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    • A Project Study report On Training Undertaken at HDFC Standard Life Insurance Company Limited On A Comparative Analysis of the Services of HDFC Standard Life Insurance Company with its Major Competitors Submitted in partial fulfillment for the Award of degree of Master Of Business AdministrationSubmitted By: - Submitted To:-SUBHAM ARORA Dr. PANKAJ GUPTAMBA ,Third semester 2011-2013
    • PREFACEPractical Research project report is one of the major components for anyprofessional course as M.B.A the real place where a professional is tested is thefield. as per stipulation of Rajasthan Technical University, kota.I had undergone a research project report at “HDFC Standard Life InsuranceCompany Limited titled “A Comparative Analysis of the Services of HDFC StandardLife Insurance Company with its Major Competitors”It was a good exposure for me to undergo training in such a company.I was able toget familiarized with the field component that will help me in building my futurecareer.Research project report in HDFC Standard Life Insurance Company Limited.It gave me knowledge about the Indian insurance market.It helps me know about growing insurance industry in India.For this project Jaipur and its adjoining areas were selected as focused areas. 2
    • AcknowledgementI express my sincere thanks to my project guide MR. SHAILESH JAIN, SENIORPUBLIC RELATION OPERATION MANAGER (HDFC LIFE) for guiding me rightfrom the inception till the successful completion of the project.I sincerely acknowledgement him for extending his valuable guidance, support forliterature, critical reviews of project and the report and above all the moral supportshe had provided to me with all stages of this project.I would also like to thank the supporting staff of APEX INSTITUTE OFMANAGEMENT AND SCIENCE for their help and cooperation throughout myproject.(Signature of student)SUBHAM ARORA 3
    • EXECUTIVE SUMMARYHDFC Standard Life insurance is the oldest life insurance company in the world. It is thelargest insurer in the UK and is the 28th largest company in the world. In India, the companyis marketing life insurance products and unit linked investment plans. From my research atHDFC LIFE, I found that the company has a lot of competition from other private insurerslike ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition from LIC. Tocompete effectively HDFC SLIC could launch cheaper and more reasonable products withsmall premiums and short policy terms (the number of year‘s premium is to be paid). Theideal premium would be between Rs. 5000 – Rs. 25000 and an ideal policy term would be10 – 20 years.HDFC must advertise regularly and create brand value for its products and services. Most ofits competitors like Aviva, ICICI, Max, Reliance and LIC use television advertisements topromote their products. The Indian consumer has a false perception about insurance – theyfeel that it would not benefit them if they do not live through the policy term. Nowadayshowever, most policies are unit linked plans where a customer is benefited even if theirdeath does not occur during the policy term. This message should be conveyed to potentialcustomers so that they readily invest in insurance.Family responsibilities and high returns are the two main reasons people invest ininsurance. Optimum returns of 16 – 20 % must be provided to consumers to keep theminterested in purchasing insurance.On the whole HDFC standard life insurance is a good place to work at. Every new recruit isprovided with extensive training on unit linked funds, financial instruments and the productsof HDFC. This training enables an advisor/sales manager to market the policies better.HDFC was ranked 13 in the Best Places to Work survey. The company should try to createawareness about itself in India. In the global market it is already very popular. With animprovement in the sales techniques used, a fair bit of advertising and modifications to theexisting product portfolio, HDFC would be all set to capture the insurance market in India asit has around the globe. 4
    • Table of Contents1. Introduction to the Industry2. Introduction to the Organization3. Research Methodology 3.1 Title of the Study 3.2 Duration of the Project 3.3 Objective of Study 3.4 Type of Research 3.5 Sample Size and method of selecting sample 3.6 Scope of Study 3.7 Limitation of Study4. Facts and Findings5. Analysis and Interpretation6. SWOT7. Conclusion8. Recommendation and Suggestions9. Appendix10. Bibliography 5
    • THE INSURANCE INDUSTRY IN INDIA AN OVERVIEW Insurance is a federal subject in India and has a history dating back to 1818. Lifeand general insurance in India is still a nascent sector with huge potential for variousglobal players with the life insurance premiums accounting to 2.5% of the countrysGDP while general insurance premiums to 0.65% of Indias GDP.[1]. The Insurancesector in India has gone through a number of phases and changes, particularly inthe recent years when the Govt. of India in 1999 opened up the insurance sector byallowing private companies to solicit insurance and also allowing FDI up to 26%.Ever since, the Indian insurance sector is considered as a booming market withevery other global insurance company wanting to have a lions share. Currently, thelargest life insurance company in India is still owned by the governmentWith the largest number of life insurance policies in force in the world, Insurancehappens to be a mega opportunity in India. It‘s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for thefinancial year 2006 – 2007). Together with banking services, it adds about 7% to thecountry‘s Gross Domestic Product (GDP). The gross premium collection is nearly2% of GDP and funds available with LIC for investments are 8% of the GDP.A well-developed and evolved insurance sector is needed for economicdevelopment as it provides long term funds for infrastructure development andstrengthens the risk taking ability of individuals. It is estimated that over the next ten yearsIndia would require investments of the order of one trillion US dollars. The Insurance sector,to some extent, can enable investments in infrastructure development to sustain theeconomic growth of the country. (Source: www.indiacore.com) 7
    • INSURANCE INDUSTRY AND ITS CHRACTERISTICS Nature of the IndustryGoods and services. The insurance industry provides protection against financial lossesresulting from a variety of perils. By purchasing insurance policies, individuals andbusinesses can receive reimbursement for losses due to car accidents, theft of property,and fire and storm damage; medical expenses; and loss of income due to disability or death.Industry organization. The insurance industry consists mainly of insurance carriers (orinsurers) and insurance agencies and brokerages. In general, insurance carriers are largecompanies that provide insurance and assume the risks covered by the policy. Insuranceagencies and brokerages sell insurance policies for the carriers. While some of theseestablishments are directly affiliated with a particular insurer and sell only that carrier‘spolicies, many are independent and are thus free to market the policies of a variety ofinsurance carriers. In addition to supporting these two primary components, the insuranceindustry includes establishments that provide other insurance-related services, such asclaims adjustment or third-party administration of insurance and pension funds.These other insurance industry establishments also include a number of independentorganizations that provide a wide array of insurance-related services to carriers and theirclients. One such service is the processing of claims forms for medical practitioners. Otherservices include loss prevention and risk management. Also, insurance companiessometimes hire independent claims adjusters to investigate accidents and claims forproperty damage and to assign a dollar estimate to the claim.Insurance carriers assume the risk associated with annuities and insurance policies andassign premiums to be paid for the policies. In the policy, the carrier states the length andconditions of the agreement, exactly which losses it will provide compensation for, and how 8
    • much will be awarded. The premium charged for the policy is based primarily on the amountto be awarded in case of loss, as well as the likelihood that the insurance carrier will actuallyhave to pay. In order to be able to compensate policyholders for their losses, insurancecompanies invest the money they receive in premiums, building up a portfolio of financialassets and income-producing real estate which can then be used to pay off any futureclaims that may be brought. There are two basic types of insurance carriers: primary andreinsurance. Primary carriers are responsible for the initial underwriting of insurance policiesand annuities, while reinsurance carriers assume all or part of the risk associated with theexisting insurance policies originally underwritten by other insurance carriers.Primary insurance carriers offer a variety of insurance policies. Life insurance providesfinancial protection to beneficiaries—usually spouses and dependent children—upon thedeath of the insured. Disability insurance supplies a preset income to an insured person whois unable to work due to injury or illness, and health insurance pays the expenses resultingfrom accidents and illness. An annuity (a contract or a group of contracts that furnishes aperiodic income at regular intervals for a specified period) provides a steady income duringretirement for the remainder of one‘s life. Property-casualty insurance protects against lossor damage to property resulting from hazards such as fire, theft, and natural disasters.Liability insurance shields policyholders from financial responsibility for injuries to others orfor damage to other people‘s property. Most policies, such as automobile and homeowner‘sinsurance, combine both property-casualty and liability coverage. Companies thatunderwrite this kind of insurance are called property-casualty carriers.Some insurance policies cover groups of people, ranging from a few to thousands ofindividuals. These policies usually are issued to employers for the benefit of their employeesor to unions, professional associations, or other membership organizations for the benefit oftheir members. Among the most common policies of this nature are group life and healthplans. Insurance carriers also underwrite a variety of specialized types of insurance, such asreal-estate title insurance, employee surety and fidelity bonding, and medical malpracticeinsurance.Other organizations in the industry are formed by groups of insurance companies, toperform functions that would result in a duplication of effort if each company carried themout individually. For example, service organizations are supported by insurance companiesto provide loss statistics, which the companies use to set their rates. 9
    • Recent developments. Congressional legislation now allows insurance carriers and otherfinancial institutions, such as banks and securities firms, to sell one another‘s products.More insurance carriers now sell financial products such as securities, mutual funds, andvarious retirement plans. This approach is most common in life insurance companies thatalready sold annuities, but property and casualty companies also are increasingly selling awider range of financial products. In order to expand into one another‘s markets, insurancecarriers, banks, and securities firms have engaged in numerous mergers, allowing themerging companies access to each others client base and geographical markets.Insurance carriers have discovered that the Internet can be a powerful tool for reachingpotential and existing customers. Most carriers use the Internet simply to post companyinformation, such as sales brochures and product information, financial statements, and alist of local agents. However, an increasing number of carriers are starting to expand theirWeb sites to enable customers to access online account and billing information, and somecarriers even allow claims to be submitted online. Many carriers also provide insurancequotes online based on the information submitted by customers on their Internet sites. Infact, some carriers will allow customers to purchase policies through the Internet withoutever speaking to a live agent.In addition to individual carrier-sponsored Internet sites, several ―lead-generating‖ sites haveemerged. These sites allow potential customers to input information about their insurancepolicy needs. For a fee, the sites forward customer information to a number of insurancecompanies, which review the information and, if they decide to take on the policy, contactthe customer with an offer. This practice gives consumers the freedom to accept the bestrate. 10
    • Working ConditionsHours. Many workers in the insurance industry—especially those in administrative supportpositions—work a 5-day, 40-hour week. Those in executive and managerial occupationsoften put in more than 40 hours. There are several occupations in the insurance industrywhere workers may work irregular hours outside of office settings. Those working in salesjobs need to be available for their clients at all times. This accommodation may result inthese individuals working 50 to 60 hours per week. Also, call centers operate 24 hours aday, 7 days a week, so some of their employees must work evening and weekend shifts.The irregular business hours in the insurance industry provide some workers with theopportunity for part-time work. Part-time employees make up 8 percent of the workforce.Work environment. Insurance employees working in sales jobs often visit prospective andexisting customers‘ homes and places of business to market new products and provideservices. Others working in the industry may need to frequently leave the office to inspectdamaged property, and at times can be away from home for days, traveling to the scene ofa disaster—such as a tornado, flood, or hurricane—to work with affected policyholders andgovernment officials.A small, but increasing, number of insurance employees spend most of their time on thetelephone working in call centers, answering questions and providing information toprospective clients or current policyholders. These jobs may include selling insurance,taking claims information, or answering medical questions.As would be expected in an industry dominated by office and sales employees, theincidence of occupational injuries and illnesses among insurance workers is low. In 2006,only 1.3 cases per 100 full-time workers were reported among insurance carriers, while just0.7 cases per 100 full-time workers were reported among agents and brokers. These figurescompare with an average of 4.4 for all private industry. 11
    • EmploymentThe insurance industry had about 2.3 million wage and salary jobs in 2006. Insurancecarriers accounted for 62 percent of jobs, while insurance agencies, brokerages, andproviders of other insurance-related services accounted for 38 percent of jobs.The majority of establishments in the insurance industry were small; however, a few largeestablishments accounted for many of the jobs in this industry. Insurance carriers tend to belarge establishments, often employing 250 or more workers, whereas agencies andbrokerages tend to be much smaller, frequently employing fewer than 20 workers (chart 1).Many insurance carriers‘ home and regional offices are situated near large urban centers.Insurance workers who deal directly with the public are located throughout the country.Almost all of those working in sales work out of local company offices or independentagencies. Many others in the industry work for independent firms in small cities and townsthroughout the country.Occupations in theIndustryAbout 44 percent of insurance workers are in office and administrative support jobs such asthose found in every industry (table 1). Many office and administrative support positions inthe insurance industry, however, require skills and knowledge unique to the industry. About29 percent of insurance workers are in management or business and financial operationsoccupations. About 16 percent of wage and salary employees in the industry are salesworkers, selling policies to individuals and businesses. Several others are employed incomputer and mathematical science occupations.Office and administrative support occupations. Office and administrative supportoccupations in this industry include secretaries, typists, word processors, bookkeepers, andother clerical workers. Secretaries and administrative assistants perform routine clerical andadministrative functions such as drafting correspondence, scheduling appointments, 12
    • organizing and maintaining paper and electronic files, or providing information to callers.Bookkeeping, accounting, and auditing clerks handle all financial transactions andrecordkeeping for an insurance company. They compute, classify, update, and recordnumerical data to keep financial records complete and accurate. Insurance claims andpolicy processing clerks process new policies, modifications to existing policies, and claimsforms. They review applications for completeness, compile data on policy changes, andverify the accuracy of insurance company records. Customer service representatives haveduties similar to insurance claims and policy processing clerks, except they work directlywith customers by processing insurance policy applications, changes, and cancellationsover the phone. They may also process claims and sell new policies to existing clients.These workers recently are taking on increased responsibilities in insurance offices, such ashandling most of the continuing contact with clients. A growing number of customer servicerepresentatives work in call centers that are open 24 hours a day, 7 days a week, wherethey answer clients‘ questions, update policy information, and provide potential clients withinformation regarding the types of policies the company issues.Management, business, and financial operations occupations. Top executives direct theoperations of an independent insurance agency, brokerage, or a large insurance carrier.Marketing managers direct carriers‘ development of new types of policies that might appealto the public and strategies for selling them to customers. Sales managers direct theactivities of the sales workers in local sales offices of insurance carriers and independentagencies. They sell insurance products, work with clients, and supervise staff. Othermanagers who work in their companies home offices are in charge of functions such asactuarial calculations, policy issuance, accounting, and investments.Claims adjusters, appraisers, examiners, and investigators decide whether claims arecovered by the customer‘s policy, estimate and confirm payment, and, when necessary,investigate the circumstances surrounding a claim. Claims adjusters work for property andliability insurance carriers or for independent adjusting firms. They inspect property damage,estimate how much it will cost to repair, and determine the extent of the insurancecompany‘s liability; in some cases, they may help the claimant receive assistance quickly inorder to prevent further damage and begin repairs. Adjusters plan and schedule the workrequired to process claims, which may include interviewing the claimant and witnesses andconsulting police and hospital records. In some property-casualty companies, claimsadjusters are called claims examiners, but in other companies, a claims examiner‘s primary 13
    • job is to review claims to ensure that proper guidelines have been followed. Onlyoccasionally—especially when disasters suddenly increase the volume of claims—do theseexaminers aid adjusters with complicated claims.In the offices of life and health insurance carriers, claims examiners are the counterparts ofthe claims adjuster who works in a property and casualty insurance firm. Examiners in thehealth insurance carriers review health-related claims to see whether the costs arereasonable based on the diagnosis. Examiners check claim applications for completenessand accuracy, interview medical specialists, and consult policy files to verify information on aclaim. Claims examiners in the life insurance carriers review causes of death and also mayreview new applications for life insurance to make sure that the applicants have no seriousillnesses that would prevent them from qualifying for insurance.Insurance investigators handle claims in which companies suspect fraudulent or criminalactivity, such as suspicious fires, questionable workers‘ disability claims, difficult-to-explainaccidents, and dubious medical treatment. Investigators usually perform database searcheson suspects to determine whether they have a history of attempted or successful insurancefraud. Then, the investigators may visit claimants and witnesses to obtain a recordedstatement, take photographs, inspect facilities, and conduct surveillance on suspects.Investigators often consult with legal counsel and are sometimes called to testify as expertwitnesses in court cases.Auto damage appraisers usually are hired by insurance companies and independentadjusting firms to inspect the damage to a motor vehicle after an accident and to provideunbiased estimates of repair cost. Claims adjusters and auto damage appraisers can workfor insurance companies, or they can be independent or public adjusters. Insurancecompanies hire independent adjusters to represent their interests while assisting theinsured, whereas public adjusters are hired to represent the insured‘s interests againstinsurance carriers.Management analysts, often called loss control representatives in the insurance industry,assess various risks faced by insurance companies. These workers inspect the businessoperations of insurance applicants, analyze historical data regarding workplace injuries andautomobile accidents, and assess the potential for natural hazards, dangerous businesspractices, and unsafe workplace conditions that may result in injuries or catastrophic 14
    • physical and financial loss. They might then recommend, for example, that a factory addsafety equipment, that a house be reinforced to withstand environmental catastrophes, orthat incentives be implemented to encourage automobile owners to install air bags in theircars or take more effective measures to prevent theft. Because the changes theyrecommend can greatly reduce the probability of loss, loss control representatives areincreasingly important to both insurance companies and the insured.Underwriting is another important management and business and financial occupation ininsurance. Underwriters evaluate insurance applications to determine the risk involved inissuing a policy. They decide whether to accept or reject an application, and they determinethe appropriate premium for each policy.Sales and related occupations. Insurance sales agents, also referred to as producers,may work as exclusive agents, or captive agents, selling for one company, or asindependent agents selling for several companies. Through regular contact with clients,agents are able to update coverage, assist with claims, ensure customer satisfaction, andobtain referrals. Insurance sales agents may sell many types of insurance, including life,annuities, property-casualty, health, and disability insurance. Many insurance sales agentsare involved in ―cross-selling‖ or ―total account development,‖ which means that, besidesoffering insurance, they have become licensed to sell mutual funds, annuities, and othersecurities. These agents usually find their own customers and ensure that the policies soldmeet the specific needs of their policyholders.Professional and related occupations. The insurance industry employs relatively fewpeople in professional and related occupations, but they are essential to companyoperations. For example, insurance companies‘ lawyers defend clients who are sued,especially when large claims may be involved. These lawyers also review regulations andpolicy contracts. Nurses and other medical professionals advise clients on wellness issuesand on medical procedures covered by the company‘s managed-care plan. Computersystems analysts, computer programmers, and computer support specialists are needed toanalyze, design, develop, and program the systems that support the day-to-day operationsof the insurance company.Actuaries represent a relatively small proportion of employment in the insurance industry,but they are vital to the industry‘s profitability. Actuaries study the probability of an insured 15
    • loss and determine premium rates. They must set the rates so that there is a high probabilitythat premiums paid by customers will cover claims, but not so high that their company losesbusiness to competitorsTable 1. Employment of wage and salary workers in insurance by occupation, 2006 and projected change, 2006-2016. (Employment in thousands) Employment, Percent 2006 Occupation change, Number Percent 2006-16 All occupations 2,316 100.0 7.4Management, business, and financial occupations 661 28.6 8.3 General and operations managers 41 1.8 -1.9 Marketing and sales managers 20 0.9 7.2 Computer and information systems managers 14 0.6 5.9 Financial managers 24 1.0 6.6 Claims adjusters, examiners, and investigators 218 9.4 10.8 Insurance appraisers, auto damage 12 0.5 12.0 Human resources, training, and labor relations 28 1.2 10.9 specialists Management analysts 29 1.2 5.4 Accountants and auditors 40 1.7 7.8 Financial analysts 16 0.7 16.9 Insurance underwriters 91 3.9 5.6 Professional and related occupations 258 11.2 8.6 Computer programmers 21 0.9 -15.1 Computer software engineers 28 1.2 24.7 Computer support specialists 19 0.8 6.8 Computer systems analysts 33 1.4 15.5 Actuaries 11 0.5 5.4 16
    • Table 1. Employment of wage and salary workers in insurance by occupation, 2006 and projected change, 2006-2016. (Employment in thousands) Employment, Percent 2006 Occupation change, Number Percent 2006-16 Market research analysts 12 0.5 6.5 Lawyers 12 0.5 5.6 Title examiners, abstractors, and searchers 23 1.0 -5.5 Registered nurses 25 1.1 6.2 Sales and related occupations 367 15.8 14.4 First-line supervisors/managers of non-retail sales 18 0.8 3.8 workers Insurance sales agents 313 13.5 15.7 Office and administrative support occupations 1,009 43.6 4.0 First-line supervisors/managers of office and 62 2.7 -6.0 administrative support workers Billing and posting clerks and machine operators 18 0.8 -2.5 Bookkeeping, accounting, and auditing clerks 47 2.0 8.9 Customer service representatives 266 11.5 19.2 File clerks 15 0.7 -45.3 Receptionists and information clerks 24 1.0 10.0 Executive secretaries and administrative assistants 57 2.4 8.2 Secretaries, except legal, medical, and executive 62 2.7 -1.5 Data entry keyers 22 0.9 -13.5 Insurance claims and policy processing clerks 222 9.6 -2.6 Mail clerks and mail machine operators, except postal 14 0.6 -21.0 service Office clerks, general 106 4.6 7.8 17
    • Table 1. Employment of wage and salary workers in insurance by occupation, 2006 and projected change, 2006-2016. (Employment in thousands) Employment, Percent 2006 Occupation change, Number Percent 2006-16Note: Columns may not add to due to omission of occupations with small employmentTraining andAdvancementA few jobs in the insurance industry, especially in office and administrative supportoccupations, require no more than a high school diploma. However, employers prefer to hireworkers with a college education for most jobs, including sales, managerial, andprofessional jobs. When specialized training is required, it usually is obtained on the job orthrough independent study during work or after-work hours. Many insurance companiesexpect their employees to take continuing education courses to improve their people skillsand their knowledge of the industry. Opportunities for advancement are relatively good inthe insurance industry.Office and administrative support occupations. Graduation from high school or a 2-yearpostsecondary business program is adequate preparation for most beginning office andadministrative support jobs. Courses in word processing and business math are assets, andthe ability to operate computers is essential. On-the-job training usually is provided forclerical jobs such as customer service representatives. Because representatives in callcenters must be knowledgeable about insurance products in order to provide advice toclients, more States are requiring customer service representatives to become licensed.Several years of experience and training can help beginners advance to higher payingpositions. Office and administrative support workers may also advance to higher payingclaims adjusting positions and entry-level underwriting jobs. 18
    • Management, business, and financial operations occupations. Management, business,and financial jobs require the same college training as similar jobs in other industries.Managerial positions usually are filled by promoting college-educated employees from withinthe company. However, some companies prefer to hire liberal arts graduates at a lower cost,and many insurers send them to company schools or enroll them in outside institutes forprofessional training. A master‘s degree, particularly in business administration or a relatedfield, is an asset for advancement into higher levels of management.For beginning underwriting jobs, many insurance companies prefer college graduates whohave a degree in business administration or a related field. As an underwriter‘scareer develops, it becomes beneficial to earn one of the voluntary professionalcertifications in underwriting. For example, the National Association of Health Underwritersoffers two certification programs: the Registered Health Underwriter (RHU) designation andthe Registered Employee Benefits Consultant (REBC) designation.The American Institute for Chartered Property-Casualty Underwriters (AICPU) offers theCPCU program, which includes courses covering a broad range of insurance, riskmanagement, and general business topics involving both personal and commercial lossexposures. Earning the CPCU designation requires passing 8 exams, meeting arequirement of at least three years of insurance experience, and abiding by the AICPU‘s andCPCU Society‘s code of professional ethics. In conjunction with the Insurance Institute ofAmerica, the AICPCU offers 22 insurance-related educational programs, including claims,underwriting, risk management, and reinsurance.In almost every State, those working as a claims examiner or adjuster must obtain a license.Licensing requirements for these workers vary by State and can include prelicensingeducation or passing a licensing exam. In some cases, professional designations may besubstituted for the exam requirement. Separate or additional requirements may apply topublic adjusters. For example, some States may require public adjusters to file a suretybond. Often, claims adjusters working for companies can work under the company licenseand not need to become licensed themselves. Most companies prefer to hire collegegraduates and those with previous experience or who have obtained licensure for claimsadjuster and examiner positions. No specific college major is required, although mostworkers in these positions have a business, accounting, engineering, legal, or medical 19
    • background. In addition, many adjusters and examiners choose to pursue certaincertifications and designations to distinguish themselves. Many State licenses andprofessional designations require continuing education for renewal. Continuing education isimportant because adjusters and examiners must be knowledgeable about changes in thelaws, recent court decisions, and new medical procedures.Auto damage appraisers typically begin as auto body repairers and then are hired byinsurance companies or independent adjusting firms. Most companies prefer auto damageappraisers to have formal training, and many vocational colleges offer 2-year programs onhow to estimate and repair damaged vehicles. Some States require them to be licensed,and certification may be required or preferred. Computer skills also are an importantqualification for many auto damage appraiser positions. As with adjusters and examiners,continuing education is important for appraisers, because many new car models and repairtechniques are introduced each year.Licensing requirements to become an insurance investigator may vary among States. Mostinsurance companies prefer to hire former law enforcement detectives or privateinvestigators as insurance investigators. Many experienced claims adjusters or examinersalso can become investigators. Most employers look for individuals with ingenuity and whoare persistent and assertive. Investigators must not be afraid of confrontation, shouldcommunicate well, and should be able to think on their feet. Good interviewing andinterrogation skills also are important and usually are developed in earlier careers in lawenforcement.Sales and related occupations. Although some employers hire high school graduates withpotential or proven sales ability for entry-level sales positions, most prefer to hire collegegraduates.All insurance sales agents must obtain licenses in the States in which they plan to sellinsurance. In most States, licenses are issued only to applicants who complete specifiedcourses and pass written examinations covering insurance fundamentals and Stateinsurance laws. New agents receive training from their employer, either at work or at theinsurance company‘s home office. Sometimes, entry-level employees attend company-sponsored classes to prepare for examinations. The National Alliance for InsuranceEducation and Research offers a wide variety of courses in health, life, and property and 20
    • casualty insurance for independent insurance agents. Others study on their own and, as on-the-job training, accompany experienced agents when they meet with prospective clients.After obtaining a license, agents must earn continuing education credits throughout theircareers in order to remain licensed insurance sales agents.Insurance sales agents wishing to sell securities and other financial products must meetState licensing requirements in these areas. Specifically, they must pass an additionalexamination—either the Series 6 or Series 7 licensing exam, both of which are administeredby the Financial Industry Regulatory Authority (FINRA). The Series 6 exam is for individualswho wish to sell only mutual funds and variable annuities; the Series 7 exam is the mainFINRA series license and qualifies agents as general securities representatives. Todemonstrate further competency in financial planning, many agents also find it worthwhile toobtain a certified financial planner (CFP) or chartered financial consultant (ChFC)designation.Sales workers may advance by handling greater numbers of accounts and more complexcommercial insurance policies. They may also choose to start an independent insuranceagency. Many also obtain related designations such as the CPCU underwriting designation,offered by the AICPCU.Professional and related occupations. For actuarial jobs, companies prefer candidates tohave degrees in actuarial science, mathematics, or statistics. However, candidates withdegrees in business, finance, or economics are becoming more common. Actuaries mustpass a series of national examinations to become fully qualified. Completion of all the examstakes from 5 to 10 years. Some of the exams may be taken while an individual is in college,but most require extensive home study. Many companies grant study time to their actuarialstudents to prepare for the exams. 21
    • EarningsIndustry earnings. Weekly earnings of nonsupervisory workers in the insurance industryaveraged $798 in May 2006, considerably higher than the average of $568 for all privateindustry. Earnings of the largest occupations in insurance in May 2006, appear in table 2Table 2. Median hourly earnings of the largest occupations in insurance, May 2006 AllOccupation Insurance industriesGeneral and operations managers $53.02 $40.97Insurance underwriters 25.29 25.17First-line supervisors/managers of office and 24.36 20.92administrative support workersClaims adjusters, examiners, and investigators 23.42 24.36Executive secretaries and administrative assistants 18.70 17.90Bookkeeping, accounting, and auditing clerks 15.55 14.69Insurance claims and policy processing clerks 14.97 14.96Customer service representatives 14.79 13.62Secretaries, except legal, medical, and executive 12.65 13.20clerks, general 11.38 11.40The method by which insurance sales agents are paid varies greatly. Most independentsales agents own their own businesses and are paid a commission only. Sales agents whoOffice are employees of an agency may be paid a salary only, a salary plus commission, ora salary plus a bonus. An agent‘s earnings usually increase rapidly with experience. Manyagencies also pay an agent‘s expenses for automobiles and transportation, travel toconventions, and continuing education.Benefits and union membership. Insurance carriers offer attractive benefits packages, asis frequently the case with large companies. Yearly bonuses, retirement investment plans,insurance, and paid vacation often are standard. Insurance agencies, which generally aresmaller, offer less extensive benefits. 22
    • HISTORICAL PERSPECTIVEThe history of life insurance in India dates back to 1818 when it was conceived as a meansto provide for English Widows. Interestingly in those days a higher premium was charged forIndian lives than the non - Indian lives, as Indian lives were considered more risky to cover.The Bombay Mutual Life Insurance Society started its business in 1870. It was the firstcompany to charge the same premium for both Indian and non-Indian lives.The Oriental Assurance Company was established in 1880. The General insurancebusiness in India, on the other hand, can trace its roots to Triton Insurance CompanyLimited, the first general insurance company established in the year 1850 in Calcutta by theBritish. Till the end of the nineteenth century insurance business was almost entirely in thehands of overseas companies.Insurance regulation formally began in India with the passing of the Life InsuranceCompanies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the1920s and 1930s sullied insurance business in India. By 1938 there were 176 insurancecompanies.The first comprehensive legislation was introduced with the Insurance Act of 1938 thatprovided strict State Control over the insurance business. The insurance business grew at afaster pace after independence. Indian companies strengthened their hold on this businessbut despite the growth that was witnessed, insurance remained an urban phenomenon.The Government of India in 1956, brought together over 240 private life insurers andprovident societies under one nationalized monopoly corporation and Life InsuranceCorporation (LIC) was born. Nationalization was justified on the grounds that it would createthe much needed funds for rapid industrialization. This was in conformity with theGovernments chosen path of State led planning and development.The non-life insurance business continued to thrive with the private sector till 1972. Theiroperations were restricted to organized trade and industry in large cities. The generalinsurance industry was nationalized in 1972. With this, nearly 107 insurers wereamalgamated and grouped into four companies- National Insurance Company, New India 23
    • Assurance Company, Oriental Insurance Company and United India Insurance Company.These were subsidiaries of the General Insurance Company (GIC).KEY MILESTONES1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate thelife insurance business.1928: The Indian Insurance Companies Act enacted to enable the government to collectstatistical information about both life and non-life insurance businesses.1938: Earlier legislation consolidated and amended by the Insurance Act with the objectiveof protecting the interests of the insuring public.1956: 245 Indian and foreign insurers along with provident societies were taken over by thecentral government and nationalized. LIC was formed by an Act of Parliament- LIC Act1956- with a capital contribution of Rs. 5 crore from the Government of India. 24
    • INDUSTRY REFORMSReforms in the Insurance sector were initiated with the passage of the IRDA Bill inParliament in December 1999. The IRDA since its incorporation as a statutory body in April2000 has fastidiously stuck to its schedule of framing regulations and registering the privatesector insurance companies. Since being set up as an independent statutory body the IRDAhas put in a framework of globally compatible regulations.The other decision taken simultaneously to provide the supporting systems to the insurancesector and in particular the life insurance companies was the launch of the IRDA onlineservice for issue and renewal of licenses to agents. The approval of institutions for impartingtraining to agents has also ensured that the insurance companies would have a trainedworkforce of insurance agents in place to sell their productsMost of the present day Life Insurance Companies in India are joint ventures between Indiangroups and conglomerates and global insurance companies. The terms of the joint venturesinclude a majority stake holding of Indian partner in the JV. The life insurance deals includea detail information guide to the customer from the insurance agent or broker citing thevarious insurance plans and policies available, the insurance premium estimates andestimate of the prices of the insurance policy short listed, the guidelines and terms of theinsurance company and many such info.The life insurance companies work in close association with the life insurance agents andbrokers. Special training and education is provided to each insurance agent or broker aboutthe facts of life insurance, how it works, industry info, insurance leads, types of insurancepolicies on offer, claims settlements, life insurance laws in India, knowledge about the returnof premium procedure of the life insurance company and the tax savings the insurance policywould provide.Besides the usual life insurance services covering individual insurance, group life insurance,family insurance, health insurance and medi claims, Life insurance products in India are alsodesigned for special target groups like: 25
    • For seniors over 50, over 65 etcFor kids or childrenFor diabeticsFor the elderlyFor HIV patientsThe ratings and reviews of the Life Insurance Companies in India are available onlinewhere you can check the rankings and rating of the insurance company you wish tobuy a policy from. You can make comparison among the various life insurancepolicies on offer by the life insurance companies of India.A comprehensive list of the major insurance companies has been provided here withcompete profile of the company, their insurance products and policies, the terms andstatistics of the insurance providers etc.Every company has different policy to offer. You just need to choose which is the bestfor you. The amount for which you want to take the policy, the tenure of policy and theamount you want to pay in each installments, all these factors you need to keep inmind and then choose the company which fulfills all your needs and provides fulltransparency 26
    • PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIAThe life insurance industry in India grew by an impressive 47.38%, with premium income atRs. 1560.41 billion during the fiscal year 2006-2007. Though the total volume of LICsbusiness increased in the last fiscal year (2006-2007) compared to the previous one, itsmarket share came down from 85.75% to 81.91%.The 17 private insurers increased their market share from about 15% to about 19% in ayears time. The figures for the first two months of the fiscal year 2007-08 also speak of thegrowing share of the private insurers. The share of LIC for this period has further comedown to 75 percent, while the private players have grabbed over 24 percent.With the opening up of the insurance industry in India many foreign players have enteredthe market. The restriction on these companies is that they are not allowed to have morethan a 26% stake in a company‘s ownership.Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billionhave poured into the Indian market and 19 private life insurance companies have beengranted licenses.Innovative products, smart marketing, and aggressive distribution have enabled fledglingprivate insurance companies to sign up Indian customers faster than anyone expected.Indians, who had always seen life insurance as a tax saving device, are now suddenlyturning to the private sector and snapping up the new innovative products on offer. Some ofthese products include investment plans with insurance and good returns (unit linked plans),multi – purpose insurance plans, pension plans, child plans and money back plans.(www.wikipedia.com) 27
    • CHAPTER-IIIntroduction to the Organization 28
    • HDFC STANDARD LIFE INSURANCE COMPANY LIMITEDLife insuranceLife insurance or life assurance is a contract between the policy owner and the insurer,where the insurer agrees to pay a sum of money upon the occurrence of the insuredindividuals or individuals death or other event, such as terminal illness or critical illness. Inreturn, the policy owner agrees to pay a stipulated amount called a premium at regularintervals or in lump sums. There may be designs in some countries where bills and deathexpenses plus catering for after funeral expenses should be included in Policy Premium. Inthe United States, the predominant form simply specifies a lump sum to be paid on theinsureds demise.As with most insurance policies, life insurance is a contract between the insurer and thepolicy owner whereby a benefit is paid to the designated beneficiaries if an insured eventoccurs which is covered by the policy.The value for the policyholder is derived, not from an actual claim event, rather it is the valuederived from the peace of mind experienced by the policyholder, due to the negating ofadverse financial consequences caused by the death of the Life Assured.To be a life policy the insured event must be based upon the lives of the people named inthe policy.Insured events that may be covered include: Serious illnessLife policies are legal contracts and the terms of the contract describe the limitations of theinsured events. Specific exclusions are often written into the contract to limit the liability ofthe insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.Life-based contracts tend to fall into two major categories: Protection policies - designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. 29
    • Investment policies - where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US anyway) are whole life, universal life and variable life policies.OverviewParties to contractThere is a difference between the insured and the policy owner (policy holder), although theowner and the insured are often the same person. For example, if Joe buys a policy on hisown life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joeslife, she is the owner and he is the insured. The policy owner is the guarantee and he or shewill be the person who will pay for the policy. The insured is a participant in the contract, butnot necessarily a party to it.The beneficiary receives policy proceeds upon the insureds death. The owner designatesthe beneficiary, but the beneficiary is not a party to the policy. The owner can change thebeneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocablebeneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, orcash value borrowing.In cases where the policy owner is not the insured (also referred to as the celui qui vit orCQV), insurance companies have sought to limit policy purchases to those with an"insurable interest" in the CQV. For life insurance policies, close family members andbusiness partners will usually be found to have an insurable interest. The "insurable interest"requirement usually demonstrates that the purchaser will actually suffer some kind of loss ifthe CQV dies. Such a requirement prevents people from benefiting from the purchase ofpurely speculative policies on people they expect to die. With no insurable interestrequirement, the risk that a purchaser would murder the CQV for insurance proceeds wouldbe great. In at least one case, an insurance company which sold a policy to a purchaser withno insurable interest (who later murdered the CQV for the proceeds), was found liable incourt for contributing to the wrongful death of the victim (Liberty National Life v. Weldon, 267Ala.171 (1957)). 30
    • Contract terms Special provisions may apply, such as suicide clauses wherein the policy becomes null if the insured commits suicide within a specified time (usually two years after the purchase date; some states provide a statutory one-year suicide clause). Any misrepresentation by the insured on the application is also grounds for nullification. Most US states specify that the contestability period cannot be longer than two years; only if the insured dies within this period will the insurer have a legal right to contest the claim on the basis of misrepresentation and request additional information before deciding to pay or deny the claim.The face amount on the policy is the initial amount that the policy will pay at the death of theinsured or when the policy matures, although the actual death benefit can provide forgreater or lesser than the face amount. The policy matures when the insured dies orreaches a specified age (such as 100 years old).Costs, insurability, and underwritingThe insurer (the life insurance company) calculates the policy prices with intent to fundclaims to be paid and administrative costs, and to make a profit. The cost of insurance isdetermined using mortality tables calculated by actuaries. Actuaries are professionals whoemploy actuarial science, which is based in mathematics (primarily probability andstatistics). Mortality tables are statistically-based tables showing expected annual mortalityrates. It is possible to derive life expectancy estimates from these mortality assumptions.Such estimates can be important in taxation regulationThe three main variables in a mortality table have been age, gender, and use of tobacco.More recently in the US, preferred class specific tables were introduced. The mortality tablesprovide a baseline for the cost of insurance. In practice, these mortality tables are used inconjunction with the health and family history of the individual applying for a policy in orderto determine premiums and insurability. Mortality tables currently in use by life insurancecompanies in the United States are individually modified by each company using pooledindustry experience studies as a starting point. In the 1980s and 90s the SOA 1975-80Basic Select & Ultimate tables were the typical reference points, while the 2001 VBT and2001 CSO tables were published more recently. The newer tables include separate mortality 31
    • tables for smokers and non-smokers and the CSO tables include separate tables forpreferred classes.Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking malesaged 25 will die during the first year of coverage after underwriting. Mortality approximatelydoubles for every extra ten years of age so that the mortality rate in the first year forunderwritten non-smoking men is about 2.5 in 1,000 people at age 65.Compare this with theUS population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (withoutregard to health or smoking status).The mortality of underwritten persons rises much more quickly than the general population.At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year.Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all ofaverage health, a life insurance company would have to collect approximately $50 a yearfrom each of a large group to cover the relatively few expected claims. (0.35 to 0.66expected deaths in each year x $100,000 payout per death = $35 per policy). Administrativeand sales commissions need to be accounted for in order for this to make business sense. A10 year policy for a 25 year old non-smoking male person with preferred medical historymay get offers as low as $90 per year for a $100,000 policy in the competitive US lifeinsurance market.The insurance company receives the premiums from the policy owner and invests them tocreate a pool of money from which it can pay claims and finance the insurance companysoperations. Contrary to popular belief, the majority of the money that insurance companiesmake comes directly from premiums paid, as money gained through investment ofpremiums can never, in even the most ideal market conditions, vest enough money per yearto pay out claimsRates charged for life insurance increase with the insurers age because, statistically, peopleare more likely to die as they get older.Given that adverse selection can have a negative impact on the insurers financial situation,the insurer investigates each proposed insured individual unless the policy is below acompany-established minimum amount, beginning with the application process. GroupInsurance policies are an exception. 32
    • This investigation and resulting evaluation of the risk is termed underwriting. Health andlifestyle questions are asked. Certain responses or information received may merit furtherinvestigation. Life insurance companies in the United States support the Medical InformationBureau (MIB), which is a clearinghouse of information on persons who have applied for lifeinsurance with participating companies in the last seven years. As part of the application,the insurer receives permission to obtain information from the proposed insuredsphysicians.[5]Underwriters will determine the purpose of insurance. The most common is to protect theowners family or financial interests in the event of the insurers demise. Other purposesinclude estate planning or, in the case of cash-value contracts, investment for retirementplanning. Bank loans or buy-sell provisions of business agreements are another acceptablepurpose.Life insurance companies are never required by law to underwrite or to provide coverage toanyone, with the exception of Civil Rights Act compliance requirements. Insurancecompanies alone determine insurability, and some people, for their own health or lifestylereasons, are deemed uninsurable. The policy can be declined (turned down) or rated Ratingincreases the premiums to provide for additional risks relative to the particular insuredMany companies use four general health categories for those evaluated for a life insurancepolicy. These categories are Preferred Best, Preferred, Standard, and TobaccoPreferred Best is reserved only for the healthiest individuals in the general population. Thismeans, for instance, that the proposed insured has no adverse medical history, is not undermedication for any condition, and his family (immediate and extended) has no history ofearly cancer, diabetes, or other conditions. Preferred means that the proposed insured iscurrently under medication for a medical condition and have a family history of particularillnessesMost people are in the Standard category. Profession, travel, and lifestyle factor intowhether the proposed insured will be granted a policy, and which category the insured falls.For example, a person who would otherwise be classified as Preferred Best may be denieda policy if he or she travels to a high risk country.Underwriting practices can vary frominsurer to insurer which provide for more competitive offers in certain circumstances. 33
    • Life insurance contracts are written on the basis of utmost good faith. That is, the proposerand the insurer both accept that the other is acting in good faith. This means that theproposer can assume the contract offers what it represents without having to fine comb thesmall print and the insurer assumes the proposer is being honest when providing details tounderwriter.Death proceedsUpon the insureds death, the insurer requires acceptable proof of death before it pays theclaim. The normal minimum proof required is a death certificate and the insurers claim formcompleted, signed (and typically notarized If the insureds death is suspicious and the policyamount is large, the insurer may investigate the circumstances surrounding the death beforedeciding whether it has an obligation to pay the claim.Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid overtime in regular recurring payments for either a specified period or for a beneficiarys lifetime.Insurance vs AssuranceThe specific uses of the terms "insurance" and "assurance" are sometimes confused. Ingeneral, in these jurisdictions "insurance" refers to providing cover for an event that mighthappen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that iscertain to happen. "Insurance" is the generally accepted term, however, people using thisdescription are liable to be corrected. In the United States both forms of coverage are called"insurance", principally due to many companies offering both types of policy, and rather thanrefer to themselves using both insurance and assurance titles, they instead use just one.Types of life insuranceLife insurance may be divided into two basic classes – temporary and permanent orfollowing subclasses - term, universal, whole life and endowment life insurance. 34
    • TEMPORARY TERMTerm assurance: provides for life insurance coverage for a specified term of years for aspecified premium. The policy does not accumulate cash value. Term is generallyconsidered "pure" insurance, where the premium buys protection in the event of death andnothing else.The three key factors to be considered in term insurance are: face amount (protection ordeath benefit), premium to be paid (cost to the insured), and length of coverage (term).Various insurance companies sell term insurance with many different combinations of thesethree parameters. The face amount can remain constant or decline. The term can be for oneor more years. The premium can remain level or increase. A common type of term is calledannual renewable term. It is a one year policy but the insurance company guarantees it willissue a policy of equal or lesser amount without regard to the insurability of the insured andwith a premium set for the insureds age at that time. Another common type of terminsurance is mortgage insurance, which is usually a level premium, declining face valuepolicy. The face amount is intended to equal the amount of the mortgage on the policyowner‘s residence so the mortgage will be paid if the insured dies.A policy holder insures his life for a specified term. If he dies before that specified term is up,his estate or named beneficiary receives a payout. If he does not die before the term is up,he receives nothing. In the past these policies would almost always exclude suicide.However, after a number of court judgments against the industry, payouts do occur on deathby suicide (presumably except for in the unlikely case that it can be shown that the suicidewas just to benefit from the policy). Generally, if an insured person commits suicide withinthe first two policy years, the insurer will return the premiums paid. However, a death benefitwill usually be paid if the suicide occurs after the two year period.Permanent Life InsurancePermanent life insurance is life insurance that remains in force (in-line) until the policymatures (pays out), unless the owner fails to pay the premium when due (the policy expiresOR policies lapse). The policy cannot be canceled by the insurer for any reason except 35
    • fraud in the application, and that cancellation must occur within a period of time defined bylaw (usually two years). Permanent insurance builds a cash value that reduces the amountat risk to the insurance company and thus the insurance expense over time. This meansthat a policy with a million dollar face value can be relatively expensive to a 70 year old. Theowner can access the money in the cash value by withdrawing money, borrowing the cashvalue, or surrendering the policy and receiving the surrender value.The four basic types of permanent insurance are whole life, universal life, limited pay andendowment.Whole life coverageWhole life insurance provides for a level premium, and a cash value table included in thepolicy guaranteed by the company. The primary advantages of whole life are guaranteeddeath benefits, guaranteed cash values, fixed and known annual premiums, and mortalityand expense charges will not reduce the cash value shown in the policy. The primarydisadvantages of whole life are premium inflexibility, and the internal rate of return in thepolicy may not be competitive with other savings alternatives. Riders are available that canallow one to increase the death benefit by paying additional premium. The death benefit canalso be increased through the use of policy dividends. Dividends cannot be guaranteed andmay be higher or lower than historical rates over time. Premiums are much higher than terminsurance in the short-term, but cumulative premiums are roughly equal if policies are kept inforce until average life expectancy.Cash value can be accessed at any time through policy "loans". Since these loans decreasethe death benefit if not paid back, payback is optional. Cash values are not paid to thebeneficiary upon the death of the insured; the beneficiary receives the death benefit only. Ifthe dividend option: Paid up additions is elected, dividend cash values will purchaseadditional death benefit which will increase the death benefit of the policy to the namedbeneficiary.Universal life coverageUniversal life insurance (UL) is a relatively new insurance product intended to providepermanent insurance coverage with greater flexibility in premium payment and the potentialfor a higher internal rate of return. There are several types of universal life insurance policies 36
    • which include "interest sensitive" (also known as "traditional fixed universal life insurance"),variable universal life insurance, and equity indexed universal life insurance.A universal life insurance policy includes a cash account. Premiums increase the cashaccount. Interest is paid within the policy (credited) on the account at a rate specified by thecompany. Mortality charges and administrative costs are then charged against (reduce) thecash account. The surrender value of the policy is the amount remaining in the cash accountless applicable surrender charges, if any.With all life insurance, there are basically two functions that make it work. Theres a mortalityfunction and a cash function. The mortality function would be the classical notion of poolingrisk where the premiums paid by everybody else would cover the death benefit for the oneor two who will die for a given period of time. The cash function inherent in all life insurancesays that if a person is to reach age 95 to 100 (the age varies depending on state andcompany), then the policy matures and endows the face value of the policy.Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age95, then the mortality function alone will not be able to cover the cash function. So in orderto cover the cash function, a minimum rate of investment return on the premiums will berequired in the event that a policy matures.Universal life insurance addresses the perceived disadvantages of whole life. Premiums areflexible. Depending on how interest is credited, the internal rate of return can be higherbecause it moves with prevailing interest rates (interest-sensitive) or the financial markets(Equity Indexed Universal Life and Variable Universal Life). Mortality costs andadministrative charges are known. And cash value may be considered more easilyattainable because the owner can discontinue premiums if the cash value allows it. Anduniversal life has a more flexible death benefit because the owner can select one of twodeath benefit options, Option A and Option B.Option A pays the face amount at death as its designed to have the cash value equal thedeath benefit at maturity (usually at age 95 or 100). With each premium payment, the policyowner is reducing the cost of insurance until the cash value reaches the face amount uponmaturity. 37
    • Option B pays the face amount plus the cash value, as its designed to increase the netdeath benefit as cash values accumulate. Option B offers the benefit of an increasing deathbenefit every year that the policy stays in force. The drawback to option B is that becausethe cash value is accumulated "on top of" the death benefit, the cost of insurance neverdecreases as premium payments are made. Thus, as the insured gets older, the policyowner is faced with an ever increasing cost of insurance (it costs more money to provide thesame initial face amount of insurance as the insured gets older).Limited-payAnother type of permanent insurance is Limited-pay life insurance, in which all the premiumsare paid over a specified period after which no additional premiums are due to keep thepolicy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age65.EndowmentsEndowments are policies in which the cash value built up inside the policy, equals the deathbenefit (face amount) at a certain age. The age this commences is known as theendowment age. Endowments are considerably more expensive (in terms of annualpremiums) than either whole life or universal life because the premium paying period isshortened and the endowment date is earlier.In the United States, the Technical Corrections Act of 1988 tightened the rules on taxshelters (creating modified endowments). These follow tax rules as annuities and IRAs do.Endowment Insurance is paid out whether the insured lives or dies, after a specific period(e.g. 15 years) or a specific age (e.g. 65).Accidental DeathAccidental death is a limited life insurance that is designed to cover the insured when theypass away due to an accident. Accidents include anything from an injury, but do not typically 38
    • cover any deaths resulting from health problems or suicide. Because they only coveraccidents, these policies are much less expensive than other life insurances.It is also very commonly offered as "accidental death and dismemberment insurance", alsoknown as an AD&D policy. In an AD&D policy, benefits are available not only for accidentaldeath, but also for loss of limbs or bodily functions such as sight and hearing, etc.Accidental death and AD&D policies very rarely pay a benefit; either the cause of death isnot covered, or the coverage is not maintained after the accident until death occurs. To beaware of what coverage they have, an insured should always review their policy for what itcovers and what it excludes. Often, it does not cover an insured who puts themselves at riskin activities such as: parachuting, flying an airplane, professional sports, or involvement in awar (military or not). Also, some insurers will exclude death and injury caused by proximatecauses due to (but not limited to) racing on wheels and mountaineering.Accidental death benefits can also be added to a standard life insurance policy as a rider. Ifthis rider is purchased, the policy will generally pay double the face amount if the insureddies due to an accident. This used to be commonly referred to as a double indemnitycoverage. In some cases, some companies may even offer a triple indemnity cov 39
    • INTRODUCTIONHDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emergedas the largest residential mortgage finance institution in the country. The corporation hashad a series of share issues raising its capital to Rs. 119 Crores. The gross premium incomefor the year ending March 31, 2007 stood at Rs. 2,856 Crores and new business premiumincome at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year endingMarch 31, 2007.HDFC operates through almost 450 locations throughout the country with its corporate headquarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE with serviceassociates in Kuwait, Oman and Qatar. HDFC is the largest housing company in India forthe last 27 years. SNAPSHOT-I Incorporated in 1977 as the first specialized Mortgage Company in India. Almost 90% of initial shareholding in the hands of domestic institutes and retail investors. Current 77% of shares held by foreign institutional investors. Besides the core business of mortgage HDFC has evolved into a financial conglomerate with holdings In:  HDFC Standard Life insurance Company- HDFC holds 78.07 %.  HDFC Asset Management Company – HDFC holds 50.1%  HDFC Bank- HDFC holds 22.25%.  Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.  HDFC Chubb General Insurance Company – HDFC holds 74%. 40
    • SNAPSHOT-II Loan Approvals Rs. 805 billion. (up to Dec 2007) (US $ 18.30 bn.) Loan Disbursements Rs.669 billion (up to Dec. 2007) (US $ 15.20 bn) Housing Units Financed 2.5 million. Distribution  Offices 181  Outreach Programs 90KEY PLAYERSMr. Deepak S Parekh is the Chairman of the Company. He is also the Executive Chairmanof Housing Development Finance Corporation Limited (HDFC Limited). He joined HDFCLimited in a senior management position in 1978. He was inducted as a whole-time directorof HDFC Limited in 1985 and was appointed as its Executive Chairman in 1993. He is theChief Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of CharteredAccountants (England & Wales).Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company sinceNovember, 2000. Prior to this, he was the Managing Director of HDFC Limited since 1993.Mr. Satwalekar obtained a Bachelors Degree in Technology from the Indian Institute ofTechnology, Bombay and a Masters Degree in Business Administration from The AmericanUniversity, Washington DC. 41
    • GROUP COMPANIESHDFC Bank: World Class Indian Bank- among the top private banks in India.HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.Intelenet Global: BPO services for international customers.CIBIL: Credit Information Bureau India Limited.HDFC Chubb: Upcoming Private companies in the field of General Insurance.HDFC Mutual FundHDFC reality.com: Helps to search properties in all major cities in IndiaHDFC securities 42
    • STANDARD LIFEStandard Life is Europe‘s largest mutual life assurance company. Standard Life, which hasbeen in the life insurance business for the past 175 years is a modern company survivingquite a few changes since selling its first policy in 1825. The company expanded in the 19thcentury from kits original Edinburgh premises, opening offices in other towns and acquittingother similar businesses.Standard Life Currently has assets exceeding over £ 70 billion under its management andhas the distinction of being accorded ―AAA‖ rating consequently for the six years byStandard and Poor. SNAPSHOT Founded in 1875, company supporting generation for last 179 years. Currently over 5 million Policy holders benefiting from the services offered. Europe‘s largest mutual life insurer. 43
    • JOINT VENTUREHDFC Standard Life Insurance Company Limited was one of the first companies to begranted license by the IRDA to operate in life insurance sector. Reach of the JV player ishighly rated and been conferred with many awards. HDFC is rated ‗AAA ‘ by both CRISILand ICRA. Similarly, Standard Life is rated ‗AAA‘ both by Moody‘s and Standard and Poor‘s.These reflect the efficiency with which HDFC and Standard Life manage their asset base ofRs. 15,000 Cr and Rs. 600,000 Cr. respectively.HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000. HDFCis the majority stakeholder in the insurance JV with 81.4% staple and Standard of as astaple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture.HDFC Standard Life Insurance Company Ltd. Is one of India‘s leading Private LifeInsurance Companies, which offers a range of individual and group insurance solutions. It isa joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.)India‘s leading housing finance institution and the Standard Life Assurance Company, aleading provider of financial services from the United Kingdom. Both the promoters are willknown for their ethical dealings and financial strength and are thus committed to being along-term player in the life insurance industry- all important factors to consider whenchoosing your insurer. 44
    • BUSINESS GROWTHTrack Record so farThe gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs. 2,856crores and new business premium income at Rs. 1,624 crores.The company has covered over 8,77,000 lives year ending March 31, 2007. Company alsodeclared our 5th consecutive bonus in as many years for our ‗with profit‘ policyholders. KEY STRENGTHFinancial ExpertiseAs a joint venture of leading financial services groups. HDFC standard Life has the financialexpertise required to manage long-term investments safely and efficiently.Range of SolutionsHDFC SLIC has a range of individual and group solutions, which can be easily customizedto specific needs. These group solutions have been designed to offer complete flexibilitycombined with a low charging structure.Strong Ethical Values:HDFC SLIC is an ethical and Cultural Organization. False selling or false commitment withthe customers is not allowed.Most respected Private Insurance CompanyHDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World ClassMagazine Business World for Integrity, Innovation and Customer Care. 45
    • CORPORATE OBJECTIVEVisionThe most successful and admired life insurance company, which means that we are themost trusted company, the easiest to deal with, offer the best value for money, and set thestandards in the industry.The most obvious choice for all.Values.Integrity.Innovation.Customer centric.People Care One for all.Teamwork.Joy and Simplicity PRODUCTS & SERVICESThe right investment strategies wont just help plan for a more comfortable tomorrow -- theywill help you get ―Sar Utha ke Jiyo‖. At HDFC SLIC, life insurance plans are created keepingin mind the changing needs of family. Its life insurance plans are designed to provide youwith flexible options that meet both protection and savings needs. It offers a full range oftransparent, flexible and value for money products. HDFC SLIC products are modern andcontemporary unitized products that offer unique customer benefits like flexibility to choosecover levels, indexation and partial withdrawals. (Source: www.hdfcslic.com) 46
    • PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE INSURANCE Individual ProductsProtection Plans A person can protect his family against the loss of his income or the burden of a loan in the event of his unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Protection range includes our Term Assurance Plan & Loan Cover Term Assurance Plan.Investment Plans HDFC SLIC‘s Single Premium Whole of Life plan is well suited to meet long term investment needs. This provides attractive long term returns through regular bonuses.Pension Plans Pension Plans help to secure financial independence even after retirement. Pension range includes Personal Pension Plan, Unit Linked Pension, Unit Linked Pension Plus.Savings Plans Savings Plans offer a flexible option to build savings for future needs such as buying a dream home or fulfilling your children‘s immediate and future needs. Savings range includes Endowment Assurance Plan, Unit Linked Endowment, Unit Linked Endowment Plus, Unit Linked Endowment Plus II, Money Back, Unit Linked Enhanced Life Protection II, Childrens Plan, Unit Linked Young Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus II. 47
    • Group ProductsOne-stop shop for employee-benefit solutionsHDFC Standard Life has the most comprehensive list of products for progressive employerswho wish to provide the best and most innovative employee benefit solutions to theiremployees. It offers different products for different needs of employers ranging from terminsurance plans for pure protection to voluntary plans such as superannuation and leaveencashment.HDFC SLIC offers the following group products to esteemed corporate clients: Group Term Insurance Group Variable Term Insurance Group Unit-Linked Plan An investment solution that provides funding vehicle to manage corpuses with Gratuity, Defined Benefit or Defined Contribution Superannuation or Leave Encashment schemes of your company Also suitable for other employee benefit schemes such as salary saving schemes and wealth management schemes 48
    • Social ProductDevelopment Insurance PlanDevelopment Insurance plan is an insurance plan which provides life cover to members of aDevelopment Agency for a term of one year. On the death of any member of the groupinsured during the year of cover, a lump sum is paid to those member beneficiaries to helpmeet some of the immediate financial needs following their loss. Eligibility Members of the development agency and their spouses with: - Minimum age at the start of the policy 18 years last birthday - Maximum age at the start of policy 50 years last birthday Employees of the Development Agency are not eligible to join the group. The group to be covered is only eligible if it contains more than 500 members. Premium Payments The premium to be paid will be quoted per member in the group and will be the same for all members of the group. The premium can only be paid by the Development Agency as a single lump sum that includes all premiums for the group to be covered. Cover will not start until the premium and all the member information in our specified format has been received. 49
    • BenefitsOn the death of each member covered by the policy during the year of cover a lump sumequal to the sum assured will be paid to their beneficiaries or legal heirs. Where the deathis as a result of an accident, an additional lump sum will be paid equal to half the sumassured. There are no benefits paid at the end of the year of cover and there is nosurrender value available at any time.The role of the Development AgencyDue to the nature of the groups covered, HDFC Standard Life will be passing certainadministrative tasks onto the Development Agency. By passing on these tasks thepremium charged can be lower. These tasks would include: Submission of member data in a specified computer format Collection of premiums from group members Recording changes in the details of group members Disbursement of claim payments and the mortality rebate (if any) to group membersThese tasks would be in addition to the usual duties of a policyholder such as: Payment of premiums Reporting of claims Keeping policy holder information up to dateTraining and support will be available to give guidance on how to complete the tasksappropriately. Since these additional tasks will impose a burden on the DevelopmentAgency, the Development Agency may charge a Rs. 10 administration fee to theirmembers. 50
    • TATA AIG LIFE INSURANCE COMPANY LIMITEDIntroductionTata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company,formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Lifecombines the Tata Group‘s pre-eminent leadership position in India and AIG‘s globalpresence as the world‘s leading international insurance and financial services organization.The Tata Group holds 74 per cent stake in the insurance venture with AIG holding thebalance 26 percent. Tata AIG Life provides insurance solutions to individuals and corporate.Tata AIG Life Insurance Company was licensed to operate in India on February 12, 2001and started operations on April 1, 2001.THE TATA GROUPThe Tata Group is one of Indias largest and most respected business conglomerates, withrevenues in 2004-05 of $17.8 billion (Rs. 799,118 million), the equivalent of about 2.8 percent of the countrys GDP. Tata companies together employ some 215,000 people. TheGroups 32 publicly listed enterprises - among them standout names such as Tata Steel,Tata Consultancy Services, Tata Motors and Tata Tea - have a combined marketcapitalization that is the highest among Indian business houses in the private sector, and ashareholder base of over 2 million. The Tata Group has operations in more than 40countries across six continents, and its companies export products and services to 140nations.AIGAmerican International Group, Inc. (AIG), world leaders in insurance and financial services,is the leading international insurance organization with operations in more than 130countries and jurisdictions. AIG companies serve commercial, institutional and individualcustomers through the most extensive worldwide property-casualty and life insurancenetworks of any insurer. In addition, AIG companies are leading providers of retirement 51
    • services, financial services and asset management around the world. AIGs common stockis listed on the New York Stock Exchange as well as the stock exchanges in London, Paris,Switzerland and Tokyo.Tata AIG has strong brand name and recall factor which most of its competitors lack in.Other than the public behemoth Life Insurance Corporation (LIC) of India which has a majorhold in the market share (of approximately 79%), the private players too are having moreand more opportunities to tighten their hold of the market. Of the private players, ICICIPrudential comes first with an almost 4.50% of the market share followed by Tata AIG withabout 2.10% of the pie. The private players have everything to work for, especially with LICnot meeting the needs of its clientele with respect to the services they need. This provides aprospect for the private sector players to increase their share of the market. Companies witha familiarity such as Tata AIG can especially achieve their targets due to the brand imagethat the Tata group has.(Source: www.tata-aig-life.com)A recent survey conducted by the Voluntary Organization in Interest of Consumer Education(VOICE) revealed Tata AIG Life Insurance Company (Tata AIG Life) as the clear winner interms of customer satisfaction in the life insurance category. This is Indias first-evercustomer satisfaction study for the insurance sector.The survey also revealed that Tata AIG Life had a high recall as a reputed brand name. Theability to provide innovative and customer-focused service such as allowing the maximumgrace period for premium payment has not only further distinguished Tata AIG Life fromother life insurance companies but also appealed to consumers.PRODUCTS & SERVICES:Corporate life insurance products: Employee Benefits Credit Life Group Pensions Workplace Solutions 52
    • Individual life insurance products: Health First Health Protector Mahalife InvestAssure II, InvestAssure Gold Shubh life, Nirbhay lifeWith respect to individual life insurance products, Tata AIG has an array of policies to suitthe needs and requirements of all age groups viz, children, students, adults, retirees etc.The ‗SUPPORT‘ arm of Tata AIG Life is constituted of Operations, Human Resources,Marketing, Corporate Training, Finance and Compliance.Tata AIG Life possesses the philosophy and drive to customize retirement obligations (forthe company) which occur in the form of cash outflows, for the maximum benefit of both theemployer and the departing employee. Points of Parity Funds available with ULIP Plans General Description Nature of Investments Risk Category Primarily invested in company Equity Funds stocks with the general aim of capital High appreciation Invested in corporate bonds,Income, Fixed Interest government securities and other fixed Medium and Bond Funds income instruments Sometimes known as Money Market Funds — invested in cash, Cash Funds Low bank deposits and money market instruments Combining equity investment Balanced Funds Medium with fixed interest instruments 53
    • Generally all life insurance companies have three types of fund which are Equity fund, Debtfund and Balance fund. These fund have different risk profile. Equity fund has high risk but itgives high return, Debt fund has low risk so it gives low return and Balanced fund iscombination of both Equity and Debt fund so risk is medium and return is also low.Both HDFC SLIC and Tata AIG LIC have 7 types of funds based on combination of Debt–Equity fund. These are liquid fund, stable managed fund, secure managed fund, defensivemanaged fund, balanced managed fund, equity managed fund, growth fund.IndexationYou have the option to increase your regular premiums by an indexation rate at any policyanniversary to protect the real value of your investment against inflation. The rate ofindexation will be in line with the increase in the Whole Sale Price Index (or in the event thatthis Index ceases to be published such other index as the Company may select for thispurpose). The base sum assured and sum assured of any attached rider would also beincreased by the corresponding indexation increase. Charges, Fees and Deductions in ULIP Premium Allocation ChargeThis is a premium-based charge. After deducting this charge from premiums, the remainderis invested to buy units. The Allocation charges are guaranteed for the entire duration ofpolicy term. Mortality ChargeThe Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the FundValue pertaining to regular premiums). It will be deducted by monthly cancellation of unitsfrom the accumulation unit account. The Mortality Charge shall remain guaranteedthroughout the policy term. 54
    • Fund Management Charge1% p.a. on With Profits Fund, 1% p.a. on Debt Fund, 1.25% p.a. on Balanced Fund and1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on adaily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by theIRDA. Policy Administration ChargeRs. 60 per month, which will increase by 5% p.a. on the 1st of January each year. PAC willbe deducted monthly by cancellation of units from the accumulation unit account. Ifpremiums are discontinued, this charge would reduce to 60% of the charge applicable forthe premium paying policies Surrender ChargeThis is the charge that applies when the policy is surrendered. It is equal to 50% of thedifference between regular premiums expected and those paid in the first year of thecontract. Service Tax Deductions12.36% service tax is applicable on the first premium of life insurance policy.Tax BenefitsTax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961.Insurance is tax free up to Rs. 100000 per annum and the returns on investment on maturityof the policy are also tax free. 55
    • RIDERS AND BONUSES HDFC Standard Life Tata AIG Life Insurance Insurance Free Look Period 15 days 15 days Based on companys Based on companys Reversionary Bonus performance performance Based on companys Based on companys Terminal Bonus performance performance TOP UP Minimum Rs. 5000 Minimum Rs. 5000 Riders Gives on diagnosis of Gives on diagnosis of Critical Illness (CI) Benefit anyone anyone of 6 critical illness of 12 critical illness Additional Term Benefit Provides Provides (ATB) Accidental Death Benefit Provides Provides (ADB) Double Benefit Provides Does not provide Triple Benefit Provides Does not provide Payer Benefit Rider (PBR) Does not provide Provides Waiver of Premium (WOP) Provides Provides Benefit POINTS OF DIFFERENCE HDFC Standard Life Tata AIG Life Insurance Insurance Grace Period 15 days 31 daysPolicy Administration Charge Rs. 60 per month Rs. 55 per month 10% on sum-assured Guaranteed Bonus Does not give after 10 year Loyalty Bonus 0.1% every year 0.25% after every 4th year Total 24 free switches in a 4 free switches per year Fund Switching Charge policy after this after this Rs. 100 per Switch Rs. 250 per switch 30% of all premium 50% of all premiumGuaranteed Surrender value paid excluding 1st paid excluding 1st premium premium 56
    • 0.80% per annum 1.75% per annum Fund Management Charge on the fund value on the fund value First 2 Premium Total 12 free Premium Redirection in a Redirection Premium Redirection Charge year is free after this Rs. in a policy after this Rs. 250 1000 per Premium Redirection per Premium Redirection Last Year Return 42.70% 72%We see that both the life insurance companies‘ products are almost same. They have samecharges, fees and deductions. There is slightly difference in charges and maximum limits ofall charges are fixed by IRDA. Before buying any life insurance policy one should checkcharges and fees on policy and company‘s overall performance and return given to itsconsumer. 57
    • COMPETITIVE ANALYSISLIFE INSURANCE CORPORATION OF INDIA (LIC)LIC has an excellent money back policy which provides for periodic payments of partialsurvival benefits as long as the policy holder is alive. 20% of the sum assured is payableafter 5, 10, 15 and 20 years and the balance 40% is payable at the 20th year along withaccrued bonus. (www.lic.com)For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and 20 yearsand the balance 40% plus the accrued bonus becomes payable at the 25th year. Animportant feature of these types of policies is that in the event of the death of the policyholder at any time within the policy term the death claim comprises of full sum assuredwithout deducting any of the survival benefit amounts which have already been paid. Thebonus is also calculated on the full sum assured.HDFC SLIC does not have a money back policy. It could offer a money back plan andcapture some portion of this market. While marketing insurance products I found that manycustomers wanted to purchase these plans.LIC offers 66 different plans; plans are formulated for specific occasions – whole life plans,term assurance plans, money back plan for women, child plans, plans for the handicappedindividuals, endowment assurance plans, plans for high worth individuals, pension plans,unit linked plans, special plans, social security schemes – diversified portfolio of products.HDFC SLIC could diversify its product portfolio. It could add more plans for high worthindividuals and women.ICICI PRUDENTIALICICI Prudential is a stiff competitor for HDFC SLIC. The company is a merger betweenICICI Bank which is the biggest private bank in India and Prudential Plc which is a global lifeinsurance company. 58
    • The company has an investment plan which is market related – Invest Shield Life. In thisplan even if the market falls, the premium will be returned to investors. It is a guaranteedplan which ensures the company carefully invests your money. The stock marketperformance of ICICI Prudential is much better than HDFC SLIC. The returns on the growthfund were 46.28% compared to the 42.70% offered by HDFC SLIC. Customers are attractedby higher returns and this is a plus point for Prudential.The company is very well advertised. The advertisements are showcased in movies,television, newspapers, magazines, bill boards, radio etc. The company has an excellentbrand ambassador – Mr. Amitabh Bacchan. His promotion of the company builds trust andfaith in the minds of our people.However the charges are very high in the plans offered by ICICI Prudential. It is 35% duringthe first year, 15% in the next year and 3% from the third year onwards. Also a higherminimum premium of Rs. 8000 is charged. Hence the policies are not accessible to thelower strata of the society. (Source: www.iciciprulife.com)BIRLA SUN LIFEBirla Sun Life Insurance Company Limited is a joint venture between The Aditya BirlaGroup, one of the largest business houses in India and Sun Life Financial Inc., a leadinginternational financial services organization. The local knowledge of the Aditya Birla Groupcombined with the expertise of Sun Life Financial Inc., offers a formidable protection for yourfuture. (Source: www.birlasunlife.com)The Aditya Birla Group has a turnover close to Rs. 33000 crores with a market capitalizationof Rs. 53400 crores (as on 31st March 2007). It has over 72000 employees across all itsunits worldwide. It is led by its Chairman - Mr. Kumar Mangalam Birla. Some of the keyorganizations within the group are Hindalco and Grasim.Sun Life Financial Inc. and its partners today have operations in key markets worldwide,including Canada, the United States, the United Kingdom, Hong Kong, the Philippines,Japan, Indonesia, India, China and Bermuda. It had assets under management of over 59
    • US$343 billion, as on 31st March 2007. The company is a leading player in the lifeinsurance market in Canada.Being a customer centric company, BSLI has invested heavily in technology to build worldclass processing capabilities. BSLI has covered more than a million lives since inceptionand its customer base is spread across more than 1000 towns and cities in India. All thishas assisted the company in cementing its place amongst the leaders in the industry interms of new business premium income. The company has a capital base of 520 crores ason 31st July, 2007.Its Flexi Life Line Plan offers life long insurance cover till the policy holder is 100 years ofage. There are guaranteed returns of 3% p.a. net of policy charges after every 5 years fromthe eleventh policy year onwards. However the charges are very high. The initial charges forthe first year are 65%. Hence the fund value is greatly reduced.BAJAJ ALLIANZBajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in over70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years in theIndian market. Together they are committed to offering you financial solutions that provideall the security you need for your family and yourself. Bajaj Allianz is the number one privatelife insurer for the year 2005 – 2006. It is leading by 78 crores. It has experienced awhopping growth of 216% in the last financial year.The company has sold 13, 00,000 policies and is backed by 550 offices across India. Itoffers travel insurance, motor insurance, home insurance, health and corporate insurance.The mortality charges are lower than HDFC SLIC. The entry age could be zero years whichallow even new born babies to be insured. (Source: www.bajajallianz.com)TATA AIGTata Aig is a joint venture between the Tata group and American International Group Inc. Inone of the plans the company offers hospital cash benefit wherein it will pay Rs. 2500 perday in case of hospitalization and Rs.12.5 lakhs in case the person suffers from any critical 60
    • illness. Annual premium is much less (about Rs. 6712) to avail such a good benefit.Charges are relatively low compared to HDFC SLIC for some policies.The company offers high coverage plans at low cost. There is a plan even for a policy termof 1 year. Your family can continue to enjoy their current lifestyle even in the case ofsomething happening to you. These plans are very flexible and HDFC SLIC could adopt thisidea of insuring individuals for short periods of time. For example; there is a family of four.The only earning member is the father.He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is able torepay the loan with his current salary in 15 years. The problem arises if something were tohappen to him within these fifteen years. Not only will the family face the emotional andfinancial loss of their father but they will also have to repay the home loan or risk beinghomeless. (Source: www.tataaig.com) MARKETING PROBLEMSThe old and out dated technique of tele marketing is used to prospect customers. Moremodern techniques must be adopted. The company must sponsor shows and givepresentations in corporate houses. The financial health check must be performed for everyprospect to assess his/her true financial position and needs. Some of the advisors skip thisvital step and the prospect ends up with a plan they do not appreciate and soon surrender ordiscontinue.Some of the main problems in marketing the policies are:  Large amount of competition (18 players in the market)  Other brands are well advertised and have higher recall value  LIC is considered a safer option  Face competition from banks and mutual funds  High premium policies are difficult to market  Incorrect perception about insurance 61
    •  Interested prospects might have a lack of time and postpone investments  Customers get defensive if you cold call  Short term plans are available only at large premium  Customers do not have risk appetite to invest in shares  Some prospects have already invested and are not interested in further investments  Consumers don‘t want to undertake medical examinations  Large amount of documentation  Customers do not like their money locked up for many years  Lack of awareness about the unit linked funds in the market  No money back plan present in the product portfolioSUGGESTIONS FOR IMPROVEMENT  Advertise about the company and its products – it motivates individuals to purchase insurance  Create a positive perception about insurance  Speak about the good features a plan offers like high returns, life cover, tax benefits, indexation, accident cover while prospecting customers  Try to sell the product/plan which the consumer requires and not the plan where the advisors benefit is higher  Bring out policies with small premiums payable for short periods of time – Rs. 5000 – Rs. 10000 per annum for 10 years  Attract the youth of India with higher returns on investment as returns are the motivating factor which influence purchase of insurance  Promote insurance in colleges and corporate houses  Promote HDFC SLIC as an Indian Company to build trust 62
    • CHAPTER-IIIResearch Methodology 63
    • RESEARCH METHODOLOGYTITLE OF THE STUDY―To Compare the products of HDFC Standard Life Insurance Company Limited and TataAIG Life Insurance Company Limited for HDFC Standard Life Insurance Company Ltd.‖DURATION OF THE PROJECTThe duration of the project was from 4 June to 18 July.OBJECTIVES OF THE STUDY 1. To analysis the product details of HDFC Standard life Insurance Company limited and Tata AIG life Insurance Company Limited. 2. To find ‗Points of Parity‘ and ‗Points of Difference‘ of HDFC Standard Life Insurance Company Limited and Tata AIG Life Insurance Company Limited. 3. To find out factors that influence customers to purchase insurance policies and give suggestions for further improvement.TYPE OF RESEARCHThere are two types of data used. They are primary and secondary data. Primary data isdefined as data that is collected from original sources for a specific purpose. Secondarydata is data collected from indirect sources. (Source: Research Methodology, By C. R.Kothari)PRIMARY SOURCESThese include the survey or questionnaire method. 64
    • SECONDARY SOURCESThese include books, the internet, company brochures, product brochures, the companywebsite, competitor‘s websites etc, newspaper articles etc.SAMPLE SIZE AND METHOD OF SELECTING SAMPLESAMPLINGSampling refers to the method of selecting a sample from a given universe with a view todraw conclusions about that universe. A sample is a representative of the universe selectedfor study.SAMPLE SIZEThe sample size for the survey conducted was on 70 respondents. This sample size wastaken on 95% confidence level and 6 significant level. Data universe for this sample is inapprox population of Jaipur excluding people below age of 18 years.SAMPLING TECHNIQUERandom sampling technique was used in the survey conducted.SCOPE OF STUDYIt was done to get the in depth knowledge of INSURANCE SECTOR PAYING CAPACITY OF CONSUMERS ADVERTISEMENTS ANS IT‘s IMPACTS.LIMITATION OF STUDYTEDIOUS TASKFIGURES CAN FLUCTUATEHIGH DEPENDENCY ON HIGH RETURNS 65
    • CHAPTER-IVFacts and Findings 66
    • FACTS AND FINDINGS We find that 47% of the respondents fall in the age group of 18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49 years. Therefore most of the respondents are relatively young (below 26 years of age). These individuals could be induced to purchase insurance plans on the basis of its tax saving nature and as an investment opportunity with high returns. In India, the largest life insurance company is Life Insurance Corporation of India. It has been in existence in India since 1956 and is completely owned by the Government of India. Today the organization has grown to 2048 offices serving 18 crore policies and has a corpus of over 340000 crore INR. The outlook of insurance as a product should be changed from something which you pay for your whole life (whole life policy) and do not receive any benefit (the nominee only receives the benefit in case of your death) to an extremely useful investment opportunity with the prospects of good returns on savings, tax saving opportunities as well as providing for every milestone in your life like marriage, education, children and retirement. HDFC SLIC is faced with a large amount of competition. There are 18 insurance companies in India inclusive of LIC. Hence to capture a larger part of the market the company could introduce more reasonable plans with lesser premium payable per annum. 67
    • CHAPTER-VAnalysis and Interpretation 68
    • ANALYSIS & INTERPRETATION “A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA” AGE GROUP OF SURVEYED RESPONDENTSTABLE 1: Age group No. of Respondents 18 - 25 years 127 26 - 35 years 67 36 - 49 years 46 50 - 60 years 24 More than 60 years 6CHART 1: 2% 9% 18 - 25 years 17% 26 - 35 years 47% 36 - 49 years 50 - 60 years More than 60 years 25% 69
    • INTERPRETATION:From the chart above we find that 47% of the respondents fall in the age group of 18 – 25years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49years.Therefore most of the respondents are relatively young (below 26 years of age). Theseindividuals could be induced to purchase insurance plans on the basis of its tax savingnature and as an investment opportunity with high returns.Individuals at this age are trying to buy a house or a car. Insurance could help them with thisand this fact has to be conveyed to the consumer. As of now many consumers have a falseperception that insurance is only meant for people above the age of 50. Contrary to popularbelief the younger you are the more insurance you need as your loss will mean a greatfinancial loss to your family, spouse and children (in case the individual is married) who arefinancially dependent on you. 70
    • CUSTOMER PROFILE OF SURVEYED RESPONDENTSTABLE 3: Customer profile No. of respondents Student 62 Housewife 5 Working Professional 116 Business 49 Self Employed 24 Government service employee 14CHART 3: 5% 9% Student 23% Housewife Working Professional 18% 2% Business Self Employed Government service employee 43%INTERPRETATION:From the chart above it can clearly be seen that 43% of the respondents are workingprofessionals, 23% are students and 18% are into business. Therefore the target marketwould be working individuals in the age group of 18 – 25 years having surplus income,interested in good returns on their investment and saving income tax. 71
    • NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE POLICY IN THEIR NAMETABLE 4: Person who have life insurance policy Yes 103 No 167CHART 4: 103, 38% 167, 62% Yes NoINTERPRETATION:This graph shows that out of total 270 respondents only 103 or 38% respondents have lifeinsurance policy in their name. Rest all don‘t have a single policy in their name. So there is avery big scope for life insurance companies to cover these people. So in future business oflife insurace will gro further. 72
    • MARKET SHARE OF LIFE INSURANCE COMPANIESTABLE 5: LIFE INSURER NUMBER OF POLICIES HDFC STANDARD LIFE 4 BIRLA SUN LIFE 3 AVIVA LIFE INSURANCE 6 BAJAJ ALLIANZ 7 LIC 55 TATA AIG 6 ICICI PRUDENTIAL 12 ING VYSYA 6 BHARTI AXA 2 OTHERS 2CHART 5: 60% 53% 50% Percentage 40% 30% 20% 11% 4% 3% 6% 7% 6% 6% 10% 2% 2% 0% Company NameINTERPRETATION:In India, the largest life insurance company is Life Insurance Corporation of India. It hasbeen in existence in India since 1956 and is completely owned by the Government of India.Today the organization has grown to 2048 offices serving 18 crore policies and has a corpusof over 340000 crore INR. 73
    • ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCETABLE 6: Premium paid (p.a.) No. of respondents Rs. 5000 - Rs. 10000 40 Rs. 10001 - Rs. 15000 26 Rs. 15001 - Rs. 24900 18 Rs. 25000 - Rs. 50000 10 Rs. 50001 - Rs. 60000 4 Rs.60001 - Rs. 80000 2 Rs. 80001 - Rs. 100000 3CHART 6: ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE 4% 2% 3% Rs. 5000 - Rs. 10000 10% 39% Rs. 10001 - Rs. 15000 17% Rs. 15001 - Rs. 25000 Rs. 25001 - Rs. 50000 Rs. 50001 - Rs. 60000 25% Rs.60001 - Rs. 80000 Rs. 80001 - Rs. 100000INTERPRETATION:From the chart above we find that, 39% of the respondents surveyed pay an annualpremium less than Rs. 10001 towards life insurance. 25% of the respondents pay an annualpremium less than Rs. 15001 and 17% pay an annual premium less than Rs. 25000. Hencewe can safely say that HDFC SLIC would be able to capture the market better if itintroduced products/plans where the minimum premium starts at Rs. 5000 per annum. 74
    • POPULAR LIFE INSURANCE PLANSTABLE 7: Type of Plan No. of Respondents Term Insurance Plans 105 Endowment Plans 122 Pension Plans 16 Child Plans 8 Tax Saving Plans 19CHART 7: POPULAR LIFE INSURANCE PLANS 3% 6% 7% Term Insurance Plans 39% Endowment Plans Pension Plans Child Plans 45% Tax Saving PlansINTERPRETATION:From the chart given above we can clearly see that 45% of the respondents holdendowment plans and 39% of the respondents hold term insurance plans. Endowment plansare very popular and serve two purposes – life cover and savings.If the policy holder dies during the policy term the nominee gets the death benefit that is,sum assured and accumulated bonus. On survival the policy holder receives the survivalbenefit with a bonus. 75
    • AWARENESS OF UNIT LINKED INSURANCE PLANSTABLE 8: Awareness of Unit Linked Plans No. of Respondents Yes 154 No 116CHART 8: AWARENESS OF UNIT LINKED INSURANCE PLANS 43% 57% Yes NoINTERPRETATION:From the chart given above we find that 57% of the respondents are aware of unit linked lifeinsurance plans and 43% are not aware of such plans. These plans should be promotedthrough advertising.The company can advertise through television, radio, newspapers, bill boards andpamphlets. This would increase awareness and arouse curiosity in the minds of theconsumer which would enable the company to market its products more effectively.Unit – linked plans are those where the benefits are expressed in terms of number of unitsand unit price. They can be viewed as a combination of insurance and mutual funds. Thenumber of units a customer would get would depend on the unit price . 76
    • CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUMTABLE 9: Willingness to spend on premium No. of respondents Percentage Less than Rs. 6,000 41 15% Rs. 6,001 - Rs. 10,000 73 27% Rs. 10,001 - Rs. 25,000 110 41% Rs. 25,001 - Rs. 50,000 41 15% Rs. 50,001 - Rs. 1,00,000 5 2%CHART 9: CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM 41% 50% Percentage 40% 27% 30% 15% 15% 20% 2% 10% 0% Less than Rs. 6,001 - Rs. 10,001 -Rs. 25,001 -Rs. 50,001 - Rs. 6,000 Rs. 10,000 Rs. 25,000 Rs. 50,000 Rs. 1,00,000 Insurance PremiumINTERPRETATION:From the graph above, we can clearly see that 41% of the respondents would be willing tospend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would be willing to spendbetween Rs. 6001 – Rs. 10000 per annum. Only 15% would be willing to spend more thanRs. 25000 per annum as life insurance premium.We could say that the maximum premium payable by most consumers is less than Rs.25000 p.a. This is further reduced as most customers have already invested with LIC, ICICIPrudential, Birla Sun Life, Bajaj Allianz etc. 77
    • CHART SHOWING IDEAL POLICY TERMTABLE 10: Ideal policy term No. of respondents 3 - 5 years 51 6 - 9 years 41 10 - 15 years 95 16 - 20 years 38 21 - 25 years 24 26 - 30 years 5 More than 30 years 3 Whole life Policy 13CHART 10: CHART SHOWING IDEAL POLICY TER 40% 35% 35% 30% Percentage 25% 19% 20% 15% 14% 15% 9% 10% 5% 5% 2% 1% 0% 3 - 5 years 6 - 9 years 10 - 15 16 - 20 21 - 25 26 - 30 More than Whole life years years years years 30 years Policy YearsINTERPRETATION:From the chart given above it can be seen that 35% of the respondents prefer a policy termof 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a term of 6 – 9 years.This means that HDFC SLIC could introduce more plans wherein the premium paying termis less than 15 years. 78
    • FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCETABLE 11: Parameter No. of Respondents Advertisements 35 High returns 84 Advice from friends 46 Family responsibilities 89 Others 16CHART 11: 6% 13% Advertisements High returns 33% Advice from friends 31% Family responsibilities Others 17%INTERPRETATION:From the chart above it can be seen that 33% of the respondents purchase life insurance tosecure their families, 33% take life insurance to get high returns, 17% purchase insuranceon the advice of their friends and 13% purchase insurance because of the influence ofadvertisements. 79
    • The main purpose of insurance is to cover the financial or economic loss that occurs to thefamily in case of the uncertain death of the policy holder. But now a days this trend ischanging. Along with protection (life cover), a savings element is being added to insurance.With the introduction of the new unit linked plans in the market, policy holders get the optionto choose where their money will be invested. They can invest their money in the equitymarket, debt market, money market or a combination of these. The debt and money marketsusually have low risk attached whereas the equity market is a high risk investment option. 80
    • PREFERRED COMPANY TYPE OF THE RESPONDENTSTABLE 12:Type of Company No. of Respondents PercentageGovernment OwnedCompany 127 47%Public Limited Company 62 23%Private Company 49 18%Foreign Company 32 12%CHART 12: PREFERRED COMPANY TYPE OF THE RESPONDENTS 70% 60% No. of Repondents (%) 60% 50% 40% 29% 30% 20% 10% 7% 4% 0% Government Public Limited Private Company Foreign Company Owned Company Company Type of CompanyINTERPRETATION:From the graph above we find that 60% of the respondents preferred to purchase insurancefrom a government owned company, 29% of the respondents preferred to purchaseinsurance from a public limited company and only 4% of the respondents preferred a foreignbased company. Heavy advertising through television, newspapers, magazines and radio isrequired. 81
    • Swot Analysis Of Hdfc Standard Life Insurance Analysis of the industry‘s environment (SWOT Analysis) HDFC and Standard Life first came together for a possible joint venture, to enter the lifeInsurance market, in January 1995. It was clear from the outset that both companies shared similar values and beliefs and a strong relationship quickly formed. In October 1995, the companies signed a 3-year joint venture agreement. STRENGTH1. Domestic image of HDFC supported by Prudential‘s international image is strength of thecompany.2. Strong and well spread network of qualified intermediaries and sales person.3. Strong capital and reserve base.4. The company provides customer service of the highest order.5. Huge basket of product range which are suitable to all age and income groups.6. Large pool of technically skilled manpower with in depth knowledge and understanding ofthe market.7. The company also provides innovative products to cater to different needs of differentcustomers. WEAKNESS1. Heavy management expenses and administrative costs.2. Low customer confidence on the private players.3. Vertical hierarchical reporting structure with many designations and cadres leading topower politics at all levels without any exception.4. Poor retention percentage of tied up agents. 83
    • OPPORTUNITIES1. Insurable population †According to ING only 10% of the population is insured, whichrepresents around 30% of the insurable population. This suggests more than 300m people,with the potential to buy insurance, remain uninsured.2. There will be inflow of managerial and financial expertise from the world‘s leadinginsurance markets. Further the burden of educating consumers will also be shared amongmany players.3. International companies will help in building world class expertise in local market byintroducing the best global practices. THREATS1. Legislation could impact.2. Great risk involved.3. Very high competition prevailing in industry.4. Lack of infrastructure in rural areas could constrain investment. 84
    • CONCLUSIONHDFC standard life insurance is first life insurance Company in India. It has businessesspread out across the globe. It was registered on 23rd December 2000. It currently ranksnumber 4 amongst the insurers in India (Source: annual premium provided by the company)The company faces a large amount of competition. To sustain itself it must promote itsproducts through advertising and improve its selling techniques. Consumers must be awareof the new plans available at HDFC SLIC. The medium of advertising used could betelevision since most of its competitors use this tool to promote their products. The companymust be promoted as an Indian company since consumers seem to have more trust ininvesting in Indian firms.The unit linked concept must be specifically promoted. The general perception of lifeinsurance has to change in India before progress is made in this field. People should not beafraid to invest money in insurance and must use it as an effective tool for tax planning andlong term savings.HDFC SLIC could tap the rural markets with cheaper products and smaller policy terms.There are individuals who are willing to pay small amounts as premium but the plans do notaccept premiums below a certain amount. It was usually found that a large number of maleswere insured compared to females. Individuals below the age of 30 (mostly male) wereinterested in investment plans. This was a general conclusion drawn during prospectingclients. 86
    • CHAPTER-VIIIRecommendation and Suggestions 87
    • Recommendation and SuggestionsThere are few recommendations that are recommended if the project is to beconducted again in future.  Employees should be trained according to the changing standards of the organization.  Company should conduct survey from time to time to according to which changes can be introduced in the organization to stay updated in the market.  They should introduce creativity into the work, so that the employees can do their work active mindedly.  Employees should be given compensation in order to keep them loyal.  Employees should be more involved in decision making to become more differentiated.  Company should provide incentives to shop keepers.  More and More dealers can be appointed, so that sell can be increased.  Distribution system should be based on wholesaler and retilers.  Channel length should be short so cost can be reduced. 88
    • CHAPTER-IXAppendix 89
    • APPENDIX A SURVEY ON „INSURANCE INDUSTRY‟Dear Sir/MadamDo you have a life insurance policy/investment plan in your name? o Yes o NoIf yes which company‟s insurance policies do you hold? o Aviva Life Insurance o HDFC Standard Life Insurance o Bajaj Allianz Life Insurance o Birla Sun Life Insurance o LIC o Tata AIG Life Insurance o ING Vysya Life Insurance o ICICI Prudential Life Insurance o Bharti Axa Life Insurance o Others (specify name)What is the approximate premium paid by you annually (in Rupees)? o Rs. 5,000 – Rs. 10,000 o Rs. 50,001 – Rs. 60,000 o Rs. 10,001 – Rs. 15,000 o Rs. 60,001 – Rs. 80,000 o Rs. 15,001 – Rs. 25,000 o Rs. 80,001 – Rs. 1,00,000 o Rs. 25,001 – Rs. 50,000 o More than Rs. 1,00,000 (specify premium)What kind of insurance policy would suit you best in your current stage of life? o Life Insurance 90
    • o Life Insurance and Investment o Pension Plans Plans o Child Plans o Tax saving plansAre you aware of the new unit linked insurance plans in the market? o Yes o NoHow much would you be willing to spend per annum if you were to go for aninvestment/insurance plan? o Less than Rs. 6,000 o Rs. 25,001 – Rs. 50,000 o Rs. 6,001 – Rs. 10,000 o Rs. 50,000 – Rs. 1,00,000 o Rs. 10,001 – Rs. 25,000 o More than Rs. 1,00,000Which according to you is an ideal policy term? (Number of years you would bewilling to pay premium) o 3 to 5 years o 21 to 25 years o 6 to 9 years o 26 to 30 years o 10 to 15 years o More than 30 years o 16 to 20 years o Whole life policyWhat motivates you to purchase insurance/investment plans? o Advertisements o Advice from friends o High Returns o Family responsibilities o Others (specify)In which kind of company would you prefer to make a purchase of insurance? o Government owned company o Public Limited Company 91
    • o Private Company o Foreign based companyTypically what kind of returns would you look at from your investments? (Pleasenote: Higher returns involve greater risk) o Less than 5% o 26% - 30% o 6% - 10 % o 31% - 40% o 11% - 15 % o 41% - 50% o 16% - 20 % o More than 50% o 21% - 25%Personal Details:Name:Address:Age: Contact No. :Profile of respondent: Student Business Housewife Self – Employed Working Professional Government Service Employee 92
    • WIBLOGRAPHYWebsites: www.hdfcslic.com www.tata-aig-life.com www.irdaindia.com www.lic.com www.money control.com www.bajajallianz.com www.icici.prulife.com BIBLOGRAPHYMagazine & News Paper Insurance World The Outlook Money Insurance Chronicle Economic Times The Times Of India 94
    • Books: Tripathy Pal, Insurance Theory and Practice Prentice Hall India 2005 Jain Mamta, Insurance HRD Practice Ritu Publication 2007 Pal Bodla Garg, Insurance Management Deep & Deep Publication 2007 Mr. Jack Kinder Secrets of Successful Insurance Sales 2005 95
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