Sandeep Project

8/8/2019 Sandeep Project

http://slidepdf.com/reader/full/sandeep-project 1/125

1

A REPORT

ON

³ENHANCEMENT OF CHANNEL DISTRIBUTION THROUGHRECRUITMENT AND DEVELOPMENT OF FINANCIAL

CONSULTANT´

SUBMITTED BY

SANDEEP KUMAR

(HDFC STANDARD LIFE INSURANCE COMPANY Ltd.)



2

AUTHORIZATION

This report titled ³Enhancement of channel distribution through recruitmentand development of financial consultant´ was written and submitted as partial

fulfillment of the requirement of MBA Program of CDLU sirsa. The report wassubmitted by sandeep kumar Gurgaon to the company guide Mr. Dinesh mohan ,Asst. Branch Manager, HDFC Standard Life Insurance Company Ltd. and to thefaculty guide, Prof.surender mor , CDLU Sirsa.



3

ACKNOWLEDGEMENT

My endeavour at HDFC Standard Life Insurance Company Ltd . has had the

benefit of several benefactors. I would therefore like to take this opportunity to

acknowledge the contributions of the following people, without whose support this

project would not have been completed successfully.

Any activity in the tradition of India begins with Guru Vandana. I first seek the blessings of my Honorable Prof. Surender mor faculty who taught me jargons of my project during the discussion to face the ground realities of Marketing afraction of whose wisdom I strove to absorb.

I am grateful to Dr. Sultan singh for giving me the opportunity to do my Summer Internship Project.

I am indebted to Mr. Dinesh mohan, Asst. Branch Manager, gurgaon sec. 15Branch , my company guide, for his help in learning actual corporate environment.

I am extremely thankful to Mr. Ankit rishi (Branch Manager), Mr. Dineshmohan (Training guide), for rendering all possible help facilitating my work incompletion of my training.

I would also like to thank to various respondents, who took time out of their busyschedules and provided me with their advice, information and expertise.

Finally I would like to thank my family and friends who have been constantsources of encouragement and support.

Regards,

SANDEEP KUMAR



4

TABLE OF CONTENTS

Page No.

Authorization««««.««««««««««««««««««.. 3

Acknowledgment«««««««««««««««««««««. 4

Abstract««««««««««««««««««««««««« 7

1. Introduction 8

1.1 Objectives«««««««««««««««««««««.. 8

1.2 Methodology««««««««««««««««««««. 8

1.3 Limitations of the Study«««««««««««««««« 9

2 . Industry Profile

2.1 Principle of insurance««««««««««««.. 10

2.2 The concept of indemnification«««««««««««... 12

2.3 Business model««««««««««««««««««« 122.4 Conceptual framework«««««««««««««««««« 13

3. About the Company

3.1 Fact sheet««««««««««««««««««« 17

3.2 The management««««««««««««««««««««««... 17

3.3 Corporate office««««««««««««««««««««... 1 8

3.4 Company profile««««««««««««««««««

4. The study of the products

4.1 Traditional plan««««««««««««««««««««.

4.2 ULIP plan«««««««««««««««««««««««

4.3 Comparison between ULIP and Traditional««««««««««.

19

21

21

21

23



5

5. Communication mix 2 4

6 . Direct Channel development

6 .1 Recruitment process«««««««««««««««««««..

6 .2 Selection and placement procedure««««««««««««««

7. Development of financial consultant7.1 Discriminant analysis««««««««««««««««««««.

7.2 Correlation analysis««««««««««««««««««««««

7.3 Regression analysis««««««««««««««««««««««.

7.4 Understand about the fund management««««««««««««««

7.5 To know risk and about average return portfolio«««««««««««..

8 . Swot analysis

9. Questionnaires analysis

10. Findings

11. Recommendations

12 . Conclusion

13. Reference

28

28

30

3435

58

68

8 4

8 9

93

94

111

112

113

119



6

ABSTRACT

The service industry is one of the fastest growing sectors in India today. Theupcoming sectors which are really showing the graph towards upwards are ± Telecom, Banking and Insurance. These sectors really have a lot of responsibilitytowards the economy.

Amongst the above mentioned areas Insurance is one sector, which took a lot of

time in positioning itself. The insurance business of non- life companies was not

much in problems but the major problem was with life insurance. Life insurance

Corporation of India had monopoly for more than 45 years, but the picture then

was completely different. Previously people felt that ³Insurance is only for classes

not for masses´ but now the picture has changed

With the coming of insurance reforms in 1999, IRDA was set up to regulate

insurance sector. This led to the entry of 1 6 new private insurance companies in

2000.

HDFC standard Life insurance company started its operations in the year 2000. It

recruits Financial Consultants for the purpose of retail sales of insurance policies to

its customers. These financial consultants act as a direct link between customer and

company. There is a separate department named Channel Development in the

company which recruits these FC¶s for it. The existing processes of recruitment are

ineffective and inadequate to recruit the right mix of people. Every year company

incurs huge cost in recruiting training and servicing FC¶s but many of them turns

out to be inefficient and do not generate any business for the company. Through



7

this research project the researcher wants to develop an effective way of recruiting

and development of fc¶s. The main purpose of this study is to do a detailed study

on the existing recruitment and retention strategies of FC¶s at HDFC SLIC.

The project aims to help understand the consumer behavior towards various

financial services like insurance and what are the factors should be taken in to

consideration before investing in Unit Linked Insurance Plans. The report enhances

the knowledge on how various financial concepts learnt in the classroom are

implemented in a real life environment.

1. INTRODUCTION

1.1 Objective of the project:

Create and Enact strategies for recruitment and retention of financialconsultants to assist HDFCSLIC to development their sales distributionchannel and extend their market.

To identify the challenge faced during the process of channeldevelopment.

To do a detailed studies about HDFCSLIC and its offerings traditional aswell as ULIP.

To study consumer perception towards Life Insurance. To determine the need and purpose of Financial Consultants.

To collect and analysis the information of prospect candidate in order to

make them in front of management.

1.2 Methodology: Many financial consultants at HDFC standard Life Insurance

Company are under performers, inactive and ineffective. They are just a liability





9

Secondary Source: It was collected from internal sources. The secondary data was

collected on the basis of organizational file, official records, news papers,

magazines, and management books, preserved information in the company¶s

database, employee handbook and website of the company.

1.3 Limitations of the Study: The main limitations of this project are as follow:

Due to lack of time researcher had to restrict the research to a particular

area i.e. Delhi and NCR.

Many people are not interested to fill up the questionnaire.

It is difficult to find the right respondent according to requirement of

research.

HR department of the company is unwilling to support as recruitment of

financial consultants is not considered as an HR function. It is considered

as a marketing function.

Regarding the making of questionnaire we were bound to make on the basis of the company¶s selection criteria only. So we are not able to getmore information.

Consumer perception towards selling insurance was a major bottleneck as

this sector is not considered respectable

2 . INDUSTRY PROFILE



10

Insurance- an Overview: Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss.Insurance is defined as the equitable transfer of the company selling the insurance.The insurance rate is a factor used to determine the amount, called the premium, to

be charged for a certain amount of insurance coverage Risk management the practice of appraising and controlling risk has evolved as a discrete field of studyand practice.

2 .1 Principle of insurance: Commercially insurable risks typically share sevencommon characteristics.

1. A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large

classes. Automobile insurance, for example, covered about 175 millionautomobiles in the united state in 2004. The existence of a large number of a large number of homogeneous exposure units allows insurers to

benefit from the so-called ³low of large number´, which in effect statesthat as the number of exposure unit¶s increase, the actual results to thiscriterion. Lloyd¶s of London is famous for insuring the life of actors,actresses and sports figures. Satellites launch insurance cover events thatare infrequent. Large commercial property policies may insure

exceptional properties for which there are no µhomogeneous¶ exposureunits. Despite failing on this criterion, many exposures like these aregenerally considered to be insurable.

2. Define Loss. The event that gives rise to the loss that gives rise to theloss that is subject to insurance should at least in principle, take place at aknown time, in a known place, and from a known cause. The classicexample is death of an insured on a life insurance policy. Fire,automobile accidents, and worker injuries may all easily meet thiscriterion .other types of losses may only be definite in theory.Occupational disease, for instance, may involve prolonged exposure toinjurious conditions where no specific time, place or cause is identifiable.Ideally, the time place and cause of a loss should be clear enough that areasonable person. With sufficient information, could objectively verifyall three elements.



11

3. Accidental Loss . The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of theinsurance. The loss should be ³pure in´ the sense that it results from an

event for which there is only the opportunity for cast. Events thatspeculative elements, such as ordinary business risks, are generally notconsidered insurable.

4. Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both theexpected cost of losses, plus the cost of issuing and administering the

policy, adjusting losses, and supplying the capital needed to reasonably

assure that the insurer will be able to pay claims. For small losses theselatter costs may be several time the size of the protection offered has realvalue to a buyer.

5. Affordable premium. If the likelihood of an insured event is so high, or the cost of event so large, that the resulting premium is large relative tothe amount of protection offered, it is not likely that anyone will buyinsurance, even if on offer. Further, as the accounting profession formallyrecognize in financial accounting standard, the premium cannot be solarge that there is not a reasonable chance of a significant loss to theinsurer. If there is no such chance, the transaction may have the form of insurance, but not the substance.

6 . Calculable Loss. There two elements that must be at estimable, if notformally calculable: The probability of loss, and the attendant cost.Probability of loss is generally an empirical exercise, while cost has moreto do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presentedunder that policy to make a reasonably definite and objective evaluationof the amount of the loss recoverable as a result of the claim.

7. Limited risk of catastrophically large losses. The essential risk is oftenaggregation. If the same event can cause losses to numerous



12

policyholders of the same insurer, the ability of that insurer to issue policy becomes constrained, not by the factors surrounding the individualcharacteristics of a given policyholder, but by the factors surrounding thesum of all policyholder so exposed. Typically, insurers prefer to limit

their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated,or an individual policy could produce exceptionally large claim, thecapital constraint will restrict an insurer¶s appetite for additional

policyholders. The classic example is earthquake insurance, where theability of an underwriter to assure a new policy depends on the number and size of the policies that it has already underwriter. Wind insurance inhurricane zones, particularly along coast lines, is another example of this

phenomenon. In extreme cases, the aggregation can affect the entireindustry, since the combined capital of insurers and reinsurers can besmall compared to the needs of potential policyholder in areas exposed toaggregation risk. In commercial fire insurance it is possible to find single

properties whose total exposed value is well in excess of any individualinsurer¶s capital constraint. Such properties are generally shared amongseveral insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

2 .2 The concept of Indemnification: The technical definition of ³indemnity´means to make whole again. There are two types of insurance contracts: 1) an³indemnity´ policy and 2) a ³pay on behalf´ or ³on behalf of´ policy. Thedifference is significant on paper, but rarely material practice.

Under the same situation, a ³pay on behalf´ policy, the insurance carrier would paythe claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of ³pay on

behalf´ language.

An entity seeking to transfer risk (an individual, corporation, or association of anytype, etc.) becomes the ³insured´ party once risk is assumed by an ³insurer´ theinsuring party, by means of a contract, called an insurance µpolicy¶. Generally, aninsurance contract includes, at a minimum, the following elements: the parties(the



13

insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss events covered, the amount of coverage(the amount to be paid to theinsured or beneficiary in the event of a loss), and exclusions (events no covered).An insured is thus said to be ³indemnified´ against the loss events covered in the

policy.

When insured parties experience a loss for a specified peril, the coverage entitlesthe policyholder to make a µclaim¶ against the insurance for covered amount of lossas specified by the policy. The free paid by the insured to the insurer for assumingthe risk is called the µpremium¶. Insurance premiums from many insured¶s are usedto fund accounts reserved for later payment of claims-in theory for a relatively fewclaimants-and for overhead costs. So long as an insurer maintains adequate fundsset aside for anticipated losses (i.e., reserves), the remaining margin is an insurer¶s

profit.

2 .3 The Business Model:

Profit=earned premium + investment income ± incurred loss - underwritingexpenses.

Insurers make money in two ways(1)through underwriting process by whichinsurers select the risk to insure and decide how much in premiums to charge for

accepting those risk and (2) by investing the premiums they collect from insured¶s.The most complicated aspect of the insurance business is the underwriting of

policies. Using a wide assortment of data, insurers predict the likelihood that aclaim will be made against their policies and price products accordingly. To thisend, insurers use actuarial science to quantify the risk they are willing to assumeand the premium they will charge to assume them. Data is analyzed to accurately

project the rate of future claims based on a given risk. Actuarial science usesstatistics and probability to analyze the risks associated with the range of fairly

covered. Up on termination of a given policy, the amount of premium collectedand the investment gain there on minus the amount paid out in claims is theinsurer¶s underwriting profit on that policy. Of course, from the insurer¶s

perspective, some policies are winners (i.e., the insurance pays out less in claimsand expenses than it receives in premiums and investment income) and some are



14

losers (i.e., the insurer pays out more in claims and expenses than it premiums andinvestment income).

An insurance underwriting performance is measured in its combined ratio. The loss

ratio (incurred losses and loss-adjustment expenses divided by net earned premium)is added to the expense ratio(underwriting expenses divided by net premium written) to determine the company¶s combined ratio. The combined ratiois a reflection of the company¶s overall underwriting profitability. A combinedratio of less than 100 percent indicates underwriting profitability, while anythingover 100 indicates an underwriting loss.

Insurance companies also earn investment profits on ³float´. Float or availablereserve is the amount of money, at hand at any given moment, that an insurer has

collect in insurance premiums but has not been paid out in claims. Insurer¶s stareinvesting insurance premiums as soon as they are collected and continue to earninterest on them until claims are paid out.

Property and casualty insurers currently make the most money from their autoinsurance line of business. Generally better statistics are available on losses andunderwriting on this line of business has benefited greatly from advance incomputing.

Finally claims and loss handling is the materialized utility of insurance. Inmanaging the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses and claims overpaymentleakages.

2 .4 Conceptual Framework:

What is life insurance? Life insurance is a contract providing for the payment of asum of money to the person assured or failing him to the person entitled to receivethe same on the happening of certain event.

Uncertainty of death is inherited in human life. It is this rise to the necessity for some form of protection against the financial loss arise the death. The object of insurance is normally to provide-

Family protection



15

Provision for old age

Why Life Insurance? We have required thinking twice before taking the plungeinto buying life insurance. Is buying insurance is necessity now? Spending an extraamount as premium at regular intervals where do you not see immediate benefitsdoes not see a necessity at the moment. May be later

Well we could be wrong. Buying insurance cannot be compared with any other form of investment. Insurance gives us a life long benefits and the returns willdefinitely come but only when we need it the most i.e. at the right time. Besides

buying insurance early in life is one of the wise decision you could take.

Insurance is not about how much more it can offer you when the stock market is atthe peak. It may not be an attractive investment option. But weight pros and consconsider how much more it can offers at a small price.

Most important of all it provides you with the unique sense of security that noother form of investment provides. It gives us a sense of financial support.Especially during that time of crises irrespective of the fluctuation in the stock

market. Insurance provides for our career goals right from the childhood years.If the earning member of the family is no more our child¶s education need will notsuffer. In fact his higher education too will be provided for. We need to spendsleepless night thinking about how to save for child¶s marriage. Life insurance willtake care of that typical once in a life time spending on marriage.

An accident or a disability may be devastating but a life insurance policy can be of utmost support for the family during such times too. Beside it provide for addition

benefits such as bonuses. We need not worry about retirement years. The rising prices, taxes and your lifestyle will be taken care of easily. And we can relax andspend our old age in comfort and peace.

Life insurance today¶s play a major role in once life at various stages. Consideringthe benefits it offers one cannot give a thought to buying an insurance policy theearliest.



16

Need of Insurance: The need for life insurance comes from the need to safeguardour family. If we care of our family¶s need you will definitely consider insurance.

Today insurance has become from even more important due to the disintegration of the prevalent joint family system, a system in which a number of generations co-existed in harmony, a system in which a sense of financial security was there aswere more earning member.

Times have changed and nuclear family has emerged. Apart from other pitfalls of anuclear family, a high sense of insecurity is observed in it today besides, the familyhas shrunk. Need are increasing with time and fulfillment of these needs is bigquestion mark.

How will we be able to satisfy all those needs? Better lifestyle, good education,and your long desired house. But again- we just cannot fritter away earnings. Weneed to save a part of it for the future too-a wise decision. This is where insurancehelps us.

Factors such as fewer numbers of earning members, stress, increasing competition,higher ambitious etc are some of the reasons why insurance has gained importanceand where insurance plays a successful role.

Insurance provides a sense of security to the income earner as also to the family.Buying insurance frees the individual from unnecessary financial burden that canotherwise make him spend sleepless night. The individual has a sense of consolidation that he has sometime to fall back on.

From the very beginning of your life, to your retirement age insurance can takecare of all your needs. Your child needs good education to mould him into citizen.After his schooling he need to go for higher education, to gain a professional edge

over the others- a necessity in this age where cut throat competition is the rule. Hiscareer needs have to be fulfilled.

Insurance is must also because of the uncertain future advertise of life. Accidents,illness, disability etc are the facts of life, which can be extremely devastating.OTHER than the hospitalization, medication bills these may run up it¶s the



17

aftermath of the accident, the physical well being of the individual that has to takeninto consideration. Will the individual be in a position to earn as before? A

pertinent question, but if he is not? Disability can be taken care of by insurance.Your family will not have to go through the grind due to your present inability.

Moreover, retirement, an age when every individual has almost fulfilled hisresponsibilities and looks forward to relaxing can be painful if not planned

properly, Have we consider the increasing inflation and taxes? Will our investmentoffer you attractive return under such circumstances? Will it take of your familyafter us? An insurance policy will definitely take care of these things. Insurancetoday has opened up new vistas a lot of potential. Considering how dependent our agriculture system is on the monsoon, he farmer sees a dim future. The uncertaintyof the monsoon too can be taken care of by insurance. Looking at the advantage of the insurance policy a number of farmers have gone into insurance. Insurance has

become necessity today.

When is the right time to buy a insurance? Buying life insurance cannot ever becompared with other investment decision since it is very much contrast with thosestock market investment where you wait for the right time to buy and sell. Neither is this like receiving tips on particular scrip doing the market and holding greatfuture prospects.

Buy life insurance at the earliest. Do we know when you will fall ill? Are we sureabout future income earning potential? Are we sure we will never meet anaccident? If not, buy insurance now.



18

This is because the future is always uncertain. Just as buying insurance is a necessary so also buying insurance early in life is important too. With proper financial planning one can work outas to how much money an individual is entitled to after the end of a particular term. A policy thatfulfills your child¶s future education needs would have to be timed appropriately so that hereceives the policy amount at the time when he needs it the most.

What does the Life Insurance provide? The proceeds accruing from life insurance policy can be utilized for. Final expenses resulting from death. Guaranteed maintenance of lifestyle. Replacement of income. Mortgage or Liquidation payment. Cost of education. Estate and other taxes. Continuity and security of interest.

Why is insurance Superior to other form of saving?

An immediate estate is created in favor of policyholder. Protection in cause of death and accidents. Liquidity in case of need- easy loans is available. Tax relief- income tax, wealth tax etc.



19

Policies can be taken under M.P.W Act 1 8 74, to protect against creditors .3. ABOUT THE COMPANY:

3.1 Fact Sheet:HDFC Standard Life Insurance

Fact sheet ± As of July 13, 2 010 31th, 2 010

Founded 2 000

Started Operations 14 th August, 2 000

Headquarters Mumbai, India

World Wide Web Address http://www.hdfcinsurance.com

Chairman Mr. Deepak S. Parekh

Managing Director & CEO Mr. Deepak M Satwalekar

Paid-Up Capital Rs. 179 6 crore

Employees 14,50 6

Number of Offices 595

Number of Cities 72 0



2 0

3.2 The Management:

Board of Directors :

Mr. Deepak S Parekh- Chairman, HDFC Standard Life Insurance

Mr. Deepak M Satwalekhar- Managing director and chief executive officer

Mr. Paresh Parashis- Executive Director and chief operating officer

Ms. Sharad Sangal- General Manager, Human Resources and Administration

Mr. Vikram Mehta - General Manager, Sales and Marketing

Mr. Prasum Gajri- Chief Investment Officer

3.3 Corporate Office:

HDFC Standard Life Insurance Company Ltd.

µTrade Star¶ 2 nd floor, µA Wing¶

Junction of Kandivita and M. R. Road

Andheri- Kurla Road,

Andheri (East), Mumbai-400059

Tel No-022- 6 751 6666

Fax No-022-2 8 222414

Email- [email protected]

Website- www.hdfcinsurance.com



2 1

3.4 Company profile:

HDFC Standard Life Insurance Company Limited was one of the first companiesto be granted license by the IRDA to operate in life insurance sector. Reach of theJV player is highly rated and been conferred with many awards. HDFC is ratedµAAA ¶ by both CRISIL and ICRA. Similarly, Standard Life is rated µAAA¶ both

by Moody¶s and Standard and Poor¶s. These reflect the efficiency with whichHDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 6 00,000Cr. Respectively.

HDFC Standard Life Insurance Company Ltd was incorporatedon 14th August 2000. HDFC is the majority stakeholder in the





23

Value for money for customers Professionalism in carrying out business

Our Vision: µThe most successful and admired life insurance company, whichmeans that we are the most trusted company, the easiest to deal with, offer the best

value for money, and set the standards in the industry.µThe most obvious choice for all¶ .

Logo:

Slogan: ³SAR UTHA KE JIYO´

4. THE STUDY OF THE PRODUCTS AVAILABLE INCOMPANY:

4.1 Traditional /Conventional plan: The conventional Insurance policies have afixed relationship between the premium and the sum assured.

Term assurance plan

Endowment assurance planMoney back planChildren plan

4.2 UNIT-linked insurance plan: UNIT-linked insurance plan which is popularlyknown as 'ULIP' is the flavor of the season. ULIP allows the policyholder tochoose his own sum assured within certain limits, for any given premium. The

policyholder may then have the right to adjust his sum assured up or down, againwithin certain limits according to his circumstances.

a .Young star super

b .Endowment super

c. Pension super



24

Unit Linked Insurance Polices (ULIPS)

Unit linked guidelines were notified by IRDA on 21st December 2005. The mainintent of the guidelines was to ensure that they lead to greater transparency andunderstanding of these products among the insured, especially since the investmentrisk is borne by the policyholder. It is the endeavor of IRDA to enable the buyer tomake the most informed decision possible when planning for financial security.We hope the following FAQs will enable a better insight to all buyers about thecharacter and features of Unit linked Products.

1. What is a ULIP?ULIP is an abbreviation for Unit Linked Insurance Policy. A ULIP is a lifeinsurance policy which provides a combination of risk cover and investment. The

dynamics of the capital market have a direct bearing on the performance of theULIPs. Remember that in a ULIP, the Investment risk is generally borne by theinvestor.

2 . What is a Unit Fund?The allocated (invested) portions of the premiums after deducting for all thecharges and premium for risk cover under all policies in a particular fund as chosen

by the policy holders are pooled together to form a Unit fund.

3. What is a Unit?It is a component of the Fund in a Unit Linked Policy.

4. What Types of Funds do ULIP Offer?Most insurers offer a wide range of funds to suit one¶s investment objectives, risk

profile and time horizons. Different funds have different risk profiles. The potentialfor returns also varies from fund to fund. The following are some of the commontypes of funds available along withan indication of their risk characteristics.

5. Are Investment Returns Guaranteed in a ULIP?Investment returns from ULIP may not be guaranteed.´ In unit linked products/policies, the investment risk in investment portfolio is borne by the policyholder´. Depending upon the performance of the unit linked fund(s) chosen; the

policy holder may achieve gains or losses on his/her investments. It should also benoted that the past returns of a fund are not necessarily indicative of the future

performance of the fund.



25

6 . What are the Charges, fees and deductions in a ULIP?ULIPs offered by different insurers have varying charge structures. Broadly, thedifferent types of fees and charges are given below. However it may be noted thatinsurers have the right to revise fees and charges over a period of time.

Premium Allocation Charge: This is a percentage of the premiumappropriated towards charges before allocating the units under the policy.This charge normally includes initial

and renewal expenses apart from commission expenses.

Mortality Charges: These are charges to provide for the cost of insurancecoverage under the plan. Mortality charges depend on number of factors

such as age, amountof coverage, state of health etc.

Fund Management Fees: These are fees levied for management of thefund(s) and are deducted before arriving at the Net Asset Value (NAV).

Policy/ Administration Charges: These are the fees for administration of the plan and levied by cancellation of units. This could be flat throughoutthe policy term or vary at a predetermined rate.

Surrender Charges: A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as mentioned in the policy conditions.

Fund Switching Charge: Generally a limited number of fund switches may be allowed each year without charge, with subsequent switches, subject to acharge.

Service Tax Deductions: Before allotment of the units the applicableservice tax is deducted from the risk portion of the premium. Investors maynote that the portion of the premium after deducting for all charges and

premium for risk cover is utilized for purchasing units.



26

7. What should one verify before signing the proposal?One has to verify the approved sales brochure for

all the charges deductible under the policy payment on premature surrender features and benefits limitations and exclusions lapsation and its consequences other disclosures Illustration projecting benefits payable in two scenarios of 6 % and 10%

returns as prescribed by the life insurance council

8 . How much of the premium is used to purchase units?The full amount of premium paid is not allocated to purchase units. Insurers allot

units on the portion of the premium remaining after providing for various charges,fees and deductions. However the quantum of premium used to purchase unitsvaries from product to product. The total monetary value of the units allocated isinvariably less than the amount of premium paid because the charges are firstdeducted from the premium collected and the remaining amount is used for allocating units.

9. Can one seek refund of premiums if not satisfied with the policy, afterpurchasing it?

The policyholder can seek refund of premiums if he disagrees with the terms andconditions of the policy, within 15 days of receipt of the policy document (FreeLook period). The policyholder shall be refunded the fund value including chargeslevied through cancellation of units subject to deduction of expenses towardsmedical examination, stamp duty and proportionate risk premium for the period of cover.

10. What is Net Asset Value (NAV)? NAV is the value of each unit of the fund on a given day. The NAV of each fund isdisplayed on the website of the respective insurers.

11. What is the benefit payable in the event of risk occurring during theterm of the policy?

The Sum Assured and/or value of the fund units is normally payable to the beneficiaries in the event of risk to the life assured during the term as per the policy conditions.



27

12 . What is the benefit payable on the maturity of the policy?The value of the fund units with bonuses, if any is payable on maturity of the

policy.

13. Is it possible to invest additional contribution above the regularpremium?

Yes, one can invest additional contribution over and above the regular premiums as per their choice subject to the feature being available in the product. This facility isknown as ³TOP UP´ facility.

14. Whether one can switch the investment fund after taking a ULIPpolicy? Yes. ³SWITCH´ option provides for shifting the investments in a policy from one

fund to another provided the feature is available in the product. While a specifiednumber of switches are generally effected free of cost, a fee is charged for switchesmade beyond the specified number.

15. Can a partial encashment/withdrawal be made?Yes, Products may have the ³Partial Withdrawal´ option which facilitateswithdrawal of a portion of the investment in the policy. This is done throughcancellation of a part of units.

16 . What happens if payment of premiums is discontinued?

a) Discontinuance within three years of commencement ± If all the premiumshave not been paid for at least three consecutive years from inception, theinsurance cover shall cease immediately.Insurers may give an opportunity for revival within the period allowed; if the

policy is not revived within that period, surrender value shall be paid at the end of third policy anniversary or at the end of the period allowed for revival, whichever is later.

b) Discontinuance after three years of commencement -- At the end of the period allowed for revival, the contract shall be terminated by paying the surrender value. The insurer may offer to continue the insurance cover, if so opted for by the

policy holder, levying appropriate charges until the fund value is not less than onefull year¶s premium. When the fund value reaches an amount equivalent to one fullyear¶s premium, the contract shall be terminated by paying the fund value.





29

In conventional plans, the premiums are invested in a common 'with profits' fundand therefore the investor cannot track his individual portfolio.

4. Maturity benefits payout: At the time of maturity the investor redeems theunits collected at the prevailing unit prices. Some plans also offer loyalty or additional units annually or at the time of maturity.At the time of maturity the conventional investor gets the sum assured plus

bonuses, if applicable in the plan.

5. Partial withdrawal: Unit Linked Plans allow the investor to make withdrawalsfrom his fund, provided the fund does not fall below the minimum fund value andsubject to other conditions.Conventional plans do not allow the investor to withdraw part of your fund.Instead, some policies offer the investor the facility to take a loan against his

investment.

6 . Switching options: The investor can change his investment fund decision byswitching between the funds as being offered by the policy.

Not available since the investment decision is taken by the insurance company.

7. Charges structure: Unit Linked Plans specify the charges under various heads.Conventional plans do not specify the charges involved.

5. COMMUNICATION MIX:

With the advent of private players in the insurance, companies resort torampant promotion. Promotion mix for this sector is as follows:

Advertisement: Advertisement can be done through the telecast media, broadcast media and print media. Insurance companies have been makingoptimal use of all the three kinds. Use of World Wide Web, as media isalmost negligible and will not be very frequent in the near future consideringthe fact that the majority of customer base of these companies is not yetexposed to the Internet. The telecast media has been the most effective of all



3 0

in case of the insurance sector. Most of the companies have their separateadvertising section to take care of this aspect. An important considerationwhile making the decision as to the selection of the media is budgetaryconstraint. Since the insurance companies work on a large scale, usually this

constraint does not stand as an obstacle.

Publicity: It is a device to promote business without making any paymentand therefore it could be also called as unpaid form of persuasivecommunication bearing a high rate of sensitivity. Developing support withthe media is an important aspect of publicity. This makes it essential that thePR officers working in the insurance organizations maintain contacts withthe media personnel, organize press conference, and offer small gifts and

memento to them. These days LGD marketing is gaining popularity theworld over. It also can be applicable here. At the apex and regional levels,the PRO¶s bear the responsibility of projecting positive image of theorganization. Thus it is necessary to select suitable personnel for this. Theyshould be in particular taught to deal with people, simple things like talking,greeting etc.

Sales Promotion: Incentives to the end users for taking the policy play animportant role in promoting the insurance business. Since the insurance

business is also related to achieving of a particular target, it is pertinent thatthe policymakers assign due weight age to the same. The offering of smallgifts during a particular period, the rebate, discount, bonus can increase

business of organization by leaps and bounds. Besides, there can be gifts for the insurance agents also.

Personal Selling: Personal selling in case of the insurance organizations isquite important considering the existence of the insurance agents spread atall levels. Selection of these agents, their training is responsibility of theorganization. There is difference in urban and rural market. Rural customersmight be uneducated / uninformed etc. compared to the urban customer.Hence the organizations will have to make selections of the rural and urbanagents accordingly.



3 1

Word of Mouth: Word of mouth communications result into wider publicity, which substantially sensitize the process of influencing theimpulse of users/prospects of the insurance services. They satisfied group of customers, opinion leaders, the social reformists, the popular personality¶s

acts as word of mouth communicators. The advertisement slogans may beinsensitive, the publicity measures may be ineffective but the positivefeelings of friends and relations communicated cannot be ineffective. Thismakes it clear that the most important thing in the promotion of any businessis the quality of services.

Telemarketing: With the development of satellite communication facilitiesand with the expansion of the television network, we find telemarketing

gaining popularity the world over. The insurance organizations in generalneed to promote telemarketing. The foreign insurance companies have beenassigning due weight age to this and in India this is beginning to gainimportance with the advent of competition in this sector. The telemarketer issupposed to be well aware of the telephonic code so that the task of satisfying the customers/their queries will not consume much of time.

World Wide Web: In banking as well as insurance, more and moreimportance is being given to online contact facilities wherebycomplaints/comments could be sent through an email. Email is fastestwritten mode of communication and since it has been recognized legally, itsuse to clear doubts has been in full swing.



32

6 . DIRECT CHANNAL DEVELOPMENT:

Channel development is basically to convince the potential customer to becomeadvisors. Now these advisors will convince some other people and that how

channel is made. Now the channel development involves a recruitment & selection process, which a person has to undergo in order to become an advisor.

HDFC Standard Life Insurance has identified individual agents as its primary

channel of distribution. The Company places a lot of emphasis on its selection

process. The agent advisors are trained in-house to ensure optimal control on

quality of training.

HDFC Standard Life Insurance invests significantly in its training programme and

each agent is trained for 5 0 hours stipulated by the IR DA before beginning to sellin the marketplace. Training is a continuous process for agents at HDFC SLI and

ensures development of skills and knowledge through a structured programmes

spread over 5 00 hours in two years. This focus on continuous quality training has

resulted in the company having amongst the highest agent pass rate in IR DA

examinations and the agents have the highest productivity among private life

insurers.

H aving set a best in class agency distribution model in place, the company is

spearheading a major thrust into additional distribution channels to further grow

its business. The company is using a five-pronged strategy to pursue alternative

channels of distribution. These include the franchisee model, rural business,



33

direct sales force involving group insurance and telemarketing opportunities,

bank assurance and corporate alliances.

6 .1 Recruitment Process in HDFC Standard Life: Before an organization begins

recruiting applicants, it should form a checklist of question, which outlines achronological sequence for the recruitment and selection process. Same is to bedone with the HDFCSLI recruitment and selection procedure, it also forms achecklist of questions, which are termed as the initial starter for the recruitment

procedure. The questions are given below with the specifications along with them:

1. What kind of the job is to be filled?

This question has a wide spectrum of answers. Hence, to answer this question in totally following sub-questions are to be answered.

Name of the job: Life Insurance Consultant Who is the boss: No boss Job objective: To sell life insurance policies or product and achieve sales

targets. How far the job is personally responsible for achieving results: Job

holder will not be responsible for achieving the sales targets because in thiskind of the job there is no salary paid, no boss over them and it is totallycommission based job, so it is on the consultant whether he think himself

responsible or not.This job is principally dealing with the end users who are interested to beinsured. HDFCSLI looking for the persons who fulfill this jobfor life long because life insurance business is a life long business and willnot end till the human being is there on the earth.

Salary and remuneration: It is totally commission based job andHDFCSLI provide fixed salary for this. There is much scope of getting ahuge collection of incentives in the form of gifts, trips and other service.

After getting the answer of these questions, we will move towards nextquestion.

2. What sort of person would do the job successfully?



34

It is very important to know that what sort of person would do this job of Lifeinsurance consultant successfully. HDFCSLI specifies some qualities, whichmust be there in a life insurance consultant. These qualities suggest some skillsthat are listed below:

Confidence : This is the main skill, which a consultant must contain becausetill he will not confident, he would not be able to convince the different kindof people.

Self-motivation: Self motivation is an essential quality, which must be, possess by an insurance a consultant because in this job, rejection is mustmore than acceptance, so an consultant has to be very strong from the heartand should not depressed soon.

Persuasion: It is one of the very effective qualities, which must be there inan insurance consultant. It shows the perceiving ability of an consultant for his job.

Urge to be financially independent: For a job which is commission based,an urge should be their in an consultant to become financially independent,then only he would be able to generate more money for himself and for thecompany.

Relationship skills: This very necessary element of quality shown in aconsultant by the HDFCSLI because these skills help the consultant to makegood relation from his customers, which is very necessary for the future of the company

3. Where will this person be found?

Now, we know what the job is and what kind of person is required for the job-only we need to find this person. The persons for this kind of job of alife insurance consultant can be found at many places through manyresources but most of the insurance consultant chosen from the relations and

with direct contacts. The following are the sources from where we can findout the persons who can become good life insurance consultant: Employment agencies: Employment agencies can be used as a wide source

for the persons to this job.

Advertising: It also plays a very effective role in finding of the persons for becoming an insurance consultant. HDFCSLI also use this source.



35

Educational institutes: They are also one of the main sources for thecompany to find out the person as a consultant.

Direct contact with people: HDFCSLI also uses direct contacts with peopleand offers business opportunity to them, company representative¶s contact tothe persons and explains business opportunity presentation to them.

4. Which person is to be recruited?The simple answer to this is that the one who fits the specification and whohas the essential characteristics as defined should be recruited. This implies

a structured approach of three steps. These are:First, compare company¶s specification for a consultant with that of the

prospect¶s specifications and remove all these who do not meet the essentialcriteria.

Secondly, move on to those areas where the µMeasuring Instruments¶ and anassessment at interview are needed. For instance,

Education, which should be at least 12 TH pass.

Age, above 1 8 years. Married people are given more importance. Doesn¶t matter male or female. He / She should possess high ambitious and zeal to become financially

independent.

Thirdly, involves the identification pattern of behavior, which will helpingin forming judgments. After all three steps have been followed and care has

been taken to see that the candidate fits into the specific job requirements

one can be sure of choosing the right candidate for the right job.6 .2 Selection and Placement Procedure of Financial Consultant: As we knowthat ³Recruitment involves seeking and attracting a pool of people, from whichqualified candidates for the job vacancies can be chosen. Recruitment sets out thenecessary stages to clarify what kind of person is required, where he/she mightfound and how to make right choice´.



36

Recruitment of life insurance consultant is also a very impressive criterion becausein this process we need to recruit and select those persons who bear some specialcharacteristics, which are very necessary to sell insurance. Life insurance is anintangible product and it needs insurance advisors who are having tremendous

skills to sell an intangible product.

The key to good selection is preparation. So many people are found of their abilityto pick a good sales person and so often, that person is good but not at the

particular job which needs to be done. It is vital to be clear about what job needsdoing and what kind of person would do it best; and then to find that person. Oncethe plan has been decided, the choice of candidate should be made carefully.

The effectiveness of the unit manager is dependent to great extent on the

effectiveness of the team of advisors supporting him, because an advisors worksunder a unit manager. So it is very important to recruit a very good team of lifeinsurance advisors who can give their best to increase the effectiveness and the

profit of the company. HDFCSLI give very much stress on it and to recruit onlythose people as a life insurance advisor who is having some key skills specifies bythe company. Further we will show the recruitment and selection procedure of lifeinsurance consultants in HDFCSL insurance company ltd, and try to analyzewhether it is the best process of recruitment or company can do certain new

modifications to enhance their recruitment processor for the increment of company¶s effectiveness. From the next page, we will see the recruitment andselection procedure of life insurance consultants.

³ A selection system is a set of successive screens at any of which an applicantmay be dropped from further consideration ´ . The process of selection of insuranceconsultant differs from companies to companies depending upon the requirement.In HDFCSLI the applicant goes through various stages, the chances of selectionget better as more and more stages are cleared.

Selection procedure: The following selection procedure is used by for theselection of life insurance consultant in HDFC Standard Life insurance company-

Preliminary interview: In this interview the applicant have face-to-faceinteraction with the respective Unit Manager and clear out all queries and



37

doubts about job. After this interview session, the prospects give hisconformation whether he is interesting to join the organization or not.

Formal application: After the confirmation of the prospects the next step isto filling up of application form with the submission of all necessary

documents that are listed below:

y Birth certificate (10 th class passing certificate, driving license, etc ).y Address proof (ration card, voter card, telephone bill, etc ).y 10 passport size color photographs. y Highest qualification certificates (mark sheet ). y A payment of Rs. 8 25 towards examination fees . y After checking the form and all documents the operations department give

its confirmation that the prospects is genuine and is subject for further process.

Declaration of date of training and venue: After the previous step, operationdepartment give the details about the training date and about the venue of thetraining. The training is a necessary part of the selection procedure. This training isunder the curriculum of Insurance Regulatory And Development Authority(IRDA). The duration is 100 hours.

Full time training (10:00 AM to 05:00 PM)

Testing: After completing the training conducted by IRDA, a test is conducted onthe same venue. This test is taken based on the training and contains the syllabus,which is prescribed by the IRDA. The test and previous training is necessary for every body that wants to become an insurance advisor.

Issue of license: After passing out the test conducted by IRDA, a license isissued from the IRDA. This license is the proof for the insurance advisor and an advisor can start his work just after getting this license. Getting thelicense is the last step in selection process.

Assignment to the SDM/CDM : The following advisor is assigned to aunit manager to whom he has to report about his work and about any queryconcerning about insurance and about the company.

The above are the following steps which are use to select an insuranceadvisors/agents. The license issued by the IRDA is the only authorized power. This



38

gives the person a right to do insurance. This license is supported to renew after every three years.





4 0

7. DEVELOPMENT OF FINANCIAL CONSULTANT:

Prosperity of an insurance company mainly depends upon how they maintain their

financial consultants and how they get back full amount of efforts from the

financial consultants so that the financial consultants can lead an insurance

company to enjoy a competitive advantage over other insurance companies. For

this purpose the insurance company should do some additional training program to

their financial consultants so that they can read the customers perception and

accordingly they can allot different financial plans to different customers. For

making the financial consultants fitted for this objective, the company should

undertake the following methodologies---

The financial consultants should understand that how to set updiscriminant analysis to screen potential good customer (low risk)from bad customer (high risk) and turn up the new customer in lowrisk and high risk. So that he can able to provide the Company productaccording their risk.

Financial Consultant should understand the correlation analysis so thathe can understand that which factor more affecting sales of theCompany.

Financial consultant should understand that how to make a regressionanalysis to calculate the risk of a customer.

. The financial consultants should understand about the fundmanagement.



4 1

The financial consultants should understand about the measurement of risk and return of each fund available in HDFC Standard LifeInsurance Company.

y 7.1 Discriminant analysis: A Financial consultant can explain his/her customers only if he able to classify customer under which category i.e.whether he/she belongs to high risk or low risk group. If he is able toclassify customer as under high risk group, then he should go to ULIP

because the return of the ULIP is subject to the market risk, otherwise heshould go for traditional plans. There are many factors influenced while acustomer get the insurance policy divide him/her in to either high risk or lowrisk such as income, no of dependent members, age etc. Analyze Classify D iscriminant Grouping Variable (Risk) D efine Range ( H igh RISK(2 ),LowRisk (2 ) ) Independents (income, age and no. of family member) Statistics Classify

Save (check all boxes) Method (Enter independents together) OK

Discriminant:Groups= Risk (1, 2)Variables= Income, Age and No. of family membersAnalysis allPriors equalStatics=Raw tableClassify=No missing Pooled.

Discriminant:



42

[DataSet1]

Group Statistics

risk Mean Std. Deviation

Valid N (listwise)

Unweighted Weighted1 income 23923.52 30472.548 29 29.000

age 28.52 7.059 29 29.000

nofmem 3.69 1.391 29 29.000

2 income 19466.69 10199.466 29 29.000

age 45.17 11.635 29 29.000

nofmem 5.79 3.940 29 29.000

Total income 21695.10 22633.994 58 58.000

age 36.84 12.710 58 58.000

nofmem 4.74 3.115 58 58.000

The above table shows the means that asked for- it gives means on each variable for people in

each sub-group, and also the overall means on each variable.

Te sts of Equality of Group M e ans

Wilks' Lambda F df1 df2 Sig.

income .990 .558 1 56 .458

age .563 43.438 1 56 .000

nofmem .884 7.348 1 56 .009

In this table µTest of Equity of group Means¶ the results of univariate ANOVA;s carried out for

each independent variable, are presented. Here, only age differ (sig. =.000) for the two group(income and no. of family member).

Group Statistics

risk Valid N (listwise)





44

df1 6

df2 22721.208

Sig. .000

Tests null hypothesis of equal

population covariance matrices.

Box¶s M Test of Equality of Covariance Matrices:

Sig. =0.000<0.05: can reject Ho: The population covariance matrices are not equal.The significance value of 0.000 indicates that the data differ significantly from multivariatenormal. This means one can not proceed with analysis.

Summary of Canonical Discriminant Functions

Eig e nvalu e s

Functio

n Eigenvalue % of Variance Cumulative %

Canonical

Correlation

1 .973 a 100.0 100.0 .702

a. First 1 canonical discriminant functions were used in the analysis.

An Eigenvalue indicate the proportion of variance explained. (Between-group sums of squares

divided by with-group sums of squares). A large eigenvalues (0.973) is associated with a strongfunction.

The canonical relation is correlation between the discriminate score and the levels of thedependent variable. A high correlation indicate a function that discriminant well. The presentcorrelation of 0.702 is not extremely high (1.00 is perfect).Canonical Correlation=0.702---(0.702)*(0.702)=49.2 8 % of the variance in the dependentvariable can be accounted for by the model(all three independents variable)

P ooled within-groups correlation matrix: low correlations lack of multicollinearity among the

independent variables

For this purpose, I use discriminate analysis technique among 5 8 sample sizethrough which a financial consultant may identify his customers whether he

belongs to high risk or low risk and accordingly he may go for ULIP if he belongsto high risk group or he may go traditional plans if he belongs to low risk group.



45

Q. HDFC Standard Life Insurance Company wanted to give the insurance policy to58 customers of alwar rajasthan. The company wanted to turn out to be µlow risk¶and µhigh risk¶ customer. These data of 5 8 customers are given a table. I will

perform a discriminant analysis and advise HDFC Standard Life InsuranceCompany on how to set up its system to screen potential good customer (low risk)from bad customer( high risk). In particular, we will build a discriminant functionand find out:1. The percentage of customer that it is able to classify correctly.2. Statistical significance of the discriminant function.3. Which variable (age, income, no. of family member) are relatively better indiscriminanting between µlow risk¶ and µhigh risk¶ applicants.

4. How to classify a new customer into of two groups- µ low risk¶ or µhigh risk¶ by building a decision rule and a cut off score.The code for low risk customer is 1 and the code for high rish customer is 2 in theRisk in the table.

S.NO. RISK INCOME AGE NOFMEM1 2 33 66 1 53 52 2 20000 47 5

3 2 17000 39 74 2 2 6 000 54 95 2 23000 4 6 46 1 20000 41 47 2 2 6 000 5 6 78 1 17000 33 59 2 24000 47 8 10 1 23000 57 711 2 12000 24 512 2 19000 51 6 13 1 22000 40 214 2 2 6 000 54 415 2 24000 52 316 2 22000 52 6 17 2 322 6 4 52 118 1 277 8 2 35 519 2 32000 6 0 1420 2 25000 50 6



46

21 1 25000 30 522 1 22000 3 8 723 1 1 8 000 30 124 1 22000 42 525 2 35743 5 8 6

26 1 28 000 33 327 2 25000 5 8 228 2 237 66 52 6 29 1 10000 43 4

30 1 12000 25 331 1 17000 30 432 2 17 6 00 50 6 33 2 3000 25 234 2 5000 4 8 435 2 5000 33 2

36 2 3000 2 8 237 2 5000 30 538 2 3500 31 539 2 10000 2 6 8 40 2 5000 2 6 441 1 27000 23 342 1 10000 27 3

43 1 14000 2 6 244 2 20000 25 2145 1 15000 25 3

46

1 30000 50 347 1 15000 32 348 1 20000 2 8 449 1 10000 22 550 1 20000 22 6 51 1 15000 20 352 1 25000 22 453 1 1 8 0000 22 354 1 15000 21 155 1 15000 21 3

56 1 20000 22 357 1 20000 22 558 1 20000 2 8 3

(Rule of thumb: if a correlation coefficient is < 0. 3 0)



47

W ilks' L ambda

Test of

Functio

n(s) Wilks' Lambda Chi-square df Sig.

1 .507 37.044 3 .000

Wilks¶ lambda is the ratio of within-groups sums of squares to the total sums of squares. This isthe proportion of the total variance in the discriminant score not explaind by difference amonggroups. A lambda of 1.00 occurs when observed group means are equal( all variance is explained

by factors other than difference between those means), while a small lambda occurs whenwithin-group variability is small compared to the total variability. A small lambda indicates thatgroup means apper to differ. The associate significance value indicates whether the difference issignificance. Here, lambda of 0.507 has a significant value (sig. =0.000), thus the group means

appear to differ.

The Wilks¶ Lambda=0.507(which is equivalent to chi-square=37.044with 3 df) is significant atthe 0.000 level. This means that the discriminan function computed in this procedure isstatistically significant at the 0.000 level. Only then, one can proceed to interpret the result.

Standardiz e d Canonical

Discriminant Function

Co e ffici e nts

Function

1

income -.260

age .934

nofmem .382

Note: The signs (+ or -) indicate a positive or a negative relation with the dependent variable.

These ³discriminant function coefficients´ work just like the beta-weights in regression.

The discriminate function (based on standarised discriminate coefficients)Z=0.3 8 2*Nofmem + 0.934*Age -0 .2 6 0* Income

Using this equation, given someone¶ value on age, income and no. of family member, we can

calculate their score on the discriminant function. To figure out what the DF score means, look at

the group centroids.



48

Structur e Matrix

Function

1

age .893

nofmem .367

income -.101

Pooled within-groups

correlations between

discriminating variables and

standardized canonical

discriminant functions

Variables ordered by

absolute size of correlation

within function.

Structure Matrix( Discriminant Loading)-Order from highest to lowest by the absolute size of the

loading, the sign + or ± indicate onle by a positive or negative relationship with the dependant

variable.

The discriminant function (based on discriminant loading):Z=0. 8 93Age + 0.37 6 Nofmem ± 0.101Income

Canonical Discriminant

Function Co e ffici e nts

Function

1

income .000

age .097

nofmem .129

(Constant) -3.939

Unstandardized coefficients



49

The µCanonical Discriminant Function Coefficients¶ indicate the unstandardized scoresconcerning the independent variables. It is the list of coefficients of the nstandardizeddiscriminant equation. Each subject¶s discriminant score would be computed by entering his or

her variable values (raw data) for each of the variables in the equation.The discriminant function ( based on unstandarized discriminant coefficients):

Z= -3.939 + 0.000 Income + 0.097Age + 0.1 2 9Nofmem

Which Discriminant function to use and when?

For interpretation purpose, use discriminant loading. The standardized discriminantcoefficients can also be used.Any variable exhibiting a loading of more than +0.30 or less than -0.30 is consider asubstantive discriminant(i.e.,age)

To calculation the discriminant Z score for the classification purposes, use theunstandarized discriminant coefficient.

Functions at Group

Ce ntroids

risk

Function

1

1 -.969

2 .969

Unstandardized

canonical discriminant

functions evaluated at

group means

µFunctions at Group Centroide¶ indicates the average discriminant score for subjects in the twogroups. More specifically, the discriminant score for each group when theVariable means (rather than individual values for each subject) are entered into the discriminantequation. Note that the two scores are equal in absolute value but have opposite signs.



5 0

Classification Statistics

Classification Processing Summary

Processed 5 8

Excluded Missing or out-of-range group

codes

0

At least one missing

discriminating variable

0

Used in Output 5 8

Prior Probabilities for Groups

risk Prior

Cases Used in Analysis

Unweighted Weighted

1 .500 29 29.000

2 .500 29 29.000Total 1.000 5 8 58 .000

Classification Results a

Risk

Predicted Group Membership

Total1 2

Original Count 1 25 4 29

2 7 22 29

% 1 86 .2 13. 8 100.0

2 24.1 75.9 100.0

a. 8 1.0% of original grouped cases correctly classified.



5 1

µClassification Results¶ is a simple summary of number and percent of subjects classifiedcorrectly and incorrectly. This table gives information about actual group membership vs.

predicted group membership.

Overall % correctly classified= 8 1.0% Sensitivity= 25/29 = 86 .2% Specificity= 22/29 = 75.9%



52

Stepwise discriminant function analysis:

y Analyze Classify Discriminant Grouping Variable (Risk) Define Range (HighRISK(2),Low Risk (2) ) Independents (income, age and no. of family member) Statistics

Classify Save (check all boxes) Method (Stepwise method) OK

Discriminant

[DataSet1]

A nalysis Cas e Proc e ssing Summary

Unweighted Cases N Percent

Valid 58 100.0


codes

0 .0



0 .0

Both missing or out-of-rangegroup codes and at least one

missing discriminating

variable

0 .0

Total 0 .0

Total 58 100.0

Group Statistics

risk

Valid N (listwise)

Unweighted Weighted

1 income 29 29.000

age 29 29.000

nofmem 29 29.000



53

2 income 29 29.000

age 29 29.000

nofmem 29 29.000

Total income 58 58.000

age 58 58.000

nofmem 58 58.000

A nalysis 1

St e pwis e Statistics

V ariabl e s Ent e r e d/R e mov e d a,b,c,d

Step

Wilks' Lambda

Exact F

Entered Statistic df1 df2 df3 Statistic df1 df2 Sig.

1 age .563 1 1 56.000 43.438 1 56.000 .000

2 nofmem .524 2 1 56.000 24.998 2 55.000 .000

At each step, the variable that minimizes the overall Wilks' Lambda is entered.

a. Maximum number of steps is 6.

b. Minimum partial F to enter is 3.84.

c. Maximum partial F to remove is 2.71.

d. F level, tolerance, or VIN insufficient for further computation.

Here¶s the table that show you the steps SPSS went through. Based on this table, ³ Age´ is the

best single predictor, and ³ no. of family member´ is the next one. If we were asked ³how many

variable would we include in a model to get the best possible prediction?´ the answer would be

³two of them: age and nofmem´.





55

In the above table are the Wilks¶ lambdas for each step. As we can see, the model is good fit for

the data just one predictor( age) or with two predictors( age and nofmem).

Summary of Canonical Discriminant Functions

Eig e nvalu e s

Functio

n Eigenvalue % of Variance Cumulative %

Canonical

Correlation

1 .909 a 100.0 100.0 .690

a. First 1 canonical discriminant functions were used in the analysis.

W ilks' L ambda

Test of

Functio


1 .524 35.563 2 .000



Co e ffici e nts

Function

1

age .925

nofmem .383

If we wanted to construct a predictive equation using just the two best predictors, it would be:



56

D iscriminant function = 0. 925* age + 0. 383* nofmem

Structur e Matrix

Function

1

age .924

nofmem .380

income a .158

Pooled within-groups

correlations between

discriminating variables and

standardized canonical

discriminant functionsVariables ordered by

absolute size of correlation

within function.

a. This variable not used in

the analysis.



Function

1

age .096

nofmem .130

(Constant) -4.156




57

Functions at Group

Ce ntroids

risk

Function

1

1 -.937

2 .937

Unstandardized



group means

If we wanted to know whether someone¶s score on this new, simpler Discriminant function

suggested that they were the high risk or low risk. we compare their score on the DF to these

centroids. If their score are closer to _ 0.937, they were probably the low risk, if their score were

closer to + 0.937, they were probably the high risk.

Classification Statistics

Classification Proc e ssing Summary

Processed 58


codes

0



0

Used in Output 58



58

Prior Probabiliti e s for Groups

risk Prior

Cases Used in Analysis

Unweighted Weighted

1 .500 29 29.000

2 .500 29 29.000

Total 1.000 58 58.000

Classification R e sults a

Risk

Predicted Group Membership

Total1 2

Original Count 1 25 4 29

2 7 22 29

% 1 86.2 13.8 100.0

2 24.1 75.9 100.0

a. 81.0% of original grouped cases correctly classified.



59

One last step-let s get a graph of people of the different groups, based on the two best predictors ( ageand no. of family member). This give us a visual representation that show how the two group separate

out from one another using these two predictors.

Graph

[DataSet1]

We can see on this graph how the two groups are visually separated from one another, based onpeople s answers to age and no. of family member. Not all discriminant function will separate groups

this perfectly. Sometime we can find predictors that statically differentiate between the groups, whilethe graphical representation still show the groups as pretty jumbled together.



6 0

Ans.1: How good is this model? How many of the 5 8 data points does it classify correctly?

To answer this question, we look at the computer output labeled Table classification result. Thisis a part of the discriminantion analysis output from any computer pacage as spss, statistica, sasand so on. For example if a priori probabilities chosen for the classification into the two groups

are equal, as we have assumed while generating this output, then we will very likely see similar number in our output.This classification result table also called the classification matrix( also known as the confusionmatrix), and it indicate that the discriminant function we have obtained is able to classify 8 1.0%of the 5 8 object correctly.More specifically, it also says that out of 32 cases predicted o be in group1, 25 were observed to

be in group1 and 7 in group 2.Similarly, 2 6 cases predict in group 2, we understand that 22 were observed to be in group in2and 4 in group 1.Thus, on the whole, only 11(7+4) cases out of 5 8 were misclassified by discriminant model, thusgiving us a classification accuracy level of ± (5 8 -11)/5 8 or 8 1%.

Ans. 2 . Statistical significance-How significant, statistically speaking, is the discriminantfunction?

This question is answered by looking at Wilks¶ Lambda and the probability value for he f-testgiven in Wilks¶ Lambda table.

W ilks' L ambda

Test of

Functio


1 .507 37.044 3 .000

The value of wilks¶ lambda is 0.507. This the value is between 0 and 1, and a low value indicate better discriminant power of model. Thus, 0.507 is an indicater of the model being good.The value of the f- test indicate that the discriminant between the two group is highly significant.Which indicate that f- test would be significant at confidence level of up to(1-.000)*100=100%



6 1

Ans.3. We have 3 independent variable- age, income, no of dependent family member for.Which of these is better predictor of a person being a low risk and high risk?



Co e ffici e nts

Function

1

income -.260

age .934

nofmem .382

To answer this question, we look at the standardized coefficient in out put. These are given in

table. This output show that age is the best predictor, with the coefficient of 0.934, followed by no. of family member, with a coefficient of 0.3 8 2, income is the last, with a coefficient of:-0.2 6 0. please recall that the absolute value of the standardized coefficient of each variableindicates its relative importance.

Ans.4. How do we classify a new policy customer into µ high¶ and µ low¶ risk category, andmake a decision on accepting or refusing him a policy.

This is the most important question to be answered. Please remember why we started out withthe discriminant analysis in this problem. HDFC Standard Life Insurance Company wished tohave a decision model for screening policy applicants.

The way to do this is to use the output in table unstandardised coefficients in the discriminantfunction and table means of canonical variable( function at group cenroids)

Functions at Group

Ce ntroids

risk

Function

1

1 -.969

2 .969

Unstandardized



group means



62

The function of group centroids, gives us the new means for the transformed group centroids.

Thus, the new mean for group 1(low risk)is -0.9 6 9, and the mean for group 2(high risk) is

+0.9 6 9. this means that the midpoint of these two is 0. This is clear when we plot the two means

on a straight line, and locate their midpoint, as shown below

0

- 0.9 6 9 + 0.9 6 9

Mean of Group 1(high risk) Mean of Group 2(high risk)

This also gives us a decision rule for classifying any new case. If the discriminant score of anapplicant falls to the right of the midpoint, we classify him as µhigh risk¶, and if the discriminantscore of an applicant falls to the left of the midpoint, we classify him as µ low risk¶. In this case,the midpoint is 0. Therefore, any positive(greater than 0) value of discriminant score will lead toclassification as¶high risk¶ any negative( less than 0) value of the discriminant score will lead toclassification as µ low risk¶. But how do we compare the discriminant of an applicant?We use the applicant¶s age, income and no. of family member and plug these into the

unstandardised discriminant function. This gives us his discriminant score.



Function

1

income .000

age .097nofmem .129

(Constant) -3.939




63

Y= -3.939 + income (0.000) + age(0.097) + nofmem(0.129)

Where Y would give us the discriminant scores of any person whose Age, Income, and No. Of family member were known.

Let us take an example of a policy applicant to HDFC Standard Life Insurance Company of a person who aged is 45 , has an income of Rs. 30,000 per month, and no. of family memberare 6 . Plugging these values into the discriminant function or model above, we find hisdiscriminant score Y to be-

Y= -3.939 + 30,000(0.000) + 45(0.097) + 6 (0.129)

Y= -3.939 + 0 + 4.3 6 5 + 0.774Y=1.200

According to our decision, rule any discriminant score to the right of the midpoint of 0 lead to a

classification in the µhigh risk¶ group. Therefore, he should be denied the policy, as he is aµhigh risk¶ customer. The same process is to be followed for any new applicant. If thisdiscriminant score is to the left of the midpoint of 0, we should give the policy, as he is a µlowrisk¶ customer.

Let us take an another example of a policy applicant to HDFC Standard Life Insurancecompany of a person who aged is 2 5, has an income 30,000 per month, and no. of familymember are 4. Plugging these values into discriminant function, we find his discriminant scoreY to be-

Y= -3.939 + 30,000(0.00) + 25(0.097) + 6 (0.129)Y= -3.939 + 0 + 2.425 + 0.51 6 Y= -0.99 8

According to our decision rule any discriminan score to the left of the midpoint of lead to aclassification in the ³low risk´ group. We should be given the policy, as he is a µlow risk¶customer.



64

7.2 Correlation analysis:

I would like to build a correlation model consisting of six variables to sales. I collect data of thesales managers of HDFC Standard life insurance of April month. These are sales, no. of Financial Consultant, marketing activity, competition, environment factor, personal factors,

company policies, training and motivational factors. I would like to correlate the sales of Aprilmonth with these other factors.

Correlation is the measure of the strength and direction of the linear relationship betweentwo variables.

1.Graphing- Scatterplot: The first step of any statistical analysis is to first graphically plot thedata. In terms of correlation graphical plots are called scatterplots. Scatterplots can show youvisually the strength of the relationship between the variable.

Select Graph Legacy Dialogs Scatter Click ³simple´, and ³Define´

Move appropriate variable into the ³Yaxis´ and ³X axis´



65

¡ ¢ £ ¤ FC ¥ ¦ § ¡ ¨

©

©

¨

©

£

¡ ¨

©

¦ £ ¦ ¤

¡ ¨

©

¨ ¢ ¨

©

¦ ¡

©

¡ ¨

©

7

5!

10"

0 5"

5 15"

0 5

"

.5"

1 15 10 15 10"

0 10"

0

#

.5 55 1" "

5 10 1# "

0 10 5

! "

5 10" !

1"

5" " #

6

6 ! 5 10 " 5 15 15 " 0 10 56.5

!

0 5!

0 5 5!

0"

0 5

5" #

10"

5 5 10"

5 15 10

# "

5 15 15 10 15 15 15 15

$

60 1"

1 7 10 10"

0 1!

1#

"

. 75"

0 16 1#

5 1" "

0 15 16

.5!

0 1#

1 7 7 1! "

0"

0 5

6. 7 3 5 10"

5 10# " " "

0 5

3 ." "

1 15 1#

5 10"

5 1"

15

"

.6"

0 1" 30 5 5 1

#

16 1

3 ."

6 10"

0 10# " "

15 15

5. 34 1

"

15 1 3 10 15 1 7 1#

4 . 7 23 1 2 1 7 1#

1 2 10 1#

1 36.5 29 1 7 1

#

10 1 3 1 2 2 0 10

4 . 2 24 1 4 2 5 5 5 16 25 10

5.5 28 10 20 5 10 1 8 1 2 2 5

2 2 0 15 20 10 10 20 10 15

5.5 32 10 15 10 5 20 20 20

2 2 0 15 1 8 15 1 2 10 15 15

3 .5 31 1 2 2 0 5 5 20 1 8 2 0

4 3 5 10 1 8 1 2 1 2 1 8 15 15

2.5

2815 15 10 10 15

20 15

3 2 0 1 2 1 8 10 15 15 15 15

4 . 3 34 10 20 5 5 20 20 20

3 . 75 26 15 20 9 8 16 1 4 1 82 . 75 30 5 25 10 5 20 20 15



66



67



68



69

2 . Correlation:

Analysis Correlate Bivariate Move all variable into the ³variable(s)´windows, click Ok.

Correlation is the measure of the strength and direction of the relation between the variable

Correlation can vary between -1 and 1. Direction of the relationship can be either positive or negative. A positive relationship is

indicating by positive value (0 to 1). A negative relationship is indicating by a negativevalue (0 to -.1).

Strength of the relationship is measured from 0 to 1/-.1. The farther value is away from0,the stronger the relation. The approximate criteria for strength is 0 for no effect, .1 for asmall effect, .3 for a medium effect, and .5 for a large effect. Notice those values can beeither positive or negative, depending upon the direction of the relationship, so a .2 and -

.2 relationship indicate the same strength, but different direction. Another useful piece of information is R2- the coefficient of determination. This is the

amount of variance explained by another variable. R Square is not provided in the output, but we can calculate R square by squaring the pearson Correlation (r).



7 0

Corr e lations

Sales FC

Mrkactvt

y comption env.factr persn.fact

com.polc

y traning

motiv.fa

t

Sales Pearson

Correlation

1 .768 ** -.191 .102 -.066 .252 .060 .086 -.327

Sig. (2-tailed) .000 .312 .592 .727 .180 .754 .653 .078

N 30 30 30 30 30 30 30 30 30

FC Pearson

Correlation

.768 ** 1 -.283 .092 -.023 .197 .128 -.006 -.215

Sig. (2-tailed) .000 .129 .629 .905 .296 .501 .975 .253

N 30 30 30 30 30 30 30 30 30

Mrkactvty Pearson

Correlation

-.191 -.283 1 -.544 ** .059 .141 -.446 * -.096 .11

Sig. (2-tailed) .312 .129 .002 .759 .456 .014 .614 .553

N 30 30 30 30 30 30 30 30 30

comption Pearson

Correlation

.102 .092 -.544 ** 1 -.370 * -.137 .434 * .100 -.520

Sig. (2-tailed) .592 .629 .002 .044 .471 .017 .597 .003

N 30 30 30 30 30 30 30 30 30

env.factr Pearson

Correlation

-.066 -.023 .059 -.370 * 1 .293 -.429 * -.347 -.04

Sig. (2-tailed) .727 .905 .759 .044 .116 .018 .060 .828

N 30 30 30 30 30 30 30 30 30

persn.fact Pearson

Correlation

.252 .197 .141 -.137 .293 1 -.226 -.419 * -.474

Sig. (2-tailed) .180 .296 .456 .471 .116 .229 .021 .008

N 30 30 30 30 30 30 30 30 30

com.polcy Pearson

Correlation

.060 .128 -.446 * .434 * -.429 * -.226 1 -.180 -.202

Sig. (2-tailed) .754 .501 .014 .017 .018 .229 .342 .283

N 30 30 30 30 30 30 30 30 30

traning Pearson

Correlation

.086 -.006 -.096 .100 -.347 -.419 * -.180 1 -.101

Sig. (2-tailed) .653 .975 .614 .597 .060 .021 .342 .594



7 1

N 30 30 30 30 30 30 30 30 30

motiv.fact Pearson

Correlation

-.327 -.215 .113 -.520 ** -.041 -.474 ** -.202 -.101 1

Sig. (2-tailed) .078 .253 .553 .003 .828 .008 .283 .594

N 30 30 30 30 30 30 30 30 30

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

We are going to correlate FC, marketing activity, competition, environment factors, personalfactors, company policies, training and motivational factor with sales.

y Correlation between sales and FC- Here is a positive correlation between the two variable, r= 0.7 68 , p= <0.05. R square ± the coefficient of determination is the amount of percentage of

variance explained by other variable. R square= 0.7 68 *0.7 68 = 0.591 R square, the percentage of variance explained in FC is 59.1%. This also means

that 40.9% of the variance is unaccounted because 100-59.1= 40.9. Direction of the relationship is positive. Strength of the relationship is 0.7 68 . The value is away from 0, so the stronger the

relation and large effect on sales.

y Correlation between sales and marketing activity-

Here is not correlation between the two variable, r= -0.191, p= >0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by other variable. R square= -0.191* -0.191 =0.03 6 R square, the percentage of variance explained in marketing activity is 3. 6 %. This

also mean that9 6 .4% of variance is unaccounted because 100-3. 6 = 9 6 .4 Direction of the relationship is negative. Strength of the relationship is -0.191. The value is closer from 0, so the weak the

relation and small effect on sales.

y Correlation between sales and competition- Here is not correlation between the two variable, r= 0.102, p=>0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by another variable. R square= 0.102*0.102=0.01 R square, the percentage of variance explained in competition is 1%. This also

means that 99% of the variance is unaccounted because 100-1= 99%.



72

Direction of relation is positive. Strength of the relationship is 0.102. The value is closer from 0, so the weak the

relationship and small effect on sales.

y Correlation between sales and environmental factors- Here is not correlation between the two variable, r= 0.0 66 , p=>0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by another variable. R square= 0.0 66 *0.0 66 =0.004 R square, the percentage of variance explained in environmental factors is 0.4%.

This means that 99. 6 % of the variance is unaccounted because 100-.4= 99. 6 Direction of relation is negative. Strength of the relationship is 0.0 66 . The value is closer from 0, so the weak the

relationship and no effect on sales.

y Correlation between sales and personal factors- Here is not correlation between the two variable, r= 0.252, p=>0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by another variable. R square= 0.252*0.252=0.0 6 3 R square, the percentage of variance explained in personal factors is 6 .3%. This

mean that 93.7% of variance is unaccounted because 100- 6 .3=93.7. Direction of relation is positive. Strength of the relationship is 0.252. The value is closer from 0, so the weak the

relationship and small effect on sales.

y Correlation between sales and company policies- Here is not correlation between the two variable, r= 0.0 6 0, p=>0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by another variable. R square= 0.0 6 0*0.0 6 0=0.004 R square, the percentage of variance explained in company policies is 4%. This

means that 9 6 % of variance unaccounted because 100-4=9 6 Direction of relation is positive.

Strength of the relationship is 0.0 6 0. The value is closer from 0, so the weak therelationship and no effect on sales.



73

y Correlation between sales and training- Here is not correlation between the two variable, r= 0.0 86 , p=>0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by another variable. R square= 0.0 86 *0.0 86 =0.007 R square, the percentage of variance explained in training is 7%. This means that

93% of variance unaccounted because 100-7=93. Direction of relation is positive. Strength of the relationship is 0.0 86 . The value is closer from 0, so the weak the

relationship and no effect on sales.

y Correlation between sales and motivational factor- Here is not correlation between the two variable, r= -0.327, p=>0.05 R square- the coefficient of determinant is the amount of percentage of variance

explained by another variance. R square= -0.327*-0.327=0.107 R square, in term of percentage of variance explained in motivational factor is

10.7%.This means that 8 9.3% variance is unaccounted because 100-10.7= 8 9.3 Direction of relation is negative. Strength of the relationship is 0.327. The value is closer from 0, so the weak the

relationship and medium effect on sales.



74

7.3 Regression analysis:

I would like to build a regression model consisting three factors, to predict the risk of insurance policy. The variable for which the data have collected are as follows.

Dependent variable:

Y= Risk

Independent variable:

X1= Income

X2= age

X3= no. of family member

Regression analysis:A regression analysis is done to explain the variance (dependent variable), based on variation inone or more other variable (Independent variable). In case there is only one variable to explainthe variance in one dependent variable, it is known as simple regression. If there are multipleindependent variable to explain the variance in a single dependent variable, it is known as amultiple regression model.

We are going to make a multiple regression model. The linear equation commonly used for aregression analysis is:

Y= a + bX1 + cX2 +dX3 +.....

Where, Y is the dependent variable and X1, X2, X3«are the independent variable, and b, c, dare the coefficients of the respective independent variable.



75

% & ' ( & ) 0 1 2 3 4 5 3 ) 1

6

2 3 2

7 8 8 66 9

58

5

7 7 @ @ @ @ A

7 5

7 9

7@ @ @ 8 B

7

7 7 6 @ @ @

5A B

7 7 8 @ @ @ A 6 A

9 7 @ @ @ @ A 9 A

7 7 6 @ @ @

5 6 7

9 9

7@ @ @ 8 8

5

7 7 A @ @ @ A

7C

7 7 8 @ @ @

57 7

9 9 7 @ @ @ 7 A

5

7 9 B @ @ @

59 6

9 7 7 @ @ @ A @ 7

7 7 6 @ @ @

5A A

7 7 A @ @ @

57 8

7 7 7 @ @ @

57 6

7 8 7 7 6 A

57 9

9 7

77C 7 8

5 5

7 8 7 @ @ @ 6 @ 9 A

7 7

5@ @ @

5@ 6

9 7

5@ @ @ 8 @

5

9 7 7 @ @ @ 8 C

7

9 9 C @ @ @ 8 @ 9

9 7 7 @ @ @ A 7

5

7 8

57A 8

5C 6

9 7 C @ @ @ 8 8 8

7 7

5@ @ @

5C 7

7 7 8

7 66 57 6

9 9 @ @ @ @ A 8 A

9 9 7 @ @ @ 7

58

9 9

7@ @ @ 8 @ A

7 9

7 6 @ @

5@ 6

7 8 @ @ @ 7

57

7

5@ @ @ A C A

7

5@ @ @ 8 8 7

7 8 @ @ @ 7 C 7

7 5 @ @ @ 8 @ 57 8

5@ @ 8 9

5

7 9 @ @ @ @ 7 6 C

7

5@ @ @ 7 6 A

9 7

7@ @ @ 7 8 8

9 9 @ @ @ @ 7

78

9 9 A @ @ @ 7 6 7

7 7 @ @ @ @ 7

57 9

9 9

5@ @ @ 7

58

7 8 @ @ @ @

5@ 8

9 9

5@ @ @ 8 7 8

9 7 @ @ @ @ 7 C A

9 9 @ @ @ @ 7 7

5



76

Re gr e ssion

[DataSet1]

V ariabl e s Ent e r e d/R e mov e d

Model

Variables

Entered

Variables

Removed Method

1 nofmem, income,

age a

. Enter

a. All requested variables entered.



77

Mod e l Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .702 a .493 .465 .369

a. Predictors: (Constant), nofmem, income, age

A NO VA b

Model Sum of Squares df Mean Square F Sig.

1 Regression 7.152 3 2.384 17.519 .000 a

Residual 7.348 54 .136

Total 14.500 57


b. Dependent Variable: risk

Co e ffici e nts a

Model

Unstandardized Coefficients

Standardized

Coefficients

T Sig.B Std. Error Beta

1 (Constant) .498 .161 3.091 .003

income -2.914E-6 .000 -.131 -1.348 .183

age .025 .004 .622 6.253 .000

nofmem .033 .016 .203 2.042 .046

a. Dependent Variable: risk

From the above table, the equation can be written as follow:



78

Risk= 0.49 8 ± 2.914E- 6 (income) + 0.025(age) + 0.33(nofmem)

From the above equation it can be inferred, if the number of family member is increased by 1,risk are estimated to increase by 0.033, assuming the other entire variable to be consistent.Similarly the influence of the risk for every units increase or decrease in the given 3 factors can

be explained by their coefficients. The negative value for policy shows that as the policy of insurance increase the risk decrease.

The measure of strength of association in the regression analysis is given by the coefficient of determination denoted by r square. The coefficient varies between 0 and 1 and represent the

proportion of total variation in the dependent variable that is accounted for by the variation inrisk can be explained by the independent variable. From the model summery, the value R squareis 0.493 which shows that 49.3% of the variation in risk can be explained by the other independent variable.

We also have the t-test value for the significance of individual independent variable to indicatethe significance level at 90% confidence level. From the above table we can see that only the

number of family member and age are statistically with a value of 0.4 6 and 0.000, which is less

than 0.1 (significant). Income is individually not significant.

From the model summery, the significance of F is 0.001. This indicates that the model is

statistically significant at a confidence level of 99.999%.



79

Multiple Regression using Stepwise method:

Obtained using Items: Analyze > Regression > Linear (Method= Stepwise)

Reproduced below are the key parts of the output produced when we select the stepwise method.

When using this method we should also select the R Squared Change option in the Linear Regression: Statistics.

Regression:

[DataSet1]

De scriptiv e Statistics

Mean Std. Deviation N

risk 1.50 .504 58

income 21695.10 22633.994 58

age 36.84 12.710 58

nofmem 4.74 3.115 58



8 0

The above table is produced by the Descriptive option.

V ariabl e s Ent e r e d/R e mov e d a

Model

Variables

Entered

Variables

Removed Method

1 Age . Stepwise

(Criteria:

Probability-of-F-

to-enter <= .050,

Probability-of-F-

to-remove >=

.100).

2 Nofmem . Stepwise

(Criteria:

Probability-of-F-

to-enter <= .050,

Probability-of-F-

to-remove >=

.100).


The above table shows us the order in witch the variable were entered and removed from our

Model. We can see that in this case two variable were added and none were removed.

Mod e l Summary

Model R R Square Adjusted R Square

Std. Error of

the Estimate

Change Statistics

R Square Change F Change df1 df2

Sig. F

Change

1 .661 a .437 .427 .382 .437 43.438 1 56 .000

2 .690 b .476 .457 .372 .039 4.130 1 55 .047

a. Predictors: (Constant), age

b. Predictors: (Constant), age, nofmem

This table is important. The Adjusted R Square value tells us about our model accounts.



8 1

In the above table we can see that model 1. Which include only age accounted for 42.5% of the

variance (Adjusted R Square=0.427). The inclusion of no. of family member into model 2

resulted in an addition 3% of the being explained (Adjusted R Square=0.457).

A NO VA c


1 Regression 6.334 1 6.334 43.438 .000 a

Residual 8.166 56 .146

Total 14.500 57

2 Regression 6.905 2 3.452 24.998 .000 b

Residual 7.595 55 .138Total 14.500 57



c. Dependent Variable: risk

This table report on ANOVA, Which assesses the overall signification of our model. As p<0.05

our model is significance.

Co e ffici e nts a

Model


Standardized

Coefficients


1 (Constant) .534 .155 3.444 .001

age .026 .004 .661 6.591 .000

2 (Constant) .444 .157 2.823 .007

age .024 .004 .616 6.150 .000

nofmem .033 .016 .203 2.032 .047




82

The Standard Beta Coefficients give a measure of the Contribution of each variable to the model.

A large value indicates that a unit change in this predictor variable has a large effect on the

criterion variable. The t and sig. (p) value give a rough indication of each predictor variable ± a

big absolute t value and small p value suggest that a predictor variable is having a large impact

on the criterion variable.

If we see in the table, which show that age has a large t-value and low sig. (p) value suggest that

the predictor variable is having a large impact on the criterion variable?

Exclud e d V ariabl e s c

Model Beta In t Sig.

Partial

Correlation

Collinearity

Statistics

Tolerance

1 income -.132 a -1.318 .193 -.175 .998

nofmem .203a

2.032 .047 .264 .950

2 income -.131 b -1.348 .183 -.180 .998

a. Predictors in the Model: (Constant), age

b. Predictors in the Model: (Constant), age, nofmem


The above table gives statistics for the variable that were excluded from each model.

The tolerance value is a measure of the correlation between the predictor variable and can vary

between 0 and 1. The closer to zero the tolerance value is for a variable, the strong therelationship between this and the other predictor variable.

We should worry about variable that have a very low tolerance. SPSS will not include a predictor variable in a model if I have a tolerance of less that 0.001. However, we may want to set our owncriteria rather higher- perhaps excluding any variable that has a tolerance level of less than 0.001.



83

Results:

When reporting the result of a multiple regression analysis, we want to inform about the portionof variance accounted for by our model, the significance of our model and the significance of the

predictor variable. In the result section, we would write:

Using the stepwise method, Adjusted R Square=0.457; F2, 55= 24.99 8 , p<0.005. Significancevariable are shown below.

Predictor Variable Beta p B

Age 0. 66 1 0.000 0.024

No. of family member 0.203 0.047 0.033

Constant (Intercept) 0.444

(Income is not a significance predictor in this model)

If we use the model for linear equation then it would be written as follows-

Risk= 0.444 + age*0.0 2 4 + no. of family member*0.033



84

Forward regression analysis:

V ariabl e s Ent e r e d/R e mov e d a

ModelVariablesEntered

VariablesRemoved Method

1 Age . Forward

(Criterion:

Probability-of-F-

to-enter <= .050)

2 Nofmem . Forward

(Criterion:

Probability-of-F-

to-enter <= .050)a. Dependent Variable: risk

Mod e l Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .661 a .437 .427 .382

2 .690 b .476 .457 .372



A NO VA c


1 Regression 6.334 1 6.334 43.438 .000 a

Residual 8.166 56 .146

Total 14.500 572 Regression 6.905 2 3.452 24.998 .000 b

Residual 7.595 55 .138

Total 14.500 57





85

A NO VA c


1 Regression 6.334 1 6.334 43.438 .000 a

Residual 8.166 56 .146

Total 14.500 57

2 Regression 6.905 2 3.452 24.998 .000 b

Residual 7.595 55 .138

Total 14.500 57




Co e ffici e nts a

Model


Standardized

Coefficients


1 (Constant) .534 .155 3.444 .001

age .026 .004 .661 6.591 .000

2 (Constant) .444 .157 2.823 .007

age .024 .004 .616 6.150 .000

nofmem .033 .016 .203 2.032 .047


Exclud e d V ariabl e s c


Partial

Correlation

CollinearityStatistics

Tolerance

1 income -.132 a -1.318 .193 -.175 .998

nofmem .203 a 2.032 .047 .264 .950

2 income -.131 b -1.348 .183 -.180 .998





87

Backward regression:

V ariabl e s Ent e r e d/R e mov e d b

ModelVariablesEntered

VariablesRemoved Method

1 nofmem, income,

age a

. Enter

2 . income Backward

(criterion:

Probability of F-

to-remove >=

.100).

a. All requested variables entered.


Mod e l Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate

1 .702 a .493 .465 .369

2 .690 b .476 .457 .372


b. Predictors: (Constant), nofmem, age

A NO VA c


1 Regression 7.152 3 2.384 17.519 .000 a

Residual 7.348 54 .136

Total 14.500 57

2 Regression 6.905 2 3.452 24.998 .000 b

Residual 7.595 55 .138

Total 14.500 57





88

A NO VA c


1 Regression 7.152 3 2.384 17.519 .000 a

Residual 7.348 54 .136

Total 14.500 57

2 Regression 6.905 2 3.452 24.998 .000 b

Residual 7.595 55 .138

Total 14.500 57




Co e ffici e nts a

Model


Standardized

Coefficients


1 (Constant) .498 .161 3.091 .003

income -2.914E-6 .000 -.131 -1.348 .183

age .025 .004 .622 6.253 .000

nofmem .033 .016 .203 2.042 .046

2 (Constant) .444 .157 2.823 .007

age .024 .004 .616 6.150 .000

nofmem .033 .016 .203 2.032 .047




89

Exclud e d V ariabl e s b


Partial

Correlation

Collinearity

Statistics

Tolerance

2 income -.131 a -1.348 .183 -.180 .998

a. Predictors in the Model: (Constant), nofmem, age


This procedure starts with all three variables in the model, and gradually eliminates those, one

after another, which do not explain much of the variance in Y. In our output of forward stepwise

regression, the regression ends up with 2 out of three independent variables remaining in the

regression model. The two variables in the model are age and no. of family member. We notice

that only two significant variable (with sig. T<0.10) at 90% confidence level. The F- test for the

model also indicate it is highly significant (F-24.99 8 , P-0.000) and R square value for the model

is .47 6 , witch is very close (0.493) to the three independent variable model. If we decided to use

the model from above table, it would be written as follows:

Risk= 0.444 + 0.0 2 4(age) + 0.033(income)

If a person age is 25 and no. of family member is 5 then risk«

Risk= 0.444 + 0.024*25 + 0.033*5

Risk=1. 2 09



9 0

7.4 UNDERSTAND ABOUT THE FUND MANAGEMENT:

For fulfilling this objective, I made analysis the following points so that I can understand how aninvestor can make a balance between the risk and return of his/her chosen portfolio.

In an insurance portfolio, there is a mixer of equity and debt securities. An investor can makeminimization of risk and maximization of return of that particular portfolio by portfoliorebalancing technique. Before understanding this technique, we should understand pros and consof equity and debt.

Understand the pros and cons of Equity and Debt

EQUITY

Pros : High returns , Low risk in Long term , High LiquidityCons : Risky , not suitable for short term investment

DEBT Pros : Stable and assured returns , Good investment for short term goals Cons : Low returns

Equity + Debt : When we combine Equity and Debt , returns are better than Debt but lessthan Equity , but at the same time risk is also minimized compared to Equity and Debt ,and when we apply technique of Portfolio Rebalancing ,both risk and returns are wellmanaged.

What is Portfolio Rebalancing?

Portfolio rebalancing is the technique through which an investor can make rearrange his portfolio by changing equity and debt in some ratio, it may be 20: 8 0, 40: 6 0 or any ratio. The ratio dependson a persons risk taking capability and return expectation. For an example let take the ratio to6 0:40, portfolio rebalancing is nothing but rebalancing investor¶s portfolio in same ratio, in casethe portfolio got changed after some months or years . Preferably the good time is every 6 months or 1 yr , but not 15 days or 1 month.

WHY SHOULD AN INVESTOR DO IT?

Every investor should understand his/her both risk and return expectation and accordingly theinvestor should proceed rebalancing his/her portfolio. An investor may use the followingconcepts while rebalancing his/her portfolio-



9 1

Case 1: Equity: Debt goes up.Action: Decrease the Equity part and shift it to Debt so that Equity: Debt is same as earlier.Reason: As the Equity has gone up , the investor could loose a lot of it if some thing badhappens , he shift the excess part to Debt so that it is safe and grows at least.

Case2

: Equity: Debt Goes Down.Action: Decrease the Debt part and shift it to Equity, so that Equity: Debt is same as earlier.Reason: As Equity part has decreased, the investors make sure that it is increased so that he doesnot loose out on any opportunity.

Limitations Lets also talk about the limitations of this strategy, once equity exposure has goneup, if the investor rebalance and bring down his Equity Exposure, he will loose out on the Profitsif Equity provides great returns after that , or if his Equity exposure as gone down and he bringup his exposure from Equity and if Equity does bad , then the investor will loose more.

Understanding the Game of Equity and Debt

The primary objective of rebalancing of a portfolio is managing risk and profit is secondary .Weknow that market is unexpected and it can go in any direction, so better be safe than sorry. Many

people are confused that if there equity has done very well then shall they book profits and getout with money and wait for markets to come down so that they can reinvest. Portfoliorebalancing is the same thing but a little different name and methodology , so once an investor get good profit in something which was risky he transfers some part to non-risk Debt.When we say Equity we mean shares or mutual funds which are related to Stock markets, whichtend to go up and down, if it goes up , there are high chances that it will come down and when it

comes down, its highly probable that it will move up again . Lets us now see with anexample²

Mr. X has Rs 1,00,000 to invest and he wants to invest it for 5 yrs and the 5 yrs returns are 30% ,-35% , 40% , 6 0% and -30% .Here we use two techniques i.e. without rebalancing andrebalancing of portfolio and we will see which technique will maximize return and minimize risk of his investment.

Let¶s look at his money and its growth in 3 different modes-- Only Equity- Only Debt- Equity + Debt in some ratio (without Portfolio Rebalancing)



92

Year Return Return/100 Equity Debt@9% Equity+Debt

(30:70)

Equity+Debt

(70:30)

1 30 0.30 130000 109000 115300 123700

2 -35 -0.35 8 4500 11 88 10 10 8 517 94793

3 40 0.40 11 8 300 129503 12 6 142 121 66 1

4 6 0 0. 6 0 18 928 0 14115 8 155595 174 8 43

5 -30 -0.3 13249 6 153 86 2 147452 13 8 906

We can see here that Debt performed better than Equity, because of the uncertain movement inreturns, also the Equity+Debt performed better than Equity but not Debt.

UNDER PORTFOLIO REBALANCING

Let us now see the performance of Equity + Debt (with portfolio rebalance)

So now, every time our Equity and Debt ratio changes, the investor can rebalance it.

Ratio = 30:70Investment = 1, 00,000Equity = 30,000Debt = 70,000

At the end of 1st year (Equity return = 30%, and debt = 9%) : Equity = 30,000 * (1.3) = 39,000Debt = 70,000 * (1.09) = 7 6 ,300Total Capital = 39,000 + 7 6 ,300 = 1,15,300

Now the investor will rebalance the portfolio

Equity = 30% of 115300 = 34590Debt = 70% of 115300 = 8 0710

Now this is new Equity and Debt investment





94

Year Rebalancing Without Rebalancing

1 115300 115300

2 110457 10 8 517

3 130 6 71 12 6 142

4 16 2424 155595

5 15 8 039 147452

For ratio 70:30

Year Rebalancing Without Rebalancing

1 123700 123700

2 96 733 94793

3 12 6 431 121 66 1

4 18 2945 174 8 43

5 1494 66 138 906

Also we see that for most of the years re-balanced portfolio outperformed ³Only Equity´ and³Only Debt´ except 1st year and 4th year . 1st yr is very easy to understand why it happened andfor 4th year, the returns were positive again after 3rd year and the investor made more profit in³Only Equity´ portfolio because of high concentration on Equity side, but we see that in 5thyear, when there was a negative return of -35% , then the ³Only Equity´ fell heavily , but therebalanced Portfolio fell very little because the investor has rebalanced it already and droppedhis/her Equity Exposure to be safe.

So in this way, an investor can make a balance his portfolio by using Portfolio rebalancing

technique which leads to at least minimum return on his/her investment in ULIP.



95

7.5 TO KNOW THE RISK AND AVERAGE RETURN OF PORTFOLIO:

I also try to find out what is the risk and average return from the date of inception of each fund. Itis assumed that before expecting a minimum rate of return by an investor on his funds, he should

be expected to know what is the amount of volatility having in his/her chosen funds and what is

the average rate of return of each funds.

Relationship between the risk and return

As we know that there is always a relationship between the expected rate of return and risk. If aninvestor wants to expect more return then he obviously bears higher risk and vise-versa. So , inthis regard the investor should be very carful before chosen a particular fund according to his risk taking capacity.

Now we discus the risk and return of various funds available in HDFC Standard Life InsuranceCompany Limited and which fund is suitable for which class of people and what are the factorsshould be taken in to consideration will be discussed in the final report.

LIFE FUND SERIES 1

Liquidfund

StableManaged

SecuredManaged

DefensiveManaged

BalancedManaged

GrowthFund

EquityFund

Risk* 0.72 0. 6 0 1.29 7.43 1 8 .8 0 40. 8 1 41.91

Annualavg.return*

9.05 8 .77 8 .93 15.42 2 8 .8 9 35. 8 2 36 .38

*Annexure-1

Interpretation: From the above table, we can say that some funds provide more returns with morerisk and vise-versa. On the basis of more risk and return, we can give the following ranking of the funds available under LIFE FUND SERIES 1----

1. Equity Fund

2. Growth Fund

3. Balanced Managed Fund

4. Defensive managed Fund

5. Secured Managed Fund



96

6 . Liquid Managed Fund

7. Stable Managed Fund

PENSION FUND SERIES 1

Liquidfund

StableManaged

SecuredManaged

DefensiveManaged

BalancedManaged

GrowthFund

EquityFund

Risk* 0.77 0.40 1.20 14.9 8 19.4 6 35.79 37.90

Annualavg.return*

9.43 9.07 9.01 7.05 24.77 41.32 42.5 6

*Annexure- 2

Ranking of funds on the basis of High risk with High return----

1. Equity fund

2. Growth Fund

3. Balanced Managed Fund

Liquid fund Stable Secured D efensive Balanced Growth Equity

0.72 0.6 1. 29

7 .43

18 .8

4 0. 8 14

1.9

1

9 .0 5 8 .77 8 .93

18 .42

28 .89

35 .82 36 .58

Life Fund Serise 1Risk Annual avg. return



97

4. Defensive Managed Fund

5. Secured Managed Fund

6 . Liquid Fund

7. Stable Managed Fund.

Group F und se ri es 1

Liquidfund

StableManaged

SecuredManaged

DefensiveManaged

BalancedManaged

GrowthFund

Risk* 0. 8 4 0.2 8 1.12 6 .55 1 8 .72 6 2.12

Annualavg.return*

9.40 8 .05 8 .6 4 14. 8 9 23.97 59. 6 9

*Annexure- 3

Ranking of funds on the basis of High risk with High return----

1. Growth Fund

2. Balanced Managed

Liquid Stable Secured D efensive Balanced Growth Equity

0. 770.

4 1. 2

14 .98

19 .46

35 .7937 .9

9 .43 9 .0 7 9 .01 7 .05

24 .77

4 1.3 1 42 .56

P ension Fund Serise 1Risk Annual avg. return



98

3. Defensive Managed

4. Secured Managed

5. Liquid fund

6 . Stable Managed

Liquid Stable Secured D efensive Balanced Growth

0. 84 0.28 1.1 2

6 .55

18 .72

62 .12

9 .4 8 .05 8 .64

14 .89

23 .97

59 .69

G roup Fund Serise 1Risk Annual avg. return



99

8 . SWOT ANALYSIS:

Strength:

Domestic image of HDFC supported by Prudential¶s international image is strength of thecompany.

Strong and well spread network of qualified intermediaries and sales person. Strong capital and reserve base. The company provides customer service of the highest order. Huge basket of product range which are suitable to all age and income groups. Large pool of technically skilled manpower with in depth knowledge and understanding

of the market. The company also provides innovative products to cater to different needs of different

customer.Weakness:

Heavy management expenses and administrative costs. Low customer confidence on the private players. Poor retention percentage of tied up agents.

Opportunities:

Insurable population- According to ING only 10% of the population is insured, whichrepresents around 30% of the insurance population. This suggests that more than 300m

people, with the potential to by insurance, remain uninsured. There will be inflow of managerial and financial expertise from the world¶s leading

insurance markets. Further the burden of educating consumers will also be shared amongmany players.

International companies will help in building world class expertise in local market byintroducing the best global practices.

Threats:

Other Private Insurance Companies also vying for the same un-insurance population.

Big public sector insurance company like LIC, National insurance company Ltd,Oriented insurance Ltd, New India Assurance Company Ltd, and United InsuranceCompany Ltd. People trust them and go to them more.

Poaching the customer by other companies. Most people do not understand the need or are not willing to take insurance policies in

general.



100

Alternative financial service such as mutual fund, banking services, share and securitiesalso pose problem and threats to the working of the life insurance sector.

9. QUESTIONNARIE ANALYSIS:

The questionnaire is made up of 17 questions, these questions have been asked to the sample

over the period of 3 months and have been recorded duly and based on various responses aspecific Graphical Representation has been done in rural and urban area.

1. Which Insurance company do you normally prefer while doing an Insurancepolicy?

In Rural areas-

In Urban areas-

Analysis: As it can be seen people still think of LIC for making their Insurance decisions,this is one place where HDFC Standard Life has to improve ± Market Penetration to get ahealthy market share from competition, Ways like Mass Advertising, Rural Seminars canbe used to remedy this.

LIC95%

HDFC SLIC1%ICICI

1%

MNYL2%OTH ERS

1%

LIC74%

HDFC SLIC8%

ICICI4%

MNYL

10%

OTH ERS4%



101

2 . Do you have Insurance coverage?

In Rural areas-

In Urban areas-

Analysis: As it can be seen the sample size reflects the Indian Insurance Market, whichshows that most people consider having an Insurance cover . Proper Education and Directcontact with prospective customers are one of the few ways to a cover the insurance sector.

YES84%

NO16%

0% 0%

YES76%

NO24%

0% 0%



10 2

3. Which company are you presently holding Insurance policies of?

In Rural areas-

In Urban areas-

Analysis: The market share is like a monopoly to LIC, the only private player to have a bitof share is ICICI Prudential as compared to the other companies and HDFC Standard LifeInsurance, increasing the market share can be done through Increasing awareness amongthe consumers Mass publicity events and education of the public must be done on thatmatter.

010

2 0

3 0

4 0

5 0

6 0

7 0

8 0

9 0100

LIC HDFC SLIC ICICI MNYL OTH ERS

0

10

2 0

3 0

4 0

5 0

6 0

7 0

8 0

LIC HDFC SLIC ICICI MNYL OTH ERS



10 3

4. On a scale of 1-5what ratings will you give to the following Insurance CompaniesRatings were on the basis of Service, Products and Knowledge of Financial Advisors?

Analysis: The above research was done with the help of a rating scale it clearly shows thateven though the private players are active in the market LIC is still the preferred brand.HDFC Standard Life Insurance has a good rating in its own terms the only thing is toexpand the network and tries to make it a household name.

0%

10 %

2 0%

3 0%

4 0%

5 0%

6 0%

7 0%

8 0%

9 0%

100 %

LIC HDFC

SLIC

IC

IC

I MNYL BAJAJ

A

LI KOTA

K LI TA

TA

A

GE

Ranting 5

Ranting 4

Ranting 3

Ranting 2

Ranting 1



10 4

5. How many Insurance policies do you have?

Analysis: Most people are still not educated enough about Insurance to know and identify itsneeds, still in Insurance market its very difficult to sell one person more than 5 policies (apart

from ULIP) because traditional Insurance products don¶t give high returns and this is what mostIndian public desire.

0 2 0 4 0 6 0 8 0 100 1 2 0

1 to 3

4 to 5

6 to 7

8 to 9

10 and above



10 5

6 . What is your primary motive for doing Insurance?

In Rural areas-

In Urban areas-

Analysis:- It is really amazing to find out that most of the people still consider Insurance as anInstrument for Tax Benefits, though according to HDFC Standard Life Insurance and otherInsurance Companies should be a Protection not an Investment or Tax Benefit and sinceand after ULIP plans people not only get Tax benefits but also an Investment plan, this slows

down the sales and scope of Traditional Products.

P rotection15%

Investment8%

Tax Benefit77%

0%

Motive

P rotection18%

Investment25%

Tax Benefit57%

0%

M otive



10 6

7. What is the average tenure of your Investment in Insurance?

Analysis: From the data it can be seen that people consider Insurance to be a Long term financial product and since its primarily used for Tax benefits, the short term nature of Investment is not

generally considered by the Indian public.

0% 5%

83%

12%

Tenure1 to 5 6 to 10 11 to 1 5 16 and above



10 7

8 . Do you think Insurance Sector is giving Good Returns?

Analysis: Though most people find that Insurance Sector does not give good returns, butit is to be noted that it is primarily a Protection and not an Investment, it is to be notedthough the majority of the people not interested in returns are mainly in for Tax Benefits.

Yes28%

No54%

Not INTEREST18%

0%

R eturns







110

11. What do you think about a career in Insurance?

Analysis : Its still positioned in the mind of the people that a career in Insurance is not veryrewarding, as from my basic analysis they find the career stressful and unrewarding , HDFCStandard Life Insurance has a done a great job in educating public about the careers in Insurance, it holds events, Career Seminars etc. which gives a proper insight into the world of Insurancecareer.

0

2 0

4 0

6 0

8 0

100

12 0

Rewarding Not Rewarding Can't Say



111

12 . Have you considered being a Financial Consultant in Insurance Company?

Analysis: People still consider that they don¶t want to be a Financial Advisor to a company,some consider that if its profitable they might, this is where the convincing part comes in. HDFCStandard Life Insurance has a great scope in for of Reward and Recognition this is whatmotivates existing and prospective Financial Advisors.

0 2 0 4 0 6 0 8 0 100 1 2 0

If P rofitable

Absolutely

Can't say



11 2

13. If you were considering a career in Insurance, which company would prefer tobe associated with?

Analysis: Most people still consider LIC as the most preferred place to work in the Insuranceindustry, even though HDFC Standard Life Insurance has a more diverse and fruitful Rewardand Recognition programme.

0

2 0

4 0

6 0

8 0

100

12 0

14 0

HDFC StandardLIFE

ICICI P rudential LI C Max New YorkLife

Others



11 3

14. Do you know about HDFC Standard Life Insurance?

In rural areas-

In urban areas-

Analysis: In rural areas mostly people are not aware about HDFC Standard Life InsuranceCompany. To make the awareness in rural areas the company take activity like sports events,cultural events etc

Yes77%

No23%

0% 0%

Yes98%

No2% 0%0%



11 4

15. How have you come to be aware of HDFC standard Life Insurance?

Analysis: As it is observed most of the company¶s public awareness comes through the Mediaand colleagues, though Direct Company Interaction is good, a bit more spread can help increasethe market share.

0

2 0

4 0

6 0

8 0

100

12 0

14 0

D irect Company Friends Media Others



11 5

16 . You are investing which is 15 years away. What would you do?

Analysis: We can see that mostly people are interested in investment in a money market mutualfund or a guaranteed investment because people are not able to take the high risk.

0

2 0

4 0

6 0

8 0

100

12 0

14 0

Investment in amoney market

mutual fund or aguaranteedinvestment

contract.

Investment inbalanced mutual

fund that has astock: bond mix of 5 0:5 0

Investment in anaggressive mutual

fund.





11 7

10. FINDINGS:

1) The Indian Insurance Market is highly untapped and people still measure an Insurancecompany by its advertising and not by its services, so tapping the mindset of the customer with the Media is a start. As of now the ³Sar Utha Ke Jiyo´ campaign will help achievesthis to some extent.

2) People still are not educated enough about Insurance and they need to know about, this iscan be achieved by educating the people involved in the Channel, they should know what

benefits besides life cover can an Insurance policy give.

3) There is one philosophy ± When a person buys a car whether it is a Mercedes Benz or aMaruti 8 00, the first thing they do is Insure, but they don¶t find the need to Insure humanlife which is priceless, such concepts have to be positioned in the mind of the consumer.

4) Most Financial Advisor candidates believe that selling an Insurance policy cannot givemuch and is not a respectful career; such belief has to be eradicated with the help of themanagement.

5) If ratios are compared 1 HDFC Standard Life Insurance earns as much as 2 others indifferent companies, this is a hypothetical figure and this is account of the selection

process, which filters and takes the most eligible people, but if numbers are consideredsince other insurance companies have huge number of agents they have more business,this is the reason why ICICI, Bajaj and Max New York Life have such a huge marketshare.

6 ) It¶s the tendency of people to purchase all financial products from a single and reliablesource and hence when a company has a variety of products consumers tend to focus onthem, this includes not only Life Insurance, but General Insurance, Mutual Fund etc.



11 8

11. RECOMMENDATIONS:

HDFC Standard Life Insurance still has to penetrate the rural market, it needs goodchannel partners or developers, since people in the rural sector are not that mucheducated selection norms for Financial Advisors could be relaxed.

The Company should try and categorize the Consultants according to their profile. For Example ± A Consultants from a higher background should be given different

performance priorities to that of Advisors from the lower strata of the society, hence asector wise classification of Consultants can be done.

It should be periodically reviewed that whether the Financial Consultants penetratedifferent areas and sectors of the market, aside from their natural market, this willenhance the channel more further into the market.

It should be checked that whether Financial Consultants use their market area to their fullest potential, and not concentrate on only one area of the market.For Example ± If a Branch has 15 areas under it, it should be checked that whether the

Consultants are working in all 15 areas or just a few selected ones.

Company should arrange small area wise customer meetings which could be conducted inthe presence of the Associate Partner; this would not only result in valuable directcustomer feedback, but also recruitment of potential Financial Consultants.

Alternative channels like NGO¶s, Self Help Group, Retired Associations, and LadiesClub who have huge number of members can be approached with this career.

Every State Government in India, has a separate cabinet ministry named ³Youth and Self Employment´ if the corresponding department can be communicated and Career seminars be presented it can provide a huge source of Recruitment.

Trainings such as Personality Development Programmes, Soft Skills and other Interpersonal traits training should be emphasized.

Career presentation should be made in such a way that they can sustain their living withfinancial and social stability, and this should be compared with a professional career tothat of a doctor or a lawyer or a Chartered Accountant.





12 0

A Questionnaire about customer¶s perception in Insurance sector

The following questionnaire is made to know about the customer perception in insurance sector i.e. how they take insurance sector in their minds and in which way the financial consultants takethe insurance sector as a career.

Name- Mr./Ms.___________________________________________________________

Place-___________________________________________________________________

Age-____________________________________________________________________

Monthly Income-__________________________________________________________

No. of dependent members in the family-________________________________________

Designation-_______________________________________________________________

1. Which Insurance company do you normally prefer while doing an Insurance policy?

I. LICII. HDFC Standard Life Insurance

III. ICICI PrudentialIV. Max New York LifeV. Others

2. Do you have Insurance coverage?

I. YesII. No

3. Which company are you presently holding Insurance policies of?

I. LICII. HDFC Standard Life Insurance

III. ICICI PrudentialIV. Max New York LifeV. Others



12 1

4. .On a scale of 1-5what ratings will you give to the following Insurance CompaniesRatings were on the basis of Service, Products and Knowledge of Financial Advisors.

Ranting----------------------------------------------(1)----------(2)-------(3)------(4) ------ (5)

I. LIC------------------------------------------( )---------( )------( )-----( )---------( )

II. HGDFC Standard Life Insurance-------( )--------( )------( )------( )-------( )

III. ICICI Prudential Life----------------------( )-------( )------( )-----( )-------( )

IV. Max New York Life-----------------------( )------( )-------( )-----( )-------( )

V. Bajaj Allianz Life Insurance--------------( )-------( )--------( )-----( )------( )

VI. Kotak Life Insurance---------------------( )-------( )--------( )------( )-------( )

VII. Tata AIG------------------------------------( )-------( )--------( )-------( )--------( )

5. How many Insurance policies do you have?

I. 1 to 3II. 4 to 5

III. 6 to 7IV. 8 to 9V. 10 and above

6 . What is your primary motive for doing Insurance?

I. Protection________%II. Investment_______%

III. Tax Benefits______%

7. What is the average tenure of your Investment in Insurance?

I. 1 to 5II. 6 to 10

III. 11 to 15IV. 16 to above



122

8 . Do you think Insurance Sector is giving Good Returns?

I. Yes

II. NoIII. Not interested

9. Do you have Knowledge of Unit Linked Insurance Plans (ULIP)?

I. YesII. No

10. What mode of Investment do you prefer in ULIP Plans?

I. SecureII. Conservative

III. Aggressive

11. . What do you think about a career in Insurance?

I. RewardingII. Not Rewarding

III. Can't say

12. . Have you considered being a Financial Consultant in Insurance Company?

I. If ProfitableII. Absolutely

III. Can't say

13. . If you were considering a career in Insurance, which company would prefer to beassociated with?

I. HDFC Standard Life InsuranceII. ICICI Prudential Life

III. LICIV. Max New York Life



123

V. Others

14. Do you know about HDFC Standard Life Insurance?

I. . YesII. No

15. How have you come to be aware of HDFC standard Life Insurance?I. Direct Company

II. FriendsIII. MediaIV. Others

16 . You are investing which is 15 years away. What would you do?

I. Invest in a money market mutual found or a guaranteed investment contractII. Invest in a balanced mutual fund that has a stock: bond mix of 50:50

III. Invest in an aggressive mutual fund.

17. You have bought a stock as part of your retirement portfolio. Its price rises by 25% after one month. If the fundamentals of the stock have not changed, what would you do?

I. Sell

II. Do nothingIII. Bur more



124

The following Scale is made to know the perception of sales managers of HDFC Standard LifeInsurance Company that what are the factors those are affecting the sales in insurance sector.

Name- Mr. / Ms.____________________________________________________

Place_____________________________________________________________

Sales in April month (Rs.) ____________________________________________

No. of Financial Consultant___________________________________________

S.No. Factors TotalWattage100%

1. Marketing activity

2. Competition

3. Environmental factor

4. Personal factors

5. Company Policies

6 . Training

7. Motivational factor



Date post:	10-Apr-2018
Category:	Documents
Upload:	chaudhary
View:	227 times
Download:	0 times

Sandeep Project

Documents