms.

The unit linked concept must be specifically promoted. The general perception of

life insurance has to change in India before progress is made in this field. People

should not be afraid to invest money in insurance and must use it as an effective

tool for tax planning and long term savings.

HDFC SLIC could tap the rural markets with cheaper products and smaller policy terms. There are individuals who are willing to pay small amounts as premium but the plans do not accept premiums below a certain amount. It was usually found that a large number of males were insured compared to females. Individuals below the age of 30 (mostly male) were interested in investment plans. This was a general conclusion drawn during prospecting clients.

86

LIMITATIONS

87

LIMITATIONS

Few problems were faced in meeting customers.

Few of the customers did not help me in giving the correct information.

Restricted time acted as a barrier for me while moving different cutomers.

Some customers were reluctant to give adequate information.

Due to short duration of the study, primary data could only be collected from100

customers.

PROBLEM ENVIRONMENT Sales Maximization

(Company was not getting the expected sale from the city due to lack of

availability and mismanagement of the workers working under distributors.)

Market Penetration

(Company wanted to grab largest market share and also wanted to tap not only

their new potential customers but it wanted to get its competitors share also.)

88

As the distribution channel of the National Companies is not up to the mark, they

are facing tough competition from other companies, which are providing prompt

services. Due to the aspects like less margins and service Problems Company

faced problems in Market Penetration and sales Maximization.

The old and out dated technique of tele marketing is used to prospect customers.

More modern techniques must be adopted. The company must sponsor shows

and give presentations in corporate houses. The financial health check must be

performed for every prospect to assess his/her true financial position and needs.

Some of the advisors skip this vital step and the prospect ends up with a plan

they do not appreciate and soon surrender or discontinue.

Some of the main problems in marketing the policies are:

Large amount of competition (18 players in the market)

Other brands are well advertised and have higher recall value

LIC is considered a safer option

Face competition from banks and mutual funds

High premium policies are difficult to market

Incorrect perception about insurance

Interested prospects might have a lack of time and postpone investments

Customers get defensive if you cold call

Short term plans are available only at large premium

89

Customers do not have risk appetite to invest in shares

Some prospects have already invested and are not interested in further

investments

Consumers don’t want to undertake medical examinations

Large amount of documentation

Customers do not like their money locked up for many years

Lack of awareness about the unit linked funds in the market

No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT

Advertise about the company and its products – it motivates individuals to

purchase insurance

Create a positive perception about insurance

Speak about the good features a plan offers like high returns, life cover,

tax benefits, indexation, accident cover while prospecting customers

Try to sell the product/plan which the consumer requires and not the plan

where the advisors benefit is higher

Improve the efficiency in operations

90

Bring out policies with small premiums payable for short periods of time –

Rs. 5000 – Rs. 10000 per annum for 10 years

Attract the youth of India with higher returns on investment as returns are

the motivating factor which influence purchase of insurance

Promote insurance in colleges and corporate houses

Promote HDFC SLIC as an Indian Company to build trust

HDFC SLIC could have a brand ambassador or a mascot to promote its

services

Should have partial withdrawals from the first year onwards

Tap the rural market where there is large potential

Diversify product portfolio

Make products more straight forward – reduce complexities

91

RECOMENDATION

92

RECOMENDATION

After conducting the survey I would like to give few suggestions as follows-

Services should be streamlined to increase the sales because due to improper

Services Company is not getting what it could get.

Although company has good market share in Noida city due to it’s brand name

But it could increase its share significantly through massive direct marketing

because company still has not touched some areas. ..

Recently significant numbers of life insurance sellers have increased which

shows a phenomenal change and development of insurance business.

Company should also increase its visibility in the city.

Lack of awareness about product offered by SBI should also be removed

through advertisement.

93

FINDINGS

94

FINDINGS

After studying the responses of about 100 respondents on life insurance trend. I

found variety of responses from different respondents. The survey has been

conducted basically on employed peoples who include doctors, engineer,

lecturers etc.

It is found from the survey that about 70% of the peoples are availing any of the

life insurance policy and in which LIFE INSURANCE CORPORATION OF

INDIA’S policy holders are on the top followed by ICICI PRUDENTIAL, KOTAK

MAHINDRA & other life insurance companies.

It is also concluded from the survey that most of policy holders are preferring

TERM PLAN(>40%) followed by ULIP(>30 %) & ENDOWMENT(>20%) plan.

It can also be concluded that very few of population are interested in continuing

with new policy & in interested people most of the people want to start another

policy after the gap of at least 6 months or more

It can also be concluded that most of the people are availing life insurance policy

for the sake of covering risk. Tax saving & investment are other objectives.

It is also seen that people are also investing money in other areas like saving bank account ,mutual fund ,fixed deposit & other government securities etc.

95

QUESTIONNAIRE

96

QUESTIONNAIRESurvey for Life Insurance

I am the student of B.B.A. SRGC Muzaffarnagar doing summer training at HDFC,

Muzaffarnagar. My project is Market Research on Life Insurance Product and

want your cooperation.

1) Name:______________________________________________________

2) Address:_____________________________________________________

_____________________________________________________

3) Age: _______________________________________________________

4) Phone No:___________________________________________________

5) Do you have any life insurance policy: ˆ YES ˆ NO

6) If yes, from which company:

___________________________________________

___________________________________________

___________________________________________

7) What kind of plan have you invested in :

ˆ ULIP ˆ Endowment ˆ Term

97

8) What is your main aim of having life insurance policy :

ˆ Risk Cover ˆ Investment ˆ Tax Saving

9) Where do you invest your money other than life Insurance .

_________________________________________________

10) What is total annual premium you pay per year for your life insurance .

________________________________________________________

11) Will you interested in any other life insurance policy:

ˆ YES ˆ NO

12) If yes, then within what time span

ˆ 0-1 month ˆ 2-3 month ˆ 3-6 month ˆ more than 6 month

13) What is the value of your life (in monetary terms)

_________________________________________________________

14) What is your objective for taking other life insurance policy & in which

plan would you like to invest:

________________________________________________________________

____________________________________________________________

15) What is your annual Income

ˆ 1-2 lac ˆ 2-3 lac ˆ 3-5 lac ˆ more than 5 lac

Signature

98

BIBLIOGRAPHY & REFERENCES

99

BIBLIOGRAPHY & REFERENCES

www.hdfcslic.com

www.tata-aig-life.com

www.irdaindia.com

www.lic.com

www.money control.com

www.bajajallianz.com

www.icici.prulife.com

Magazine –

Insurance World

The Outlook Money

Secrets of Successful Insurance Sales by Mr. Jack Kinder

100

http://www.irdaindia.com/

http://www.tata-aig-life.com/

http://www.hdfcslic.com/

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