HRM INSURnce manasa

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A STUDY ONHRM IN INSURANCEWITH REFERENCE TO

IDBI FEDERAL LIFE INSURANCE CORPORATION

MANASA GUPTA.P

1415-10-672-011

Project submitted in partial fulfillment for the award of the

Degree of

MASTER OF BUSINESS ADMINISTRATION

By

Osmania University, Hyderabad -500007


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STUDENT DECLARATION (Annexure-I)

I Manasa Gupta hereby declare that this project is the record of

authentic work carried out by me during the academic year 2010

2012 and has not been submitted to any other University or Institute

towards the award of any degree.

Signature of the student

Manasa Gupta


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SUPERVISOR CERTIFICATE (Annexure-II)

This is to certify that the Project Work titled HRM IN INSURANCE is a

bonafide work of Manasa Gupta Enroll No: 1415-10-672-011 carried

out in partial fulfillment for the award of degree MBA of OSMANIA

UNIVERSITY under my guidance.

This project work is original and not submitted earlier for the award of

any degree / diploma or associate ship of any other University /

Institution.

Signature of the Supervisor

Mrs. Renuka


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ACKNOWLEDGEMENT

This satisfaction and euphoria that accompany the successful

completion of any work would be incomplete without mentioningthose people who made it possible with their constant guidance and

encouragement crowned my efforts with success.

First and foremost I would like to express my gratitude to Mr. Samuel

Sir Principal, PIM and Mrs. Renuka Coordinator - MBA for their

constant guidance and support throughout our stay at this prestigious

institute.

My grateful acknowledgements to the Team of IDBI Federal Life

Insurance for their support and for providing excellent workatmosphere which made my work possible. I would take this

opportunity to express my sincere gratitude to all the persons for their

valuable assistance and continuous support during my Management

Program.

I would also like to thank Mrs. Kavitha Govind, Company Guide for her

supervision as our mentor and even her suggestions played a crucial

role in the completion of the project.

Words carry no meaning when it comes to acknowledge the help and

support I got from our faculty. They were there to help me from many

intricacies that used to prop up in my mind during this dissertation

work.

At this juncture I would like to express my deep sense of gratitude

towards all the teaching and non-teaching staff ofPIM.

Last but not least I am thankful to all our friends who supported andencouraged in every way to get away from some better experience and

boosted our confidence.

I avail this opportunity to express deepest love to my family members.

They have always been our pillar to our strength and support.


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TABLE OF CONTENTSS.NO CONTENTS

1. INTRODUCTION

2. IRDA REGULTIONS

3. INSURANCE SECTOR

4 IDBI LIFE INSURANCE CORPORATION

5. HRM IN INSURANCE


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Executive SummaryIn todays corporate and competitive world, I find that insurance sector

has the maximum growth and potential as compared to the other

sectors. Insurance has the maximum growth rate of 70-80% while as

FMCG sector has maximum 12-15% of growth rate. This growth

potential attracts me to enter in this sector and IDBI Federal Life

Insurance Co. Ltd.has given me the opportunity to work and get

experience in highly competitive and enhancing sector.

The success story of good market share of different market

organizations depends upon the availability of the product and services

near to the customer, which can be distributed through a distribution

channel. In Insurance sector, distribution channel includes only agents

or agency holders of the company. If a company like LIC,RELIANCE LIFEINSURANCE, TATA AIG, MAX etc have adequate agents in the market

they can capture big market as compared to the other companies.

Agents are the only way for a company of Insurance sector through

which policies and benefits of the company can be explained to the

customer. Insurance sector is the most typical one because it dealsmainly with the sales of policies as it is the business for every insurance

company. Though it looks some what difficult once we are accustomed

to it it becomes easier and interesting to do the work.


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Literature Review

Life Insurance sector is one of the key areas where enormous business

potential exists. In India currently the life insurance premium as a

percentage of GDP is 1.3 per cent against 5.2 per cent in the US, but in

the liberalized scenario, the life insurance premiums were projected to

grow at around 18% to 20% from Rs 215 billion in 1998- 99 to Rs 592

billion in 2004-05 and to Rs 1450 billion by 2009-10. Corporate non-life

premium was projected to grow from Rs 84 billion in 1998-99 to Rs 386billion in 2009-10 and personal line non-life from Rs 4 billion to Rs 51

billion.

The Insurance sector, after the opening up, provides greater

opportunities. Several global players have emerged and the market has

changed significantly. In the changed scenario, the expectation is that

the low Insurance premium as a percentage of GDP prevailing in Indiawill improve and will offer better opportunities to the insurance

players.

In the life Insurance segment the Life Insurance Corporation of India

(LIC) is the major player. The LIC has 2050 branches. It is constituted in

to seven Zones. Currently there are 5, 60,000 LIC agents in India.

General Insurance is another segment, which has been growing at a

faster pace.


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CHAPTER 1:

INTRODUCTION


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The banking system in India is significantly different from that of other

Asian nations because of the countrys unique geographic, social, and

economic characteristics. India has a large population and land size, a

diverse culture, and extreme disparities in in-come, which are markedamong its regions. There are high levels of illiteracy among a large

percentage of its population but, at the same time, the country has a

large reservoir of managerial and technologically advanced talents.

Between about 30 and 35 percent of the population resides in metro

and urban cities and the rest is spread in several semi-urban and rural

centers. The countrys economic policy framework combines socialistic

and capitalistic features with a heavy bias towards public sectorinvestment. India has followed the path of growth-led exports rather

than the export-led growth of other Asian economies, with emphasis

on self-reliance through import substitution.

These features are reflected in the structure, size, and diversity of the

countrys banking and financial sector. The banking system has had to

serve the goals of economic policies enunciated in successive five year

development plans, particularly concerning equitable income

distribution, balanced regional economic growth, and the reduction

and elimination of private sector monopolies in trade and industry. In

order for the banking industry to serve as an instrument of state policy,

it was subjected to various nationalization schemes in different phases.

As a result, banking remained internationally isolated because of

preoccupations with domestic priorities, especially massive branch

expansion and attracting more people to the system.


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Moreover, the sector has been as-signed the role of providing support

to other economic sectors such as agriculture, small-scale industries,

exports, and banking activities in the developed commercial centers

(i.e., metro, urban, and a limited number of semi-urban centers).Thesefeatures have left the Indian banking sector with weaknesses and

strengths.

A big challenge facing Indian banks is how, under the current

ownership structure, to attain operational efficiency suitable for

modern financial intermediation.

On the other hand, it has been relatively easy for the public sector

banks to recapitalize, given the increases in nonperforming assets(NPAs), as their Government-dominated ownership structure has

reduced the conflicts of interest that private banks would face.

Competitive advantage of a company can be generated from human

resources (HR) and company performance is influenced by a set of

effective HRM practices. In this study, we intended to assess the HR

practices in insurance companies. Primary data based on 218

respondents from four insurance companies (two multinational-7

branches and two Indian-7 branches) were analyzed to assess HR

practices being practiced by insurance companies in India. Six factors

from factor analysis were further analyzed. Training and benefits was

found highly in practice in the insurance companies. Further,

performance appraisal, selection and socialization of employees, and

HR planning and recruitment were moderately practiced in insurance

companies. Workforce diversity and contemporary HR practices and

competitive compensation were also practiced to some extent.

ANOVA results showed that Indian companies did not practice

workforce diversity. Compensation practices were found more


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competitive or performance based in Multinational insurance

companies than in Indian ones. The gender effect showed that only

competitive compensation was perceived significantly differently by

male and female employees/executives. Interactive effects weresignificant on workforce diversity and contemporary issues, training

and benefits, and selection and socialization of employees.

Human Resource Management (HRM, HR) is the management of an

organization's employees. While human resource management is

sometimes referred to as a "soft" management skill, effective practice

within an organization requires a strategic focus to ensure that people

resources can facilitate the achievement of organizational goals.

Effective human resource management also contains an element of risk

management for an organization which, as a minimum, ensures

legislative compliance.


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Origin

Fundamentally, human resource management is based on the

assumption that employees are individuals with varying goals and

needs. Human resources should not be categorized with basic business

resources (trucks, filing cabinets, etc.).

Practicing good human resource management (HRM) enables managers

of an enterprise to express their goals with specificity, increasing

worker comprehension of goals, and provide the necessary resources

to promote successfully accomplishment of said goals. When HRM is

properly employed members of the workforce are expressive of thegoals and operating practices of the firm.

HRM is seen by practitioners in the field as a more innovative view of

workplace management than the traditional approach. Its techniques

force the managers of an enterprise to express their goals with

specificity so that they can be understood and undertaken by the

workforce and to provide the resources needed for them tosuccessfully accomplish their assignments. As such, HRM techniques,

when properly practiced, are expressive of the goals and operating

practices of the enterprise overall. HRM is also seen by many to have a

key role in risk reduction within organisations.

Synonyms such as personnel management are often used in a more

restricted sense to describe activities that are necessary in the

recruiting of a workforce, providing its members with payroll and

benefits, and administrating their work-life needs. Torrington and Hall

(1987) define personnel management as being:


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a series of activities which: first enable working people and their

employing organisations to agree about the objectives and nature of

their working relationship and, secondly, ensures that the agreement is

fulfilled" (p. 49).

While Miller (1987) suggests that HRM relates to:

".......those decisions and actions which concern the management of

employees at all levels in the business and which are related to the

implementation of strategies directed towards creating and sustaining

competitive advantage" (p. 352).

Human resource management is sometimes referred to as:

Organizational management Personnel administration Manpower management Human capital management Industrial management.

HRM strategy

An HRM strategy pertains to the means as to how to implement the

specific functions of Human Resource Management. An organization's

HR function may possess recruitment and selection policies, disciplinary

procedures, reward/recognition policies, an HR plan, or learning anddevelopment policies; however all of these functional areas of HRM

need to be aligned and correlated, in order to correspond with the

overall business strategy. An HRM strategy thus is an overall plan,

concerning the implementation of specific HRM functional areas.


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An HRM strategy typically consists of the following factors:-

"Best fit" and "best practice" meaning that there is correlationbetween the HRM strategy and the overall corporate strategy. As

HRM as a field seeks to manage human resources in order to

achieve properly organizational goals, an organization's HRM

strategy seeks to accomplish such management by applying a

firm's personnel needs with the goals/objectives of the

organization. As an example, a firm selling cars could have a

corporate strategy of increasing car sales by 10% over a five year

period. Accordingly, the HRM strategy would seek to facilitate

how exactly to manage personnel in order to achieve the 10%

figure. Specific HRM functions, such as recruitment and selection,

reward/recognition, an HR plan, or learning and development

policies, would be tailored to achieve the corporate objectives.

Close co-operation (at least in theory) between HR and thetop/senior management, in the development of the corporate

strategy. Theoretically, a senior HR representative should be

present when an organization's corporate objectives are devised.

This is so, since it is a firm's personnel, or provides a service. The

personnel's proper management is vital in the firm being

successful, or even existing as a going concern. Thus, HR can be

seen as one of the critical departments within the functional area

of an organization.

Continual monitoring of the strategy, via employee feedback,surveys, etc.


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The implementation of an HR strategy is not always required, and may

depend on a number of factors, namely the size of the firm, the

organizational culture within the firm or the industry that the firm

operates in and also the people in the firm.

An HRM strategy can be divided, in general, into two facets the

people strategy and the HR functional strategy. The people strategy

pertains to the point listed in the first paragraph, namely the careful

correlation of HRM policies/actions to attain the goals laid down in the

corporate strategy. The HR functional strategy relates to the policies

employed within the HR functional area itself, regarding the

management of persons internal to it, to ensure its own departmental

goals are met.HRM strategies can also be depicted in the form of

models. The best fit strategies relate to Hard HRM model and people

centric strategies relate to Soft HRM strategies.


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Hard HRM The Hard human resource management model or strategic

fit model is a model with an epitome of utilizing the people working in

the organization as any other resource of the organization. This model

emphasize on the usage of the people working in the organization inthe same manner as any other resources are used. It enunciates the

concept that people should be hired cheaply and must be brewed and

makes to work as fully as possible. The essence of the hard model

approach is the synergy between the organizational strategies and

human resource management. People are visualized as a submissive

resource and are managed and controlled by a logical approach to

make assure the optimal utilization of the people for the attainment ofthe competitive advantage.

Soft HRM The epitome of the soft model of human resource

management is the creation of a strategic relationship between the

employees and the organization. The soft model emphasizes on the

interests of distinctive organizations stakeholders and the mapping of

organizations goals with the stakeholders interests. The theme of softhuman resource management model is that people are intangible

assets as this valuable resource cannot be transacted in terms of selling

and buying and their value is beyond the traditional financial codes.

People working in the organization are treated in a unique manner as

compare to the other resources in the organization. Soft human

resource management essence is the mutual admiration between

organization and employees. Soft human resource managementconcentrates on the humanist side of human resource management

which has an epitome of people motivation by buying their inputs on

vital decisions and encouraging the team work within the organization.


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Functions

The Human Resources Management (HRM) function includes a variety

of activities, and key among them is deciding the staffing needs of anorganization and whether to use independent contractors or hire

employees to fill these needs, recruiting and training the best

employees, ensuring they are high performers, dealing with

performance issues, and ensuring your personnel and management

practices conform to various regulations. Activities also include

managing your approach to employee benefits and compensation,

employee records and personnel policies. Usually small businesses (for-

profit or nonprofit) have to carry out these activities themselvesbecause they can't yet afford part- or full-time help. However, they

should always ensure that employees haveand are aware of

personnel policies which conform to current regulations. These policies

are often in the form of employee manuals, which all employees have.

Note that some people distinguish a difference between HRM (a major

management activity) and HRD (Human Resource Development, a

profession). Those people might include HRM in HRD, explaining thatHRD includes the broader range of activities to develop personnel

inside of organizations, including, e.g., career development, training,

organization development, etc. There is a long-standing argument

about where HR-related functions should be organized into large

organizations, e.g., "should HR be in the Organization Development

department or the other way around?"The HRM function and HRD

profession have undergone major changes over the past 2030 years.

Many years ago, large organizations looked to the "PersonnelDepartment," mostly to manage the paperwork around hiring and

paying people. More recently, organizations consider the "HR

Department" as playing an important role in staffing, training and

helping to manage people so that people and the organization are

performing at maximum capability in a highly fulfilling manner.


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OBJECTIVE

The primary objective of doing this project is to study employeeattitude regarding the training program and the benefits of the training

program. During this student internship program period I have to

achieve something which is helpful to develop my skills and

simultaneously some value addition to the company, by getting more

business because of the training program.

The main objective of this study is to know the employee opinionregarding the training program.

To find out what are the training needs in concern area.To find out the benefits of the training program to the employee

and to the organization.

To find out the enhancement in business to the organization as a result

of Training and Development to the employee.

Apart from this the project also aims to focus on the HRM

Organizational Structure, the HRM policies implemented in the

organization.


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RESEARCH DESIGN

1. Methodology:

Conclusive research:

Conclusive researchis meant to provide information that is useful in

reaching conclusions or decision-making. It tends to be quantitative in

nature that is to say in the form of numbers that can be quantified and

summarized.

It relies on both secondary data, particularly existing databases that are

reanalyzed to shed light on a different problem than the original one

for which they were constituted, and primary research, or data

specifically gathered for the current study.

The purpose of conclusive research is to provide a reliable or

representative picture of the population through the use of

a valid research instrument. In the case of formal research, it will also

test hypothesis.

In Descriptive study the project is often arranged as distinct phases.First demarcate the population about which you need knowledge, then

select a sample, gather the empirical data, analyze them, perhaps with

the same method as in the earlier study from which the model was

taken, and finally assess the findings.

2. Method:

Deductive method: a "top-down" approach. We begin withKirkpatricks theory. We then narrow that down into more specific

hypotheses that we can test. We narrow down even further when we

collect observations to address the hypotheses. This ultimately leads us

to be able to test the hypotheses with specific data -- a confirmation (or

not) of our original theories.


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Sample size:

Truly representative sample size of 50 so that there will be minimum

sampling error.

3. DATA COLLECTION AND PREPARATION

The questionnaires will be prepared and distributed in the marketing

department, filled in by employees and employers.

Both primary data (questionnaires and informal interviews), and

secondary data (companys training manual and reports, information

from website) will be used.

The questionnaire will be personally administered to see accuracy and

reliability of responses.

4. DATA ANALYSIS & INTERPRETATION

MS excel or SPSS software will be used for analyzing and interpretation

of the data.


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CHAPTER 2:

IRDA REGUALTIONS


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The Insurance Regulatory and Development Authority (IRDA) is a

national agency of the Government of India, based in Hyderabad. It was

formed by an act of Indian Parliament known as IRDA Act 1999, which

was amended in 2002 to incorporate some emerging requirements.Mission of IRDA as stated in the act is "to protect the interests of

the Policyholders, to regulate, promote and ensure orderly growth of

the Insurance industry and for matters connected therewith or

incidental thereto." In 2010, the Government of India ruled that

the Unit Linked Insurance Plans (ULIPs) will be governed by IRDA, and

not the market regulator Securities and Exchange Board of India

MISSION STATEMENT OF IRDA

To protect the interest of and secure fair treatment to

policyholders;

To bring about speedy and orderly growth of the insurance

industry (including annuity and superannuation payments), for

the benefit of the common man, and to provide long term funds

for accelerating growth of the economy; To set, promote, monitor and enforce high standards of integrity,

financial soundness, fair dealing and competence of those it

regulates;

To ensure speedy settlement of genuine claims, to prevent

insurance frauds and other malpractices and put in place

effective grievance redressal machinery;

To promote fairness, transparency and orderly conduct in

financial markets dealing with insurance and build a reliablemanagement information system to enforce high standards of

financial soundness amongst market players;

To take action where such standards are inadequate or

ineffectively enforced;


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To bring about optimum amount of self-regulation in day-to-day

working of the industry consistent with the requirements of

prudential regulation.

EXPECTATIONS

The law of India has following expectations from IRDA:

1.To protect the interest of and secure fair treatment topolicyholders.

2.To bring about speedy and orderly growth of the insuranceindustry (including Annuity and Superannuation payments), forthe benefit of the common man, and to provide long term funds

for accelerating growth of the economy.

3.To set, promote, monitor and enforce high standards of integrity,financial soundness, fair dealing and competence of those it

regulates.

4.To ensure that insurance customers receive precise, clear andcorrect information about products and services and make them

aware of their responsibilities and duties in this regard.5.To ensure speedy settlement of genuine claims, to prevent

insurance frauds and other malpractices and put in place effective

grievance redressal machinery.

6.To promote fairness, transparency and orderly conductin Financial markets dealing with insurance and build a reliable

management information system to enforce high standards of

financial soundness amongst market players.

7.To take action where such standards are inadequate orineffectively enforced.

8.To bring about optimum amount of Self-regulation in day to dayworking of the industry consistent with the requirements of

prudential regulation.


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DUTIES, POWERS AND FUNCTIONS OF IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers andfunctions of IRDA as follows:

1.Subject to the provisions of this Act and any other law for thetime being in force, the Authority shall have the duty to regulate,

promote and ensure orderly growth of the insurance business

and re-insurance business.

2.Without prejudice to the generality of the provisions contained insub-section (1), the powers and functions of the Authority shall

include:

Issue to the applicant a certificate of registration, renew, modify,withdraw, suspend or cancel such registration.

Protection of the interests of the policy holders in mattersconcerning assigning of policy, nomination by policy holders,insurable interest, settlement of Insurance claim, surrender value

of policy and other terms and conditions of contracts of

insurance.

Specifying requisite qualifications, code of conduct and practicaltraining for intermediary or insurance intermediaries and agents.

Specifying the code of conduct for surveyors and loss assessors.Promoting efficiency in the conduct of insurance business.Promoting and regulating professional organizations connected

with the insurance and re-insurance business.

Levying fees and other charges for carrying out the purposes ofthis Act.


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Calling for information from, undertaking inspection of,conducting enquiries and investigations including audit of the

insurers, intermediaries, insurance intermediaries and other

organizations connected with the insurance business.Control and regulation of the rates, advantages, terms and

conditions that may be offered by insurers in respect of general

insurance business not so controlled and regulated by the Tariff

Advisory Committee under section 64U of the Insurance Act, 1938

(4 of 1938).

Specifying the form and manner in which books of account shallbe maintained and statement of accounts shall be rendered by

insurers and other insurance intermediaries.

Regulating investment of funds by insurance companies.Regulating maintenance of margin of solvency.Adjudication of disputes between insurers and intermediaries or

insurance intermediaries.

Supervising the functioning of the Tariff Advisory Committee.Specifying the percentage of premium income of the insurer to

finance schemes for promoting and regulating professional

organizations referred to in clause (f).

Specifying the percentage of life insurance business and generalinsurance business to be undertaken by the insurer in the rural or

social sector.

Exercising such other powers as may be prescribed from time totime.


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CHAPTER 3:

INSURANCE SECTOR


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INDUSTRY PROFILE

Insurance is a subject listed in the concurrent list in the Seventh

Schedule to the Constitution of India where both center and states can

legislate. The insurance sector has gone through a number of phases

and changes. Since 1999, when the government opened up the

insurance sector by allowing private companies to solicit insurance and

also allowing foreign direct investment of up to 26%, the insurance

sector has been a booming market. However, the largest life-insurance

company in India is still owned by the government.

BREIF HISTORY

The insurance sector in India has completed all the facets ofcompetition from being an open competitive market to being

nationalized and then getting back to the form of a liberalized market

once again. The history of the insurance sector in India reveals that it

has witnessed complete dynamism for the past two centuries

approximately.

With the establishment of the Oriental Life Insurance Company in

Kolkata, the business of Indian life insurance started in the year 1818.


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Important milestones in the Indian life insurance

business

1912: The Indian Life Assurance Companies Act came into force forregulating the life insurance business.

1928: The Indian Insurance Companies Act was enacted forenabling the government to collect statistical information on bothlife and non-life insurance businesses.

1938: The earlier legislation consolidated the Insurance Act withthe aim of safeguarding the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies weretaken over by the central government and they got nationalized.

LIC was formed by an Act of Parliament, viz. LIC Act, 1956. Itstarted off with a capital of 5 crore and that too from the

Government of India.

The history of general insurance business in India can be traced back to

Triton Insurance Company Ltd. (the first general insurance company)

which was formed in the year 1850 in Kolkata by the British.


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Important milestones in the Indian general insurance

business

1907: The Indian Mercantile Insurance Ltd. was set up which wasthe first company of its type to transact all general insurance

business.

1957: General Insurance Council, an arm of the InsuranceAssociation of India, framed a code of conduct for guaranteeing

fair conduct and sound business patterns.

1968: The Insurance Act improved for regulating investments andset minimal solvency levels and the Tariff Advisory Committee was

set up.

1972: The General Insurance Business (Nationalization) Act, 1972nationalized the general insurance business in India. It was with

effect from 1st January 1973.

107 insurers integrated and grouped into four companies viz. theNational Insurance Company Ltd., the New India Assurance Company

Ltd., the Oriental Insurance Company Ltd. and the United India

Insurance Company Ltd. GIC was incorporated as a company.


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Insurance Market- Present:

The insurance sector was opened up for private participation four years

ago. For years now, the private players are active in the liberalized

environment. The insurance market have witnessed dynamic changes

which includes presence of a fairly large number of insurers both life

and non-life segment. Most of the private insurance companies have

formed joint venture partnering well recognized foreign players across

the globe.

There are now 29 insurance companies operating in the Indian market

14 private life insurers, nine private non-life insurers and six public

sector companies. With many more joint ventures in the offing, the

insurance industry in India today stands at a crossroads as competition

intensifies and companies prepare survival strategies in a DE tariffed

scenario.

There is pressure from both within the country and outside on the

Government to increase the foreign direct investment (FDI) limit from

the current 26% to 49%, which would help JV partners to bring in funds

for expansion.

There are opportunities in the pensions sector where regulations are

being framed. Less than 10 % of Indians above the age of 60 receive

pensions. The IRDA has issued the first license for a standalone health

company in the country as many more players wait to enter. The health

insurance sector has tremendous growth potential, and as it matures

and new players enter, product innovation and enhancement will

increase. The deepening of the health database over time will alsoallow players to develop and price products for larger segments of

society.


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State Insurers Continue To Dominate

There may be room for many more players in a large underinsured

market like India with a population of over one billion. But the reality is

that the intense competition in the last five years has made it difficultfor new entrants to keep pace with the leaders and thereby failing to

make any impact in the market. Also as the private sector controls over

26.18% of the life insurance market and over 26.53% of the non-life

market, the public sector companies still call the shots. The countrys

largest life insurer, Life Insurance Corporation of India (LIC), had a share

of 74.82% in new business premium income in November 2005.

Similarly, the four public-sector non-life insurers New IndiaAssurance, National Insurance, Oriental Insurance and United India

Insurance had a combined market share of 73.47% as of October

2005. ICICI Prudential Life Insurance Company continues to lead the

private sector with a 7.26% market share in terms of fresh premium,

whereas ICICI Lombard General Insurance Company is the leader

among the private non-life players with a 8.11% market share. ICICI

Lombard has focused on growing the market for general insurance

products and increasing penetration within existing customers throughproduct innovation and distribution.

Reaching Out To Customers

No doubt, the customer profile in the insurance industry is changing

with the introduction of large number of divergent intermediaries such

as brokers, corporate agents Etc.

The industry now deals with customers who know what they want and

when, and are more demanding in terms of better service and speedier

responses. With the industry all set to move to a DE tariffed regime by

2007, there will be considerable improvement in customer service

levels, product innovation and newer standards of underwriting.


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Intense Competition

In a de-tariffed environment, competition will manifest itself in prices,

products, underwriting criteria, innovative sales methods and

creditworthiness. Insurance companies will vie with each other tocapture market share through better pricing and client segmentation.

The battle has so far been fought in the big urban cities, but in the next

few years, increased competition will drive insurers to rural and semi-

urban markets.

Global Standards

While the world is eyeing India for growth and expansion, Indian

companies are becoming increasingly world class. Take the case of LIC,

which has set its sight on becoming a major global player following a

Rs280-crore investment from the Indian government. The company

now operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and will soon

start operations in Saudi Arabia. It also plans to venture into the African

and Asia-Pacific regions in 2006.

The year 2005 was a testing phase for the general insurance industry

with a series of catastrophes hitting the Indian sub-continent.

However, with robust reinsurance programs in place, insurers have

successfully managed to tide over the crisis without any adverse impact

on their balance sheets.

With life insurance premiums being just 2.5% of GDP and general

insurance premiums being 0.65% of GDP, the opportunities in theIndian market place is immense. The next five years will be challenging

but those that can build scale and market share will survive and

prosper.


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PRESENT SCENARIO OF INSURANCE INDUSTRY

India with about 200 million middle class household shows a hugeuntapped potential for players in the insurance industry.

Saturation of markets in many developed economies has made

the Indian market even more attractive for global insurance

majors. The insurance sector in India has come to a position of

very high potential and competitiveness in the market. Indians,

have always seen life insurance as a tax saving device, are now

suddenly turning to the private sector that are providing them

new products and variety for their choice.

Consumers remain the most important center of the insurancesector. After the entry of the foreign players the industry is seeing

a lot of competition and thus improvement of the customer

service in the industry. Computerization of operations and

updating of technology has become imperative in the current

scenario. Foreign players are bringing in international bestpractices in service through use of latest technologies

The insurance agents still remain the main source through whichinsurance products are sold. The concept is very well established

in the country like India but still the increasing use of other

sources is imperative. At present the distribution channels that

are available in the market are listed below:

Direct selling Corporate agents Group selling Brokers and cooperative societies Bank assurance


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Customers have tremendous choice from a large variety ofproducts from pure term (risk) insurance to unit-linked

investment products. Customers are offered unbundled productswith a variety of benefits as riders from which they can choose.

More customers are buying products and services based on their

true needs and not just traditional money back policies, which is

not considered very appropriate for long-term protection and

savings. There is lots of saving and investment plans in the

market. However, there are still some key new products yet to be

introduced - e.g. health products.

The rural consumer is now exhibiting an increasing propensity forinsurance products. A research conducted exhibited that the rural

consumers are willing to dole out anything between Rs. 3,500 and

Rs. 2,900 as premium each year. In the insurance the awareness

level for life insurance is the highest in rural India, but the

consumers are also aware about motor, accidents and cattleinsurance. In a study conducted by MART the results showed that

nearly one third said that they had purchased some kind of

insurance with the maximum penetration skewed in favor of life

insurance. The study also pointed out the private companies have

huge task to play in creating awareness and credibility among the

rural populace. The perceived benefits of buying a life policy

range from security of income bulk return in future, daughter's

marriage, children's education and good return on savings, in thatorder, the study adds.


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APPLICATION OF INFORMATION TECHNOLOGY IN

INSURANCE SECTOR

There is an evolutionary change in the technology that hasrevolutionized the entire insurance sector. Insurance industry is a

data-rich industry, and thus, there is a need to use the data for

trend analysis and personalization.

With increased competition among insurers, service has become akey issue. Moreover, customers are getting increasingly

sophisticated and tech-savvy. People today dont want to acceptthe current value propositions, they want personalized

interactions and they look for more and more features and add

ones and better service

The insurance companies today must meet the need of the hourfor more and more personalized approach for handling the

customer. Today managing the customer intelligently is very

critical for the insurer especially in the very competitiveenvironment. Companies need to apply different set of rules and

treatment strategies to different customer segments. However, to

personalize interactions, insurers are required to capture

customer information in an integrated system.

With the explosion of Website and greater access to directproduct or policy information, there is a need to developing

better techniques to give customers a truly personalized

experience. Personalization helps organizations to reach their

customers with more impact and to generate new revenue

through cross selling and up selling activities.


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To ensure that the customers are receiving personalizedinformation, many organizations are incorporating knowledge

database-repositories of content that typically include a search

engine and let the customers locate the all document and

information related to their queries of request for services.

Customers can hereby use the knowledge database to managetheir products or the company information and invoices, claim

records, and histories of the service inquiry. These products also

may be able to learn from the customers previous knowledgedatabase and to use their information when determining the

relevance to the customers search request.


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WHY LIFE INSURANCE?

In recent times, there has been growing awareness about life insurance

products and the various benefits they offer to individuals. Offerings

like unit linked insurance plans (ULIPs) have done their bit to draw

individuals towards the insurance segment. Also tax benefits, presently

under Section 80C of the Income Tax Act, have contributed to their

allure and helped in popularizing insurance products. Conversely, there

are products like medical insurance or medi claim as it is commonly

referred to, which can add value to an individuals insurance portfolio,

but are relatively lesser known. Lets start off with why people need Life

Insurance in the first place. An insurance policy is primarily meant to

protect the income of the familys breadwinners. The idea is if anyone

or both die, their dependents may hereto continue to live comfortably.

The circle of life begins at birth, followed by education, marriage and

eventually, after a lifetime of work, we look forward to a life of

retirement. Our finances too tend to change as we go through the

various phases of our life. In the first twenty years of our life, we are

financially and emotionally dependent on our parents and there are no

financial commitments to be met. In the next twenty years, we gainfinancial independence and provide for our families. This is also the

stage when our income may be insufficient to meet the growing

expenses of a young household. In the following twenty years, as our

children grow and become financially independent, we see our savings

grow, a nest egg put away for life after retirement. The final twenty

years of life, post retirement is the time to reap the rewards of our hard

work. It is important to remember that with time, our needs and

aspirations tend to change and we have to ensure that we have asuitably dynamic financial plan.

Very often it is said that before you let the worry get into your head,

buy Life Insurance. Why?

Life Insurance provides protection to your family - your family gets a

specified sum in a lump sum when they need it the most i.e. when you


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are not around. While the emotional loss cannot be mitigated, the lump

sum received from an insurance company can help take care of your

familys financial future. Life Insurance policies also offer tax benefits

though tax saving should not be the primary reason an individual

should look at a Life Insurance policy. Finally, Life Insurance contracts

allow an individual to save money in a tax efficient manner and allow

savings to grow to help meet our future financial obligations. The most

important question is what is the value of your life? Heard of this

Yaksha question: What is the greatest mystery on earth? Yudhisthir

answers, Everyone has to die. But no one thinks that for himself. This

is the greatest mystery. That is the paradox that makes people avoid

life insurance! That also makes agents take the wrong line of selling

Insurance as a tax saving and/or Investment product (ULIP). So what

should we do? Start with calculating the Human Life Value (HLV). A very

simple way of looking at it is as following: Imagine a monthly income of

Rs 10000 and the net income provided to the family is Rs./- 8000 after

deducting Rs 2000 for personal expenses. Thus the annual income

provided to your family is Rs 96000. The amount of money that will

earn Rs 96000 p.a. at 8% interest rate is Rs 12, 00,000. This is only a

representation of the value of HLV. It is not the exact way of calculatingyour HLV. The future income growth, your income generating assets,

liabilities, spouse income, childrens education, etc. are also to be

factored in. Indian consumers have bought life insurance for reasons of

tax saving rather than the core need of providing for ones family in

case of death of breadwinner. With largest number of life insurance

policies in force in the world, Insurance happens to be a mega

opportunity in India. It is a business growing at the rate of 15-20

percent annually and presently is of the order of Rs 450 billion.Together with banking services, it adds about 7 per cent to the

countrys GDP. Gross premium collection is nearly 2 per cent of GDP

and funds available with LIC for investments are 8 per cent of GDP.


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MYTHS ABOUT LIFE INSURANCE

Nearly 80 per cent of Indian population is without life insurance cover

while health insurance and non-life insurance continue to be below

international standards. And this part of the population is also subjectto weak social security and pension systems with hardly any old age

income security. This itself is an indicator that growth potential for the

insurance sector is immense. Life insurance is not bought in India.

General insurance is often bought because there are compulsions

under the law (motor vehicles, public liability, workmen etc.) or from

the financiers asking for insurance as collateral security. In the case of

life insurance, there is very little compulsion. The tendency is to defer

the decision. The possibility of death is either ignored or notconsidered imminent. Most people never do believe that they can

succumb to destiny and they think, they will live a long and healthy life.

Sadly, that is not always true. A prudent financial plan needs to build in

the risk of dying too early to ensure that our familys financial future is

protected. There are financial tools that help us determine the risk of

dying early leading to the quantum of Life Insurance required. While

the algorithms may be different, conceptually, all that these tools try

and determine is the present value of your future earnings keeping inmind your future goals and aspirations. It is important that each one of

us put some thought into the potential exposure of our family to the

risk of the primary wage earners risk of dying too early and arrive at the

level of protection required. Before we get into the recommended

approach to Life Insurance, let us delve on some of the myths

surrounding Life Insurance in India. These myths will help explain why

the number of individuals insured and the average amount of insurance

cover per individual is so low in our country. Life insurance protects you

and your loved ones in the event that you meet with an untimely

demise. You are accustomed to a certain standard of living, and you

would like to sustain the same standard of living for your wife in your

absence.


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TAX SAVING CONCEPT

The question that we should ask ourselves is - do we believe that

destiny will announce its arrival in our lives? Will destiny always allow

you to complete your tax planning for the year and then strike? The

answer is a resounding no. However, lack of education has made

customers believe that insurance is a tax-planning tool and the

protection element is only a marketing strategy. Sad, but true; this is

the way Life Insurance has been largely sold in this country. Individuals

buy enough Life Insurance to get tax breaks just before the financial

year ends. The moot question is - are we buying Life Insurance to save

taxes or are we buying it to protect our familys financial future? Since

people believe that nothing ever can happen to them, the decision on

quantum of insurance cover and timing is made just before the financial

year ends. Tax benefits have been driving LICs business over the years

and the same will drive private players too, since the same incentives

are available to all insurance companies. There is a large potential in

rural India. As stipulated by the Insurance Regulatory DevelopmentAuthority, five per cent of our new business must cover rural India and

the figure must reach 15 per cent by the fifth year. All of this is very

encouraging for the life insurance sector. Innovative products, smart

marketing and aggressive distribution, thats the triple whammy

combination that has enabled fledgling private insurance companies to

sign up Indian customers faster than anyone ever expected. Indians,

who have always seen life insurance as a tax saving device, are nowsuddenly turning to the private sector and snapping up the new

innovative products on offer.


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GUARANTEED RETURNS

The question we need to ask is - how much is the guaranteed return

that a Life Insurance contract can give. The answer is, I do not know.

Unfortunately, individuals expect life insurance companies to give high

guaranteed returns. What most individuals fail to understand is that

life insurance contracts are long-term contracts. The way in which the

contract works is that the premium that each of us pays gets invested

after deducting for the cost of mortality and other administrative

expenses of the insurance company. Since the premium is paid over a

period of time, the investment return that the insurance company can

generate on our savings depends upon the prevailing investment

opportunities at the time when the premium is paid. With volatility in

interest rates and capital markets, the level of investment return that

an insurance company can generate can vary substantially. In such a

scenario, where is the scope for the insurance company to offer a fixed

return to their policyholders but have the earnings stream that is highly

volatile and variable? Interest rates on Government of India securitieshave fallen by over three hundred basis points in the last three years.

Given such an economic environment, it is foolhardy to expect that the

high guaranteed return policies can continue for very long. The classic

example is Japan where with interest rates at subzero levels, insurance

companies that offered guaranteed return policies to their

policyholders are going down. Again, if you are buying Life Insurance for

the high guaranteed return the policy offers, please examine thecompany and the product again. Your insurance company may not be

able to pay you the promised return when your family needs the

money most.


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SELECTION OF RIGHT PRODUCT

Almost all the insurance companies offer what is called an illustration

to customers the illustration is designed to help the customer

understand the policy values better. From a customer point of view, it

is imperative that each customer understands and is able to determine

the benefits of the product. Given the long-term nature of the Life

Insurance contract, it is important to look at the profile of the life

insurance company that is underwriting the risk. Given that all the

private sector insurance players are new to the business, it would help

to look at the past record of the foreign partner in the joint venture and

the ability of the Indian partner to continue to infuse capital, given the

capital-intensive nature of the business. Again, it is very simple to

compare the product with other company products because almost all

insurers have their web portals with their product details. Even cost

comparisons can be made through premium calculators. What is

needed most is the guaranteed return and wider risk coverage. Riders

are very economical and one should always choose the desired ridersalong with the basic life insurance policy.

THE STIFF COMPETITION

The competition is stiff and, besides, theres a behemoth to contend

with. Private players realize what they are up against and are,

consequently, tailoring their strategy to suit the circumstances. There is

no question of competing with LIC. It already has about 10 lakh agentsand that number is likely to go up to 11 lakh by the end of the current

fiscal. No company is allowed to poach on anothers agents, least of all

on LICs. Private players only select freshers and, five years down the

line, they hope to have about 1-lakh agents. Right now most of them


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have about 5000 to 8,000 agents, either undergoing training or already

on the streets. Unlike the non-life segment, selling life insurance

requires a more personal touch, which is why good agents are

important in this business.

In life insurance, policies are sold not bought. As of now about 60 per

cent of the agents work on a part-time basis, but the ratio will come

down to 50 per cent by the end of their 10th year in operation. All

insurance agents earnings are commission-based. They make a 40 per

cent commission in the first year on new business and 7.5 per cent in

the next two years on renewable business. The commission rate

declines to 5 per cent in the fourth year. All insurers are careful about

selecting and training their agents. They want them to remain

committed. Insurers know that there is enough business for everybody.

Even if an insurer gets 1 to 2 per cent of the 250 to 300 million

insurable Indians, it would have covered a lot of ground. The growing

popularity of the private insurers shows in other ways. They are coining

money in new niches that they have introduced. The state ownedcompany still dominates segments like endowments and money back

policies. But in the annuity or pension products business, the private

insurers have already wrested over 33 percent of the market. And in

the popular unit-linked insurance schemes, they have a virtual

monopoly with over 90 percent of the customers.


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FEW PROMINENT REASONS OF FAILURE

1. Beneficiary: The most prominent feature of a life insurance policy is

the beneficiary clause, which facilitates the easy transfer of your money

to your successors. However, you need to be aware of the different

kinds of beneficiaries in life insurance. You can have your children as

multiple beneficiaries.

All you have to do is to indicate the names of these recipients and the

amount of proceeds that they are going to get. Naming a contingent

beneficiary is always practical. Suppose that your first beneficiary dies

near the time of your own death. In that case, your children will qualify

for your insurance money if you nominate them as contingent orsecondary beneficiaries. A contingent beneficiary can get life insurance

proceeds if the primary beneficiary dies before he or she can receive

the assets. If you have named your minor child as a beneficiary, you will

have to appoint a guardian/appointee who will administer the

insurance proceeds upon your death. As revocable beneficiary, the

recipient can be changed any time during the policy. While in

irrevocable beneficiary clause as in the case of absolute assignments,

you cannot change your assignees name unless they consent to it.With an irrevocable assignee, creditors cannot touch the policy

proceeds, as these monies are not considered to be a part of your

assets.

2. Lapsation of policy: It can happen that due to certain circumstances

you forget to pay your premiums, even in the specified grace period.

Unfortunately, because you have missed the deadline your policy will

lapse. Consequently, your insurance company can stop covering you ormay provide you reduced insurance coverage equivalent to the total

premiums paid formerly (also called paid-up policies). Nonetheless, a

lapsed policy may be renewed in some plans, although the exact

renewal procedure varies among different insurers. Revival of policy is

not simple.


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Other than payment of interest the life insured has to undergo the

medical examination and accordingly the policy terms may be revised.

3. Cash Surrender Value: Permanent life insurance policies like

universal life insurance, whole life insurance and variable life insuranceare more attractive because of the presence of built-in cash value.

Term life insurance policies do not offer cash values. The interesting

aspect of these policies is that you can surrender your policy and get

the accrued cash value in your hands provided you have a substantial

amount of cash value. Cash Value is a part of your premium is put in

savings or another investment account according to the type of policy

you purchase. As a result, the ongoing interest you receive from your

investment account gradually increases your cash value.

4. Non-Forfeiture Options: In permanent life insurance policies, if you

fail to pay the premiums in the grace period, you wont lose your life

insurance - your accumulated cash value will come to your rescue with

the following options. The above non-forfeiture options may differ from

one insurance company to another.

5. Surrender: It is always easy to terminate (surrender) your policy and

get the entire cash surrender value, which will solve your liquidityproblems. However, you need to consider many factors before

surrendering your policy, such as the increase in the cash surrender

value if your policy is maintained for the full term. Consult your

insurance advisor to about the full consequences of these issues before

deciding whether the policy should be cashed or kept.

6. Policy Loan: Another positive characteristic of a life insurance policy

is that you can take out a policy loan against your policy to cater to youremergency needs. The interest is relatively low and the policy loan can

be repaid in a lump sum or installments. If you are incapable of

repaying your policy loan, your insurance company will use your cash

value to settle the loan.


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7. Dividends: Dividends are the earnings paid out by the insurer to its

shareholders and/ or policyholders. You are entitled to enjoy the fruits

of your insurance companys labor, for example, dividends if you own a

participating policy.

THE INDIAN PSYCHE

Traditionally, the psyche of the Indian insurance seeker has been such

that they have been averse to term insurance plans. Term plans require

regular premium payments to be made throughout the tenure of the

policy; the sum assured is paid only upon the unfortunate death of the

policyholder during the policy tenure. If the policyholder survives thetenure, he is paid nothing; in other words, there are no survival

benefits. The absence of survival benefits makes these plans rather

unpopular among policyholders, as they like to receive a return as are

ward for investing. They fail to appreciate that insurance is about

insuring and not investing, so typically there should not be any

expectations of a return. A med claim policy or car insurance or home

insurance or factory/warehouse insurance doesnt offer returns.Similarly, there are no returns from a term plan. To worsen matters,

insurance advisors werent interested in educating insurance seekers

about why term plans are a must-have for every individual regardless of

age. This gave a fillip to endowment plans not only because they pay

the sum assured on the unfortunate death of the policyholder during

the policy term, but also because they pay a survival benefit if the

policy holder survives the term.


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MONOPOLY REGIME AND OPENING UP

The life insurance sector was nationalized and consolidated into one

entity viz. LIC in 1956. Since then, the LIC has been a monopoly

operator, charged with the tasks of making life insurance available

throughout the country, particularly in rural areas, and mobilizing

savings by providing attractive insurance products. On the first count,

LIC has been fairly successful having built up a large regional

distribution network comprising 2,048 branches, rural areas now

account for over 25 percent of new policies. However, the Indian

insurance market, with an estimated $5 in annual premiums paid percapita, has not made a significant contribution to savings mobilization.

Like other long-term saving instruments, life insurance has experienced

a relative decline recently, mainly owing to the comparatively low

interest rate paid on life insurance funds. The LIC is subject to similar,

although somewhat less restrictive portfolio allocation constraints as

pension funds, some 75 percent of annual portfolio investments must

be allocated to Central/State government securities or socially orientedpurposes, while the remaining 25 percent can be invested in private

sector, cooperative sector as per IRDA regulation. 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

opening up of the sector is likely to lead to greater spread and

deepening of insurance in India and this may also include restructuring

and revitalizing of the public sector companies. In the private sector, 15


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life insurance companies have been registered. A host of private

Insurance companies operating in both life and non-life segments have

started selling their insurance policies since 2001.

FUTURE OF INSURANCE SECTOR

Indias life insurance market has grown rapidly over the past six years,

with new business premiums growing at over 40% per year. The

premium income of Indias life insurance market is set to double by

2012 on better penetration and higher incomes. Insurance penetration

in India is currently about 4% of its GDP, much lower than the

developed market level of 6-9%. In several segments of the population,

the penetration is lower than potential. For example, in urban areas,

the penetration of life insurance in the mass market is about 65%, and

it considerably less in the low-income unbanked segment. In rural

areas, life insurance penetration in the banked segment is estimated to

be about 40%, while it is marginal at best in the unbanked segment.

The total premium could go up to $80-100 billion by 2012 from the

present $40 billion as higher per capita income increases per capita

insurance intensity.

The average household premium will rise to Rs 3,000-4,100 from the

current Rs 1,300 because of penetration by the existing and new

players. Indias ratio of life insurance premium to its GDP is around 4

per cent against 6-9 per cent in the developed world. It could rise to

5.1-6.2 by 2012 in tandem with the countrys demographic profile. Indiahas 17 life insurers and the state owned Life Insurance Corp. of India

dominates the industry with over 70 percent market share, though

private players have been growing aggressively. Considering the worlds

largest population and an annual growth rate of nearly 7 per cent, India


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offers great opportunities for insurers. US based online insurance

company ebix.com plans to enter the Indian market following

deregulation of its insurance sector. Online insurer ebix.coms

expansion into India is a major step for the company to become aglobal supplier of internet-based insurance tools for consumers and

insurance professionals. In a diverse country such as India it is

imperative that a universal insurance infrastructure be created to

maximize efficiency in the insurance industry.

Online insurer ebix.com can offer the Indian market a business-to-

consumer internet portal where consumers have more choice while

purchasing insurance and an internet-based agency management

system that will help agents work more efficiently with multiple

carriers. Foreign holding in Indian insurance companies is limited to 26

per cent. The government wants to increase the cap to 49 percent, but

its communist allies oppose such a move. The market is moving beyond

single-premium policies and unit linked insurance products which are

easier to sell. The agency model is the dominant sales channelaccounting for more than 85 per cent of fresh premiums but overall

inactivity and attrition is much higher at 50-55 per cent than the global

average of 25 per cent. Opportunities include health insurance and

pensions, the report said; adding only 1.5-2 percent of total healthcare

expenditure in India was currently covered by insurance. A life

insurance policy covers ones personal self. Unlike with general

insurance, it is not like insuring a vehicle; having said that, if weconsider that Indias population is over one billion and growing, we get

a picture of the true potential of the life insurance sector in India.


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Major Players in the Insurance Industry in India

Life Insurance Corporation of India (LIC):

Life Insurance Corporation of India (LIC) was established on 1

September 1956 to spread the message of life insurance in the country

and mobilise peoples savings for nation-building activities. LIC with its

central office in Mumbai and seven zonal offices at Mumbai, Calcutta,

Delhi, Chennai, Hyderabad, Kanpur and Bhopal, operates through 100

divisional offices in important cities and 2,048 branch offices. LIC has

5.59 lakh active agents spread over the country. The Corporation also

transacts business abroad and has offices in Fiji, Mauritius and United

Kingdom. LIC is associated with joint ventures abroad in the field of

insurance, namely, Ken-India Assurance Company Limited, Nairobi;

United Oriental Assurance Company Limited, Kuala Lumpur; and Life

Insurance Corporation (International), E.C. Bahrain. It has also entered

into an agreement with the Sun Life (UK) for marketing unit linked life

insurance and pension policies in U.K. In 1995-96, LIC had a total

income from premium and investments of $ 5 Billion while GIC

recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC's

income grew at a healthy average of 10 per cent as against the

industry's 6.7 per cent growth in the rest of Asia (3.4 per cent in

Europe, 1.4 per cent in the US). LIC has even provided insurance cover

to five million people living below the poverty line, with 50 per centsubsidy in the premium rates. LIC's claims settlement ratio at 95 per

cent and GIC's at 74 per cent are higher than that of global average of

40 per cent. Compounded annual growth rate for Life insurance

business has been 19.22 per cent per annum


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General Insurance Corporation of India (GIC):

The general insurance industry in India was nationalized and agovernment company known as General Insurance Corporation of India

(GIC) was formed by the Central Government in November 1972. With

effect from 1 January 1973 the erstwhile 107 Indian and foreign

insurers which were operating in the country prior to nationalization,

were grouped into four operating companies, namely, (i) National

Insurance Company Limited; (ii) New India Assurance Company Limited;

(iii) Oriental Insurance Company Limited; and (iv) United IndiaInsurance Company Limited. (However, with effect from Dec'2000,

these subsidiaries have been de-linked from the parent company and

made as independent insurance companies).

All the above four subsidiaries of GIC operate all over the country

competing with one another and underwriting various classes of

general insurance business except for aviation insurance of national

airlines and crop insurance which is handled by the GIC.

Besides the domestic market, the industry is presently operating in 17

countries directly through branches or agencies and in 14 countries

through subsidiary and associate companies.

In Addition to above State Insurers, the Following have been

permitted to enter into Insurance Business

The introduction of private players in the industry has added to the

colors in the dull industry. The initiatives taken by the private players

are very competitive and have given immense competition to the on

time monopoly of the market LIC.


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Since the advent of the private players in the market the industry has

seen new and innovative steps taken by the players in this sector. The

new players have improved the service quality of the insurance.

As a result LIC down the years have seen the declining phase in its

career. The market share was distributed among the private players.

Though LIC still holds the 75% of the insurance sector but the upcoming

natures of these private players are enough to give more competition

to LIC in the near future. LIC market share has decreased from 95%

(2002-03) to 82 %( 2004-05).

The other major players in this Sector are discussed briefly below:

HDFC Standard Life Insurance Co. Ltd: HDFC Standard LifeInsurance Company Ltd. is one of Indias 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.), Indias

leading housing finance institution and The Standard Life

Assurance Company, a leading provider of financial services from

the United Kingdom. Their cumulative premium income, including

the first year premiums and renewal premiums is Rs. 672.3 for the

financial year, Apr-Nov 2005.

Max New York Life Insurance Co. Ltd: Max New York LifeInsurance Company Limited is a joint venture that brings together

two large forces - Max India Limited, a multi-business corporate,

together with New York Life International, a global expert in life

insurance. With their various Products and Riders, there are more

than 400 product combinations to choose from. They have a


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national presence with a network of 57 offices in 37 cities across

India.

ICICI Prudential Life Insurance Co. Ltd: ICICI Prudential LifeInsurance Company is a joint venture between ICICI Bank, a

premier financial powerhouse and prudential plc, a leading

international financial services group headquartered in the United

Kingdom. ICICI Prudential was amongst the first private sector

insurance companies to begin operations in December 2000 after

receiving approval from IRDA. The company has a network of

about 56,000 advisors; as well as 7 bank assurance and 150

corporate agent tie-ups.

Birla Sun Life Insurance Co. Ltd: Birla Sun Life Insurance Companyis a joint venture between Aditya Birla Group and Sun Life

financial Services of Canada.


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CHAPTER 4:

IDBI FEDERAL LIFE

INSURANCE

CORPORATION


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IDBI Federal Life Insurance Company

Established in March 2008, IDBI Federal Life Insurance Company is a

joint venture between three major companies- IDBI Bank- Indiaspremiere industrial bank, Federal bank private sector bank and Ageas

- international insurance company operating out of Europe. IDBI Bank

holds 48% equity whereas Federal and Ageas hold 26% of equity each.At IDBI Federal, IDBI endeavor to deliver products that provide value

and convenience to the customer. Through a continuous process of

innovation in product and service delivery IDBI intend to deliver world-

class wealth management, protection and retirement solutions to

Indian customers.

Having started in March 2008, in just five months of inception IDBI

became one of the fastest growing new insurance companies to garner

Rs 100 Cr in premiums.

The company offers its services through a vast nationwide network

across the branches of IDBI Bank and Federal Bank in addition to a

sizeable network of advisors and partners. As on April 30th 2011, thecompany has issued over 2.94 lakh policies with over Rs 16, 499 Cr in

Sum Assured.

Product Portfolio:

Being a new entrant, IDBI is slowly increasing its portfolio which

includes:

Retirement Plan: With rising inflation, its absolutely necessary to make

provisions for the future which makes retirement plan an important

financial decision. Better known as Pension plan, this plan takes care of

financial needs after retirement by investing a part of your savings for

limited period.


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Pension plan provides steady income after retirement and takes care of

daily needs. The pension plan offered by IDBI Federal is Retiresurance.

Term Plan: A risk plan which provides comprehensive cover for your

family in the unfortunate event of untimely demise. A term lifeinsurance plan provides good cover at relatively nominal cost and has

no survival benefits. IDBI Federal Life term plan is Termsurance.

Investment Plan: Popularly known as ULIP, an investment plan invests

part of your savings in equity or debt market as per your preference.

The objective of investment plan is to give you returns which easily

beat the rising costs since the usual returns in a bank are extremely

low. ULIPs offered by IDBI Federal Life are Wealthsurance,

Bondsurance and Incomesurance.

Health Plan: Slightly different from health insurance, health plan

provides cover for surgery costs, critical illness. A lump sum is paid

irrespective of actual hospital bill. Healthsurance is IDBI Federal Lifes

health plan.

Distribution Network:

IDBI Federal Life Insurance Company leverages on the strongdistribution network of its promoters and advisors.

Financial Information:

The total premium earned for the half year ended September 30, 2010

was Rs 3,427 million. The profit after tax for the same period is Rs 513

million. There have been 132 death claims reported during the period

out of which 43 claims were settled and 19 claims were rejected.


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Marketing Campaigns:

IDBI Federal Life recently launched television commercials focusing on

its frontline products Wealthsurance and Incomesurance.

The campaign taglines are Jisne bhi suna khareed liya and

Guaranteed Income ki Bhavishavani Whereas the first

advertisement reflects that the product is so great that whoever hears

about it, buys it instantly, the second advertisement promises to be

clear and transparent on the issue of returns in the investment product.

IDBI Federal has also introduced two animation characters by the name

of Happy and Lucky to promote the brand.

Management:

GV Nageswara Rao is the MD & CEO of IDBI Federal Life Insurance.

Aneesh Srivastava is the CIO of IDBI Federal Life Insurance.

Michael J Wood is the appointed actuary of IDBI Federal Life Insurance.

IDBI Federal Life Insurance Product Table:

Retirement/Pension Plan Retiresurance

Term Plan Termsurance

Savings & Investment Plan Wealthsurance

Savings & Investment Plan Bondsurance

Savings & Investment Plan Incomesurance

Health Plan Healthsurance


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IncomesuranceIDBI Federal Incomesurance Endowment and Money Back Plan is

loaded with lots of benefits which ensure that you get Guaranteed

Annual Payout along with insurance protection which will help you to

reach you goals with full confidence. Incomesurance Plan is very flexible

and allows you to customize your Plan as per your individual and

familys future requirements. Moreover it also allows you to choose

Premium Payment Period, Payout Period, Payout Options and more.

IDBI Federal Incomesurance Endowment and Money Back Plan

(Incomesurance) not only gives you unmatched transparency andflexibility but there are lots of other features which are inbuilt in the

product like convenient premium payment options, Tax benefits and

double advantage of Endowment and Money Back plan. Incomesurance

combines Endowment and Money Back benefits into one plan. You can

get periodic payments as in Money Back or get a lump sum at maturity

as in Endowment. You can make it into an Endowment

plan or Money Back plan, as you wish.

Tax Benefits: Incomesurance gives you two tax benefits in a single plan.

Your premium is deductible under Sec 80C, so you save income-tax

when you pay premium. Even better, the payouts you receive are fullytax-free under Sec 10(10D) so you can enjoy the additional income

without any tax outgo.


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Premiums Waived in Case of Death: Incomesurance protects your plan

with insurance. If unfortunately anything happens to you, your

premiums can be fully waived and your beneficiary can receive payouts

just as you had envisaged. You can also choose to get a lump sum thatprovides financial security to your family.

Convenient Premium Payment Options: Incomesurance allows you to

choose 5, 10 or 15 years as your Premium Payment Period. For the

same payout amount, the premium is lower if you choose longer

Premium Payment Period, so you can save more comfortably.

Therefore, even if you want the payout in a short period of 5 years, you

can pay premiums over a long period up to 15 years.

Complete Transparency: Incomesurance offers complete transparency

in declaration of your payouts. Please refer to 'Determination of

Additional Annual Payout' in the brochure for a detailed explanation of

how the Additional Annual Payout will be computed and determined.

Incomesurance offers complete transparency in declaration of your

payouts.


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Corporate ObjectiveMission

To be the leading provider of wealth management, protection andretirement solutions that meets the needs of our customers and adds

value to their lives.

Vision

To continually strive to enhance customer experience throughinnovative product offerings, dedicated relationship management

and superior service delivery while striving to interact with our

customers in the most convenient and cost effective manner.

To be transparent in the way we deal with our customers and to actwith integrity.

To invest in and build quality human capital in order to achieve ourmission.

Values

Transparency: Crystal Clear communication to our partners andstakeholders

Value to Customers: A product and service offering in whichcustomers perceive value

Rock Solid and Delivery on Promise: This translates into beingfinancially strong, operationally robust and having clarity in

claims

Customer-friendly: Advice and support in working with customersand partners

Profit to Stakeholders: Balance the interests of customers,partners, employees, shareholders and the community at large.


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ORGANIZATIONALSTRUCTURE


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CHAPTER 5:

HRM ININSURANCE


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Human Resource Management (HRM) is the function within an

organization that focuses on recruitment of, management of, and

providing direction for the people who work in the organization.

Human Resource Management can also be performed by line

managers.

Human Resource Management is the organizational function that

deals with issues related to people such as compensation, hiring,

performance management, organization development, safety,

wellness, benefits, employee motivation, communication,

administration, and training.

Human Resource Management is also a strategic and comprehensiveapproach to managing people and the workplace culture and

environment. Effective HRM enables employees to contribute

effectively and productively to the overall company direction and the

accomplishment of the organization's goals and objectives.

Human Resource Management is moving away from traditional

personnel, administration, and transactional roles, which are

increasingly outsourced. HRM is now expected to add value to thestrategic utilization of employees and that employee programs

impact the business in measurable ways. The new role of HRM

involves strategic direction and HRM metrics and measurements to

demonstrate value.


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ROLE OF HUMAN RESOURCE MANAGEMENT IN INSURANCE

Services sectors like banks and insurance are entirely dependent on

the knowledge, expertise, skills, attitudes and quality of human

resources for growth and success. Hence effective management ofhuman resources is extremely critical in banks and insurance

companies.

Human resource management in banking & insurance concentrates

on building employee capabilities. Employee capabilities serve as the

trigger and create growth opportunities for the organization. As

employee capabilities is the key link to success in banks and

insurance companies, the HR department becomes astrategiccapabilities unit. Some key funct

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