An overview of life insurance sector. (1)

An overviewof Life Insurance Sector
1
Title of the Project
An overview of Life Insurance Sector
Submitted by
Name of the Candidate :
RegistrationNo. :
College Roll No. :
Name of the College :
Supervised by
Name of the Supervisor:
Name of the College:
Year of Submission

2

3
Acknowledgment
It is to acknowledge that the project has been done with the help,
guidance and supervision of Without his help and guidance it was
impossible to complete the project successfully.
I would also like to thank our Principal for his help and co-operation
to complete the project with the permission to use the college library
and computers.

4
Table of Contents
Particulars Page No.
 Introduction 3-10
 Review of Literature 11
 Objectives 12
 Methodology 13
 Limitation of Study 14
 Nationaland International Scenario 15-16
 Various Life insurance products 17-20
 Analysis and Findings 21-25
 Conclusionand Suggestion 26-27
 Bibliography 28
 Questionnaires 29
Annexure-I 30
Annexure-II 31
THANK YOU

5
Introduction
What Is Insurance?
Insurance is nothing but a system of spreading the risk of one onto the shoulders
of many. It is a method or process which distributes the burden of the loss on a
number of people within the group formed for this particular purpose.
The definition of insurance can be made from two points:
 Functional: - Insurance is a co-operative device to spread the loss caused by
a particular risk over a number of persons who are exposed to it and who
agree to insure themselves against the risk.
 Contractual :- “Insurance is a legal contract in which an insurer promise to
pay a specific amount to another party, the insured, if a particular event
happens and the insured suffers a financial loss as a result”- Oxford
Dictionary.
So from the above discuss we can say that insurance is a social device which
reduces uncertainty by spreading the economic burden of losses among
members of a group who have similar risk.
Insurance is a contract between the insurer and the policy holder. Insurance is a
special type of contract apart from the usual essentials of a valid contract;
insurance contracts are subject to two additional principles viz. principle of
Good Faith and the principle of Insurable Interest. These apply to all insurances,
both life and non-life. Insurance is relevant only if there are uncertainties. If
there is no uncertainty about the occurrenceof an event, it cannot be insured
against. In case of a human being death is certain, but the time of death is
uncertain. That case the personis insured, because of the uncertainty about the
time of his death. Again insurance does not protect the asset. It does not prevent
its loss due to the peril which cannot be avoided through insurance. Insurance
only tries to reduce the risk of the owner and compensates for the losses.
Only economic consequences can be insured.

6
History of Insurance:
Insurance had been known to exist since 3000 BC. The Chinese
traders travelling in river would distribute their goods among several
vessels, so that the loss from any one vessel being lost would be
shared. So that any single person should not be suffer for any loss.
The Babylonian traders would agree to pay additional sums to
lenders, as the price for writing off the loans in case of the
merchandise being stolen. Again the Greeks had started charitable
societies in the late 7th century AD to take care of the funeral and
families of member who died. The Great Fire of London in 1666
where more than 13000 houses were lost gave a boost to insurance
and the first fire insurance company called “The Fire Office” was
started in the year 1680.

7
Classification of Insurance
INSURANCE INDUSTRY
Life
Insu
ranc
e
General Insurance
Mar
ine
Insu
ranc
e
Fire
Insu
ranc
e
Accidental Insurancre
Mot
or
Car
Insu
ranc
e
Cas
h -
in-
tran
sit
Insu
ranc
e
Thir
d
Part
y
Insu
ranc
e
Bur
glar
y
Insu
ranc
e
Fide
lity
Gua
rant
ee
Insu
ranc
e
Bhr
ama
n
Sur
aks
ha
Insu
ranc
e
Social Insurance
Em
ploy
ee's
Stat
e
Insu
ranc
e
Wor
kme
n's
Co
mpe
nsat
ion
insu
ranc
e
Oth
er
Soci
al
Insu
ranc
e

8
History of Life Insurance:
Life insurance came to India from England in 1818. The first life insurance
company in India was Oriental Life Insurance Company. The life insurance
companies, which came into existence between 1818 and 1869, treated Indian
lives as subnormal and charged an extra premium of 15% to 20%. The first
Indian insurance company the Bombay Mutual Life Assurance Society situated
in 1870 to cover Indian lives at normal rates.
By the middle of 1950s there were 154 Indian insurers, and 16 foreign insurers
carrying on life insurance business in India.
Life insurance:
Though human life cannot be valued, a monetary sum could be determined
based on the loss of income in future years. Hence, in life insurance, the Sum
Assured (or the amount guaranteed to be paid in the event of a loss) is by way
of a ‘benefit’. Life Insurance products provide a definite amount of money in
case the life insured dies during the term of the policy or becomes disabled on
account of an accident.
Importance of Life Insurance:
 To ensure that your immediate family has some financial supportin the
event of your demise.
 To finance your children’s education and other needs.
 To have a savings plan for the future so that you have a constantsource of
income after retirement.
 To ensure that you have extra income when your earnings are reduced due to
serious illness or accident.
 To provide for other financial contingencies and life style requirements.

9
Life Insurance Sectors of India
LIFE INSURANCE
ORGANIZATION
Public
Sector
Life
Insurance
Corporation
of India
Private
Sector
SBI Life
Insurance
Co.Ltd.
Tata AIG Life
Insurance
Co.Ltd.
Bajaj Allianz
Life Insurace
Co. Ltd.
Others

10
 Life Insurance Corporation of India (LICI):
Life Insurance Corporation of India was established by passing an act in the
parliament on 1st July in 1956 named LICI Act.
TodayLIC had 2048 fully computerized branch offices, 109 divisional offices,
8 zonal offices, 992 satellite offices and the corporateoffice. LIC has tie up with
some Banks and offers on-line premium collection facility or ECS in selected
cities. Now LIC has launched its ‘SATELLITE SAMPARK’ offices to provide
easy access to its policy holders. LIC has issued over one crore policies during
the current year. It has crossed the milestone of issuing 1,01,32,995 new
policies by 15th October, 2005.
 SBI Life Insurance Co. Ltd.:
State Bank of India and BNP Paribas Assurance jointly started SBI Life. SBI
owns 74% of the total capital and BNP Paribas Assurance the remaining 26% of
the capital. It is the largest private life insurer and was the 1st private life
insurance company to becomeprofitable. It has more than 16,000 branches and
adding more by the day. In present this company has authorised capital of
Rs.250 crorers and paid-up capital Rs.125 crores.
 Tata AIG Life Insurance Co. Ltd.:
Tata group and American International Group jointly started Tata AIG. In Life
Insurance sector this company has large share. Tata group owns 74% of the total
capital and AIG the remaining 26% of the capital. It started business with the
capital of Rs.185 crores. Tata AIG is one of the most trustable insurance
companies in India. Tata AIG has over the years has created a name for
themselves in the insurance sectorof India.

11
 Bajaj Allianz Life Insurance Co. Ltd.:
This tie-up brings together two companies, one Bajaj Finserv and Allianz SE in
2001. Allianz SE Co. has 26% share and Bajaj Finserv has 74% share in total
capital. It operates in at least 70 countries across the world and has a minimum
of 119 years' experience in the financial industry. At present Allianz SE
manages assets whose combined worth is more than Rs. 5500,000 crores. At
present the insurer is managing assets worth INR 394.33 billion and it has a
solvency ratio of 516.28%.

12
Insurance RegulatoryDevelopmentAuthority
The Insurance Regulatory Authority was set up on 23rd January in 1996. Before
that any insurance related affaires were managed according to Insurance Act,
1938. This organization formed as an autonomous body, named Insurance
Regulatory Development Authority (IRDA). The IRDA Act, 1999 was passed
as per the major recommendation of the Malhotra Committee report (1994)
which recommended establishment of an independent regulatory authority for
insurance sectorin India. The objectives of this authority are:
a) To assist in the growth and expansion of insurance business.
b) To make the policy holders secure.
c) To control and expand the insurance business.
The Insurance Regulatory and Development Authority Act, 1999 is an act to
provide for the establishment of an Authority to protect the interests of holders
of insurance policies, to regulate, promoteand ensure orderly growth of the
insurance industry. The IRDA Act, 1999 also allows private players to enter the
insurance sectorin India besides a maximum foreign equity of 26 per cent in a
private insurance company having operations in India. Indian insurance industry
is regulated by the terms and conditions of the IRDA. At present there are 22
life insurers in India.
The IRDA has recently taken away the tariffs of the interest rates and this has
provided insurers greater independence when it comes to deciding the price of
their insurance policies. The insurance industry has also becomemore
competitive as a result.

13
Review of Literature:
While earlier studies on life insurance sector mainly focused upon LIC, it was
only after reforms in this sector that certain studies covering private players
have taken place. Among early studies, Arora (2002) highlighted that LIC was
likely to face tough competition from private insurers having large established
network and their trained intermediaries throughout India, analyzed the various
types of products offered by public sectorgiant and the new global players in
the private sector, opportunities and challenges before the insurance industry in
India due to liberalization, globalization and privatization. It is said that
bancassurance provided the best opportunities to tap the large potential in rural
and semi urban areas as banks have a strong network of more than 40,000
branches in these areas. It is identified that private insurance players introduced
a wider range of insurance products and set up brand promotion as part of their
new strategy. These new covers had flexibility and added benefits to suit the
needs of customers who were unsatisfied with the traditional and rigid plans.
Kulshrestha and Kulshrestha (2006) highlighted that demand for life insurance
in rural India was expanding at the annual rate of 18 per cent as compared to 3.9
per cent in urban areas which provided good opportunity for life insurers to
perform.

14
Objectives:
 To explain the meaning of insurance.
 To understand the concept and mechanism of insurance.
 To know about the products of life insurance.
 To know the consumer response about life insurance.
 To compare and analyze the financial performance of private sector
life insurance companies and Life Insurance Corporation of India.
 To discuss the historical background and the present state of
insurance industry after liberalization of insurance sector.
 To find out the customer satisfaction level among the go with their
respecting insurance companies in which they hold the police.
 To offer suggestions based on findings.
 To eliminate the confusion in different assurance policies.

15
Methodology:
The scopeofmethodology is wider than method. The coreconceptunderlying
research is its methodology. The methodology controls the study, dictates the
acquisition of the data, and arranges them in logical relationships, sets up a
means of refining the raw data, contrives an approach so that the meanings that
lie below the surface of those data become manifest, and finally issue a
conclusion or series of conclusions that lead to an expansion of knowledge.
The study engages mainly a small region of Kolkata.
The research or study contents less primary data, more secondarydata to reach
conclusion due to lack of time, experience and off-course financial barriers. It
covers the information collected from different sites via internet, journals, blogs
and newspapers.

16
Limitationsof the Study:
The present research work is undertaken to maximize objectivity and minimize
the errors. However, there are certain limitations of the study, which are to be
taken in to consideration for the present research work. It is understood that the
limitations are a part of the research work.
 The study needs more information regarding the topic to give a clear view.
But lack of time and financial barriers didn’t permit to continue.
 The study is based on the analysis of secondarydata only collected from
internet.
 The study fully depends on financial data collected from the published
financial statements of companies. This study incorporates all the limitations
that are inherent in the financial statements.
 The data for analysis is basically derived from financial statements. They are
not adjusted for inflation.
 The study contents less primary data due to lack of experience and time.

17
National and international Scenario
In both the national and international level life insurance business strongly
develops the financial sector. While the world is observing India for growth and
expansion, Indian insurance companies are becoming increasingly world class.
The Indian insurance market is the 19th largest globally and ranks 5th in Asia.
But the Life Insurance market in India is an underdeveloped market that was
only tapped by the state owned LIC till the entry of private insurers. The
penetration of life insurance products was 19 percent of the total 400 million of
the insurable population. With the entry of the private insurers the rules of the
game have changed. The 12 private insurers in the life insurance market have
already grabbed nearly 9.88 percent of the market in terms of premium income.
LIC is one of the biggest insurance companies in India. It had set its sight on
becoming a major global insurer following a Rs. 280 crores investment from the
Indian government. Since nationalization, LIC has built up a vast network of
2048 branches, 100 divisional and 7 zonal offices spread over the country.
Individual agents are the major sourcefor getting new business in life insurance
industry. It is evident from the fact that LIC and private life insurers got 88.66
per cent and 66.3 per cent of their total new business respectively through
individual agents during the year 2006-07.
With the entry of private insurers in life insurance business, it is obvious that
some proportion of new business will go in the hands of private life insurers. An
attempt, therefore, has been made to study the growth of new business in terms
of policies and premium income of Indian life insurance industry. Further,
the share of private insurers and LIC in total new business has also been
studied. The total new business policies of life insurance industry increased
from 253.71 lac in 2002-03 to 353.74 lac in 2010-11, registering a growth rate
of 16.1 per cent during the period of study. Similarly, total new business
premium of life insurance industry increased from Rs. 9707.45 crore in 2000-
01 to Rs. 92988.71 crore in 2007-08, which showed a growth rate of 35.1 per
cent.

18
Presentscenario-
In the financial year 2011-12 the total investments of LIC exceeds Rs. 5,20,000
crores, of which nearly Rs. 3,00,000 crores were directly in government related
securities, Rs. 16,000 crores in State Electricity Board, nearly Rs. 22,000 crores
in housing loans and many more. LIC also funds close to 24.6% of the Indian
Government expenses. The Economics Times Brand Equity Survey 2010 rated
LIC as the no. 4 service brand of the country. LIC is also the 8th most trusted
brand of India.
SBI Life Insurance is currently growing at an impressive rate of 200%. As per
the latest IRDA report SBI Life ranks No. 3 amongst the private insurers. The
company has increased its market share to 19.9% in the financial year 2011-12.
The new business premium for the company stood at Rs. 6,531 Crore in current
year. The Gross Written Premium (GWP) collected by company recorded at Rs.
13,133 Crore, a growth of 1%, over the last financial year. SBI Life is one of the
largest private life insurers and was the 1st private life insurance company to
become profitable.
Private insurer Tata AIG Life Insurance Company on Monday said it has
achieved a break even in the 10th year of operation and posted a net profit of Rs
51.79 crores for the year ended 31 March, 2011.
Bajaj Allianz has growth rate in 2011-2012 14.9%.
In present there many insurance company are making profit and increasing
market in India.

19
Various Life insurance products
Figure 1
 Term Insurance: (fig.1)
You can chooseto have protection for a set period of time with Term Insurance.
In the event of death or Total and Permanent Disability if the benefit is offered,
your dependants will be paid a benefit. In Term Insurance, no benefit is
normally payable if the life assured survives the term. This covers the policy
holder for specified period i.e. 5,10,15,20 or 30 years.
Figure 2
 Whole Life Insurance: (fig.2)
With whole life insurance, you are guaranteed lifelong protection. Whole life
insurance pays out a death benefit so you can be assured that your family is
protected against financial loss that can happen after your death. It is also an
ideal way of creating an estate for your heirs as an inheritance. It covers the
policy holder for life long or 100 years whichever is earlier, with the limited
premium paying term.

20
Figure 3
 EndowmentPolicy:(fig.3)
An Endowment Policy is a savings linked insurance policy with a specific
maturity date. An unfortunate event by way of death or disability occur
to you during the period, the Sum Assured will be paid to your beneficiaries. On
your surviving the term, the maturity proceeds onthe policy become payable.
This plan is suitable for fulfilling all long and short term financial needs.
Figure 4
 Money back plansor cash back plans: (fig.4)
Under this plan, certain percent of the sum assured is returned to the insured
personperiodically as survival benefit. On the expiry of the term, the balance
amount is paid as maturity value. The life risk may be covered for the full sum
assured during the term of the policy irrespective of the survival benefits paid.

21
Figure 5
 Children Policies: (fig.5)
These types of policies are taken on the life of the parent/children for the benefit
of the child. By such policy the parent can plan to get funds when the child
attains various stages in life. Some insurers offer waiver of premiums in case of
unfortunate death of the parent/proposer during the term of the policy.
Figure 6
 UnitLinked InsurancePolicy:(fig.6)
Unit Linked Insurance Policies (ULIPs) offer a combination of investment and
protection and allow you the flexibility and choice on how your premiums are
invested. IN UNIT LINKED PLANS, THE INVESTMENT RISK
PORTFOLIO IS BORNE BY YOU AS YOU ARE THE INVESTOR.
Typically, the policy will provide you with a choice of funds in which you may
invest. You also have the flexibility to switch between different funds during
the life of the policy. In the event of death or permanent disability, the policy
will provide the Sum Assured (to the extent you are covered) so that you can
take comfort in knowing that your family is protected from sudden financial
loss. A ULIP has varying degrees of risk and rewards. There are various

22
charges applicable for Unit Linked Policies and the balance amount out of the
premium is only invested in the fund/funds chosen by you. It is important to
ask your insurer or agent or broker questions to understand the sum total of
charges that you have to incur. It is important to assess your risk appetite and
investment horizon before deciding to buy a ULIP policy. You must also read
the terms and conditions of the policy carefully to understand the features of
the policy including the lock-inperiod, surrender value, surrenders charges
etc. All the types of plans mentioned above can be offered under ULIP plans.

23
Analysis and Findings
 Existing Life Insurance policy:
Here 60% said Yes, 40% said No.
 PreferredLife Insurance Co.:
Here 75% of respondents are preferred public sectorand 25% of the
respondents are preferred private sector.
0%
10%
20%
30%
40%
50%
60%
70%
YES NO
RESPODENTS
RESPODENTS
0%
10%
20%
30%
40%
50%
60%
70%
80%
Public Co. Private Co.
RESPODENTS
OPTIONS RESPODENTS
YES 60%
NO 40%
OPTIONS RESPODENTS
Public Co. 75%
Private Co. 25%

24
 Respondents’age:
Here the majority of 60% of the respondents fall in the age group of 45-55
years. Another 25% fall in the category of 35-45 years. There are 5% of the
respondents who fall in the age group of above 55years, while the 4% are in the
age group of 25-35 years and the remaining 6% fall in the category of 18-25
years. Thus, from the analysis it can be concluded that the majority of
respondents fall in the age group of 45-55 years.
 Current type of policy:
POLICY TYPES OPTIONS
YES NO
Endowment 57% 43%
Whole Life 30% 70%
Money Back 54% 46%
Term insurance 24% 76%
Children Plan 52% 48%
ULIP 25% 75%
Age Limit(Yr.) RESPODENTS
18-25 6%
25-35 4%
35-45 25%
45-55 60%
55 above 5%

25
Here the majority of 54% invested in money back policy. 57% invested in
endowment, 52% in Children plan, 30% in whole life and 25% invested in
ULIP.
 PresentPurpose of taking policy:
0%
10%
20%
30%
40%
50%
60%
70%
80%
OPTION YES
OPTION NO
PURPOSE OPTIONS
YES NO
Tax Saving 55% 45%
Investment 39% 61%
Life risk 36% 64%
Regular Return 30% 70%
Retirement Benefit 8% 92%

26
Here 55% respondents are taking policies for tax savings. 39% for making
investments, 36% for overcome life risk, 30% for regular returns and only 8%
for retirement benefits.
 PreferredPremium payment:
OPTIONS YES NO
Monthly 45% 55%
Quarterly 30% 70%
Half Yearly 40% 60%
Yearly 65% 35%
Here 65% respondents are willing to pay premium yearly. 45% paying premium
monthly, 40% half yearly and 30% make their premium payment quarterly.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Tax Saving Investment Life risk Regular
Return
Retirement
Benefit
YES
NO

27
 Reasonforchoosing a particular company for Life Insurance:
Here 60% respondents admitted brand name for choosing their life insurance.
55% for their agents and 40% consider track record to invest in life insurance.
Findings:
1. Currently 60% respondents have their life insurance policy.
2. Respondents (75%) are believe in Public Co. i.e. LICI.
3. Here 60% respondents falling in the age group of 45-55 years.
4. 57% of respondents invested in Endowment policy. 52% of respondents in
Children plan and 54% in Money back. ULIP attracts only 25%.
5. Many of respondents (55%) taking life insurance policies for the purposeof
Tax saving. 39% for willing to invest in life insurance and 36% to overcome
the life risk.
6. 65% of respondents preferred to make premium payment by yearly. 45%
respondents execute payment of premium by Monthly.
7. Here 60% of respondents believe in Brand name.
OPTIONS YES NO
Agent 55% 45%
Brand Name 60% 40%
Track Record 40% 60%

28
Conclusion and Suggestion
I. LIC is the oldest player in the Insurance market, so people are more aware of
i.e., as compared to new players.
II. People believe in Life Insurance Company only and therefore, everybody
wants to go in for a policy with different life insurance policies in LICI. It
will take time to private companies to win the confidence of the people.
III. Basically people make varied form of investment for creating wealth, to
protect their families against pre-mature death and to protect income against
disability, sickness or critical illness.
IV. It has clearly come out that most of the people like to go in for a policy,
which gives them tax benefit.
V. Most of the people think that services have improve after allowing private
companies in insurance sector.
VI. When the productis like life insurance, reputation of the company, publicity
of the company & after sale services of the company matters a lot.
VII. ULIP policy is subject to market risk therefore, people are less interest to
buy this.
VIII. There are some private companies growing their market not only in India but
also in overseas.
IX. Guidelines of IRDA in insurance sectorindulge both private and public
companies to act together.
X. Most of the people influenced by their family and friends when they are
buying an insurance policy.

29
Suggestion:
 More new products and services should be innovated through bancassurance
process to tap rural and social sectors.
 As the awareness level among the Government officials for some insurance
policies like ULIP, Money back plan, Endowment plan, Children's plan,
Protection plan, etc. are very low, periodical awareness programs in
the respective government officials with concurrence of higher officials
should be conducted.
 To enhance the satisfaction level of policyholders and to avoid
losing the existing customers periodical market surveys should be
conducted.
 To utilize one of the most important marketing channel (commercial
banks) very effectively for promoting the products, steps should be
taken to make the banks incorporate successfulsales tactics used by them to
sell other financial services.
 To retain old customers and to attract new customer's products with
adds-onfeatures should be introduced besides attractive advertisements.

30
Bibliography
Magazines:-
 Insurance Plus.
 Business India.
 Economic Times.
Websites:-
www.way2insurance.com
www.indiaonline.com
www.licindia.org
www.businessMapsof india.com
www.scribd.com
Books:-
 Arora, R.S.. “Financial Reforms and Service Sector–AStudy Of Life
Insurance Industry in India”, In B.B. Tandon and A.K. Vashisht (Eds.),
Financial Sector Reforms–An Unpublished Agenda for Economic
Development: 259-270, New Delhi: Deep & Deep, 2002.
 Kulshresth, Laxmi R., Kulshresth, Anuja. 2006. “Liberalization and Rural
Insurance Prospects and Challenges”, Life Insurance Today, 1(10): 9-13.
 IRDA Report.

31
Some relevant Questionnaires:
1. Do you have any Life Insurance policy?
2. What is your preferred sectorin Life Insurance Company?
3. What the different types of policy are for invest?
4. State the purposeof invests in policies.
5. How would you like to pay premium?
6. What is the reason for choosing a particular company for Life Insurance?

32
Annexure-I
Supervisor’s Certificate
This is to certify that Mr.... a student of B.Com. Part-III Honours in Accounting
& .. under the University of Calcutta has worked under my supervision and
guidance for his project work and prepared a Project Reportwith the title An
overview of Life Insurance Sector. The project report, which he is submitting, is
his genuine and original work to the best of my knowledge.
Signature
Place: Kolkata Name:
Date: Designation:
Name of the College :

33
Annexure-II
Student’s Declaration
I hereby declare that the Project Work with the title AN OVERVIEW OF
LIFE INSURANCE SECTOR Submitted by me for the partial fulfilment of
the degree of B.Com. Part-III Honours in Accounting & Finance under the
University of Calcutta is my original work and has not been submitted earlier
to any other University / Institute for the fulfilment of the requirement for any
courseof study.
I also declare that no chapter of this manuscript in whole or in part has been
used for this report has been duly acknowledged providing details of such
literature in the references.
Signature
Place: Kolkata. Name:
Date: Address:
Registration No.:
Roll No.:

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