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     insurance-project insurance-project Document Transcript

    • CHAPTER 1INTRODUCTOIN 1
    • 1.1 INTRODUCTION TO THE STUDYEveryone is exposed to various risks. Future is very uncertain, but there is way to protectone’s family and make one’s children’s future safe. Life Insurance companies help us toensure that our family’s future is not just secure but also prosperous.Life Insurance is particularly important if you are the sole breadwinner for your family.The loss of you and your income could devastate your family. Life insurance will ensurethat if anything happens to you, your loved ones will be able to manage financially.This study titled “Study of Consumers Perception about Life Insurance Policies” enablesthe Life Insurance Companies to understand how consumer’s perception differs fromperson to person. How a consumer selects, organizes and interprets the service qualityand the product quality of different Life Insurance Policies, offered by various LifeInsurance Companies. Insurance is a tool by which fatalities of a small number are compensated out offunds (premium payment) collected from plenteous. Insurance companies pay back forfinancial losses arising out of occurrence of insured events e.g. in personal accidentpolicy death due to accident, in fire policy the insured events are fire and other alliedperils like riot and strike, explosion etc. hence insurance safeguard against uncertainties.It provides financial recompense for losses suffered due to incident of unanticipatedevents, insured with in policy of insurance. Moreover, through a number of acts ofparliament, specific types of insurance are legally enforced in our country e.g. third partyinsurance under motor vehicles Act, public liability insurance for handlers of hazardoussubstances under environment protection Act. Etc. 2
    • WHAT IS INSURANCEIt is a commonly acknowledged phenomenon that there are countless risks in everysphere of life .for property, there are fire risk; for shipment of goods. There are perils ofsea; for human life there are risk of death or disability; and so on .the chances ofoccurrences of the events causing losses are quite uncertain because these may or maynot take place. Therefore, with this view in mind, people facing common risks cometogether and make their small contribution to the common fund. While it may not bepossible to tell in advance, which person will suffer the losses, it is possible to work outhow many persons on an average out of the group, may suffer losses. When risk occurs,the loss is made good out of the common fund .in this way each and every one shares therisk .in fact they share the loss by payment of premium, which is calculated on thelikelihood of loss .in olden time, the contribution make the above-stated notion ofinsuranceDEFINITION OF INSURANCE Insurance has been defined to be that in, which a sum of money as a premium ispaid by the insured in consideration of the insurer’s bearings the risk of paying a largesum upon a given contingency. The insurance thus is a contract whereby: a. Certain sum, termed as premium, is charged in consideration, b. Against the said consideration, a large amount is guaranteed to be paid by the insurer who received the premium, c. The compensation will be made in certain definite sum, i.e., the loss or the policy amount which ever may be, and d. The payment is made only upon a contingencyMore specifically, insurance may be defined as a contact between two parties, whereinone party (the insurer) agrees to pay to the other party (the insured) or the beneficiary, acertain sum upon a given contingency (the risk) against which insurance is required. 3
    • TYPES OF INSURANCEInsurance occupies an important place in the modern world because of the risk, whichcan be insured, in number and extent owing to the growing complexity of present dayeconomic system. The different type of insurance have come about by practice withininsurance companies, and by the influence of legislation controlling the transacting ofinsurance business, broadly, insurance may be classified into the following categories: 1. Classification from business point of view a) Life insurance, and b) General insurance 2. Classification on the basis of nature of insurance a) Life insurance b) Fire insurance c) Marine insurance d) Social insurance, and e) Miscellaneous insurance 3. Classification from risk point of view a) Personal insurance b) Property insurance c) Liability insurance d) Fidelity general insurance 4
    • THE IMPORTANCE OF INSURANCE Insurance benefits society by allowing individuals to share the risks faced by manypeople. But it also serves many other important economic and societal functions. Becauseinsurance is available and affordable, banks can make loans with the assurance that theloan’s collateral (property that can be taken as payment if a loan goes unpaid) is coveredagainst damage. This increased availability of credit helps people buy homes and cars.Insurance also provides the capital that communities need to quickly rebuild and recovereconomically from natural disasters, such as tornadoes or hurricanes. Insurance itself has become a significant economic force in most industrializedcountries. Employers buy insurance to cover their employees against work-relatedinjuries and health problems. Businesses also insure their property, including technologyused in production, against damage and theft. Because it makes business operations safer,insurance encourages businesses to make economic transactions, which benefits theeconomies of countries. In addition, millions of people work for insurance companies andrelated businesses. In 1996 more than 2.4 million people worked in the insurance industryin the United States and Canada. Insurance as an investment that offers a lot more interms of returns, risk cover & as also that tax concessions & added bonusesNot all effects of insurance are positive ones. The possibility of earning insurancepayments motivates some people to attempt to cause damage or losses. Without thepossibility of collecting insurance benefits, for instance, no one would think of arson, thewillful destruction of property by fire, as a potential source of money. 5
    • THE INSURANCE INDUSTRY TODAY Since the 1970s, the insurance business has grown dramatically and undergonetremendous changes. As a result of the deregulation of financial services businesses—including insurance, banking, and securities trading—the roles, products, and services ofthese formerly distinct businesses have become blurred. For instance, citizens in the U.S.state of California voted in 1988 to allow banks to sell insurance in that state. In Canada,banks may also soon be allowed to sell insurance. Advances in communications technology have also allowed traditionallydistinct financial businesses to keep instantaneous track of developments in otherbusinesses and compete for some of the same customers. Some insurance companies nowoffer deposit accounts and mortgages. In the United States, life insurance companies nowsell more pension plans and other asset management services than they do conventionallife insurance. Developments in computer technology that have given insurance providersthe ability to quickly access and process information have allowed them to custom-designpolicies to fit the needs of individual customers. But the increasing complexity of policieshas also made some aspects of buying and selling insurance more difficult. In addition, improvements in geological and meteorological technology have thepotential to change the way property insurers calculate risks of damage. For example, asscientists improve their abilities to predict severe weather patterns, such as hurricanes,and geological disturbances, such as earthquakes, insurers may change how they provideprotection against losses from such events 6
    • EVOLUTION OF INSURANCE IN INDIA The marine insurance is the oldest form of insurance. If we trace Indian historythere are evidence that marine insurance was practiced here about three thousand yearsago. The code of Manu indicates that there was the practice of marine insurance carriedout by the traders in India with those of Srilanka, Egypt and Greece .it is wonderful to seethat Indians had even anticipated the doctrine of average and contribution. Fright wasfixed according to season and was then very much at the mercy of the wind and otherelements. Travelers by sea and land were very much exposed to the risk of losing theirvessels and merchandise because of piracy on open seas and highway robbery ofcaravans was very common. The practice of insurance was very common during the ruleof Akbar to Aurangzeb, but the nature and coverage of the insurance in this period is notwell known. It was the British insurer who introduced general insurance in India in themodern form. The Britishers opened general insurance in India around the year 1700 .thefirst company known as the sun insurance office was set up in Calcutta in the year 1710.This was followed by several insurance companies like London assurance and royalexchange assurance (1720), Phoenix Assurance Company (1782). Etc. General insurancebusiness in the country was nationalized with effect from 1st January 1973 by theGeneral Insurance Business (Nationalization) Act, 1972. More than 100 non-lifeinsurance companies including branches of foreign companies operating within thecountry were amalgamated and grouped into four companies, viz., the National InsuranceCompany Ltd., the New India Assurance Company Ltd., the Oriental Insurance CompanyLtd., and the United India Insurance Company Ltd. with head offices at Calcutta,Bombay, New Delhi and Madras, respectively. 7
    • Life insurance in the current form came in India from united kingdomwith the establishment of a British firm, oriental life assurance company in 1818 followedby Bombay life assurance company in 1823, the madras equitable life insurance societyin 1829 and oriental life assurance company in 1874.prior to 1871, Indian lives weretreated as sub standard and charged an extra premium of 15% to 20%. Bombay mutuallife assurance society, an Indian insurer that came in to existence in 1871, was the first tocover Indian lives at normal rates. The Indian insurance company Act 1923 was enactedinter alia, to enable the government to collect statistical information about life and non-life insurance business transacted in India by Indian and foreign insurer, including theprovident insurance societies. The first half of the 20th century marked by two world war, the adverse affectsof the World War I and World War II on the economy of India, and in between them theperiod of world wide economic crises triggered by the Great depression. The first half ofthe 20th century was also marked by struggles for India’s independence. The aggregateeffect of these events led to a high rate of bankruptcies and liquidation of life insurancecompanies in India. This had adversely affected the faith of the general public in theutility of obtaining life cover In this background, the Parliament of India passed the Life Insurance of India Act on19th June 1956, and the Life Insurance Corporation of India was created on 1stSeptember, 1956, by consolidating the life insurance business of 245 private life insurersand other entities offering life insurance services. 8
    • Since 1972, the insurance sector has been totally under the control ofgovernment of India through LIC and GIC and its subsidiaries. As a result, revenue ofboth of them increased in the last years .the amount of savings pooled by LIC increasedfrom Rs.2704 crores in 1974 to Rs .57670 in 1994 with an annual growth rate of 16.53%.similarly premium underwritten by GIC rose from 280 crores in 193 to 7647 crores in1998 showing an annual growth rate of 25.18%. Despite increase in premium collected by both LIC and GIC their were inefficiencyand red tapeisum creeped in to the insurance sector. Apart from that a major policy shiftby the Narasimha Rau government during 1990’s.the Indian economy opened for foreigncompetition .In this background The government of India in 1993 had set-up a highpowered committee by R.N Malhothra ,former governor reserve bank of India, toexamine the structure of Indian insurance sector and recommended changes to make itmore efficient and competitive keeping in view structural changes in other part of thefinancial system of the country. Insurance sector has been opened up for competition from Indian private insurancecompanies with the enactment of Insurance Regulatory and Development Authority Act,1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory andDevelopment Authority (IRDA) was established on 19th April 2000 to protect theinterests of holder of insurance policy and to regulate, promote and ensure orderly growthof the insurance industry. IRDA Act 1999 paved the way for the entry of private playersinto the insurance market, which was hitherto the exclusive privilege of public sectorinsurance companies/ corporations. 9
    • EVOLUTION OF INSURANCE ORGANIZATION With a view to serve the society, the insurance organizations have been developedin different forms with innovation of insurance practice for social welfare anddevelopment; some of these forms are outlined here.a) Self-insurance The arrangement in which an individual or concern sets up a private fund to meetthe future risk. If some losses happened in the future the firm meets the loss out of thefund. While it may be called ‘self insurance’ it is not a single matter of fact, insurance atall because there is no hedge, no shifting, or distributing the burden of risk among largerPersons. It is merely a provision to meeting the unforeseen event. Here the insuredbecome the insurer for the particular risk. But it can be effectively worked only whenthere is wide distribution of risks subjected the same hazard.b) PartnershipA partnership firm may also carry on the insurance business for the sake of profit. Since itis not an entity distinct from the persons comprising it, the personal liability of partners inrespect to the partnership debts is unlimited. In case of huge loss the partners may have topay from their own personal funds and it will not be profitable to them to starts insurancebusiness .in the early period before the advent of joint stock companies many insuranceundertakings were partnership firms or unincorporated companiesc) Joint stock companies The joint stock companies are those, which are organized by the shareholders whosubscribe the necessary capital to start the business. These are formed for earning profitsfor the stockholders who are the real owners of the companies. The management of acompany is entrusted to a board of directors who is elected by the shareholders fromamongst themselves. The company can operate insurance business and policyholdershave nothing to do with the management of the concern. But in life insurance it is thepractice to share certain portion of profit among the certain policyholders. 10
    • d) Mutual fund companies The mutual fund companies are co- operative association formed for thepurpose of effecting insurance on the property of its members. The policyholders arethemselves the shareholders of the companies each member is insured as well as insured.They have power to participate in management and in the profit sharing to the full extent.Whenever the income is more than the expenses and claims, it is accumulated I the formof saving and is entitled in reducing the rate of premium. Since the insured are insurersalso, they always try to reduce the management expenses and to keep the business atsound level.e) Co-operative insurance organizations Cooperative insurance organizations are those concerns, which areincorporated and registered under Indian cooperative societies Act. The concerns are alsocalled ‘co operative insurance societies’ these societies like mutual fund companies arenon profit organization .the aim is to provide insurance protection to its members at thelowest reasonable net cost .the Indian insurance Act. 1938, has provided specialprovisions for the co-operative insurance societies, but after nationalization the societieshave ceased to exist.f) Lloyd’s Association Lloyd’s association is one of the greatest insurance institutions in the world.Taking its name from the coffee house Lloyd where underwriters assembled to transactbusiness and pick-up news. The organization traces its origins to the latter part of theseventeenth century .so it is the oldest insurance organization in existing form in theworld. In 1871,Lloyds Act was passed incorporating the members of the association intoa single corporate body with perpetual succession and a corporate seal .the powers ofLloyds corporation were extended from the business of marine insurance to the otherinsurance and guarantee business. The Lloyds Association also publishes, Lloyds list andregister of shipping for the information of insuring public and the insurers 11
    • g) State Insurance The government of a nation, some times, owns the insurance and runs thebusiness for the benefit of the public. The sate insurance is defined as that insurancewhich is under public sector. In Brazil, Japan and Mexico, the insurance are largelynationalized. Previously, the state undertook only those insurances, which were regardedas vital for the national interest.INSURANCE SECTOR REFORMS Having looked at the insurance sector, the efforts made by the government tomake the industry more dynamic and customer friendly. To begin with, the Malhotracommittee was set up with the objective of suggesting changes that would achieve themuch required dynamism.The Malhotra Committee Report In 1993, Malhotra Committee, headed by former Finance Secretary and RBIGovernor R. N. Malhotra, was formed to evaluate the Indian insurance industry andrecommend its future direction. In 1994, the committee submitted the report and gave thefollowing recommendations:StructureGovernment stake in the insurance Companies to be brought down to 50%Government should take over the holdings of GIC and its subsidiaries so that thesesubsidiaries can act as independent corporationsAll the insurance companies should be given greater freedom to operate 12
    • CompetitionPrivate Companies with a minimum paid up capital of Rs.1bn should be allowed to enterthe industryNo Company should deal in both Life and General Insurance through a single entityForeign companies may be allowed to enter the industry in collaboration with thedomestic companies.Postal Life Insurance should be allowed to operate in the rural market.Only one State Level Life Insurance Company should be allowed to operate in each statRegulatory BodyThe Insurance Act should be changed.An Insurance Regulatory body should be set up.Controller of Insurance (Currently a part from the Finance Ministry)InvestmentsMandatory Investments of LIC Life Fund in government securities to be reduced from75% to 50%.GIC and its subsidiaries are not to hold more than 5% in any company (There currentholdings to be brought down to this level over a period of time).Customer ServiceLIC should pay interest on delays in payments beyond 30 days.Insurance companies must be encouraged to set up unit linked pension plans.Computerization of operations and updating of technology to be carried out in theinsurance industry.Overall, the committee strongly felt that in order to improve the customer services andincrease the coverage of the insurance industry should be opened up to competition.But at the same time, the committee felt the need to exercise caution as any failure on thepart of new players could ruin the public confidence in the industry 13
    • Few Life Insurance policies are:Whole life policies - Cover the insured for life. The insured does not receive moneywhile he is alive; the nominee receives the sum assured plus bonus upon death of theinsured.Endowment policies - Cover the insured for a specific period. The insured receivesmoney on survival of the term and is not covered thereafter.Money back policies - The nominee receives money immediately on death of theinsured. On survival the insured receives money at regular intervals during the term.These policies cost more than endowment with profit policies.Annuities / Childrens policies - The nominee receives a guaranteed amount of moneyat a pre-determined time and not immediately on death of the insured. On survival theinsured receives money at the same pre-determined time. These policies are best suitedfor planning childrens future education and marriage costs.Pension schemes - are policies that provide benefits to the insured only upon retirement.If the insured dies during the term of the policy, his nominee would receive the benefitseither as a lump sum or as a pension every month. Since a single policy cannot meet allthe insurance objectives, one should have a portfolio of policies covering all the needs 14
    • 1.2 BACKGROUND OF THE STUDY“Life Insurance is a contract for payment of a sum of money to the person assured on thehappening of the event insured against”. Usually the insurance contract provides for thepayment of an amount on the date of maturity or at specified dates at periodic intervals orat unfortunate death if it occurs earlier. Obviously, there is a price to be paid for thisbenefit. Among other things the contracts also provides for the payment of premiums, bythe assured.Life Insurance is universally acknowledged as a tool to eliminate risk, substitute certaintyfor uncertainty and ensure timely aid for the family in the unfortunate event of the deathof the breadwinner. In other words, it is the civilized world’s partial solution to theproblems caused by death. Life insurance helps in two ways dealing with prematuredeath, which leaves dependent families to fend for themselves and old age without visiblemeans of support.The most common types of life insurance are whole life insurance and term lifeinsurance. Whole life insurance provides a lifetime of protection as long as you pay thepremiums to keep the policy active. They also accrue a cash value and thus offer asavings component. Term life insurance provides protection only during the term of thepolicy and the policies are usually renewable at the end of the term 15
    • There are many Life Insurance Companies likeLIFE INSURANCE CORPORATION OF INDIABAJAJ ALLIANZ LIFE INSURANCE COMPANYICICI PRUDENTIAL LIFE INSURANCE COMPANYHDFC STANDARD LIFE INSURANCE COMPANYBIRLA SUN-LIFE INSURANCE COMPANYING VYSYA LIFE INSURANCE COMPANYMETLIFE INSURANCE COMPANYTATA AIG LIFE INSURANCE COMPANYMAX NEW YORK LIFE INSURANCE COMPANYOM KOTAK MAHINDRA LIFE INSURANCE COMPANY 16
    • CHAPTER 2RESEARCH DESIGN 17
    • RESEARCH DESIGN2.1 STATEMENT OF THE PROBLEM This Study will help us to understand the consumer’s perception about life insurance companies. This study will help the companies to understand, how a consumer selects, organizes and interprets the Quality of service and product offered by life insurance companies.2.2 SCOPE OF THE STUDY This study is limited to the consumers within the limit of Bangalore city. The study will be able to reveal the preferences, needs, perception of the customers regarding the life insurance products, It also help the insurance companies to know whether the existing products are really satisfying the customers needs .2.3 NEED FOR THE STUDY 1) The deeper the understanding of consumer’s needs and perception, the earlier the product is introduced ahead of competitors, the expected contribution margin will be greater .Hence the study is very important. 2) Consumer markets and consumer buying behavior can be understood before sound product and marketing plans are developed 3) This study will help companies to customize the service and product, according to the consumer’s need. 4) This study will also help the companies to understand the experience and expectations of the existing customers. 5) Apart from creating, manufacturing and distribution capabilities for life insurance products, an in depth study of the consumers, their preferences and demand for their product is very necessary for setting up an efficient marketing network. 18
    • 2.4 OBJECTIVE OF THE STUDY o Ascertain the profile and characteristics of potential buyers. o To have an insight into the attitudes and behaviors of customers. o To find out the differences among perceived service and expected service. o To produce an executive service report to upgrade service characteristics of life insurance companies. o To access the degree of satisfaction of the consumers with their current brand of Insurance products.2.5. REVIEW OF LITERATURE:The literature review section critically examine the recent or historically significantstudies, company data or industry reports that acts as a basis for proposed studies to beginwith the research discussion of the related literature and relevant secondary data from acomprehensive prospective, moving to more specific studies, that are associate withresearch problem. Basically the literature should be applied to the study, than theresearcher proposes. The literature may also explain the needs for the proposed work toappraise the short comings and informational gaps in secondary data sources. To carry the research work the researcher has gone through a few reports,books, journals and websites. The details regarding Life Insurance Industry, history,origin and growth of the industry is also taken from some books, magazines etc. Thesources of this information are as follows: Catalogues and Broachers from various life insurance companies. Articles from magazines and news paper. Information from various websites. 19
    • 2.6 RESEARCH DESIGN:A research design is a basic plan, which guides the researcher in the collection andanalysis of data required for practicing the research. Infect the research design is theconceptual structure where the research is conducted. It constitutes the ‘Blue Print’ forthe collection, measurement and analysis of the data. The study is carried out tounderstand the Consumer Perception about life insurance companies in Bangalorecity .For this study the researcher used exploratory research design. This research covers50 consumers in Bangalore city, belonging to various age groups.2.7 SAMPLE DESIGN:The process of drawing a sample from a large population is called sampling. Populationrefers to the total of items about which information is defined. Well-selected samplesmay reflect fairly and accurately the characteristics of the population.Sampling Unit:The sample unit of this survey was the customers having life insurance policies inBangalore city.Sample Size:The sample size was 50 customers of different life insurance companies, from thevarious parts of the Bangalore city.Sampling Technique Adopted:Convenient sampling2.8 SOURCES OF DATA:After identifying and defining the research problem and determining specific informationrequired to solve the problem the researcher will look for the type and sources of datawhich may yield the desired results, while deciding about the method of data collection tobe used for the study, there are two types of data. 20
    • Secondary Data:Secondary data means data that are already available i.e. they refer to the data which havebeen collected and analyzed by someone and can save both money and time of theresearcher. Secondary data may be available in the form of company records, tradepublications, libraries etc. Secondary data sources are as follows: Company Reports Daily Newspaper Standard Textbook Various WebsitesPrimary Data:Primary data are those, which are collected for the first time. Primary data is collected byframing questionnaires. The questionnaire contained questions, which are both open-ended and closed-ended. Open-ended questions are questions requiring answers in theresponder’s own words. Closed-ended questions are those wherein the respondent has tomerely check the appropriate answer from a list of options available. Any doubts raisedby the respondents were clarified to get the perfect answers from the distributors. Open-ended questions yielded more insightful information, whereas closed-Ended questionswere relatively simple to tabulate and analyze.2.9 FIELD WORK:An interview-schedule and well-structured questionnaire is administered to the targetrespondents to collect primary data (Copy of questionnaire is attached in the appendix)Open and close-ended questions are used in the questionnaire. The orders of the questionsare in such a manner that they begin with simple questions and lead on the questions thatneeded more involvement from respondents.The secondary data are collected fromperiodicals, magazines, journals and Internet. 21
    • OPERATIONAL DEFINITIONS OF THE STUDYMarketing:Marketing is a social and managerial process by which individuals and group obtain whatthey need and want through creating, offering and exchanging products of value withothers.Marketing Management:Marketing Management is the process of planning and executing the conception, pricing,promotion and distribution of individual and organizational goals.Marketing Research:Marketing research is the systematic and objective search for, and analysis of informationrelevant to the identification and solution of any problems in the field of marketing.Consumer Research:Consumer research is the methodology used to study consumer behaviour.Consumer Behaviour:Consumer behaviour is the study of how individuals make decisions to spend theiravailable resources [time, money, efforts] on consumption related items.Market Segmentation:Market segmentation is the process of dividing a market in the distinct subsets ofconsumer with common needs or characteristics and selecting one or more segments totarget with distinct marketing mix.Positioning:Positioning is the act of designing the company’s offering and image so that they occupya meaningful and distinct competitive position in the target consumer’s mind. 22
    • Perception:Perception is the process by which an individual selects, organizes, and interpretsinformation input to create a meaningful picture of the world. For a marketer to influencea motivated buyer to buy their products rather than competitors they must be careful totake the perception process into account while designing their marketing campaigns.Perception therefore influence what product consumer buys.Attitude:An attitude is a person enduring favorable or unfavorable evaluation, emotional feeling,and action tendencies towards some object or idea.Attributes:Attributes are the strengths and weaknesses of a brand that create attitudes and are usedby consumers to choose between brands that are relatively similar or functionallyequivalent.Values:A value is a concept of the desirable. An internalized standard of evaluation a personpossession. This standard determines or guide an individual evaluation of the manyobjects encountered in everyday life.Brand:A brand is a name, term, sign, symbol, or design or a combination of them, used toidentify the goods or services of one seller or group of seller and the differentiate themfrom those of competitors. 23
    • 2.10 LIMITATIONS OF THE STUDYAlthough the study was carried out with extreme enthusiasm and careful planning thereare several limitations, which handicapped the research viz. Time Constraints:The time stipulated for the project to be completed is less and thus there are chances thatsome information might have been left out, however due care is taken to include all therelevant information needed. Sample size:Due to time constraints the sample size was relatively small and would definitely havebeen more representative if I had collected information from more respondents. Accuracy:It is difficult to know if all the respondents gave accurate information; some respondentstend to give misleading information. 24
    • CHAPTER 3PROFILE OF THE INDUSTRY 25
    • 3.1 INDUSTRY PROFILEHistory and Development of Life InsuranceLife Insurance, in its present form, came to India from the United Kingdom withestablishment of a British firm, Oriental Life Insurance Company in Calcutta in 1818,followed by Bombay Life Assurance Company in 1823, the Madras Equitable LifeInsurance society in 1829 and Oriental Government security Assurance Company in1874. Prior to 1871, Indian Lives were treated as sub-standard and charged an extrapremium of 15% to 20%. Bombay Mutual Life Assurance Society, a Indian insurer whichcame into existence in 1871 was the first to cover Indian lives at normal rates.The Indian life Assurance Companies Act, 1912 was the first statutory measure toregulate life insurance business. Later, in 1928, the Indian Insurance Companies Act wasenacted, to enable the government to collect statistical information about both life andnon-life insurance business transacted in India by Indian and foreign insurers, includingthe provident insurance societies. Comprehensive arrangements were, however, broughtinto effect with the enactment of the Insurance Act, 1938.By 1956, 154 Indian insurers, 16 non-Indian insurers and 15 provident societies werecarrying online insurance business in India. On 19th January 1956, the management of theentire life insurance business of 229 Indian insurers and provident insurance societies andthe Indian life insurance business of 16 non-Indian Life insurance companies thenoperating in India, was taken over by the central Government and then nationalized on 1stSeptember 1956 when the Life Insurance Corporation came into existence.With largest number of life insurance policies in force in the world, Insurance happens tobe a mega opportunity in India. It’s a business growing at the rate of 15-20 per centannually and presently is of the order of Rs 450 billion. Together with banking services,it adds about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 percent of GDP and funds available with LIC for investments are 8 per cent of GDP. 26
    • Yet, nearly 80 per cent of Indian population is without life insurance cover whilehealth insurance and non-life insurance continues to be below international standards.And this part of the population is also subject to weak social security and pensionsystems with hardly any old age income security. This itself is an indicator that growthpotential for the insurance sector is immense. A well-developed and evolved insurance sector is needed for economicdevelopment as it provides long-term funds for infrastructure development and at thesame time strengthens the risk taking ability. It is estimated that over the next ten yearsIndia would require investments of the order of one trillion US dollar. The Insurancesector, to some extent, can enable investments in infrastructure development to sustaineconomic growth of the country.INSURANCE AND BUSINESS ENVIRONMENTInsurance is considered as one of the important segment of the economy for its growthand development. This industry provides long term funds which are essential for thegrowth and development of the nation .so the growth of insurance industry largelydepends up on the environment in which they exists. Here I would like to mention aboutIndian business environment and their impact on insurance sector. There are two type ofenvironment which affect the business one is environment which is internal to theorganization (internal environment) and the other one which is external to theorganization (external environment). Internal environment includes management,technology, competitors, employees, shareholders, policyholders, marketing intermediaryetc. The external environment of insurance business has been classified in four parts,namely legal, economic, financial, and commercial. let us discus them in detail by takingone by one. 27
    • THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY(IRDA)The Malhotra Committee felt the need to provide greater autonomy to insurancecompanies in order to improve their performance and enable them to act as independentcompanies with economic motives. For this purpose, it had proposed setting up anindependent regulatory body- The Insurance Regulatory and Development Authority.Based on the Malhotra committee report in April 2000 IRDA was incorporated. Sincebeing set up as an independent statutory body the IRDA has put in a framework ofglobally compatible regulations. Section 14 of the IRDA Act 1999, lays the duties, powerand functions of the authority .the authority shall have the duty to regulate, promote andensure orderly growth of the insurance business and reinsurance business.Reforms and ImplicationsThe liberalizations of the Indian insurance sector has been the subject of much heateddebate for some years. The sector is finally set to open up to private competition. TheInsurance Regulatory and Development Authority bill will clear the way for private entryinto insurance, as the government is keen to invite private sector participation intoinsurance. To address those concerns, the bill requires direct insurers to have a minimumpaid-up capital of Rest. 1 billion, to invest policyholder’s funds only in India; and torestrict international companies to a minority equity holding of 26 percent in any newcompany. Indian Promoters will also have to dilute their equity holding to 26 percentover a 10-year period.Over the past three year, around 30 companies have expressed interest in entering thesector and many foreign and Indian companies have arranged alliances. Whether theinsurer is old or new, private or public, expanding the market will present challenges. Anumber of foreign Insurance Companies have set up representative offices in India andhave also tied up with various asset management companies. Some of the Indiancompanies, which have tied up with International partners, are. 28
    • Indian Partners International PartnersBombay Dyeing General Accident, UKTata American Int. Group, USDabur Group Liberty Mutual Fund, USICICI Prudential, UKSundaram Finance Winterthur Insurance, SwitzerlandHindustan Times Commercial Union, UKRanbaxy Cigna, USHDFC Standard Life, UKCK Birla Group Zurich Insurance, SwitzerlandDCM Shriram Royal Sun Alliance, UKGodrej J Rothschild , UKM A Chidambaram Met LifeCholamandalam Guardian Royal Exchange, UKSK Modi Group Legal and General, Australia20th Century Finance Canada LifeAlpic Finance Allianz Holding, GermanyVysya Bank INGKotak Mahindra Chubb, USThe likely impact of opening up of India’s insurance sector is that private playersmay swamp the market. International insurers often derive a significant part oftheir business from multinational operations. Multinational insurers are indeedkeenly interested as; perhaps there home markets are saturated while emergingcountries have low insurance penetration and high growth rates 29
    • Type of life insurance policiesWhole life insuranceWhole life is a form of permanent insurance, with guaranteed rates and guaranteed cashvalues. It is the least flexible form of permanent insurance.Universal life insuranceUniversal life is similar to whole life, except that you can change the death benefit (themoney paid to the beneficiary when the insured person dies), the amount of premiumsand how often you pay the premiums.Variable life insuranceVariable life insurance is the riskiest form of permanent insurance, but it can also giveyou the best return for your money. Essentially, the life insurance company will investyour insurance premiums for you. If the investments do well, the death benefit and cashvalue of the policy go up. If they do poorly, they go down. Its a little like putting yoursavings into the stock market.Group life insuranceMany companies allow their employees to buy group life insurance through the company.Usually, you can get very good rates for this insurance but you have to give the insuranceup when you stop working there. For that reason, group insurance can be a good way tobuy a little extra life insurance, but it does not make sense to make it your main policy. 30
    • There are a number of policies for specific insurance needs. Some of these include: 1. Family income life insurance. This is a decreasing term policy that provides a stated income for a fixed period of time, if the insured person dies during the term of coverage. These payments continue until the end of a time period specified when the policy is purchased. 2. Family insurance. A whole life policy that insures all the members of an immediate family -- husband, wife and children. Usually the coverage is sold in units per person, with the primary wage-earner insured for the greatest amount. 3. Senior life insurance. Also known as graded death benefit plans, they provide for a graded amount to be paid to the beneficiary. For example, in each of the first three to five years after the insured dies, the death benefit slowly increases. After that period, the entire death benefit is paid to the beneficiary. This might be appropriate if the beneficiary is not able to handle a large amount of money soon after the death, but would be in a better position to handle it a few years later. 4. Juvenile insurance. This is life insurance on a child. Coverage is paid for by an adult, usually the parents or guardians. Such policies are not considered traditional life insurance because the child is not producing an income that needs to be protected. However, by buying the policy when the child is young, the parents are able to lock in an extremely low premium rate and allow many more years of tax-deferred cash value buildup . 31
    • 5. Credit life insurance. This insurance is designed to pay off the balance of a loan if you die before you have repaid it. Credit life insurance is available for many kinds of loans including student loans, auto loans, farm equipment loans, furniture and other personal loans including credit cards. Credit life insurance can be purchased by an individual. Usually it is sold by financial institutions making loans, like banks, to borrowers at the time they take out the loan. If a borrower dies, the proceeds of the policy repay the loan directly to the lender or creditor.6. Mortgage insurance This decreasing term coverage is designed to pay off the unpaid balance of a mortgage if you die before the mortgage is paid off. Premiums are generally level throughout the term of the policy. The policy is usually independent of the mortgage, meaning that the financial institution granting the mortgage is separate from the insurance company issuing the policy. The proceeds of the policy are paid to the beneficiaries of the policy, not the mortgage company. The beneficiary is not required to use the proceeds to pay off the mortgage7. Annuity An annuity is a form of insurance that enables you to save for your retirement. Basically, you give the insurance company money for a certain period of time, and then after you retire they will pay you a certain amount of money every year until you die. There are many different forms of annuities. . Most people who buy annuities are 55 or older 32
    • 3.2 PROFILE OF THE ORGANISATIONS: LIFE INSURANCE CORPORATION OF INDIA Life Insurance Corporation of India was formed in September 1956 by passing LIC Act, 1956 in Indian parliament. On the nationalization of the life insurance in 1956, the premium rating of Oriental Government security life Assurance company were adopted by LIC with a reduction of 5% of the tabular premium or Re. 1 per thousand sum assured, whichever was less. This reduction was made in anticipation of economies of scale that would emerge on the merger of different insurers in a single entity. Life Insurance Corporation Of India - there are many things to consider as Life Insurance Corporation of India offers various insurance products which are very complex, but underlying this complexity is a simple fact. The building blocks for all Life Insurance Corporation of India are (1) investment return; (2) mortality experience; and (3) expense management; for your Life Insurance Corporation Of India 33
    • Objectives of LIC • Spread Life Insurance much more widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. • Maximize mobilization of peoples savings by making insurance-linked savings adequately attractive. • Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. • Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. • Act as trustees of the insured public in their individual and collective capacities. • Meet the various life insurance needs of the community that would arise in the changing social and economic environment. • Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.Promote amongst all agents and employees of the Corporation a sense of participation,pride and job satisfaction through discharge of their duties with dedication towardsachievement of Corporate Objective 34
    • VISION"A trans-nationally competitive financial conglomerate of significance to societies andPride of India “MISSION"Explore and enhance the quality of life of people through financial security by providingproducts and services of aspired attributes with competitive returns, and by renderingresources for economic development”Various policies offered by life insurance corporation of India are 1) Whole Life Schemes • Whole life with profit • Limited payment whole life • Single Premium whole life • Convertible whole life plan 2) Endowment Schemes • Endowment plan with profit • Limited payment Endowment • Jeevan Mitra (Double Cover) • Jeevan Mitra (Triple cover) • Bhavishya Jeevan • Jeevan Anand • New Jana Raksha 3) Term Assurance Plan • Anmol Jeevan • 2 Year Term Assurance • Covertible Term • New Bima Kiran 35
    • 4) Plan for needs of Children • Komal Jeevan • Jeevan Sukanya • Jeevan Kishore • Jeevan Balya • Jeevan Chaya • Marriage/educational annuity • Deffered Endowment 5) Periodic Money Back Plan • Jeevan Samridhi • Jeevan Rekha Plan • Money Back Plan • Jeevan Surabhi • Jeevan bharathi 6) Medical benefits linked insurance • Asha Deep II • Jeevan Asha II 7) For benefits to Handicapped • Jeevan Aadhar • Jeevan Vishwas 8) Plans to cover housing loans • Mortagage redemption 9) Joint life plan • Jeevan sathi 36
    • 10) Investment plan • Bima Nivesh Triple cover11) Capital market linked plan • Bima plus. Description of the LIC PoliciesWhole life plan:Whole life plan are those policies which life assured has to pay premiums till hisdeath the sum assured will be paid to his dependent generally 70 years is assumed asa maximum age for payment of premium.Under the whole life premium are payable throughout the life time of the life assuredand this is the cheapest form of policy.This plan is ideally suited to person who wants maximum provision for his family atminimum cost. It also meets the needs for funds required for funeral, religious ritesand ceremonies to be performed, tax liabilities if any and expenses connected with thelast sickness and hospital charges etc.Endowment Assured Plan:Endowment plans are not covering the risk for whole life of the life assured. The termof risk cover under this plan is as per the need of life assured.Endowment assurance plan are the most popular. They are eminentlySuited to meet it one policy the twin demands of old age provision and risk cover forfamily. The sum assured is payable on maturity or at death if earlier. Thus anEndowment Assurance Policy provides for retirement and also serves as a means offamily provisions.Term AssuranceUnder the term assurance the risk cover is generally for specific short term. Such termassurance is maximum for 2 years. Generally this type of assurance is useful for airtraveling. 37
    • Money Back PlansUnder this plan specific percentage of sum assured will be backed to the life assuredafter specific period of time. This plan is of special interest to person who besidesdesiring to provide for their own old age and family feels the need for lump sumbenefits at periodical intervals. Under these policies part of the sum assured is paid tothe life assured in installments at selected intervals.Children PlanUnder the children plans the risk on the life of the children where covered generallythis type of plans are helpful in education and marriage of the children.Jeevan Balya:This plan is designed to enable a parent to provide for the child by payment of a verylow premium an Endowment Assurance Policy, the risk under which will commencefrom the vesting date. In addition, Premium benefit and income benefit are includedas additional benefit by payment of appropriate additional premium during thedeferment period.This policy shall be cancelled in case the life assured shall die before the deferreddates and in such an event provided the policy is then in full force in for a reducedcash option.Marriage Endowment/ educational annual planEvery father desires to see that his children are well settled in life through soundeducation, leading to good jobs and happy marriage. These needs arise at ages whichcan be approximately anticipated. Say when the children are between 18 to 25 year ofage. This plan provides for a sum assured to keep aside to meet marriage educationalexpenses of children. Under this plan the S A along with the vested bonus shall bepayable at the end of the selected term either is lump sum or in ten half yearlyinstallment, at the option of the life assured nominee beneficiary.Jeevan MitraThis plan provides additional insurance cover equal to the sum assured in the even ofdeath during the term of policy so that the total insurance cover in the event of deathis twice the basic sum assured. i.e. The basic sum assured is doubled and the accruedbonus is also paid. 38
    • ING VYSYA LIFE INSURANCEING Vysya Life Insurance Company Private Limited entered the private life insuranceindustry in India in September 2001, and in a short span of 18 months has establisheditself as a distinctive life insurance brand with an innovative, attractive and customerfriendly product portfolio and a professional advisor force. It also distributes products inclose cooperation with its sister company ING Vysya Bank through Bank assurance.Currently, it has over 3000 advisors working from 22 locations across the country andover 300 employees.ING Vysya Life Insurance Company is headquartered at Bangalore and has established astrong presence in the cities of Delhi, Mumbai, Kolkata, Hyderabad and Chennai. Inaddition ING Vysya Life operates in Vizag, Vijaywada, Mangalore, Mysore, Pune,Nagpur, Chandigarh, Ludhiana and Jaipur.ING Vysya Life has pioneered product innovations in the Indian life insurance marketwith customer-oriented cash bonus endowment and money back products. (ReassuringLife and Maximising Life), the first anticipated whole life product (Fulfilling Life) andthe first Term/Critical Illness combination product (Conquering Life). Conquering Life isan innovative term and critical illness product that has been launched recently.Conquering Life provides affordable term cover and critical illness coverage for 10critical illnesses of upto 50% of the Sum Assured. ING Vysya Life declared a bonus inSeptember 2002 of 5% (cash bonus - payable immediately) and 4% (reversionary bonus -payable at the end of the term). 39
    • The company has over 25,000 customers at the end of 2002 and has achieved a firstpremium income of Rs. 17 crores in 2002.ING Vysya Life Insurance is a joint venture between ING Insurance International BV apart of ING Group, the worlds largest life insurance company (Fortune Global 500,2002), ING Vysya Bank, with 1.5 million customers and over 400 outlets and GMRTechnologies and Industries Limited, part of GMR Group also based in Bangalore andinvolved in the field of power generation, infrastructural development and several otherbusinesses.ING Vysya Life has a paid up capital of Rs.140 crores and an authorised capital of Rs.200 crores.Life insurance products offered by the company are:1) Protection plan • Critical illness plan • Endowment plan2) Savings plan • Endowment plan • Child protection plan • Money back plan3) Investment Plan • Whole life plan • Limited payment endowment plan • Anticipated whole life plan 40
    • TATA-AIG Life Insurance Tata-AIG Life Insurance Company is a joint venture between the Tata Group and American International Group Inc (AIG), the leading US-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in America. Its member companies write a wide range of commercial, personal and life insurance products through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world. AIG’s global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products. TATA holds 76% shares and AIG holds 24% shares in the total share capital of TATA AIG. Tata AIG Life Insurance Company Ltd. "Tata AIG Life" offers a broad array oflife insurance products to individuals, associations and businesses of all sizes, with awide variety of additional coverage to ensure our customers can find an insuranceproduct to meet their needs. Tata-AIG Life Insurance and Tata-AIG General Insurance,both joint ventures between the Tata Group and American International Group (AIG),provide life and general insurance policies and solutions to companies, institutions andorganizations across India. It is licensed to operation on 12th February 2001. TATA-AIGlife is spread over28 branch offices and 39 training offices across the country. Tata-AIG Life offers a broad array of life insurance products and solutions tocorporate and other organizations. These products and solutions have various value-added benefits and options that deliver flexibility and choice to the companys clients.Tata AIG Life has completed its 4th year of operations and registered a Total Premium ofRs. 497 Crores for the period April 2004 - March 2005. 41
    • The company has some 20 life insurance products with over 250 product combinations,including endowment to term, pension to group life and credit life, money back to wholelife plans, etc. Tata-AIG Life uses different distribution channels, including directmarketing, brokerage and banc assurance, to service client groups in 19 Indian cities. Tata-AIG Life is the first private insurer in India to offer group retirementschemes. Additionally, the companys group management division focuses on providingemployee benefit solutions.PRODUCTS The product range of TATA-AIG Life is wide-spread across different segments.Some of the products are mentioned below. Maha life Invest Assure Health Protector Star Kid Shubh Life Nirvana Nirvana Plus Money Saver Plan Health First Assure Golden Life Assure 10, 20, 30 years – Security and Growth Assure Educate at 18, 21 Assure Career Builder Plan at 27 Assure Golden Years Plan Assure 21 Money Saver Plan Assure 1/5/10/15/20/25 years/ to age lifelines TROP 42
    • HDFC STANDARD LIFE INSURANCEThe Partnership: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 companiesshared similar values and beliefs and a strong relationship quickly formed. In October1995 the companies signed a 3 year joint venture agreement.Around this time Standard Life purchased a 5% stake in HDFC, further strengthening therelationship.The next three years were filled with uncertainty, due to changes in government andongoing delays in getting the IRDA (Insurance Regulatory and Development authority)Act passed in parliament. Despite this both companies remained firmly committed to theventure.In October 1998, the joint venture agreement was renewed and additional resource madeavailable. Around this time Standard Life purchased 2% of Infrastructure DevelopmentFinance Company Ltd. (IDFC). Standard Life also started to use the services of theHDFC Treasury department to advise them upon their investments in India.Towards the end of 1999, the opening of the market looked very promising and bothcompanies agreed the time was right to move the operation to the next level. Therefore,in January 2000 an expert team from the UK joined a hand picked team from HDFC toform the core project team, based in Mumbai.Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake inHDFC Bank.In a further development Standard Life agreed to participate in the Asset ManagementCompany promoted by HDFC to enter the mutual fund market. The Mutual Fund waslaunched on 20th July 2000 43
    • Incorporation of HDFC Standard Life Insurance Company Limited:The company was incorporated on 14th August 2000 under the name of HDFC StandardLife Insurance Company Limited. Companies ambition from as far back as October 1995,was to be the first private company to re-enter the life insurance market in India. On the23rd of October 2000, this ambition was realized when HDFC Standard Life was the onlylife company to be granted a certificate of registration. HDFC are the main shareholdersin HDFC Standard Life, with 81.4%, while Standard Life owns 18.6%. Given StandardLifes existing investment in the HDFC Group, this is the maximum investment allowedunder current regulations. HDFC and Standard Life have a long and close relationshipbuilt upon shared values and trust. The ambition of HDFC Standard Life is to mirror thesuccess of the parent companies and be the yardstick by which all other insurancecompanys in India are measured.Products offered by the company are:INDIVIDUAL PLAN • With Profit Endowment Assurance • With Profits Money Back • Single Premium Whole of Life • Term assurance Plan • Loan Cover Term Assurance • Personal Pension Plan • Children’s Plan GROUP PLANS • Group Term Insurance • Development Insurance Plan 44
    • ICICI PRUDENTIAL LIFE INSURANCE COMPANY ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank,a premier financial powerhouse, and prudential plc, a leading international financialservices group headquartered in the United Kingdom. ICICI Prudential was amongst thefirst private sector insurance companies to begin operations in December 2000 afterreceiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential’s equity base stands at Rs. 925 crore with ICICI Bank andPrudential plc holding 74% and 26% stake respectively. In the quarter ended June 30,2005 , the company garnered Rs 335 crore of new business premium for a total sumassured of Rs 2,619 crore and wrote 111,522 policies. For the past four years, ICICIPrudential has retained its position as the No. 1 private life insurer in the country, with awide range of flexible products that meet the needs of the Indian customer at every stepin life.Products offered by ICICI Prudential are1. Savings Plan 1) Smart kid 2) Life Time 3) Save ‘n’ Protect 4) Cash Bak2. Protection plan • Life Guard 45
    • • Extra Protection Through • Riders3. Retirement Plans • Forever Life • Life link pension • Life time pension • Reassure4. Investment Plans • Assure Invest • Life Link5. Group plans • Group Superannuation • Group Gratuity • Group Term Assurance 46
    • OM KOTAK MAHINDRA LIFE INSURANCE COMPANY Established in 1985 as Kotak Capital Management Finance promoted by UdayKotak the company has come a long way since its entry into corporate finance. It hasdabbled in leasing, auto finance, hire purchase, investment banking, consumer finance,broking etc. The company got its name Kotak Mahindra as industrialists Harish Mahindraand Anand Mahindra picked a stake in the company. Kotak Mahindra is today one ofIndias leading Financial Institutions Old Mutual plc is an international financial services group based in London withexpanding operations in life assurance, asset management, banking and generalinsurance. Old Mutual is listed on the London Stock Exchange (where it is included onthe FTSE 100 Index) and also on the South African, Namibian, Malawi and Zimbabwestock exchanges. It has 156 years of experience in the life insurance business. TheProducts offered by the Company areIndividual Plan • Kotak Endowment Plan • Kotak Term Plan • Kotak Retirement Income Plan • Kotak Child Advantage Plan • Kotak Preferred Term Plan • Kotak Capital Multiplier Plan • Kotak Safe Investment Plan • Riders • Exclusions Under Riders 47
    • Group PlanKotak Term Group planKotak Gratuity Group planKotak Credit Term Group planRidersExclusions Under RidersRuralKotak Gramina Bima Yojana 48
    • MET LIFE INSURANCE COMPANYMetLifeFor almost 137 years, Metropolitan Life Insurance Company has been insuring the livesof the people who depend on them. Their success is based on their long history of socialresponsibility, strong leadership, sound investments, and innovative products andservices.MetLife BeginsThe origins of Metropolitan Life Insurance Company (MetLife) go back to 1863, when agroup of New York City businessmen raised $100,000 to found the National Union LifeandHelping and Healing PeopleIn 1909, MetLife Vice President Haley Fiske announced that "insurance, not merely as abusiness proposition, but as a social program" would be the future policy of the companySupporting Country and CommunityOver the years, MetLife has made a difference by supporting urban renewal projects andcommunity financing. The companys social commitment and its commitment to thesecurity of its policyholders have proven to be good business.MetLife Today In 2001 MetLife was the first insurance company to establish a financialholding company with a nationally chartered bank.Products Offered by the company are1) Whole Life • Met 100 Non par • Met 100 Gold par • Met 100 Platinum par 49
    • 2) Endowment • Met Gold par • Met Platinum par • Met Junior par • Met junior Non par3) Money Back • Met Sukh • Met Junior MB4) Term • Met Mortagage Protector • Met Riders • Accidental death 50
    • BIRLA SUN LIFE INSURANCE COMANY LIMITEDBirla Sun Life Financial Services offers a range of financial services for resident Indiansand Non Resident Indians. Brought together by two large, powerful and reputed businesshouses, the Aditya Birla Group and Sun Life Financial , it is our aim to offer diverse andtop quality financial services to customers. The Mutual Fund and Insurance companiesprovide wealth management and protection products to customers while the Distributionand Securities companies provide brokerage and trading services for investment inequities, debt securities, fixed deposits, etc.Insurance is not about something going wrong. Its often about things going right. One of thewonders of human nature is that we never believe anything can actually go wrong. Surely, life hasits share of ifs. At Birla Sun Life however, they believe it has its equally pleasant share of buts aswell. Birla Sun Life stand committed to help you realize those happy moments which make a life.Be it living the same lifestyle in your post retirement days or providing a secure future for yourloved ones, in case something happens to you.The life insurance products offered by the company areIndividual life • Premium Back Term Plan • Flexi Secure Life Retirement Plan • Single Premium Bond • Birla Sun Life Term Plan • Flexi Life Line Whole Life Plan • Flexi Cash Flow Money back PlanGroup Life • Pro Group Term Insurance • Group Superannuation Plan • Group Gratuity Plan 51
    • MAX NEW YORK LIFE INSURANCE COMPANY LTD.Max New York Life today emerged as the countrys leading private life insurancecompany having recorded a sum assured of over Rs 2100 crore for the year ending March31, 2002. This was the first full year of operations for Max New York Life.The company has sold over 64,000 policies in the last financial year. The total annualizedfirst year premium for the financial year was over Rs 43 crore with the First YearPremium Income amounting to over Rs 38 crore. This has exceeded the expectations ofthe company and the projections as submitted to IRDA. Over 70 per cent of the premiaincome was from protection-oriented Whole Life Policies, which reinforces thecompanys focus on providing the true value of life insurance to the customerGiven the better-than-expected performance of the company, the shareholders haveincreased their investment in the company to Rs 250 crore with an authorized sharecapital to Rs 300 crore making Max New York Life Insurance Company among thehighest capitalized life insurance companies in IndiaMax New York Life also met its commitment for the rural and social sectors.The company has 11 offices, over 1900 Agent Advisors and over 490 employees. MaxNew York Life believes in delivering top value to all its stakeholders. As part of the bestpractices adopted, the Company instituted satisfaction surveys conducted by independentagencies to measure the satisfaction levels of its customers, agents and employees. MaxNew York Life has clearly emerged as delivering top value across all these stakeholdersMax New York Life offers a suite of flexible products. It has eight base products andnine options & riders that can be customized to over 250 combinations enablingcustomers to choose the policy that best fits their need 52
    • The products are –Whole Life Participating d ConvertibleWhole Life-Non-Participating,Children Endowment at age 18,Children Endowment at age 24,20-year Endowment Participating Policy,Endowment to age 60,Five-year Term Renewable an,Easy Term 53
    • BAJAJ ALLIANZ LIFE INSURANCE COMPANY LIMITED Bajaj Allianz life Insurance Company Limited is a joint venture between BajajAuto Limited and Allianz AG of Germany. Both enjoy a reputation of expertise, stabilityand strength. Bajaj Allianz General Insurance received the Insurance Regulatory andDevelopment Authority (IRDA) certificate of Registration (R3) on May 2nd, 2001 toconduct General Insurance business (including Health Insurance business) in India. TheCompany has an authorized and paid up capital of Rs 110 crores. Bajaj Auto holds 74%and Allianz, AG, holds the remaining 26% Germany. In its first year of operations, the company has acquired the No. 1 status amongthe private non-life insurers. As on 31st March 2003, Bajaj Allianz General Insurancemaintained its leadership position by garnering a premium income of Rs.300 Crores.Bajaj Allianz also became one of the few companies to make a profit in its first full yearof operations. Bajaj Allianz made a profit after tax of Rs.9.6 crores Bajaj Allianz today has a network of 42 offices spread across the length andbreadth of the country. From Surat to Siliguri and Jammu to Thiruvananthapuram, all theoffices are interconnected with the Head Office at Pune. In the first half of the current financial year, 2004-05, Bajaj Allianz garnered apremium income of Rs. 405 crores, achieving a growth of 84% and registered a 52%growth in Net profits of Rs.20 Crores over the last year for the same period. In thefinancial year 2003-04, the premium earned was Rs.480 Crores, which is a jump of 60%and the profit zoomed by 125% to Rs. 21.6 Crores 54
    • CHAPTER 4ANALYSIS AND INTERPRETATION 55
    • 4.1 INTRODUCTION TO ANALYSIS: In order to extract meaningful information from the data them. The analysis can be conducted by using simple statistical tools like percentages, averages and measures of dispersion. Alternatively the collected data may be analyzed, the data analysis is carried out. The data are first edited, coded and tabulated for analyzing by using diagrams, graphs, charts, pictures etc. Data analysis is the process of planning the data in an ordered form, combining them with the existing information and extracting from them. Interpretation is the process of drawing conclusions from the gathered data in the study. In this research the researcher has analyzed the data using percentages and graphs.4.2 DATA ANALYSIS TOOLS USED: In this research the data analysis tools used are percentages and graphs. The various attributes were analyzed separately and the importance to each was calculated on the basis of the percentage. The rank having the maximum percentage was taken to be preferred importance to the particular attribute. After looking at each attribute separately, all the attributes were considered together to develop a map on the most preferred rank for all the attributes. 56
    • TABLE 1 AGE OF RESPONDENTS SL.NO AGE IN YEARS NUMBER PERCENTAGE OF OF RESPONDENTS RESPONDENTS 1. 19 – 28 24 48 % 2. 29 – 38 13 26 % 3. 39 – 48 6 12 % 4. 49 – 58 6 12 % 5. 59 – 68 0 0% 6. 69 – 78 1 2% TOTAL 50 100 %SOURCE :- SURVEY DATAINFERENCE: The above table classified the respondents according to their age group.The majority of the respondents belong to the age group 19 to 28 years with 48% and thesecond age group is 29 to 38 years with 26%, followed by 39 to 48 years and 49 to 58years with 12% each. 57
    • GRAPH 1 AGE OF RESPONDENTS60%50% 48%40%30% 26%20% 12% 12%10% 2% 0%0% 19 - 28 29 - 38 39 - 48 49 - 58 59 - 68 69 - 78 YRS YRS YRS YRS YRS YRS 58
    • TABLE 2DIFFERENCIATION OF THE RESPONDENTS INTO MALE AND FEMALE TYPES OF NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS RESPONDENTS MALE RESPONDENTS 34 68% FEMALE 16 32% RESPONDENTS TOTAL 50 100 %SOURCE: - SURVEY DATAINFERENCE: This table helps us to understand that there are more number ofmale consumers with 68% market share than the female consumers with 32%Market share. 59
    • GRAPH 2DIFFERENCIATION OF THE RESPONDENTS INTO MALE AND FEMALE 80% 70% 68% 60% 50% 40% 32% 30% 20% 10% 0% TS TS EN EN D D N N PO PO ES ES R R LE LE A AM M FE 60
    • TABLE 3 DIFFERENCIATION OF RESPONDENTS BASED ON THEIR OCCUPATION SL.NO OCCUPATION NUMBER OF PERCENTAGE RESPONDENTS OF RESPONDENTS 1. STUDENTS 2 4% 2. GOVERNMENT 20 40 % EMPLOYEES 3. PRIVATE 24 48 % EMPLOYEES 4. HOUSE WIVES 2 4% 5. RETIRED 2 4% PERSONS TOTAL 50 100 %SOURCE :- SURVEY DATAINFERENCE: It could be inferred that majority of consumers of life insurance policiesare private employees with 48% and Government employees with 40%, followed bystudents, house wives and retired persons with 4 % each. 61
    • GRAPH 3DIFFERENCIATION OF RESPONDENTS BASED ON THEIR OCCUPATION 60% 50% 48% 40% 40% 30% 20% 10% 4% 4% 4% 0% S ES ES ES TS N YE YE IV EN SO W O O D R PL PL U SE PE ST EM EM U ED O H T TE IR EN ET A M IV R N PR R VE O G 62
    • TABLE 4 TABLE SHOWING INCOME GROUP OF RESPONDENTS SL.NO INCOME NUMBER OF PERCENTAGE GROUP RESPONDENTS OF RESPONDENTS 1. LESS THAN 5 10 % 5000 2. 5001 – 10,000 16 32 % 3. 10001 – 15000 17 34 % 4. 15001 – 20000 8 16 % 5. 20001 – 25000 2 4% 6. GREATER 1 2% THAN 30000 7. NIL 1 2% TOTAL 50 100 %SOURCE: - SURVEY DATAINFERENCE: The majority of dominant income group having life insurance policiesbelong to the income group of 10,001 to 15,000, which is middle class group. Followedby the income group of 5,001 to 10,000. 63
    • GRAPH 4 GRAPH SHOWING INCOME GROUP OF RESPONDENTS40%35%30%25%20%15%10%5%0% <5000 5001 - 10001 - 15001 - 20001 - >25000 NIL 1000 15000 20000 25000 64
    • TABLE 5 DIFFERENCIATION OF RESPONDENTS ACCORDING TO THE ASSETS OWNED SL.NO ASSETS NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS 1. HOUSE 19 38 % 2. TWO 25 50 % WHEELER 3. CAR 6 12 % TOTAL 50 100 %SOURCE: - SURVEY DATAINFERENCE: This table helps us to know that most of consumers with life insurancepolicies own two wheelers with 50%, 38% of consumers own house and12% of theconsumers own car. 65
    • GRAPH 5DIFFERENCIATION OF RESPONDENTS ACCORDING TO THE ASSETS OWNED 60% 50% 50% 40% 38% 30% 20% 12% 10% 0% HOUSE TWO CAR WHEELER 66
    • TABLE 6 MARKET SHARE OF DIFFERENT LIFE INSURANCE COMPANIES COMPANIES NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS LIC 39 78 % TATA AIG 1 2% HDFC 3 6% ICICI 4 8% MAX NEWYORK 1 2% KOTAK MAHINDRA 1 2% ALLIANCE BAJAJ 1 2%SOURCE: - SURVEY DATAINFERENCE: This table helps us to understand the market share of different lifeinsurance companies. LIC has a major share of 78 %, followed by ICICI Prudential with8% market share, followed by HDFC Standard Life with 6% market share. 67
    • GRAPH 6 MARKET SHARE OF DIFFERENT LIFE INSURANCE COMPANIES90% 78%80%70%60%50%40%30%20% 6% 8%10% 2% 2% 2% 2%0% J A IG FC K I C IC JA R R LI A IC D D YO A TA H IN B EW H TA E A C N M N X IA K A TA LL M O A K 68
    • TABLE 7 TABLE SHOWING ATTRIBUTES FROM RESPONDENTS SL.NO ATTRIBUTE RESPONDENTS RANK 1. RETURN ON 17 1 INVESTMENT 2. COMPANY 13 2 REPUTATION 3. PREMIUM 10 3 OUTFLOW 4. SERVICE 7 4 QUALITY 5. PRODUCT 3 5 QUALITYSOURCE :- SURVEY DATAINFERENCE: This table shows the strengths and weaknesses of the company, and whatare the important criteria or attributes on which decision making is done. From this tablewe can infer that consumers give more importance for Return on investment, secondlythey prefer company reputation, and then premium outflow followed by service qualityand product quality. 69
    • R ET U RN O N IN VE C 0 2 4 6 8 10 12 14 16 O S 18 M TM PA EN T 17 NY R EP U PR TA TI EM O N 13 IU M O70 U TF GRAPH 7 SE LO R W 10 VI C E Q U PR AL O I 7 TY DU CT Q U AL IT 3 Y GRAPH SHOWING ATTRIBUTES FROM RESPONDENTS
    • TABLE 8FACTORS WHICH INFLUENCED TO SELECT LIFE INSURANCE COMPANY SL.NO FACTORS RESPONDENTS RANK 1. PERSONAL INTEREST 25 1 2. FAMILY 11 2 3. FRIENDS 6 3 4. AGENTS 5 4 5. ADVERTISEMENT 2 5 6. OTHERS 1 6SOURCE :- SURVEY DATAINFERENCE: This table is helpful in knowing which media is best suitable forpromoting a life insurance company. It can be seen that personal factor influences aconsumers to select a life insurance company, followed by family, friends , agents andadvertisements. 71
    • GRAPH 8FACTORS WHICH INFLUENCED TO SELECT A LIFE INSURANCE COMPANY 30 25 25 20 15 11 10 6 5 5 2 1 0 Y TS S T T S IL ES EN D ER EN M N R EM TH IE FA G TE FR A O IS IN RT L VE NA D SO A RPE 72
    • TABLE 9 VALUE OF RESPONDENTS LIFE INSURANCE POLICY SL.NO AMOUNT NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS 1. < 10000 0 0% 2. 10000 – 25000 5 10 % 3. 25000 – 50000 8 16 % 4. 50000-100000 15 30 % 5. > 100000 22 44 %SOURCE :- SURVEY DATAINFERENCE: It can be inferred that majority of consumers buy the life insurance policywhich costs more than Rs. 1,00,000 followed by Rs. 50,000 to Rs.1,00,000, followed byRs. 25,000 to Rs. 50,000. 73
    • GRAPH 9 VALUE OF RESPONDENTS LIFE INSURANCE POLICY50% 44%45%40%35% 30%30%25%20% 16%15% 10%10%5% 0%0% > 10000 10000 - 25000 - 50000 - > 100000 25000 50000 100000 74
    • TABLE 10 RESPONDENTS PREFERENCE TO INVEST THEIR MONEY NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS INSURANCE 24 48 % COMPANY BANK 26 52 % TOTAL 50 100 %SOURCE :- SURVEY DATAINFERENCE: From the table it is clear that majority of people (52%) prefer to invest inBank and others (48%) prefer to invest in Insurance companies. 75
    • GRAPH 10 RESPONDENTS PREFERENCE TO INVEST THEIR MONEY53% 52%52%51%50%49% 48%48%47%46% INSURACE BANK COMPANY 76
    • TABLE 11 SATISFACTION OF RESPONDENTS WITH CURRENT LIFE INSURANCE COMPANY RESPONSE NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS YES 47 94 % NO 3 6% TOTAL 50 100 %SOURCE :- SURVEY DATAINFERENCE: From this table it could be inferred that 94% of the consumers aresatisfied with the service and quality of products of their life insurance companies. Only6% of consumers are not satisfied. 77
    • GRAPH 11SATISFACTION OF RESPONDENTS WITH CURRENT LIFE INSURANCE COMPANY100% 94%90%80%70%60%50%40%30%20%10% 6% 0% YES NO 78
    • TABLE 12 RATINGS OF THE SERVICES OFFERED BY THE RESPONDENT’S LIFE INSURANCE COMPANY RATINGS NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS EXCELLENT 7 14 % VERY GOOD 12 24 % GOOD 20 40 % AVERAGE 11 22 % POOR 0 0% TOTAL 50 100 %SOURCE: - SURVEY DATAINFERENCE: From this table it could be inferred that 40% of the consumers have ratedservice offered as good, 24% of them have rated them as very good, 22% of them haverated as average and 14% of them have rated as excellent. 79
    • GRAPH 12RATINGS OF THE SERVICES OFFERED BY THE RESPONDENT’S LIFE INSURANCE COMPANY 45% 40% 40% 35% 30% 24% 25% 22% 20% 14% 15% 10% 5% 0% 0% E D R T D G N O O O LE A O PO O R G G EL VE Y C R A EX VE 80
    • TABLE 13CONSUMERS WILLINGNESS TO COMMUNICATE THE SERVICE OFFERED BY THEIR LIFE INSURANCE COMPANY RESPONSES NUMBER OF PERCENTAGE OF RESPONDENTS RESPONDENTS YES 39 78 % NO 11 22 % TOTAL 50 100 %SOURCE :- SURVEY DATAINFERENCE: From this table it can be noted that the majority of consumers (78%)would like to communicate to others about the service offered by life insurancecompanies and 22% of consumers would not like to communicate the service offered. 81
    • GRAPH 13CONSUMERS WILLINGNESS TO COMMUNICATE THE SERVICE OFFERED BY THEIR LIFE INSURANCE COMPANY 90% 78% 80% 70% 60% 50% 40% 30% 22% 20% 10% 0% YES NO 82
    • TABLE 14 NUMBER OF LIFE INSURANCE COMPANY KNOWN BY RESPONDENTS NUMBER OF LIFE NUMBER OF PERCENTAGE OF INSURANCE RESPONDENTS RESPONDENTS COMPANY KNOWN <5 18 36 % 5–7 29 58 % 8 – 10 2 4% >10 1 2% TOTAL 50 100 %SOURCE :- SURVEY DATAINFERENCE: This table helps us to know the consumer awareness about the lifeinsurance companies. 58% of the consumers are aware about 5 to 7 life insurancecompanies, followed by 36% consumers who know less than 5 life insurance companies. 83
    • GRAPH 14NUMBER OF LIFE INSURANCE COMPANY KNOWN BY RESPONDENTS70%60% 58%50%40% 36%30%20%10% 4% 2%0% <5 5 TO 7 8 to 10 > 10 84
    • TABLE 15 SCORES OF DIFFERENT LIFE INSURANCE COMPANIES COMPANIES SCORES RANK LIC 345 1 ICICI PRUDENTIAL 211 2 HDFC 194 3 TATA AIG 123 4 ING VYSYA 121 5 BIRLA SUNLIFE 118 6 MET LIFE 90 7 OTHERS 41 8SOURCE:- SURVEY DATAINFERENCE: From the table we can rank the life insurance companies, LIC stands first,followed by ICICI Prudential followed by HDFC Standard life, followed by TATA AIG. 85
    • GRAPH 15 SCORES OF DIFFERENT LIFE INSURANCE COMPANIES 9 8 8 7 7 6 6 5 5 4 4 3 3 2 2 1 1 0 L A IG FE FE C FC S A SY ER LI A LI TI LI D VY TA H N TH EN ET SU TA O D G M U IN LA R IP IR B ICIC 86
    • CHAPTER 5FINDINGS, CONCLUSION AND SUGGESTIONS 87
    • 5.1 FINDINGS The majority of respondents belonged to the age group of 19 to 28 years which formed 48% followed by age group of 29 to 38 years which formed 26%. The male consumers capture the Market share with 68%, followed by the female consumers with 32%. The majority of the consumers of life insurance companies are private employees with 48% and Government employees with 40% The dominant income group having life insurance group belong to the group of 10001 to 15,000 followed by 5,001 to 10,000. LIC has a major market share of 78%. The factors which influenced to select a life insurance company is the personal factor, followed by family, friends, agents and advertisements. 88
    • The value of respondents life insurance policy costs more than1, 00,000 followed by 50,000 to 1,00,000.Majority of the people (52%) prefer to invest in bank others (48%)prefer to invest in insurance company.Majority of consumers are satisfied with the service and quality ofproducts of their life insurance companies.Majority of consumers (78%) would like to communicate the serviceoffered by life insurance companies.Majority of consumers (58%) are aware about 5 to 7 life insurancecompanies.LIC stands first followed by ICICI prudential, followed by HDFCStandard Life. 89
    • 5.2 CONCLUSIONAn Insurance policy is an investment oriented plan. As compared to other investmentplans, the investment portfolio of the Insurance Policy functions like a mutual fund andother investment. It is invested in a portfolio of debt and equity instruments, inconformity with the announced investment policy. Hence it grows or erodes in line withthe performance of that portfolio.From this study it reveals that the consumer’s attitude towards Insurance Policy andInsurance Company changed a lot. A 5 years before the consumers and the general publicwere not interested to take an Insurance Policy but now days there are many options andchoices in front of the customers. They are interested to take high return policies in orderto secure their lives. People are aware of all the benefits and returns of insurance policies.As a result of this new international and domestic companies are coming to the IndianMarket.Since there are many players in the Indian Insurance Market the competition level is veryhigh. So the companies are introducing new schemes. From this it is found that The LICis the major market share holder in the insurance field. Even if there are many players inthis field still it is an untapped market. Only a few portion of Indian population is insured. 90
    • 5.3 RECOMMENDATIONS AND SUGGESTIONSWith regard to insurance companies, consumers respond at different rates, depending onthe consumers characteristics. Hence Insurance companies should try to bring their newproduct to the attention of potential early adopters. a) Due to the intense competition in the life insurance market, the life insurance companies have to adopt better strategies to attract more customers. b) Keeping the cost, quality and return on investment in tact is necessary in order to tackle the competition. c) Life insurance products are taken mainly by middle and higher income group. Hence they should be regarded as maim targeted income groups. Life insurance products which are suitable for lower income group should also be released so that the market share increases. d) Return on investment, company reputation and premium outflow are most preferred attributes that are expected by the respondents. Hence greater focus should be given to these attributes. 91
    • e) Private life insurance companies should adopt effective promotional strategies to increase the awareness level among the consumers.f) Life insurance companies should ask for their consumer feedback to know whether the consumers are really satisfied or dissatisfied with the service and product of the companies. If they are dissatisfied , then the reasons for dissatisfaction should be found out and should be corrected in future.g) The LIC brand name has earned a lot of goodwill and enjoys a high brand equity. As there is intense competition in life insurance market, LIC should work hard to maintain its top position and offer better service and product. 92
    • BIBLIOGRAPHY 93
    • BIBLIOGRAPHY 1) Dr. Singh, Avtar, Principles of Insurance Law, S Chand & Sons, Delhi,2003. 2) Leon G. Schiffman, Lestie Lazar Kanwk, Consumer Behaviour, Himalaya Publishers, Delhi,2004 3) Kotler Philip, Marketing Management, Pearson Education Inc. 11th Edition. 4) Stanton William J, Etzel Michael J, Walker Bruce J, Fundamentals of Marketing, McGraw-Hill international, Singapore, 2002 5) Ravi Shankar, Services Marketing, Prentice Hall, 2000. 6) Valarie Azithaml, Marry Jo Bittner, Services of Marketing, Prentice Hall, 2001 7) Rutchnee .T & K.S.Arun Kumar,Consumer preference & buying perception of ready made silk garments,PGDSM,International center for training & research in tropical sericulture,Newspapers: • Economic Times • Business Line 94
    • World Wide Web: • www.lic.com • www.irda.org • www.wikipedia.com 95
    • ANNEXURE 96
    • QUESTIONNAIREA STUDY CONDUCTED TO UNDERSTAND THE CONSUMER’SPERCEPTION ABOUT LIFE INSURANCE POLICIES 1. Name : 2. Age: 3. Address: 3 a. Phone number: 4. Occupation: 5. Monthly income: <5000 5001-10,000 10,000-15,000 15,001-20000 20,001-25,000 >25,000 Nil 6. Do You Own House Two Wheeler Car 7. Do you have a Life Insurance Policy with any Life InsuranceCampany? Yes No 7.a) If yes, name the Company___________________________________ b) Name the policy which you own_____________________________ 97
    • 8. What factors do you consider while selecting a life insurance company? Premium Outflow Company Reputation Service Quality Product Quality Return on Investment9. What factors influenced to select a Life Insurance company? Personal interest Friends Family Agents Advertisements others10. What is the value of your life insurance? >10,000 10,000-25,000 25,000-50,000 50,000-1,00,000 >1,00,00011. Do you prefer to invest your money in a Insurance company or in a Bank? Insurance Company Bank12. Are you satisfied with your current Life Insurance Company? Yes No If Yes Why?___________________________________________ If No Why?___________________________________________13. How do you rate the service offered by your Life Insurance Company? Excellent Very Good Good Average Poor 98
    • 14. Would you like to communicate the service offered by your Life Insurance Company to others? Yes No15. How many Life insurance Compannies do you know? <5 5-7 8-10 >10 16. How do you rate the following Life Insurance Companies? LIC HDFC ING VYSYA MET LIFE INDIA INSURANCE BIRLA SUNLIFE ICICI Prudential TATA AIG Others 17. Would You like to continue with the same Life Insurance Company? Yes No18. Any suggestions for improving the service offered by life insurance companies Thank You. 99