A project report on the study of solvency margin in icici prudential life insurance

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A project report on the study of solvency margin in icici prudential life insurance

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A project report on the study of solvency margin in icici prudential life insurance

  1. 1. Study of Solvency Margin in ICICI Prudential life insurance . Contents SL.NO. TITLES PAGE NO. 1 EXECUTIVE SUMMERY 1-4 2 INSURANCE INDUSTRY 5-10 3 COMPANY PROFILE 11-36 4 RESEARCH METHODOLOGY 37-45 5 DATA ANALYSIS 46-55 6 LIMITATIONS OF THE SOLVENCY MARGIN 56 7 FINDINGS 57 8 SUGGESTIONS 58 9 CONCLUSION 59 10 BIBLIOGRAPHY 60 11 ANNEXURY 61 EXECUTIVE SUMMERY Babasabpatilfreepptmba.com 1
  2. 2. Study of Solvency Margin in ICICI Prudential life insuranceThe In-plant Training was introduced to have an exposure to organization concepts.In-plant training was for 2 months (8 weeks). It is been done with intention of correlatingthe organization’s practical exposure with reference to the theory which I learnt in thecollege. ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank,a premier financial powerhouse, and prudential plc, a leading international financialservice group headquartered in United Kingdom. ICICI Prudential joint ventureconsisting of ICICI holding 74% of the equity and the balance 26% held by Prudentialgroup of UK. ICICI Prudential was amongst the first private sector insurance companiesto begin operations in December 2000 after receiving approval from InsuranceRegulatory Development Authority (IRDA). It is now one of the leading private LifeInsurance companies of India since its inception.Topic of the study:“The study of Solvency margin in ICICI Prudential life insurance.”Research objectives: 1) To understand the meaning and importance of solvency margin 2) To know the procedure of calculation of solvency margin 3) To know why some companies fails in maintaining the adequate solvency margin and some measures to over come from those problems 4) To calculate the solvency margin for the past 5 financial years, of ICICI Prudential life insurance company 5) To know the limitations of solvency marginNeed for the study: Babasabpatilfreepptmba.com 2
  3. 3. Study of Solvency Margin in ICICI Prudential life insurance Solvency margin is one of the major concepts in insurance. IRDA regulates thelimits of solvency margin. Solvency margin helps the company in case of any adverseclaim situation. And it gives the confidence to the customers about the safety of thecompany.Scope of the study: Solvency margin has large scope for its study. Solvency margin calculation is thework of the actuary of the company, which is to be calculated as per the norms of theIRDA. Solvency margin is fully internal to any of the insurance company and thetransactions are fully confidential. So the solvency margin has lots of scope for its study.Findings  Solvency margin helps the company in case of any adverse claim situations.  Solvency margin gives the confidence to investors to invest in the company  Solvency margin is one of the major sources of fund for the government.  As on 31st march 2005 ICICI Prudential Company has Rs2354040838.50 as the solvency margin. As on 31st march 2006 ICICI Prudential company has Rs5268490105.50 as the solvency margin As on 31 st march 2007 ICICI Prudential company has Rs9444863631.00 as the solvency margin As on 31 st march 2008 ICICI Prudential company has Rs16788443704.50 as the solvency margin As on 31st march 2009 ICICI Prudential Company has Rs19512898935.50 as the solvency margin which shows the financial strength and back up for the companySuggestions:  IRDA can increase the minimum limits of the solvency margin. Even though the company feels it bit difficult in the initial stage in the long run the company will be benefited.  IRDA can take the steps to publish the accounts for solvency margin along with the annual reports. It reveals the transferences of the company..  IRDA can mention solvency margin as one of the topic for the study in case of pre license IRDA compulsory training. Babasabpatilfreepptmba.com 3
  4. 4. Study of Solvency Margin in ICICI Prudential life insuranceLimitations of the study:The study is limited to 8 weeksNon availability sufficient dataThe study is restricted to last 5 years financial data. Babasabpatilfreepptmba.com 4
  5. 5. Study of Solvency Margin in ICICI Prudential life insurance INTRODUCTION In common sense, Insurance is a provision made against possible loss due toanticipated contingencies and uncertainties in human life. It is a safe guard againstaccepted risks and hazards. Insurance does not avoid the possibility of risk or danger. butit spreads the loss of misfortune of a person over many persons who are exposed tosimilar risk and compensates the loss suffered by one of them. Insurance and be defined as “A contract between parties whereby one party undertakes to pay an agreed sum on happening of a certain event or to make good the lossarising from an accepted event, which may or may not occur, in return for a considerationcalled premium”.Conceptually a general term “insurance” includes two concepts where as 1) Assurance 2) InsuranceAssurance: Assurance is an agreement of guarantee to pay a specified amount to theother on happening of an event sure to occur such as death or attainment of certain age bya person. It refers to Life Insurance.Insurance : Insurance is an agreement to indemnify (compensate)loss suffered by aperson on happening of an event which is un certain to occur such as accident, fire,collision, robbery, etc, example general insurance, namely, fire, marine and other formsof insurance. Babasabpatilfreepptmba.com 5
  6. 6. Study of Solvency Margin in ICICI Prudential life insurance LIFE INSURANCELife Insurance offers a way to replace the loss of income that occurs when someone dies.It is a contract between the insured person and the company that is providing theInsurance. If the insured dies while the contract is in force, the insurance company Pays aspecified sum of money to the person or persons you name as beneficiaries.Life insurance ensures that your family will receive financial support in your absence.Put simply, life insurance provides your family with a sum of money should somethinghappen to you. It protects your family from financial crises. In addition to serving as a protective cover, life insurance acts as a flexiblemoney-saving scheme, which empowers you to accumulate wealth-to buy a new car, getyour children married and even retire comfortably. Babasabpatilfreepptmba.com 6
  7. 7. Study of Solvency Margin in ICICI Prudential life insuranceHistory of insurance The root of insurance might be traced to Babylonia, where tracers wereencouraged to assume the risk of the caravan trade through loans that were repaid(with interest) only after the goods add arrived safety a practices resemblingbottomward and given legal force in the code of Hammurabi (C.2100 BC). ThePhoenicians and the Greek applied a similar system to their seaborne commerce.The Romans used burial clubs as a form of life insurance, providing funeralexpenses for members and later payments to the survivors. Security and constantsearch for security have been the unending endeavors of human race since thebeginning of the civilization. Right from the stone-age man to the modern ITpersonality, this search for security has brought out innovative ideas. Unlike otherfinancial products, insurance is a complex product and one, which plays a key rolein the long-term financial well being of a customer. Before the agents can advisetheir clients on which insurance solution is most appropriate for them, they willhave to understand the financial standing of their customer, his risk profile, etc.it is for this very reason that, as per IRDA, all agents need to undergo somemandatory training before being allowed to sell a life insurance product. Babasabpatilfreepptmba.com 7
  8. 8. Study of Solvency Margin in ICICI Prudential life insuranceLife insurance in India In India, insurance started with life insurance. It was in the early 19th century whenthe Britishers on their postings in India felt the need of life insurance cover. It stated withEnglish companies like, “The European and the Albert”. The first Indian insurancecompany was the Bombay Mutual Assurance Society Ltd., formed in 1870. In the wake of the Swadeshi Movement in India in the early 1900s, quite a goodnumber of Indian companies were formed in various parts of the country to transactinsurance business. To name a few: ‘Hindustan Co-operative’ and ‘National Insurance’in Kolkata; ‘United India’ in Chennai; ‘Bombay Life’, ‘New India’ and ‘Jupiter’ inMumbai and ‘Lakshmi Insurance’ in New Delhi.Nationalization of life insurance in India In 1956, life insurance business was nationalized and LIC of India came intobeing on 1.9.1956. The government took over the business of 245 companies (including75 provident fund societies) who were transacting life insurance business at that time.Thereafter, LIC got the exclusive privilege to life insurance business in India. Relevant laws were amended in 1999 and LIC’s monopoly right to transact lifeinsurance business in India came to end. At the close of financial year ending 31.3.2004,twelve new companies were registered with the Insurance Regulatory & DevelopmentAuthority (IRDA) to transact life insurance business in India Babasabpatilfreepptmba.com 8
  9. 9. Study of Solvency Margin in ICICI Prudential life insurance INSURANCE REGULATORY & DEVELOPMENT AUTHORITY ACT, 1999.Insurance regulatory and development authority is a constituted boby which is createdto regulate the insurance business in India.Mission“To protect the interests of the policyholders, to regulate, promote and ensure orderlygrowth of the insurance industry and for matters connected therewith or incidentalthereto”.Insurance regularity and development Authority (IRDA)  This is a corporate body established for the purpose and objects as set out in the explanation to the title.  The Authority replaces ‘Controller” under Insurance Act 1938.  The first schedule amends insurance act 1938  It states that if the ‘Authority’ is superseded by central Government, the ‘Controller of Insurance’ may be appointed till such time as the ‘Authority’ is reconstituted.Membership of IRDA a) A chairperson b) Not more thae five whole time members c) Not more than four part time members appointed by the central government. Babasabpatilfreepptmba.com 9
  10. 10. Study of Solvency Margin in ICICI Prudential life insuranceFunctions of IRDA  To issue the certificate of registration,renew,withdraw,suspend or cancel such registration.  To appoint the interests of the policy holders/insured in the matter of insurance contact with the insurance company.  To specify the requisite qualification code of conduct and training for insurance intermediaries and agents.  To specify the code of conduct for surveyors/loss assessors.  To promote the efficiency in the conduct of insurance business.  To promote and regulate professional organizations connected with the insurance and reinsurance business.  To undertake inspection conduct enquiries and investigations including the audit of insurers and insurance intermediaries.  To control and regulate the rates, terms and conditions to be offered by the insurer regarding general insurance business not so controlled by tariff advisory committee.  To mention the form and manner for maintenance of books of accounts and the statements of accounts.  To regulate investment of funds by the insurance companies.  To adjudicate disputes between insurers and intermediaries of insurance.  To supervise the functioning of tariff advisory committee.  To specify the percentage of life insurance business and general insurance business to be undertaken in the rural or social sector. Babasabpatilfreepptmba.com 10
  11. 11. Study of Solvency Margin in ICICI Prudential life insuranceScope of IRDA  To permit private companies to enter the insurance market, Government has enacted Insurance Regulatory & Development Authority Act, 1999.  The act was passed by the Parliament in December 1999.  The Act provides for the establishment of the Authority 1. To protect the interest of holders of insurance policies. 2. To regulate, promote and ensure orderly growth of insurance industry. 3. For matters connected there with or incidental thereto.  The Act also sought to amend the following Acts- 1. The Insurance Act, 1938. 2. The Life Insurance Corporation, 1956. 3. The General insurance Business (Nationalization) Act, 1972.  The Act applies to the whole of India including J & K State. Babasabpatilfreepptmba.com 11
  12. 12. Study of Solvency Margin in ICICI Prudential life insurance Babasabpatilfreepptmba.com 12
  13. 13. Study of Solvency Margin in ICICI Prudential life insurance ICICIPRUDENTIAL LIFE INSURANCE COMPANY LIMITEDThe company profile ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank -one of Indias foremost financial services companies-and prudential plc - a leadinginternational financial services group headquartered in the United Kingdom. Total capitalinfusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% andPrudential plc holding 26%. ICICI Prudential has started its operations in December 2000 after receivingapproval from Insurance Regulatory Development Authority (IRDA). Today, company’snation-wide team comprises of 2099 branches (inclusive of 1,116 micro-offices), over276,000 advisors; and 18 bancassurance partners. ICICI Prudential is the first life insurer in India to receive a National InsurerFinancial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICIPrudential has been voted as Indias Most Trusted Private Life Insurer, by The EconomicTimes - AC Nielsen ORG Marg survey of Most Trusted Brands. As the company growits distribution, product range and customer base, company continue to tiredlessly upholdits commitment to deliver world-class financial solutions to customers all over India. Babasabpatilfreepptmba.com 13
  14. 14. Study of Solvency Margin in ICICI Prudential life insurancePromotersICICI Bank ICICI Bank Limited (NYSE:IBN) It is India ‘s largest private sector bankand the second largest bank in the country with consolidated total assets of about US$ 95billion’s of march 31,2009. The ICICI Bank subsidiaries include India’s leading privatesector insurance companies and among its largest securities brokerage firm, mutual fundsand private equity firm. The ICICI currently operation 19 countries including India.Prudential plc It is established in London in 1848, prudential plc is a leading internalretail financial services group with significant operation is Asia and UK. Prudential hasbeen writing prote3ction and savings insurance for over the 160 years, and today hasmore than 21million customers worldwide and over 249billion assets under managementas of December 31, 2008. In Asia, Prudential is leading Europe-based life insurance withoperations in China, Hong Kong, India, Indonesia, Japan,, Korea, Malaysia, Philippines,Singapore, Taiwan, Thailand and Vietnam, prudential is largest asset management. Andoperation in ten market including China, Hong Kong, India, Japan, Korea,Singpore,Taiwan,Vietnam,and United Arab Emirates. Babasabpatilfreepptmba.com 14
  15. 15. Study of Solvency Margin in ICICI Prudential life insuranceVisionTo be the dominant Life and Pension player built on trust by world class people andservice.This the company hope to achieve by: • Understanding the needs of customers and offering them superior products and service • Leveraging technology service customers quickly, efficiently and conveniently • Developing and implementing super risk management and investment strategies to offer sustainable and stable returns to their policyholders • Providing an enabling environment to foster growth and learning for their employees • And above all, building transparency in all their dealings.MissionIn the ICICI prudential Life Insurance Company is continues process, movement anddirection to enable every individuals as a member of ICICI company community, torealize and active his potential so as to contribute to the achievement of the insurancegoal and derive satisfaction there fromObjectives ♦ Excellence in customer service. ♦ Profit orientation. ♦ Belongings and commitment to the organization. ♦ Fairness in all dealings and relations. ♦ Risk taking and innovation. ♦ Team playing. ♦ Learning and renewal ♦ Integrity. ♦ Transparency and discipline. In policies and system Babasabpatilfreepptmba.com 15
  16. 16. Study of Solvency Margin in ICICI Prudential life insurance BOARD OF DIRECTORSThe ICICI prudential Life Insurance Company Limited Board Comprises reputed peoplefrom the finance industry both from India and abroad.Mr.Chanda D.Kochhar, ChairpersonMr. N. S. Kannan, DirectorMr. K.Ramkumar, DirectorMr. Barry Stowe, DirectorMr. Adrisan O’Connor, DirectorMr. Keki Dadiseth, Independent DirectorProf. Marti G. Subranhmanyam, Independent DirectorMs. Rama Bijapurkar, Independent DirectorMr. Vinod Kumar Dhall, Independent DirectorMr. V. Vaidyanathan, Managing Director andCEOManagement teamMr. V. Vaidyanathan Managing Director & CEOMs. Anita Pai Executive Vice President – Customer Service, Technology & MarketingDr. Avijit Chatteriee Appointed ActuaryMr. punit Nanda Executive Vice President Babasabpatilfreepptmba.com 16
  17. 17. Study of Solvency Margin in ICICI Prudential life insuranceAssets held in the company as on 31st July 2009Equity 63% 289724 millionsDebt 37% 168554 millionsTotal 100% 458278 millionsAssets held by :Linked policy holders 90.3% 413836 millionsOther policy holders 09.7% 44442 millionsTotal 100% 458278 millions Babasabpatilfreepptmba.com 17
  18. 18. Study of Solvency Margin in ICICI Prudential life insurance STUDY OF DEPARTMENTS IN THE ICICI PRUDENTIALFinance Finance function in ICICI Prudential is committed to create an infrastructure thatis aligned to shareholder expectations. Finance basically comprises of four functions. .Corporate Planning and MIS provide feedback on business strategies. This includesdriving the budgeting process, providing strategic inputs for decision-making andmanagement reporting and analysis. The Accounts function includes preparation andmaintenance of financial records, funds management, and expense processing andtreasury operations. Compliance ensures that every action is within the regulatoryframework. This includes reviewing compliance requirements and supporting the ethicalframework of ICICI Prudential life. Internal audit provides assurance to the managementover the organizations control framework and includes process risk management,information security assessment and business continuity assessment.Marketing The Marketing function at ICICI Prudential life insurance covers an array ofactivities - brand and media management, channel support, direct marketing andcorporate communications. The Brand and Communications team is in charge ofadvertising, consumer research, media planning & buying and Public Relations; that helpsdevelop and nurture ICICI Prudentials corporate identity while effectivelycommunicating its varied product offerings to the customer. Channel marketing providessupport to the sales force by streamlining the design and development of collaterals andsales tools across distribution channels. The Direct marketing team was set up to generatehigh quality leads for profitable business. The team achieves this through target databaseacquisition and communicating customized product information through e-mailers,telemarketing and innovative direct mailers. Babasabpatilfreepptmba.com 18
  19. 19. Study of Solvency Margin in ICICI Prudential life insuranceTied Agency Tied Agency is the largest distribution channel of ICICI Prudential, comprising alarge advisor force that targets various customer segments. The strength of tied agencylies in an aggressive strategy of expanding and procuring quality business. With focus onsales & people development, tied agency has emerged as a robust, predictable andsustainable business model.Rewards and recognition: ICICI prudential has its own rewards and recognitionprograms like, club membership, career growth opportunity, foreign tours, additional payouts, various training programs for high achievers etc., which boost the performance andmorale of the employees.Bancassurance and AlliancesICICI Prudential was a pioneer in offering life insurance solutions through banks andalliances. Within a short span of two years, and with nearly a large number of partners,B & A has emerged as a vital component of the company’s sales and distribution strategy,contributing to approximately one third of company’s total business. The business philosophy at B&A is to leverage distribution synergies with ourpartners and add value to its customers as well as the partners. Flexibility, adaptation andexperimenting with new ideas are the hallmarks of this channel.Customer Service The Operations department oils the work processes between the customer and thecompany to ensure consistent and quality service to the customer. To streamline theoperations, the Operations department interfaces between the clients and the agents, thebranches and the underwriters, and manages work processes. The Vision at Customer Service is to deliver ‘World Class Service’ at everyopportunity. Units such as the 9 to 9 contact centre, Outbound Call Centre, CustomerCare and Query Resolution Unit are all committed to providing effective solutions to overlakhs of customers across the country. Babasabpatilfreepptmba.com 19
  20. 20. Study of Solvency Margin in ICICI Prudential life insuranceOperations: This department works in the company in case of processing of the policies at theinitial stage, primary underwriting, department of cash, etc.Human Resource The people strategy of ICICI Prudential is “To build a committed team with aculture of innovation, learning and growth. The Human Resource Function at ICICIPrudential drives the people strategy of the business. With its initial focus on operationalexcellence to deliver benefits and services to staff members, HR is now committed tobuilding capability through state of the art processes. A robust performance managementsystem, compensation system and a segmented training architecture enable it to delivervalue to the organization.Information Technology The Information Technology function at ICICI Prudential is committed to enablebusiness through the use of technology. It is segmented into 4 groups to enable highestlevels of delivery to the customers: Life Asia Solutions Group that provides flexibility indesigning better product offerings to end-users, the Solutions Group- Web that providesreal-time information to customers and is responsible for customer relationshipmanagement, IT Architecture & Corporate Solutions Group is in charge of developingand maintaining a blueprint for the IT architecture for the enterprise as a whole. This teamworks as an in house R&D Solution Group, exploring new technological initiatives andalso caters to information needs of corporate functions in the organization. ITInfrastructure group is responsible for providing hardware, software, network services tothe whole organization. This group runs the Digital Nervous System of the Enterprise atthe highest levels of efficiency and provide robust, scalable and highly available platformfor deployment of business application. Babasabpatilfreepptmba.com 20
  21. 21. Study of Solvency Margin in ICICI Prudential life insuranceTraining: The department of training always aims at educating its employees of theorganization. In the company the training will be given to each level of employees.Training may be conducted because of the requirement from the employees or it may beas the initiation from the company. Training will be conducted in the different occasionslike promotion of an employee, the launch of the new product, etc. Babasabpatilfreepptmba.com 21
  22. 22. Study of Solvency Margin in ICICI Prudential life insurance ICICI PRUDENTIAL LIFE INSURANCE PRODUCTS/ PLANSInsurance Solutions for Individuals: ICICI Prudential Life Insurance offers a range of innovative, customer-centricproducts that meet the needs of customers at every life stage. Its products can beenhanced with up to 5 riders, to create a customized solution for each policyholder.Protection Solutions  Life Guard: Is a protection plan, which offers life cover at very low cost. It is available in 3 options Level term assurance, level term assurance with return of premium and single premium.  Home Assure: Is a mortgage reducing term assurance plan designed specifically to help customers cover their home loans in a simple and cost-effective manner.Child Plans  Smart Kid: Is Education plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child’s life. Smart Kid plans are also available in unit-linked form both single premium and regular premium.Retirement Solutions  Forever Life is a retirement product targeted at individuals in their thirties.  Secure Plus Pension: Is a flexible pension plan that allows one to select between 3 levels of cover. Babasabpatilfreepptmba.com 22
  23. 23. Study of Solvency Margin in ICICI Prudential life insuranceMarket-linked products  Lifetime Pension: is a regular premium market-linked pension plan  Life Link Pension II is a single premium market-linked pension plan.  Invest Shield Pension is a regular premium pension plan with a capital guarantee on the investible premium and declared bonuses.  Golden Years: is a limited premium paying retirement solution that offers tax benefits. up to Rs 100,000 u/s 80C, with flexibility in both the accumulation and payout stages. ICICI Prudential also launched “Salaam Zindagi”, a social sector group insurance policy targeted at the economically underprivileged sections of the society.  Life Time Super: A market-linked insurance products that adapts itself to changing protection and investment need. The benefits are potentional to earn high returns, Death benefit, partial withdrawals, Tax benefits.  Life Link Super: It is the unique, single premium united linked investment-cum- insurance solution. It offers attractive premium allocation along with flexible investment options to opportunity to enjoy potentially high returns on your investments, without compromising on the protection of your family.  Life Time Plus: It is one –stop solution for investors who are looking for a plan offers for the benefits of the insurance cover along with flexible investment options. The payment will be three different modes like Monthly, half yearly, Year.  Premier Life Gold: The Premier Life Gold High net worth segment is looking for plan which gives potional high returns, liquated and a flexibility option to design there own plan. And wealth along with insurance protection. Babasabpatilfreepptmba.com 23
  24. 24. Study of Solvency Margin in ICICI Prudential life insuranceSavings Solutions  Secure Plus: Is a transparent and feature-packed savings plan that offers 3 levels of protection.  Cash Plus: Is a transparent, feature-packed savings plan that offers 3 levels of protection as well as liquidity options.  Save’n’ Protect: Is a traditional endowment savings plan that offers life protection along with adequate returns.  Cash Back :Is an anticipated endowment policy ideal for meeting milestone expenses like a child’s marriage, expenses for a child’s higher education or purchase of an asset.  Life Time Gold: Is offer customers the flexibility and control to customize the policy to meet the changing needs at different life stages. Each offer 4 fund options ? Preserver, Protector, Balancer and Maximiser.  Life Link II: Is a single premium Market Linked Insurance Plan which combines life insurance cover with the opportunity to stay invested in the stock market.  Premier Life: Is a limited premium paying plan that offers customers life insurance cover till the age of 75.  Invest Shield Life: Is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest.  Invest Shield Cash: Is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest along with flexible liquidity options. Babasabpatilfreepptmba.com 24
  25. 25. Study of Solvency Margin in ICICI Prudential life insurance  Invest Shield Gold: Is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest along with limited premium payment terms.Health Solution  Health Assure: Is a regular premium plan which provides l ong term cover against 6 critical illnesses by providing policyholder with financial assistance, irrespective of the actual medical expenses.  Health Assure Plus: Is a regular premium plan which provides long term cover against 6 critical illnesses by providing financial assistance, irrespective of actual medical expenses, as well as an equivalent life insurance cover Babasabpatilfreepptmba.com 25
  26. 26. Study of Solvency Margin in ICICI Prudential life insuranceFlexible Rider Options ICICI Prudential Life offers flexible riders, which can be added to the basicpolicy at a marginal cost, depending on the specific needs of the customer.  Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the rider sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit.  Accident Benefit: This rider option pays the sum assured under the rider on death due to accident.  Critical Illness Benefit: Protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death.  Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on Smar Kid, Secure Plus and Cash Plus  Waiver of Premium: In case of total and permanent disability due to an accident, the premiums are waived till maturity. This rider is available with Secure Plus and Cash Plus. Babasabpatilfreepptmba.com 26
  27. 27. Study of Solvency Margin in ICICI Prudential life insuranceCompetitors for the ICICI Prudential life insurance company in theIndian life insurance industry1 --------------- -------------- Life insurance corporation of India.2 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.3 104 15.11.2000 Max New York Life Insurance Co. Ltd.4 107 10.01.2001 Kotak Mahindra Old Mutual Life Insurance Limited5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.6 110 12.02.2001 Tata AIG Life Insurance Company Ltd.7 111 30.03.2001 SBI Life Insurance Company Limited.8 114 02.08.2001 ING Vysya Life Insurance Company Private Limited9 116 03.08.2001 Bajaj Allianz Life Insurance Company Limited1 117 06.08.2001 Metlife India Insurance Company Ltd.01 121 13.01.2002 Reliance life insurance company limited11 122 14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.21 127 06.02.2004 Sahara India Insurance Company Ltd.31 128 17.11.2005 Shriram Life Insurance Company Ltd.41 130 14.07.2006 Bharti AXA Life Insurance Company Ltd.51 133 04.09.2007 Future Generali India Life Insurance Company6 Limited1 135 19.12.2007 IDBI Fortis Life Insurance Company Ltd.71 136 08.05.2008 Canara HSBC Oriental Bank of Commerce Life8 Insurance Company Ltd.1 138 27.06.2008 Aegon Religare Life Insurance Company Ltd.92 140 27.06.2008 DLF Pramerica Life Insurance Company Ltd.0 Babasabpatilfreepptmba.com 27
  28. 28. Study of Solvency Margin in ICICI Prudential life insurance SWOT ANALYSISStrengths:  Vast untapped market In a country of 1 billion people there is a huge potential market for life insuranceproducts. In India the penetration of the insurance sector in the rural and semi-urban areasis low. There is a market of 900 million for life insurance and 200 million forhouseholder’s insurance policy. In addition to this the affluent section can be tapped forOverseas Medi claim and Travel Insurance policies.  Huge pool of skilled professionals At ICICI Prudential Life Insurance company there is no dearth of skilledprofessionals to carry out a successful Life Insurance venture.Weakness:  Lack of networking among branches In spite of growing emphasis on total branch mechanization (TBM) and fullcomputerization of branches, the rural and semi-urban branches have still to seeinformation technology as an enabler. Complete integration of branch network involveshuge investments for creating IT and communication infrastructure.  Low savings rate Though we have a huge market for insurance policies, the middle class whoconstitutes the bulk of this market is today burdened under inflationary pressures. Thesecret lies in inculcating savings habit but considering the amount of surplus fundsavailable with the middle class for investing in future security, the ability to save is verynominal Babasabpatilfreepptmba.com 28
  29. 29. Study of Solvency Margin in ICICI Prudential life insurance Babasabpatilfreepptmba.com 29
  30. 30. Study of Solvency Margin in ICICI Prudential life insuranceOpportunities:  Data mining Banks have a huge customer database which has to be properly leveraged. Targetsegments should be identified and tapped.  A wide distribution network of banks provides a great opportunity to sell insurance products through banks.  Another potential area of growth of Bancassurance is exploiting the corporate customers and tying up for insurance of the employees of corporate clientsThreats:  Human Resource Challenges Success in Bancassurance venture requires a change in mindset. Though we havea large talent pool, the inability to sell complex insurance products on the part of bankprofessionals and their reluctance to learn can be severe setback. There has to be a changein the thinking, approach and work culture. Babasabpatilfreepptmba.com 30
  31. 31. Study of Solvency Margin in ICICI Prudential life insuranceSegmentation of the insurance products in ICICI Prudentialsegmentation Purpose of the segment Suitable plansYoung & Single Asset creation Wealth creation plansYoung & Just married Asset creation & protection Wealth creation and mortgage protection plansMarried with kids Childrens education, Asset Education insurance, creation and protection mortgage protection & wealth creation plansMiddle aged with grown up Planning for retirement & Retirement solutions &kids asset protection mortgage protectionAcross all life-stages Health plans Health Insurance Babasabpatilfreepptmba.com 31
  32. 32. Study of Solvency Margin in ICICI Prudential life insurance AWARDS ICICI Pru Life ranked as the Most Trusted Pvt Life Insurance brand in the BrandEquity "Most Trusted Brands 2009" survey ICICI Prudential Life won a Gold award for About ULIPS.com and Health Savercampaign, innovation award for www.taxguru 08-09.com and a silver award for itsInsurance yoga campaign at the ICICI Group Marketing Excellence award. Confederation of Indian Industry (CII) - Western Region recently awarded ICICIPrudential Life a Commendation for Strong Commitment to HR Excellence 2008 at theCII HR Summit 2008. Babasabpatilfreepptmba.com 32
  33. 33. Study of Solvency Margin in ICICI Prudential life insurance ICICI Prudential Life Insurance was awarded with the coveted ICAI Award forExcellence in Financial Reporting by the Institute of Chartered Accountants of India(ICAI) for the financial year ended March 31, 2008. ICICI Prudential Life was awarded the Life Insurance Company of the Year atthe12th Asia Insurance Industry Awards 2008. ICICI Prudential Life won the Award for Brand Excellence in the Banking andICICI Prudential life insurance Babasabpatilfreepptmba.com 33
  34. 34. Study of Solvency Margin in ICICI Prudential life insurance ICICI Prudential Life was awarded with two Bronze Effies in the sevicescatgeory for its Corporate campaign and Retirement Number campaign ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runnerup at the Outlook Money & NDTV Profit Awards 2008 ICICI Prudential Life was awarded the SAP ACE 2008 Best Business ObjectsAward for its IT practices ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runnerup at the Outlook Money & NDTV Profit Awards 2007 ICICI Prudential Life’s, retirement solutions campaign for the year 2006-07 wasawarded the Bronze Effy trophy in the services category.It also won the Brand EquityBravery Award 2007, instituted by Ad club. Babasabpatilfreepptmba.com 34
  35. 35. Study of Solvency Margin in ICICI Prudential life insurance Innovation Award for launching Diabetes Care – Prudence Award 2006. PeopleAward for excellence in training and people development - Prudence Award 2006 . Best Life Insurer 2003. Outlook Money Awards 2003 & 2004 IMM Award forExcellence. Institute of Marketing & Management Indias Most Customer Responsive Insurance Company. Avaya Global ConnectEconomic Times. Customer Responsiveness Awards Organisation with Innovative HRPractices Indira Group of Institutes Babasabpatilfreepptmba.com 35
  36. 36. Study of Solvency Margin in ICICI Prudential life insurance Superbrand 2003-04 Silver Effie for Effectiveness of the ‘Retire from Work not life’ advertisingcampaign Effies 2003 Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Co. Ltd. wasadjudged the Businesswoman of the year at The Economic Times Awards for CorporateExcellence, 2007-08. Babasabpatilfreepptmba.com 36
  37. 37. Study of Solvency Margin in ICICI Prudential life insurance ICICI Prudential Life won the UK Trade & Investment India Business Awards2008 in the Business Partnership Award-Large Company category Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was adjudgedthe Entrepreneur of the Year-Manager at the Ernst and Young Entrepreneur Awards2007. Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was awardedthe Outstanding Businesswoman of the Year at CNBC TV18s India Business LeaderAwards 2007 Babasabpatilfreepptmba.com 37
  38. 38. Study of Solvency Margin in ICICI Prudential life insurance Prudence Customer Centricity Award 2004 & 2005. Prudential Corporation Asia Babasabpatilfreepptmba.com 38
  39. 39. Study of Solvency Margin in ICICI Prudential life insuranceRECOGNISATION ICICI Prudential Life was recognized as the most trusted brand amongst privatelife insurers in the Economic Times-Most Trusted Brand survey 2008. IMM Award for Excellence. Institute of Marketing & Management Organizationwith Innovative HR Practices. India Group of Institutes Organization with Innovative HRPractices. Asia-Pacific H R Congress Awards for HR Excellence Babasabpatilfreepptmba.com 39
  40. 40. Study of Solvency Margin in ICICI Prudential life insuranceTopic of the study:“The study of Solvency margin in ICICI Prudential life insurance.”Research objectives: 1) To understand the meaning and importance of solvency margin 2) To know the procedure of calculation of solvency margin 3) To know why some companies fails in maintaining the adequate solvency margin and some measures to over come from those problems 4) To calculate the solvency margin for the past 5 financial years, of ICICI Prudential life insurance company 5) To know the limitations of solvency margin Babasabpatilfreepptmba.com 40
  41. 41. Study of Solvency Margin in ICICI Prudential life insuranceNeed for the study: Solvency margin is one of the major concepts in insurance. IRDA regulates thelimits of solvency margin. Solvency margin helps the company in case of any adverseclaim situation. And it gives the confidence to the customers about the safety of thecompany.Scope of the study: Solvency margin has large scope for its study. Solvency margin calculation is thework of the actuary of the company, which is to be calculated as per the norms of theIRDA. Solvency margin is fully internal to any of the insurance company and thetransactions are fully confidential. So the solvency margin has lots of scope for its study. Babasabpatilfreepptmba.com 41
  42. 42. Study of Solvency Margin in ICICI Prudential life insurance SOLVENCY MARGIN Solvency margin is the amount by which the assets of an insurer exceed itsliabilities, and will form part of the insurer’s shareholder’s funds. Methods of valuationsof assets and liabilities of an insurer are prescribed in the insurance regulations, Rules forestimating the liabilities will obviously be different for long-term and general insurancebusiness. The regulations stipulated the minimum solvency margin, which an insurermust maintain.Why is the solvency margin needed? All insurance companies have to pay claims to policy holders. These could becurrent or future claims of policy holders. Insurers are expected to put aside a certain sumto cover these liabilities. These are also referred to as technical provisions. Insurance,however, is risky business and unforeseen events might occur sometimes, resulting inhigher claims not anticipated earlier. For instance, calamities like the Mumbai floods,J&K earthquake, fire, accidents of a large magnitude, etc may impose an unbearableburden on the insurer. In such circumstances, technical provisions though initially prudent, may proveinsufficient for taking care of liabilities. If the liability is large, there is a possibility of theinsurance company becoming insolvent. This would create an awkward situation for theinsurance sector, regulator and also the government. The solvency margin is thus aimed ataverting such a crisis. The purpose of the extra capital all insurers are required to keep asper the regulatory norms is to protect policy holders against unforeseen events. This also helps the company to settle the emergency claims and gives theconfidence to the public to invest in the respected company. Babasabpatilfreepptmba.com 42
  43. 43. Study of Solvency Margin in ICICI Prudential life insuranceWhy some companies failing to maintain the solvency margin……..?There are certain factors which affects the working of the solvency margin some of thosefactors are:• Poor mortality experience• Poor expense experience• Expense inflation• Inadequate investment returns• Poor lapse and surrender experience• Asset default and depreciation• Mismatched investments• Guaranteed surrender values/investments returns• Liquidity• Options• Change in business mix• Inadequate reinsurance• Operational risks Babasabpatilfreepptmba.com 43
  44. 44. Study of Solvency Margin in ICICI Prudential life insuranceHow to handle threats to maintain appropriate solvency margin……..?• Management actions• Role of the Appointed Actuary• Regulations• Timely intervention by regulator• Conservative asset and liability valuations• Risk based capital/solvency margin• Holistic and integrated approach to risk management• Incentives to encourage prudent risk management Babasabpatilfreepptmba.com 44
  45. 45. Study of Solvency Margin in ICICI Prudential life insuranceHow much solvency margin required…………………….? The calculation of Solvency margin depends on the factors like total reserve forthe conventional products total fund that the management of any insurance companyintended to invest and also the total sum assured that the any insurance company writes. According to the guidelines of the IRDA total solvency margin required is 4% ofreserve for conventional products +1%of all unit linked insurance funds without anyguarantee + 2% of all unit linked insurance funds with some guarantee+0.3% of (sumassured –(reserves for conventional product + unit linked insurance fund with someguarantee+ unit linked insurance product without any guarantee)) The first two factors ensure that the insurance company is protected againstmoments and interest rates or investment income and 0.3% of (sum assured – policyholder’s fund) ensures that the company is protected against the adverse claimsituations…. As an additional safety measure IRDA mandates that an insurance company mustmaintain 150% of solvency margin as the solvency margin or Rs50 crores as a solvencymargin whichever is higher. This can be explained much better with the followingexample. Suppose the company has Rs200 million as a reserve for conventional product,Rs500 million units fund without guarantee, Rs50 million unit funds with someguarantee. So the total fund is 750 million. Then the company calculates the solvency margin as, for the conventional policyholders fund (200 million *0.4), for the unit fund without any guarantee (500 million*0.1), for the unit funs with some guarantee (50 million *0.2) here if the insurancecompany has sum assured of 5000 million then, 5000million-750million (sum of above 3types of fund) that comes 4250 million which should be multiplied by 0.3 % then, Babasabpatilfreepptmba.com 45
  46. 46. Study of Solvency Margin in ICICI Prudential life insurance4% of 200million is Rs8 million1% of 500 million is Rs5 million2% of 50 million is Rs1 million0.3% of 4250 million is Rs12.75 millionThen the total becomes 26.75 million (total of all the above)Now IRDA wants any insurance company to maintain 150% of the above calculated fundi.e. 26.75*150% is equal to Rs40.12 million. Babasabpatilfreepptmba.com 46
  47. 47. Study of Solvency Margin in ICICI Prudential life insuranceCHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR.. PARTICULARS AMOUNT (IN MILLIONS) RESERVE FOR CONVENTIONAL PRODUCTS 200 POLICY HOLDERS UNIT FUND WITH SOME 50 GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY 500 GURENTEE TOTAL AMOUNT OF POLICY HOLDERS 750 FUND SUMASSURED WRITTEN BY THE COMPANY 5000 Babasabpatilfreepptmba.com 47
  48. 48. Study of Solvency Margin in ICICI Prudential life insurance CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR........ PERTICULERS AMOUNT PERCENTAGE %AMOUNT (MILLIONS) (MILLIONS)RESERVE FOR CONVENTIONAL 200 4% 8.00PRODUCTSPOLICY HOLDERS UNIT FUND 50 2% 1.00WITH SOME GUARANTEEPOLICY HOLDERS UNIT FUND 500 1% 5.00WITHOUT ANY GURENTEETOTAL AMOUNT OF POLICY 750 14.00HOLDERS FUND(SUMASSURED WRITTEN BY 4250 0.3% 12.75THE COMPANY – TOTALAMOUNT OF POLICYHOLDERS FUND) TOTAL 26.75CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDASPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 26.75 * 150% = 40.12 MILLION RS Babasabpatilfreepptmba.com 48
  49. 49. Study of Solvency Margin in ICICI Prudential life insurance Calculation of solvency margine for the past 5 years of the ICICI prudential life insurance company.CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2005 PARTICULARS AMOUNT(in 000,s) RESERVE FOR CONVENTIONAL PRODUCTS 8252789.00 POLICY HOLDERS UNIT FUND WITH SOME 2674799.20 GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY 24073192.80 GURENTEE TOTAL AMOUNT OF POLICY HOLDERS FUND 35000781.00 SUMASSURED WRITTEN BY THE COMPANY 350007810.00 Babasabpatilfreepptmba.com 49
  50. 50. Study of Solvency Margin in ICICI Prudential life insurance CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2005 PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)RESERVE FOR CONVENTIONAL 8252789.00 4% 33011.5600PRODUCTSPOLICY HOLDERS UNIT FUND 2674799.20 2% 53495.9840WITH SOME GUARANTEEPOLICY HOLDERS UNIT FUNDWITHOUT ANY GURENTEE 24073192.80 1% 240731.9280TOTAL AMOUNT OF POLICY 327239.5600HOLDERS FUND(SUMASSURED WRITTEN BYTHE COMPANY – TOTAL 315007029.oo 0.3% 945021.8070AMOUNT OF POLICYHOLDERS FUND) TOTAL 1569360.5590CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDASPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 1569360.559 * 150% = 2354040.8385 Babasabpatilfreepptmba.com 50
  51. 51. Study of Solvency Margin in ICICI Prudential life insuranceCHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2006 PARTICULARS AMOUNT(in 000,s) RESERVE FOR CONVENTIONAL PRODUCTS 11567031.OO POLICY HOLDERS UNIT FUND WITH SOME 7203515.OO GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY 64831635.OO GURENTEE TOTAL AMOUNT OF POLICY HOLDERS FUND 83602181.OO SUMASSURED WRITTEN BY THE COMPANY 836021810.00 Babasabpatilfreepptmba.com 51
  52. 52. Study of Solvency Margin in ICICI Prudential life insurance CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2006 PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)RESERVE FOR CONVENTIONAL 11567031 4% 462681.2400PRODUCTSPOLICY HOLDERS UNIT FUND 7203513 2% 144070.2600WITH SOME GUARANTEEPOLICY HOLDERS UNIT FUND 64831635 1% 648316.3500WITHOUT ANY GURENTEETOTAL AMOUNT OF POLICYHOLDERS FUND1075067.8500(SUMASSURED WRITTEN BY 752419629 0.3% 2257258.8870THE COMPANY – TOTALAMOUNT OF POLICYHOLDERS FUND) TOTAL 3512326.7370CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDASPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 3512326.737 * 150% = 5268410.1055 Babasabpatilfreepptmba.com 52
  53. 53. Study of Solvency Margin in ICICI Prudential life insuranceCHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2007 PARTICULARS AMOUNT (in 000’s) RESERVE FOR CONVENTIONAL PRODUCTS 18044258.00 POLICY HOLDERS UNIT FUND WITH SOME 13388448.60 GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY 120496037.40 GURENTEE TOTAL AMOUNT OF POLICY HOLDERS 151928744.00 FUND SUMASSURED WRITTEN BY THE COMPANY 1519287440.00 Babasabpatilfreepptmba.com 53
  54. 54. Study of Solvency Margin in ICICI Prudential life insurance CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2007 PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)RESERVE FOR CONVENTIONAL 18044258.0 4% 721770.3200PRODUCTSPOLICY HOLDERS UNIT FUND 13388448.6 2% 267768.9720WITH SOME GUARANTEEPOLICY HOLDERS UNIT FUND 120496037.4 1% 1204960.3740WITHOUT ANY GURENTEETOTAL AMOUNT OF POLICY 2194499.6660HOLDERS FUND(SUMASSURED WRITTEN BYTHE COMPANY – TOTAL 1367358696.0 0.3% 4102076.0880AMOUNT OF POLICYHOLDERS FUND) TOTAL 6296575.7540CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDASPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 6296575.754 * 150% = 9444863.631 Babasabpatilfreepptmba.com 54
  55. 55. Study of Solvency Margin in ICICI Prudential life insuranceCHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2008 PARTICULARS AMOUNT (in 000’s) RESERVE FOR CONVENTIONAL PRODUCTS 24831049.00 POLICY HOLDERS UNIT FUND WITH SOME 25075304.00 GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY 225677736.00 GURENTEE TOTAL AMOUNT OF POLICY HOLDERS 275584089.00 FUND SUMASSURED WRITTEN BY THE COMPANY 2755840890.00 Babasabpatilfreepptmba.com 55
  56. 56. Study of Solvency Margin in ICICI Prudential life insurance CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2008 PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)RESERVE FOR CONVENTIONAL 24831049 4% 993241.9600PRODUCTSPOLICY HOLDERS UNIT FUND 25075304 2% 501506.0800WITH SOME GUARANTEEPOLICY HOLDERS UNIT FUND 225677736 1% 2256777.3600WITHOUT ANY GURENTEETOTAL AMOUNT OF POLICY 3300175.4000(SUMASSURED WRITTEN BY 2480256801 0.3% 7440770.4030THE COMPANY – TOTALAMOUNT OF POLICYHOLDERS FUND) TOTAL 11192295.8030CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDASPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 11192295.803 * 150% = 16788443.7045 Babasabpatilfreepptmba.com 56
  57. 57. Study of Solvency Margin in ICICI Prudential life insuranceCHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2009 PARTICULARS AMOUNT (IN 000’S) RESERVE FOR CONVENTIONAL PRODUCTS 31569812.00 POLICY HOLDERS UNIT FUND WITH SOME 286668999.70 GUARANTEE POLICY HOLDERS UNIT FUND WITHOUT ANY 258002097.30 GURENTEE TOTAL AMOUNT OF POLICY HOLDERS 318238809.00 FUND SUMASSURED WRITTEN BY THE COMPANY 3182388090.00 Babasabpatilfreepptmba.com 57
  58. 58. Study of Solvency Margin in ICICI Prudential life insurance CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2009 PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)RESERVE FOR CONVENTIONAL 31569812.00 4% 1262792.4800PRODUCTSPOLICY HOLDERS UNIT FUND 28666899.70 2% 573337.9940WITH SOME GUARANTEEPOLICY HOLDERS UNIT FUND 258002097.30 1% 2580020.9730WITHOUT ANY GURENTEETOTAL AMOUNT OF POLICY 28666899.70HOLDERS FUND 4416151.4470(SUMASSURED WRITTEN BY 2864149281.00 0.3% 8592447.8430THE COMPANY – TOTALAMOUNT OF POLICYHOLDERS FUND)TOTAL 13008599.2900CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDASPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150% = 13008599.29 * 150% = 19512898.935 Babasabpatilfreepptmba.com 58
  59. 59. Study of Solvency Margin in ICICI Prudential life insuranceLimitations of the solvency margin  Solvency margin is very internal for any insurance company.  It is not fixed for the specific period it becomes bit difficult to calculate on regular basis because it is the work of higher authorities if the company.  It becomes a very heavy amount to those companies who have just entered the industry.  Even though it is one of the major reserve that the company keeps it cannot be published in the final reports of the insurance company. Babasabpatilfreepptmba.com 59
  60. 60. Study of Solvency Margin in ICICI Prudential life insuranceFindings  Solvency margin helps the company in case of any adverse claim situations.  Solvency margin gives the confidence to investors to invest in the company  Solvency margin is one of the major sources of fund for the government.  As on 31st march 2005 ICICI Prudential Company has Rs2354040838.50 as the solvency margin. As on 31st march 2006 ICICI Prudential company has Rs5268490105.50 as the solvency margin As on 31 st march 2007 ICICI Prudential company has Rs9444863631.00 as the solvency margin As on 31 st march 2008 ICICI Prudential company has Rs16788443704.50 as the solvency margin As on 31st march 2009 ICICI Prudential Company has Rs19512898935.50 as the solvency margin which shows the financial strength and back up for the company.  Solvency margin of ICICI Prudential is increasing in the rate of its growth in business. Babasabpatilfreepptmba.com 60
  61. 61. Study of Solvency Margin in ICICI Prudential life insuranceSuggestions:  It can be suggested that “the persons in the organizations can be made aware of the solvency margin. by conducting the training sessions for both the employees and advisors” It gives them more confidence to sell the insurance products.  IRDA can increase the minimum limits of the solvency margin. Even though the company feels it bit difficult in the initial stage in the long run the company will be benefited.  IRDA can take the steps to publish the accounts for solvency margin along with the annual reports. It reveals the transferences of the company..  IRDA can mention solvency margin as one of the topic for the study in case of pre license IRDA compulsory training.  IRDA can also simplify the investment norms so that the money can be better utilized and income from the solvency margin amount can be increased (Rs1951289893.50 is not the small amount). Babasabpatilfreepptmba.com 61
  62. 62. Study of Solvency Margin in ICICI Prudential life insuranceConclusion: Every study and project needs to be concluded. Hence, the study conducted in ICICIPrudential helped me to know some thing about its product, working environment of thecompany, rules and regulations to be followed in the company, how to handle the workpressure. I got the maximum exposure because personally I met the customer and I havealso sold some of the insurance products this gave us the confidence to how to work andhelped us to apply the theoretical knowledge to the practical job, because practicalexposure differs significantly From text book knowledge. ICICI Prudential is performing fantastically well in the Indian insurance industryand is the No. 1 private player among the 19 other private life insurance players.Topic: solvency margin is one of the important terminologies in the insurance sector. Every insurance company has to maintain the solvency margin according to theguidelines issued by the IRDA. Solvency is beneficial to IRDA because it reduces theburden, helpful for the company because it helps the company to manage the adverse theclaim situation, and also helps the customers because it gives them the since of securityfor their investments. Babasabpatilfreepptmba.com 62
  63. 63. Study of Solvency Margin in ICICI Prudential life insuranceBibliography:Books:  Marketing research by A Parashuraman, Dhurv Grewal, R Krishnan.  IRDA Pre-licencing training exam book(IRDA syllabus).  ICICI Prudetial product training materials.Magazines:  Insurance wordWeb sites:  www.iciciprulife.com  www.iciciprupartner.com  www.irdaindia.org  icici prudential intranet. Babasabpatilfreepptmba.com 63
  64. 64. Study of Solvency Margin in ICICI Prudential life insuranceAnnexture:Five years balance sheet of ICICI Prudential life insurance. Babasabpatilfreepptmba.com 64

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