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A detailed study of d various products offered by LIC

Published in: Economy & Finance, Business
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Lic projct

  2. 2. I, EMMANUEL SAVIO , Roll No. 8246 student of St. AndrewsCollege, Bandra, in the Third year Bachelor of commerce inBanking and Insurance (Semester VI) , hereby declare that Ihave completed the research report on the topic of“INSURANCE (LIC)” in the academic year 2011-2012. Theinformation submitted is herein is true, to the best of myknowledge.Stamp of College Signature of student(St. Andrews College of Arts, EMMANUEL SAVIOCommerce, Science and Management)Signature of Signature ofCoordinator ExternalExaminer CERTIFICATE
  3. 3. I, RENU TIWARI here by certify that the following student ofSt. Andrew’s College of T.Y.B.Com (Banking & Insurance)Semester (VI) has completed his research report on“INSURANCE (LIC)” for the academic year 2011-2012.Information submitted is true & original to the best of myknowledge.Stamp of college Signature of Professor(St. Andrews College of Arts, (Prof. RENU TIWARI) Commerce, Science & Management)
  4. 4. ACKNOWLEDGEMENT It gives me immense pleasure in acknowledging the valuable &co-operative assistance extended to me by the various individualswho have helped me successfully in completing this project.First of all I would like to show my gratitude to Professor RENUTIWARI and my guide Professor RENU TIWARI for their assistance,encouragement and support on the topic “INSURANCE (LIC)”.I would also like to express my gratitude to the employees working inLIC Corporation for helping me in my survey to complete my project.I would like to thank my parents, friends & colleagues who havesupported me during the making of this research report. Theinformation provided by them has helped me gain practicalunderstanding of the subject.I would like to thank the Mumbai University for giving me theopportunity to carry out the research.It is the encouragement of all these people that has helped meproceed towards achieving my goals.
  6. 6. EXECUTIVE SUMMARYSomeone has greatly said that practical knowledge is far better thanclassroom teaching. During this project I fully realized this and come toknow about the present real world of Insurance sector. It includes all theactivities involved in providing insurance products to the final customers.I am pleased to know about the consumers’ wants and competitors activitiesin the real world of Insurance. The subject of my study is to analyze thepresent insurance sector and products offered by LIC by applying varioustools like cold calling and through direct interaction with customer’s. I havealso done research on the growth of private life insurance companies in thelast five years. The report contains first of all brief introduction about thecompany.Then it contains the current status of private insurance companies andforeign insurance companies in India.I also put forward recommendations of the consumers and conclusionsthat will help LIC to provide consumer satisfactory services in the insurancesector.Emmanuel Savio Page 1St. Andrew’s College T.Y.B.B.I
  7. 7. RESEARCH OBJECTIVE1. The report gives the brief background of the sector and proceeds to highlight the short comings of the existing setup and players.2. The benefits of liberalized sector are enumerated.3. The report also tries to identify the market potential for insurance products and the strategy that can be employed to exploit the same.4. The stress is also given on knowing the awareness level of general public.RESEARCH METHODOLOGY:To conduct the market research first of all it is necessary to create a researchdesign.A research design is basically a blue print of how a research is to beconducted, it may include;1. Choosing the approach2. Determining the types of data needed.3. Locating the source of data.4. Choosing a method of data.RESEARCH DESIGN:Basically there are 3 types of approaches used during any research:1. Exploratory2. Descriptive3. Experimental.Emmanuel Savio Page 2St. Andrew’s College T.Y.B.B.I
  8. 8. During this research Descriptive and Exploratory approach is taken intoconsideration because of the availability of relevant information to describethe relationships between the marketing problem and the availableinformation.TYPES OF DATA USED:Both primary and secondary data is used in the research.Data Collection Methods:To conduct the market research the data is collected by two sources.SECONDARY DATA:Secondary data is one which already exists and is collected from thepublished sources. The sources from which secondary data was collectedare:• Newspapers and Magazines like Economic Times, Insurance Times, and Insurance Post.• Internet.PRIMARY DATA:The primary sources of data refer to the first hand Information. Primary datais collected during the survey with the help of QuestionnairesEmmanuel Savio Page 3St. Andrew’s College T.Y.B.B.I
  9. 9. INTRODUCTIONInsurance is a social device where uncertain risks of individuals may becombined in a group and thus made more certain - small periodiccontributions by the individuals provide a found out of which those whosuffer losses may be reimbursed. In addition to being a means to protect oneself, the insurance Industry is anefficient conduit for the saving of people to be channeled towards economicgrowth. In India, the Insurance Industry7 is more than150 years old. Today,it is monopolized by two PSU’s in their respective fields of life and GeneralInsurance. However, with the successful passage IRDA Bill through both houses ofparliament in December 1999 the sector has been opened up to privateplayers. This will provided much. Needed impetus to the Industry and willimprove the quality of service and products and will also increaseemployment opportunities.There are still some issues their need to be sorted out, particularly withregard to the status of intermediaries as envisaged by the InsuranceRegulatory Authority.An insurance company works out how likely it is that anaccident or event will happen and what it would cost to putit right. Based on this, the insurance company sets what isknow as a premium.This is the amount it asks you to pay in order to protectyourself against the accident or event. The cost of thepremium is often spread so you pay it on a monthly basis. Ifwhatever it is you have insured yourself against happens,you then make a claim to your insurance company and itpays out the agreed amount.Emmanuel Savio Page 4St. Andrew’s College T.Y.B.B.I
  10. 10. INTRODUCTION OF THE COMPANY “LIFE INSURANCE CORPORATION OF INDIA (LIC)Life Insurance Corporation of India (LIC) was formed in September, 1956,by an Act of Parliament, viz., Life Insurance Corporation Act, 1956, withcapital contribution from the Government of India.The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill,outlined the objectives of LIC thus to conduct the business with the utmosteconomy, and a spirit of trusteeship; to charge premium no higher thanwarranted by strict actuarial considerations; to invest the funds for obtainingmaximum yield for the policy holders consistent with safety of the capital;to render prompt and efficient service to policy holders, thereby makinginsurance widely popular. Since nationalization, LIC has built up a vastnetwork of 2,048 branches, 100divisions and 7 zonal offices spread over thecountry.The Life Insurance Corporation of India also transacts business abroad andhas offices in Fiji, Mauritius and United Kingdom. LIC is associated withjoint ventures abroad in the field of insurance, namely, Ken-India ,AssuranceCompany Limited, Nairobi; United Oriental Assurance Company Limited,Kuala Lumpur and Life Insurance Corporation (International) E.C.Bahrain.The Corporation has registered a joint venture company in 26thDecember,2000 in Katmandu, Nepal by the name of Life InsuranceCorporation (Nepal) Limited in collaboration with Vishal Group Limited, alocal industrial Group. An off-shore company L.I.C. (Mauritius) Off-shoreLimited has also been set up in 2001 to tap the African insurance market.Emmanuel Savio Page 5St. Andrew’s College T.Y.B.B.I
  11. 11. General Insurance:General insurance business in the country was nationalized with effect from1stJanuary, 1973 by the General Insurance Business (Nationalization) Act,1972. More than 100 non-life insurance companies including branches offoreign companies operating within viz., the National Insurance CompanyLtd., The New India Assurance Company Ltd., The Oriental InsuranceCompany Ltd., and The United India Insurance Company Ltd. with headoffices at Calcutta, Bombay, New Delhi and Madras, respectively. GeneralInsurance Corporation (GIC) which was the holding company of the fourpublic sector general insurance companies has since been de linked from thelater and has been approved as the "Indian Re insurer" since 3rd November 2000. The share capital of GIC and that of the four companiesare held by the Government of India. All the five entities are Governmentcompanies registered under the Companies Act, 1956. The general insurancebusiness has grown in spread and volume after nationalization. The fourcompanies have 2699 branch offices, 1360divisional offices and 92 regionaloffices spread all over the country. GIC and its subsidiaries haverepresentation either directly through branches or agencies in 16countriesand through associate locally incorporated subsidiary companies in 14other countries. A wholly- owned subsidiary company of GIC, i.e. IndianInternational Pvt. Ltd. is operating in Singapore and there is a joint venturecompany, viz. Ken-India Assurance Ltd. in Kenya. A new wholly ownedsubsidiary called New India International Ltd., UK has also been registered.Emmanuel Savio Page 6St. Andrew’s College T.Y.B.B.I
  12. 12. PRODUCTS OF LICWhole Life with Profits Plan – 002Features:This plan is mainly devised to create an estate for the heirs of thepolicyholder as the plan basically provides for payment of sum assured plusbonuses on the death of the policyholder. However, considering theincreased longevity of the Indian population, the Corporation has amendedthe above provision, thereby proving for payment of sum assured plusbonuses in the form of maturity claim on completion of age 80 years or onexpiry of term of 40 years from date of commencement of the policywhichever is later. The premiums under the policy are payable up to age 80years of the policyholder or for a term of 35 years whichever is later. If thepayment of premium ceases after 3years, a paid-up policy for such reducedsum assured will be automatically secured provided the reduced sum assuredexclusive of any attached bonus is not less thanRs.250/-. Such reduced paid-up policy is not entitled to participate in the bonus declared thereafter but thebonuses already declared on the policy will remain attach, provided thepolicy is converted in to a paid-up policy after the premiums are paid for 5years.Suitable For:This policy is suitable for people of all ages who wish to protect theirfamilies from financial crises that may occur owing to the policyholderspremature death.BENEFITSSURVIVAL BENEFIT:Sum assured plus accrued bonuses and the terminal bonuses, if any; onthe policyholder attaining age 80 years or on expiry of term of 40 years fromthe date of commencement of the policy whichever is later.Emmanuel Savio Page 7St. Andrew’s College T.Y.B.B.I
  13. 13. DEATH BENEFIT:Sum assured plus accrued bonuses and the terminal bonuses, if any, on thedeath of the policyholder are paid to his/her nominees/heirs.LIMITED PAYMENT WHOLE LIFE - PLAN 005 (WITH PROFITS)Features:This is the best form of life assurance for family provision since it enablesthe Life Assured to pay all the premiums during the ordinarily vigorous andmost productive years of life. He need not pay any premium in the laterstages of life if and when his conditions might become adverse.With Profits Limited Payments Policies do not cease to participate in profitsafter completion of the premium paying period but continue to share in theperiodical Bonus Distribution until the death of the Life Assured. If thepolicyholder pays at least 3 years premiums and then discontinues payingany more premiums, a reduced paid-up assurance policy comes into force.Such a reduced paid-up Policy will not been titled to participate in theprofits declared.Thereafter, but such Bonus as has already been declared on the Policy willremain attached thereto. The premium paying term under this plan is fiveyears minimum and 55 years maximum.BENEFITS Survival benefitsIf the Life Assured survives the premium paying period and the policycontinues in full force, provided all premiums have been paid, but no furtherpremiums are required to be paid.BENEFITSDisability Benefit:In case policy holder becomes totally and permanently disabled due to anaccident before reaching the age of 70 and the policy is in full force, he willnot be required to pay further premiums, (the Disability Benefit is availablein respect of the firstRs.20000 sum assured on anyone life) and the policywill continue to be in force.Emmanuel Savio Page 8St. Andrew’s College T.Y.B.B.I
  14. 14. Accident Benefit:By paying a small extra premium of Rs. l per Rs. 1000/- sum assured peryear he or his family are entitled to the following benefits on death orpermanent disability caused by accident. Even students above the age of 18years can avail of this benefit.Premium Stoppage:If payment of premiums ceases after at least THREE years premiums havebeen paid , a free paid-up policy for a reduced sum assured will beautomatically secured provided the reduced sum assured, exclusive of anyattached bonus, is not less than Rs. 250/-.The reduced sum assured will become payable on the event as stipulated inthe policy.Bonus:Is there anything extra payable besides the sum assured at the time of claimsettlement? Yes, but only if it is a with profits policy. Every year the LifeInsurance Corporation distributes its surplus among policyholder to withprofits polices in the form of bonuses. Substantial bonuses have beendeclared in the past after each valuation of policy liabilities.ANMOL JEEVAN - I (WITHOUT PROFITS) BENEFITSOn Death during the Term of the Policy: Sum Assured On Maturity: NilRESTRICTIONS(A) Minimum age at entry: 18 years (completed)(B) Maximum age at entry: 55 years (nearer birthday)(C)Maximum age at maturity: 65 years(D) Minimum Term: 5 years(E) Maximum Term: 25 yearsEmmanuel Savio Page 9St. Andrew’s College T.Y.B.B.I
  15. 15. (F) Minimum Sum Assured: Rs. Five Lakh(G) Maximum Sum Assured: Rs. Three Crore (Inclusive of all termAssurance plans)Note: The policy would be issued in multiples of Rs. one lakh for SumAssured above Rs. five lakh.(H)Mode of Premium Payment: Yearly, Half- Yearly and Single premium.(I) Rebates:•Sum Assured Rebate: NIL in case of regular premium policies and Re. l Sum Assured for policies of Rs.25 lakh and above in case ofsingle premium policies.•Mode Rebate: 1% of Annual premium for yearly mode and nil for halfyearly mode.UNDERWRITING, AGE PROOF AND MEDICALREQUIREMENTS:The plan is available to Standard and Sub-standard lives (upto Class VIEMR). This plan is also available to female lives (category I and II livesonly) and to physically handicapped persons subject to certain conditions.Standard age proof will have to be submitted along with the Proposal Form.PAID-UP AND SURRENDER VALUE:•The policy will not acquire any paid-up value.• No Surrender Value will be available under this plan.GRACE PERIOD FOR NON-FORFEITURE PROVISIONS:A grace period of 15 days will be allowed for payment of yearly or half-yearly premiums. If death occurs within this period and before the paymentof the premium then due, the policy will still be valid and the Sum Assuredpaid after deduction of the said premium as also unpaid premiums fallingdue before the next policy anniversary of the Policy. If the premium is notpaid before the expiry of the days of grace, the Policy gets lapsed.Emmanuel Savio Page 10St. Andrew’s College T.Y.B.B.I
  16. 16. REVIVAL:If the Policy has lapsed, it may be revived during the life time of the LifeAssured, but before the date of expiry of policy term, on submission of proofof continued insurability to the satisfaction of the Corporation and thepayment of all the arrears of premium together with interest at such rate asmay be prevailing at the time of the payment. The corporation reserves theright to accept or decline the revival of discontinued policy. The revival ofthe discontinued policy shall take effect only after the same is approved bythe Corporation and is specifically communicated to the Life Assured. Thecost of the Medical reports, including Special Reports, if any, required forthe purposes of revival of the policy, should be borne by the Life Assured.PAYMENT OF CLAIMS:No Claims concession will be applicable to this Policy.BACK-DATING INTEREST:The policy can be back dated within the financial year. No dating backinterest shall be charged.BENEFITS:Survival benefits:If one or both the lives survive to the maturity date, the sum assured, alongwith the accumulated bonus, is payable.Death Benefits:In case either of the couple dies during the policys term, two things happen.One, LIC pays to the surviving spouse the full sum assured. And, two, thepolicy continues on the life of the surviving partner without him/her havingto pay any further premiums ,i.e. the life cover on the survivor continues freeof cost. The sum assured is again be payable on the death of the otherpartner in case both the husband and wife were to die during the term of thepolicy. Vested bonus would also be paid along with the sum assured on thesecond death.Emmanuel Savio Page 11St. Andrew’s College T.Y.B.B.I
  17. 17. NEW INSURANCE SCHEMES:Universal Health Insurance SchemeThe Universal Health Insurance policy is available to groups of 100 or morefamilies. he policy provides for reimbursement of medical expenses uptoRs.30000/-towards hospitalization members of the family, death cover dueto an accident 5000 to the earning head of the family and compensation dueto loss f earning head of the family @ Rs.50/- per day upto a maximum of15 days, after awaiting period of three days, when the earning head of thefamily is hospitalized.The premium under the policy is Rs.1! - Per day (i.eRs.365/-per annum) foran individual Rs. 1.5 per day for a family of five limited to spouse andchildren (i.e.Rs.548 per annum), and Rs.2/- per day (i.e. Rs. 730 per annum)for covering dependent overall family size of seven. A subsidy of Rs. 100per year towards annual premium for "Below Poverty Life" families is alsoprovided under the scheme.For purpose of this policy hospital means:•Any Hospital/Nursing home registered with the local authorities and underthe supervision of a registered and qualified Medical practitioner.•Hospital, Nursing Home runs by Government.•Enlisted hospitals run by NGOs/ Trusts/ selected private hospitals withfixed schedule of charges.•Hospitalization should be for a minimum period of 24 hours. However, thistime limit is not applied to some specific treatments and also where due totechnological advancement hospitalization for 24 hours may not be required.Emmanuel Savio Page 12St. Andrew’s College T.Y.B.B.I
  18. 18. Main Exclusions:•All pre-existing diseases.•Corrective, cosmetic or aesthetic dental surgery or treatment.•Cost of spectacles, contact lens and hearing aid.•Primarily diagnostic expenses not related to sickness/injury.•Treatment for Pregnancy, Childbirth, Miscarriage, abortions etc.Age Limitations:This policy covers people between the age of 3 months to 65 years.Floater Basis:The benefit of family will operate on floater basis i.e. the totalreimbursement of Rs.30,000/- can be availed of individually or collectivelyby members of the family. Unit plans:Unit plans are investment plans for those who realize the worth of hard-earned money. These plans help you see your savings yield rich benefits andhelp you save tax even if you don’t have consistent income.•Jeevan plus•Future plus•Bima plus•Market plus•Money plus•Profit plus•Fortune plusEmmanuel Savio Page 13St. Andrew’s College T.Y.B.B.I
  19. 19. Fortune plus:It is a unit linked assurance plan where premium payment term (PPT) is 5years and the premium payable in the first year will be 50% of totalpremium payable under the policy. The level of cover will depend on thelevel of premium you agree to pay. Four types of investment funds areoffered. Premiums paid after allocation charge will purchase units of theFund type chosen. The Unit Fund is subject to various charges and value ofthe units may increase or decrease, depending on the Net Asset Value(NAV). The plan therefore serves the purpose of insurance-cum-investment.1. Payment of Premiums:You may pay premiums regularly at yearly, half-yearly, quarterly ormonthly (ECS) intervals for 5 years. The minimum First year premium willbe Rs.20,000/- and you may pay any amount exceeding it. From secondyear onwards each year’s premium will be 25% of the first year premium.Other Features:i) Partial Withdrawals:You may encash the units partially after the third policy anniversary subjectto the following:In case of minors, partial withdrawals shall be allowed from the policyanniversary coinciding with or next following the date on which the lifeassured attains majority(i.e. on or after18th birthday).Partial withdrawals may be in the form of fixed amount or in the form offixed number of units.For 2 years’ period from the date of withdrawal, the Sum Assured underthe Basic plan shall be reduced to the extent of the amount of partialwithdrawals made.Under policies where less than 3 years’ premiums have been paid andfurther premiums are not paid, the partial withdrawals shall not be allowed.Under policies where at least 3 years’ premiums have been paid, partialwithdrawal will be allowed subject to Policyholder’s Fund Value being atleast Rs. 10,000/-.Emmanuel Savio Page 14St. Andrew’s College T.Y.B.B.I
  20. 20. ii) Switching:You can switch between any fund types for the entire Fund Valueduring the policy term subject to switching charges, if any.iii) Discontinuance of premiums:If premiums are payable either yearly, half-yearly, quarterly or monthly(ECS) and the same have not been duly paid within the days of grace underthe Policy, the Policy will lapse. A lapsed policy can be revived during theperiod of two years from the due date of first unpaid premium. i Where at least 3 years’ premiums have been paid, the Life Cover andAccident Benefit rider, if any, shall continue during the revival period.During this period, the charges for Mortality and Accident Benefit cover, ifany, shall be taken, in addition to other charges, by canceling an appropriatenumber of units out of the Policyholder’s Fund Value every month. This willcontinue to provide relevant risk covers for i.e. two years from the due dateof first unpaid premium, orii. Till the date of maturity, oriii. Till such period that the Policyholder’s Fund Value reduces to Rs.5,000/-, whichever is earlier. The benefits payable under the policy indifferent contingencies during this period shall be as under:A. In case of Death: Higher of Sum assured under the Basic Plan or thePolicyholder’s Fund Value. The Sum Assured shall be subject to provisionsof Partial Withdrawals made, if any.B. In case of Death due to accident: Accident Benefit Sum Assured inaddition to the amount under A above, if Accident Benefit is opted for.C. On Maturity: The Policyholder’s Fund Value.D. In case of Surrender (including Compulsory Surrender): ThePolicyholder’s Fund Value. The Surrender value, however, shall be paidonly after the completion of 3 policy years.E. In case of Partial Withdrawals: For 2 year’s period from the date ofwithdrawal, the sum assured under the basic plan shall be reduced to theextent of the amount of partial withdrawals made.Emmanuel Savio Page 15St. Andrew’s College T.Y.B.B.I
  21. 21. II) Where the policy lapses without payment of at least 3 years’ premiums,the Life Cover and Accident Benefit rider cover, if any, shall cease and nocharges for these benefits shall be deducted. However, deduction of all theother charges shall continue. The benefits under such a lapsed policy shall bepayable as underF. In case of Death: The Policyholder’s Fund Value.G. In case of death due to accident: Only, the amount as under F above.H. In case of Surrender (including Compulsory Surrender): Policyholder’sFund Value / monetary value as the case may be, shall be payable after thecompletion of the third policy anniversary. No amount shall be payablewithin 3 years from the date of commencement of policy.I. In case of Partial withdrawal: Partial Withdrawals shall not be allowedunder such a policy even after completion of 3 years period.III) Revival: If due premium is not paid within the days of grace, the policylapses. A lapsed policy can be revived during the period of two years fromthe due date of first unpaid premium or before maturity, whichever is earlier.The period during which the policy can be revived will be called “Period ofrevival” or “revival period” .If premiums have not been paid for at least 3full years, the policy may be revived within two years from the due date offirst unpaid premium.The revival shall be made on submission of proof of continued insurabilityto the satisfaction of the Corporation and the payment of all the arrears ofpremium without interest. If at least 3 full years’ premiums have been paidand subsequent premiums are not paid, the policy may be revived within twoyears from the due date of first unpaid premium but before the date ofmaturity. No proof of continued insurability shall be required but all arrearsof premium without interest shall be required to be paid.The Corporation reserves the right to accept the revival at its own terms ordecline the revival of a lapsed policy. The revival of a lapsed policy shalltake effect only after the same is approved by the Corporation and isspecifically communicated in writing to the Propose / Life Assured.Irrespective of what is stated above, if less than 3 years’ premiums havebeen paid and the Policyholder’s Fund Value is not sufficient to recover theEmmanuel Savio Page 16St. Andrew’s College T.Y.B.B.I
  22. 22. charges, the policy shall be terminated and thereafter revival will not beentertained.If 3 years’ or more than 3years’ premiums have been paid and thePolicyholder’s Fund Value reduces to Rs.5000/-, the policy shall terminateand Policyholder’s Fund Value as on such date shall be refunded to the LifeAssured and thereafter revival will not be allowed.IV) Settlement Option: When the policy comes for maturity, you mayexercise “Settlement Option” and may receive the policy money ininstallments spread over a period of not more than five years from the dateof maturity. There shall not be any life cover during this period. The value ofinstallment payable on the date specified shall be subject to investment riski.e. the NAV may go up or down depending upon the performance of thefund.Reinstatement:A policy once surrendered will not be reinstated.Risks borne by the Policyholder:i) LIC’s Fortune Plus is a Unit Linked Life Insurance product which isdifferent from the traditional insurance products and is subject to the riskfactors.ii) The premium paid in Unit Linked Life Insurance policies are subject toinvestment risks associated with capital markets and the NAV’s of the unitsmay go up or down based on the performance of fund and factorsinfluencing the capital market and the insured is responsible for his/herdecisions.iii) Life Insurance Corporation of India is only the name of the InsuranceCompany and LIC’s Fortune Plus is only the name of the unit linked lifeinsurance contract and does not in any way indicate the quality of thecontract, its future prospects or returns.iv) Please know the associated risks and the applicable charges, from yourInsurance agent or the Intermediary or policy document of the insurer.v) The various funds offered under this contract are the names of the fundsand do not in any way indicate the quality of these plans, their futureprospects and returns.Emmanuel Savio Page 17St. Andrew’s College T.Y.B.B.I
  23. 23. vi) All benefits under the policy are also subject to the Tax Laws and otherfinancial enactments as they exist from time to time.Cooling off period:If you are not satisfied with the “Terms and Conditions” of the policy, youmay return the policy to us within 15 days.Loan: No loan will be available under this plan.Assignment: Assignment will be allowed under this plan.Exclusions: Any amount exceeding it. From second year onwards eachyear’s premium will be 25% of the first year premium. In case the LifeAssured commits suicide at any time within one year, the Corporation willnot entertain any claim by virtue of the policy except to the extent of thePolicyholder’s Fund Value on death.MARKET PLUS“IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENTPORTFOLIO IS BORNE BY THE POLICYHOLDER"LIC’s MARKET PLUS:This is a unit linked deferred pension plan. You can take the plan with orwithout risk cover. You can also choose the level of cover within the limits,which will depend on whether the policy is a Single premium or Regularpremium contract and on the level of premium you agree to pay. Theallocated premiums will be applied to purchase units as per the Fund typechosen. Your Unit Account will be subject to deduction of charges asspecified in the Policy Conditions. The value of the units in the Unit Fundmay increase or decrease, depending on the investment return of the assetsrepresenting the chosen Fund i.e.Payment of Premiums:You may pay premiums regularly at yearly, half-yearly or quarterly intervalsover the term of the policy. The minimum annual premium will be Rs.5,000/- increasing thereafter in multiples of Rs.1, 000/-.Alternatively, a SingleEmmanuel Savio Page 18St. Andrew’s College T.Y.B.B.I
  24. 24. premium can be paid subject to a minimum of Rs.10,000 and thereafter inmultiples of Rs.1, 000.ii.Benefits: A) Death Benefit:If the Life cover is opted for, the Sum Assured under the Basic Plantogether with the Fund Value of units either as a lump sum or as pension. Incase the policy is taken without life cover, then the Fund Value of the unitsheld in the Policyholder’s Unit Account shall be payable either as a lumpsum or as a pension. The amount of pension will depend on the thenprevailing immediate annuity rates under the annuity option chosen.B) Benefit on Vesting:On your surviving to the date of vesting, the Fund Value of the units held inyour Unit Account will compulsorily be utilized to provide a pension basedon the then prevailing immediate annuity rates under the relevant annuityoption. However, you may opt to commute up to one-third of the Benefit tobe paid asa lump sum. Further, you may choose to purchase pension fromLIC or other life insurance company.Accident Benefit Option:If you have opted for life cover, you may opt for Accident Benefit equal tolife cover subject to minimum Rs. 25,000 and maximum Rs. 50 lakh (takenall policies with LIC of India and other insurers).In case of death byAccident, an additional sum equal to Accident benefit will be payable.Eligibility Conditions And Other Restrictions:Basic PlanMinimum Age at entry: 18 years completedMaximum Age at entry: 70 years (age nearer birthday).However if life cover is opted for, then 65 yearsMinimum Age at vesting: 40 years (age last birthday)Maximum Vesting Age: 75 years (age last birthday)Minimum Deferment Term: 5 yearsEmmanuel Savio Page 19St. Andrew’s College T.Y.B.B.I
  25. 25. Minimum Sum Assured: Rs. 25,000 for Single premium Rs. 50,000 forRegular premiumMaximum Sum Assured: Single Premium - Equal to single premiumRegular Premium - 20 times of the annualized premium.i) Investment of Funds:The premiums allocated to purchase units will be strictly invested accordingto the investment pattern committed in various fund types. Various typesof fund and their investment pattern will be as under:Fund Type Short-term investments such as money market instruments(including Govt. Securities & Corporate Debt) Investment in ListedEquity Shares:Bond FundNot less than 80%100%NilSecured FundNot less than 65% not more than 85% not less than15% & not more than35%.Balanced FundNot less than 50% not more than 70% not less than30% & not more than50%.Growth Fundi. Not less than 20% not more than 40% not less than60% & not more than80%.ii.The Policyholder has the option to choose any ONE of the above 4funds. Incase no fund has been opted for, the allocated premiums shall, bydefault, be invested in the SECURED FUND.iii. Method of Calculation of Unit price:Units will be allotted based on the Net Asset Value (NAV) of the respectivefund as on the date of allotment. There is no Bid-Offer spread (the Bid priceand Offer price of units will both be equal to the NAV). The NAV will beEmmanuel Savio Page 20St. Andrew’s College T.Y.B.B.I
  26. 26. computed on daily basis and will be based on investment in Government /Government Guaranteed Securities /Corporate Debt notPerformance, Fund Management Charge and whether fund is expanding orcontracting under each fund type.iv. Charges under the Plan:Units will be allotted based on the Net Asset Value (NAV) of the respectivefund as on the date of allotment. There is no Bid-Offer spread (the Bid priceand Offer price of units will both be equal to the NAV). The NAV will becomputed on daily basis and will be based on investment performance, FundManagement Charge and whether fund is expanding or contracting undereach fund type.(A) Premium Allocation Charge:This is the percentage of the premium appropriated towards charges from thepremium received. The balance known as allocation rate constitutes that partof the premium which is utilized to purchase (Investment) units for thepolicy.For Single premium policies: 3.3%v. Allocation charge for Top-up: 1.25%(B) Charges for Risk Covers:Mortality Charge:This is the cost of insurance cover. These are age specific and will be takenevery month.Accident Benefit charge:This is the cost of Accident Benefit rider and will be levied every month atthe rate of Rs. 0.50 per thousand Accident Benefit Sum Assured per policyyear. (C) Other Charges: Policy Administration charge Rs. 60/-per monthduring the first policy year and Rs. 20/- per month thereafter, throughout theterm of the policy.Fund Management Charge:This is the charge levied as a percentage of the value of units and shall beappropriated by adjusting NAV at following rates:0.75% p.a. of Unit FundEmmanuel Savio Page 21St. Andrew’s College T.Y.B.B.I
  27. 27. for Bond Fund 1.00% p.a. of Unit Fund for ?Secured? Fund 1.25%p.a. ofUnit Fund for Balanced Fund 1.50% p.a. of Unit Fund for Growth Fund.Switching Charge:This is the charge levied on switching of monies from one fund to another.Within a given policy year 4 switches will be allowed free of charge.Subsequent switches in that year shall be subject to a switching charge ofRs. 100 per switch.Bid/Offer Spread:NilSurrender Charge:NilService Tax Charge:A service tax charge shall be levied on the Mortality and Accident Benefitrider charge, if any, on a monthly basis. The level of this charge will be asper the rate of service tax as applicable from time to time. Presently, the rateof Service Tax is 12% with an educational cess at the rate of 2% thereon andhence effective rate is 12.24%.Miscellaneous Charge:This is a charge levied for an alteration within the contract, such as reductionin policy term, change in premium mode, etc. An alteration may be allowedsubject to a charge of Rs. 50/-.(D) Right to revise charges:The Corporation reserves the right to revise all or any of the above chargesexcept the premium allocation charge and charges for risk covers, with theprior approval of IRDA.Emmanuel Savio Page 22St. Andrew’s College T.Y.B.B.I
  28. 28. WHOLE LIFE PLANSuitabilityPeople who wish to provide for their dependants huge sums atcomparatively low contribution as premium can take this policy. Under thisplan an individual gets life coverage for almost whole of his life.Salient FeaturesSum assured is payable only on the death of the life assuredPremiums have to be paid for 35 years or till age 80 years whichever is morePremiums cease on death of the life assuredBenefitsOn DeathSum assured + vested bonuses are payable to nominees/beneficiaries ondeath of life assured only.Other ConditionsMinimum sum assured: Rs 20000Minimum premium must be Rs.800 per annumMinimum age at entry: 18 yearsMaximum age at entry: 60 yearsEmmanuel Savio Page 23St. Andrew’s College T.Y.B.B.I
  29. 29. Objectives of LICSpread Life Insurance widely and in particular to the rural areas and to thesocially and economically backward classes with a view to reaching allinsurable persons in the country and providing them adequate financialcover against death at a reasonable cost.•Maximize mobilization of peoples savings by making insurance-linkedsavings adequately attractive.•Bear in mind, in the investment of funds, the primary obligation toits policyholders, whose money it holds in trust, without losing sight of theinterest of the community as a whole; the funds to be deployed to the bestadvantage of the investors as well as the community as a whole, keeping inview national priorities and obligations of attractive return.•Conduct business with utmost economy and with the full realization that themoneys belong to the policyholders.•Act as trustees of the insured public in their individual and collectivecapacities.•Meet the various life insurance needs of the community that would arise inthe changing social and economic environment.•Involve all people working in—the corporation to the best of theircapability in furthering the interests of the insured public by providingefficient service with courtesy.•Promote amongst all agents and employees of the Corporation a senseof participation, pride and job satisfaction through discharge of their dutieswith dedication towards achievement of Corporate Objective.Emmanuel Savio Page 24St. Andrew’s College T.Y.B.B.I
  30. 30. GROWTH OF PRIVATE LIFE INSURANCE COMPANIES IN THE LAST 5YEARSThe insurance industry recorded a booming growth of 35% in premiumincome during2004-05 with the 13 private sector players walking away with.An impressive 129%while the Life Insurance Corporation of India recordeda 21% growth. Thus the market share of state behemoths dropped to 78% in2004 05 from 87% average ago. According to ASSOCHAM Eco Pulse(AEP) Study, the industry premium increased to Rs253.42bn in 2004-05from Rs187.1bn in 2003-04. The LIC total premium for the year 2004-05amounted to Rs197.85bn as against the Rs162.84bn during previous year.The figures for the first two months of the fiscal 2005-06 also speak of thegrowing share of the private insurers. The share of LIC for this period hasfurther come down to 75%, while the private players have grabbed over 24%share. "With the huge potential the market has, the Government should,more seriously look into increasing the FDI cap in the sector" said MahendraK. Sanghi, ASSOCHAM President. During April-June 2005, the largestprivate company ICICI Prudential has increased its share from 6.25% in2004-05 to 7.68% in current fiscal. The opening up of the sector has givensome of the most innovative products like the customized insurance policiesand now the unit linked policies that have gained much of customerattention. The sector has huge potential and certain other new and innovativeareas can also be looked into for enhancing market share and premiumincome, said Sanghi. HDFC is next in the row with 2.91% market sharewhich has increased from 1.92%last fiscal followed by TATA AIG whichnow shares 2% of the market from 1.18%last fiscal. Birla Sun lifes sharehas dropped from 2.45% during FY05 to 1.76% in first two months ofFY06. SBI life comes next with 1. 72% share and has in fact dropped afew percent points from last year. Max New York life and Aviva LifeInsurance have captured more than 1% share each from less than 1% shareduring FY05. Others like ING, AMP Sanmar, Met Life and Sahara Indiahave less than 1 % share. The detail of the market share of life insurancecompanies is attached. The market share of the private players has doubledevery year from 5.6% in 2002-03 to, 12% in2003-04 and close to 22% in2004-05.The state run insurance company has the biggest advantage of itshuge network which the company can use to penetrate into rural market thatis still lying untapped. Another option with the life insurance companies tocapture more and more market share could be product innovation andEmmanuel Savio Page 25St. Andrew’s College T.Y.B.B.I
  31. 31. constantly developing an insurance product in order to meet the ever-changing requirements of the customer. Quality customer service andeducation can be another area where a company can differentiate itself fromother companies.IT to boost life market growth?THE LIFE Insurance Corporation of India (LIC) has turned to informationtechnology in a bid to shed its image as a dinosaur among more nimbleprivate sector companies. LIC, Indias dominant life insurer, is encouragingpolicyholders to use its web site to pay premiums and make claims. Last-month, it announced new mobile phone SMS(testing) services to alertpolicyholders of news about their plans. These moves, unmatched by mostof LICs smaller private sector rivals, are part of an effort to open newchannels to increase the speed and quality of customer service -long seen asLICs weakness after decades as Indias monopoly life insurer.LICs performance in the year to March 2004 suggests that these efforts areworking. It sold27 million new policies generating Rs.85.7 billion (US$1.9billion) in premium income - an annual growth of about 11 percent. LICsdeployment of information technology may have helped it maintain its 88percent market share of premium sales. Yet few believe that technologyalone will drive the companys - and in effect, the Indian life industrysexpansion. "Ultimately the growth of life insurance depends on growth ofthe economy," said TK. Banerjee, a board member of the InsuranceRegulatory Development Authority. Indias economic growth rate in March2004 hit double-digit figures to become Asias fastest-growing economy.Most economists forecast growth to stabilize at around 7 percent to 2005.Banerjee said that this climate of rising economic prosperity is encouragingconsumers to think more about insurance.Nonetheless, most life companies believe consumers still need Sanmar:"People still dont think that insurance is important. Most sales happen afterpersonal interaction. "AMP Sanmar, a two-year old joint venture betweensouth.-Indian based conglomerate Sanmar and Australias AMP, hasemployed some 3,000 sales agent’s are targeting small and medium-sizedtowns that have low penetration rates of life insurance. Indias life insurancepenetration is less than three percent. "Were focused on places where thereis no other company - not even LIC," Subramaniam said,-remarking thatunlike LIC, AMP Sanmar regards the internet and mobile phones asEmmanuel Savio Page 26St. Andrew’s College T.Y.B.B.I
  32. 32. channels for promotion, not sales. He said that the internet is not widespreadas a channel to sell consumer products in India, but Subramaniam has notruled out deploying such technology in the future. Whatever the merits ofnew distribution channels, the industry fears a decline in sales following newtaxes levied on single premium products. Single premium life insurance hasbeen popular in India mainly because guaranteed returns were tax-free.This encouraged policyholders to pay large premiums with minimal riskcover, for payments at maturity that often exceeded the returns of moresophisticated financial products such as mutual funds. But last October, thegovernment decided to tax premiums that paid above 20 percent of the sumassured. The decision has reduced sales of single premium products, whichis likely to restrain the overall growth of Indias life industry. The industryregulator has forecast growth of life premiums to be around 20 percent toMarch -2004, about the same level as 1999, down from a burst of sales in2002 of 43.5 percent. Indias life insurers have rallied to persuade thegovernment to rescind the ruling later this year, but any decision must waitfor the end of parliamentary elections currently underway.Emmanuel Savio Page 27St. Andrew’s College T.Y.B.B.I
  33. 33. CURRENT STANDING OF PRIVATE LIFEINSURANCE COMPANIES IN URBAN SECTORLife insurance is possibly the most- retail of all financial services, and isrequired by people of all segments and in all locations. At a broad level,ICICI Prudential aims to secure the families of the middle and upper classworking people in urban India. To this end, they have pursued a pan-India distribution strategy and backedit up with arrange of products that meets the needs of a wide range ofpeople, be they from rural or urban areas.Today, they have branches in 74 locations and rural presence in more than15 states. Certainly, the majority of the business still comes from urban areassuch as metros and mini-metros. However, they have seen rural businessgrow significantly and expect it to continue making greater contribution inthe years to come.ROLE OF FOREIGN COMPANIES IN INDIAGovernment has allowed 26% foreign equity participation in the insurancesector. This has its limitations. While most foreign insurers planning to starttheir services in India were not pleased by this condition, they reluctantlyagreed that this was expected in an opening economy and this will notchange their outlook for India. After all no insurance company can afford toignore a market of 1bn people. But the fact remains that they:•Can not appoint majority directors on the company board;•Can not have say in the day to day workings of the company;•Can Affect Only Special Resolutions.This cap, however, will have a great impact on the Indian counter part toraise 74% of the funds in their joint venture. To add to this if Indian partnerslike State bank of India, with over 9000 branches nationwide, will demandpremium for their existing distribution network, we will see the foreigninsurance companies demand hefty premiums for bringing in their globalexpertise and brand.Emmanuel Savio Page 28St. Andrew’s College T.Y.B.B.I
  34. 34. Mr. Vaidya, Chairman of SBI, has recently stated that all it is looking for isa good and reliable partner and the question of a hefty premium to becharged to its foreign partner is not significant. Them monolith has finallycome to business senses foreign companies are unhappy even about lawspertaining to repatriation of funds. The Stipulated investment criteria is alsosomething that all players in the sector, be it Indian or foreign, are closingwatching. The foreign players are essentially looking to tap their" global expertise inthe variety markets and use that know-how to work in the Indian scenario.Designing of products, information systems, technical expertise, manpowerplanning etc is what one expects the foreign players to have a say in. Anyventure of the joint kinds needs to be between equals. If this is not there thenthere is every chance that a partner in the venture will feel increasingly uncomfortable and would be looking to call the joint venture off.Emmanuel Savio Page 29St. Andrew’s College T.Y.B.B.I
  35. 35. FINDINGSQUESTIONNAIRE ANALYSISRespondents =80Respondents Responded =60Response Rate =75%Respondents are taken from private, government and business sectors.1. According to you who has played a major role in the field of lifeinsurance companies?INSURANCE PVT. GOVT. BUSINESS EMLOYEES EMPLOYEES MANLIC 10 13 10HDFC 5 3 5ICICI 3 3 4OTHERS 2 1 12. Which insurance companies have been successful to make strongpublic base by advertisement?INSURANCE PVT. GOVT. BUSINESS EMLOYEES EMPLOYEES MANLIC 12 14 12HDFC 3 2 4ICICI 4 3 3OTHERS 1 1 1Emmanuel Savio Page 30St. Andrew’s College T.Y.B.B.I
  36. 36. 3. Which insurance company has gained massive public support in thecurrent fiscal year?INSURANCE PVT. GOVT. BUSINESS EMLOYEES EMPLOYEES MANLIC 12 14 10HDFC 3 2 5ICICI 3 2 4OTHERS 2 14. Do you think insurance policy is in the direction of public welfare? PVT. SECTOR GOVT. BUSINESS SECTOR MANYES 13 16 12NO 7 4 85. Is retirement bond or pension policy launched by the number ofprivate player as well as public sector Company in the direction ofsecured old age? PVT. SECTOR GOVT. BUSINESS SECTOR MANYES 15 18 13NO 5 2 76. Do you think that risk coverage factor included in Insurance policyattracts general public towards the policy? PVT. SECTOR GOVT. BUSINESS SECTOR MANYES 12 16 11NO 8 4 9Emmanuel Savio Page 31St. Andrew’s College T.Y.B.B.I
  37. 37. 7. What according to you, the term plan that only covers riskand doesn’t cover maturity benefit on survival at the end of the termprovides security cover over policy holders or a smart way ofaccumulative money from policy holders? PVT. SECTOR GOVT. BUSINESS SECTOR MANYES 11 15 12NO 9 5 88. Do you think that the arrival of so many private companies in thisinsurance sector envisage a lot of choice to policy holder? PVT. SECTOR GOVT. BUSINESS SECTOR MANYES 16 18 16NO 4 2 49. Do you agree that customer-centricity and transparency are thebuzzwords for success in this evolving industry? PVT. SECTOR GOVT. BUSINESS SECTOR MANYES 18 20 19NO 2 - 1Emmanuel Savio Page 32St. Andrew’s College T.Y.B.B.I
  38. 38. CONCLUSIONAfter overhauling the all situation that boosted a number of Pvt. Companiesassociated with multinational in the Insurance Sector to give befittingcompetition to the established behemoth LIC in public sector, we come atthe conclusion that :1) There is very tough competition among the private insurance companieson the level of new trend of advertising to lull a major part of Customers.2) LIC is not left behind in the present race of advertisement.3) The entry of the Pvt. Players in the Insurance Sector has expandedthe product segment to meet the different level of the requirement of thecustomers. It has brought about greater choice to the customers.4) Private insurers have restricted reach to the customers.5) LIC has vast market and very firm grip on its traditional customers andmonopoly of life insurance products.6) Bank assurance - that allows life insurers to leverage on the risk productthrough bank network, was adopted by private players. But LIC was also notleft behind as picking up majority stake in the corporation Bank and largeequity stake in the Oriental Bank of Commerce.IRDA is also playing very comprehensive role by regulating normsmandating to private players in this sector, that increases the confidencelevel of the customers to the private playersEmmanuel Savio Page 33St. Andrew’s College T.Y.B.B.I
  39. 39. RECOMMENDATIONSIn the modernized well advanced hi-tech approach to the customer everypossible facilities and effort to build up the confidence of the rising policyholders towards. Insurance companies, to complete one another nothing isleft to recommend. But some recommendations that are intensely felt andhighly required for insures to sustain in the market.These are as follows:a) More and more transparency should be ascertained between insurersand policy holders.b) Particularly, in the emerging boom in the insurance company, everyinsurance company should be customer centered, and well versed in thehandling of problem and grievances of the policy holders.c) Each and Every product launched by the Insurance Company should be infavor of increasing need of policy holders.IRDA should be more and more responsible to the insurance sector bydetermining some standard. It should be mandatory to every insurers tomake more and more responsible and responsive to the policy holders so thatcomprehensive understanding may be developed among policy holders. Itmay be beneficial on both sidesEmmanuel Savio Page 34St. Andrew’s College T.Y.B.B.I
  40. 40. BIBLIOGRAPHYBROCHURES / INFORMATION BOOKLETS•Product List L.I.C.•L.I.C. Annual Report•HDFC Annual Report•Malhotra Committee Report on Reforms in the Insurance Sector, 1993.•The Insurance Regulatory and Development Authority Bill, 1999.NEWSPAPERS / MAGAZINES•The Economic Times•DNA money•Insurance PostBOOKS•Dr. Gupta S.P& Dr. Gupta M.P., Business Statistics by Addition 2004, NewDelhi.WEBSITES••••• Savio Page 35St. Andrew’s College T.Y.B.B.I
  41. 41. Emmanuel Savio Page 36St. Andrew’s College T.Y.B.B.I