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Executive summary


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Executive summary

  1. 1. EXECUTIVE SUMMARYHDFC Standard Life insurance is the oldest life insurance company in the world.It is the largest insurer in the UK and is the 28th largest company in the world. InIndia, the company is marketing life insurance products and unit linkedinvestment plans. From my research at HDFC SLIC, I found that the company hasa lot of competition from other private insurers like ICICI, Aviva, Birla Sun Lifeand Tata AIG. It also faces competition from LIC. To compete effectively HDFCSLIC could launch cheaper and more reasonable products with small premiumsand short policy terms (the number of year‟s premium is to be paid). The idealpremium would be between Rs. 5000 – Rs. 25000 and an ideal policy term wouldbe 10 – 20 years. HDFC must advertise regularly and create brand value for itsproducts and services. Most of its competitors like Aviva, ICICI, Max, Relianceand LIC use television advertisements to promote their products. The Indianconsumer has a false perception about insurance – they feel that it would notbenefit them if they do not live through the policy term. Nowadays however, mostpolicies are unit linked plans where a customer is benefited even if their deathdoes not occur during the policy term. This message should be conveyed topotential customers so that they readily invest in insurance. Family responsibilitiesand high returns are the two main reasons people invest in insurance. Optimumreturns of 16 – 20 % must be provided to consumers to keep them interested inpurchasing insurance. On the whole HDFC standard life insurance is a good placeto work at. Every new recruit is provided with extensive training on unit linkedfunds, financial instruments and the products of HDFC. This training enables anadvisor/sales manager to market the policies better. HDFC was ranked 13 in theBest Places to Work survey. The company should try to create awareness aboutitself in India. In the global market it is already very popular. With animprovement in the sales techniques used, a fair bit of advertising and
  2. 2. modifications to the existing product portfolio, HDFC would be all set to capturethe insurance market in India as it has around the globe. THE INSURANCE INDUSTRY IN INDIA AN OVERVIEWWith the largest number of life insurance policies in force in the world, Insurancehappens to be a mega opportunity in India. It‟s a business growing at the rate of15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for thefinancial year 2006 – 2007). Together with banking services, it adds about 7% tothe country‟s Gross Domestic Product (GDP).The gross premium collection isnearly 2% of GDP and funds available with LIC for investments are 8% of theGDP. Even so nearly 65% of the Indian population is without life insurance coverwhile health insurance and non-life insurance continues to be below internationalstandards. A large part of our population is also subject to weak social securityand pension systems with hardly any old age income security. This in itself is anindicator that growth potential for the insurance sector in India is immense. Awell-developed and evolved insurance sector is needed for economic developmentas it provides long term funds for infrastructure development and strengthens therisk taking ability of individuals. It is estimated that over the next ten years Indiawould require investments of the order of one trillion US dollars. The Insurancesector, to some extent, can enable investments in infrastructure development tosustain the economic growth of the country.HISTORICAL PERSPECTIVEThe history of life insurance in India dates back to 1818 when it was conceived asa means to provide for English Widows. Interestingly in those days a higherpremium was charged for Indian lives than the non – Indian lives, as Indian liveswere considered more risky to cover. The Bombay Mutual Life Insurance Societystarted its business in 1870. It was the first company to charge the same premiumfor both Indian and non-Indian lives. The Oriental Assurance Company was
  3. 3. established in 1880. The General insurance business in India, on the other hand,can trace its roots to Triton Insurance Company Limited, the first generalinsurance company established in the year 1850 in Calcutta by the British. Till theend of the nineteenth century insurance business was almost entirely in the handsof overseas companies. Insurance regulation formally began in India with thepassing of the Life Insurance Companies Act of 1912 and the Provident Fund Actof 1912. Several frauds during the 1920s and 1930s sullied insurance business inIndia. By 1938 there were 176 insurance companies. The first comprehensivelegislation was introduced with the Insurance Act of 1938 that provided strictState Control over the insurance business. The insurance business grew at a fasterpace after independence. Indian companies strengthened their hold on thisbusiness but despite the growth that was witnessed, insurance remained an urbanphenomenon. The Government of India in 1956, brought together over 240 privatelife insurers and provident societies under one nationalized monopoly corporationand Life Insurance Corporation (LIC) was born. Nationalization was justified onthe grounds that it would create the much needed funds for rapid industrialization.This was in conformity with the Governments chosen path of State led planningand development. The non-life insurance business continued to thrive with theprivate sector till1972. Their operations were restricted to organized trade andindustry in large cities. The general insurance industry was nationalized in 1972.With this, nearly 107 insurers were amalgamated and grouped into fourcompanies- National Insurance Company, New India Assurance Company,Oriental Insurance Company and United India Insurance Company. These weresubsidiaries of the General Insurance Company (GIC).
  4. 4. KEY MILESTONES1912: The Indian Life Assurance Companies Act enacted as the first statute toregulate the life insurance business.1928: The Indian Insurance Companies Act enacted to enable the government tocollect statistical information about both life and non-life insurance businesses.1938: Earlier legislation consolidated and amended by the Insurance Act with theobjective of protecting the interests of the insuring public.1956: 245 Indian and foreign insurers along with provident societies were takenover by the central government and nationalized. LIC was formed by an Act ofParliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from theGovernment of India.Some of the important milestones in the general insurance business in India are:1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact allclasses of general insurance business.1957: General Insurance Council, a wing of the Insurance Association of India,frames a code of conduct for ensuring fair conduct and sound business practices.1968: The Insurance Act amended to regulate investments and setminimum solvency margins and the Tariff Advisory Committee set up.1972: The General Insurance Business (Nationalization) Act, 1972nationalize the general insurance business in India with effect from 1stJanuary 1973.INDUSTRY REFORMSReforms in the Insurance sector were initiated with the passage of the IRDA Billin Parliament in December 1999. The IRDA since its incorporation as statutorybody in April 2000 has fastidiously stuck to its schedule of framing regulationsand registering the private sector insurance companies. Since being set up as anindependent statutory body the IRDA has put in framework of globally
  5. 5. compatible regulations. The other decision taken simultaneously to provide thesupporting systems to the insurance sector and in particular the life insurancecompanies was the launch of the IRDA online service for issue and renewal oflicenses to agents. The approval of institutions for imparting training to agents hasalso ensured that the insurance companies would have a trained workforce ofinsurance agents in place to sell their products.HDFC Standard Life Insurance Company Ltd. is one of Indias leading privateinsurancecompanies, which offers a range of individual and group insurancesolutions. It is a joint venture between Housing Development Finance CorporationLimited (HDFC Ltd.), Indias leadinghousing finance institution and a GroupCompany of the Standard Life, UK. HDFC as onDecember 31, 2007 holds 72.38per cent of equity in the joint venture.HDFC STANDARD LIFE INSURANCE PARENTAGEHDFC Limited.•HDFC is India leading housing finance institution and has helped build morethan23, 00,000 houses since its incorporation in 1977.•In Financial Year 2003-04 its assets under management crossed Rs. 36,000 Cr.•As at March 31, 2004, outstanding deposits stood at Rs.7 , 8 4 0 c r o r e s . T h e depositor base now stands at around 1 million depositors.•Rated AAA by CRISIL and ICRA for the 10th consecutive year•Stable and experienced management•High service standards•Awarded The Eco nomic Ti mes Corporate Citizen of the yearAward for its long-standing commitment to community development.March, 2008Silver Abby at Goafest 2008HDFC Standard Lifes radio spot for PensionPlans won a Silver Abby in the radiowriting craft category at the Goafest2008 organised by the Advertising AgenciesAssociation of India(AAAI). The radi o co mmercial „Pa ta nahin chala‟ touched several
  6. 6. changes in life in the blink of an eye through an old man‟s perspective.Theobjective was drive awareness and ask people to invest in a pension plan tolive life tothe fullest even after retirement, without compromising on one‟s self-respect.Laadli Media Award 2007HDFC Standard Life received Laadli Media Award 2007 fori t s B i g c a r T V commercial. It showed how a daughter wants to bemore responsible towards her family and asks her dad to upgrade to a biggercar by offering him the extra moneyRequired to buy the car.HDFC Standard Lifereceived this award for two years consecutively. In 2006, it wonfor the Papa TVcommercial, which challenged the stereotype parents saving only for their sonseducation or daughters wedding. The co mpan y took a bold stepbyshowing parents saving for their daughters education abroad,demonstratingProgressive thinking.Laadli Media Awards, instituted in 2007,by Population First, an NGO working onwomens rights and socialdevelopment, is g iven to professionals in print and electronic mediaand ad makers for gender sensitive news reports, articles, print, TVads, and films.March, 2008Unit Linked Savings Plan Tops Mint Best TV Ads SurveyThe Unit LinkedSavings Plan advertisement of HDFC Standard Life, one of theleadingprivate insurance companies in India, has topped Mint‟s Top TelevisionAdvertisement survey conducted, for February 2008. HDFC StandardLife‟s UnitLinked Savings Plan advertisement was ranked 4th in terms of acombined score of adawareness and brand recall and 3rd in ter ms ofad diagnostic scores (likeability, enjoyment, believability, and claim). Therespondents were between 18 and 40 years.Mint‟s exclusive report, „New voicesin a makeover‟ outlines the survey in detail.February, 2008Deepak M Satwalekar Awarded QIMPRO Gold Standard Award 2007MrDeepak M Satwal ekar, Managing Director and CEO, HDFCStandard Life, received the QIMPRO Gold Standard Award 2007 in thebusiness category at the 18thannual Qi mpro Awards function. Theaward celebrates excellence in individual performance and highlightsthe quality achievements of extraordinary individuals inan era of globalcompetition and expectations.January, 2008Sar Utha Ke Jiyo Among India‟s 60 Glorious Advertising MomentsH D F CStandard Life‟s advertising slogan honoured as one of„60 GloriousAdvertising & Marketing Moments over the last 60years in India,‟
  7. 7. b y 4Ps Business and Marketing magazine. The magazine said that HDFCStandard Life isone of the first private insurers to break the ice using theidea of self respect (Sar Utha Ke Ji yo) instead of death to convey its brand proposition. This wasthen,followed by others including ICCI Prudential, thus giving HDFCStandard Life thecredit of bringing up one such glorious advertising andmarketing moment in the last60 years.4th August 2008HDFC Standard Life Launches Unit Linked Wealth Maximiser Plus23rd July 2008HDFC Standard Life Launches SimpliLife, a Unit Linked Plan in Simplest Way14th May 2008HDFC Standard Life Declar es Re sul ts for FY2007 -08; NewBusiness Pre miumIncome grows by 63%4th March 2008HDFC Standard Life Expands its Reach with Inauguration of Mohali Branch21st October 2007 –HDFC Standard Life Announces Muthoot Capital Services as its CorporateAgencyfor Distribution of Life and Pension Products7th May 2007HDFC Standard Life expands its reach to smaller cities in Madhya Pradesh15th February 2007HDFC Standard Life expands it‟s reach in Vidarbha16th May 2006HDFC Standard Life records impressive growth7th February 2006HDFC Standard Life records impressive growth29th November 2005HDFC Standard Life posts strong growth16th August 2005HDFC Standard Life grows faster than the private sector average16th May 2005HDFC Standard Life declares results for FY 2004-05
  8. 8. PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIAThe life insurance industry in India grew by an impressive 47.38%, with premiumincome at Rs. 1560.41 billion during the fiscal year 2006-2007.Though the totalvolume of LICs business increased in the last fiscal year (2006-2007) comparedto the previous one, its market share came down from85.75% to 81.91%.The 17private insurers increased their market share from about 15% to about 19% in ayears time. The figures for the first two months of the fiscal year 2007-08 alsospeak of the growing share of the private insurers. The share of LIC for this periodhas further come down to 75 percent, while the private players have grabbed over24 percent. With the opening up of the insurance industry in India many foreignplayers have entered the market. The restriction on these companies is that theyare not allowed to have more than a 26% stake in a company‟s ownership. Sincethe opening up of the insurance sector in 1999, foreign investments of Rs. 8.7billion have poured into the Indian market and 19 private life insurance companieshave been granted licenses. Innovative products, smart marketing, and aggressivedistribution have enabled fledgling private insurance companies to sign up Indiancustomers faster than anyone expected. Indians, who had always seen lifeinsurance as a tax saving device, are now suddenly turning to the private sectorand snapping up the new innovative products on offer. Some of these productsinclude investment plans with insurance and good returns (unit linkedplans),multipurpose insurance plans, pension plans, child plans and money backplans.
  9. 9. HDFC STANDARD LIFE INSURANCE COMPANY LIMITED INTRODUCTION HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emerged as the largest residential mortgage finance institution in the country. The corporation has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores and new business premium income at Rs.1, 624 Crores. The company has covered over 8, 77,000 lives year ending March 31, 2007.HDFC operates through almost 450 locations throughout the country with its corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing company in India for the last 27 years. SNAPSHOT-I1. Incorporated in 1977 as the first specialized Mortgage Company in India.2. Almost 90% of initial shareholding in the hands of domestic institutes and retail investors. Current 77% of shares held by foreign institutional investors.3. Besides the core business of mortgage HDFC has evolved into a financial conglomerate with holdings In: HDFC Standard Life insurance Company- HDFC holds 78.07 %. HDFC Asset Management Company – HDFC holds 50.1% HDFC Bank- HDFC holds 22.25%. Intel net Global (Business Process Outsourcing) – HDFC holds 50%. HDFC Chubb General Insurance Company – HDFC holds 74%.
  10. 10. SNAPSHOT-II1. Loan Approvals Rs. 805 billion.(up to Dec 2007) (US $ 18.30 bn.)2. Loan Disbursements Rs.669 billion(up to Dec. 2007) (US $ 15.20 bn)3. Housing Units Financed 2.5 million.4. Distribution Offices 181 Outreach Programs 90KEY PLAYERSMr. Deepak S Parekh is the Chairman of the Company. He is also the ExecutiveChairman of Housing Development Finance Corporation Limited (HDFC Limited).He joined HDFC Limited in a senior management position in1978. He was inductedas a whole-time director of HDFC Limited in 1985 and was appointed as itsExecutive Chairman in 1993. He is the Chief Executive Officer of HDFC Limited.Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England &Wales).Mr. Deepak M Satwalekar is the Managing Director and CEO of the Companysince November, 2000. Prior to this, he was the Managing Director of HDFCLimited since 1993. Mr. Satwalekar obtained a Bachelors Degree in Technologyfrom the Indian Institute of Technology, Bombay and a Masters Degree in BusinessAdministration from The American University, Washington DC.GROUP COMPANIESHDFC Bank: World Class Indian Bank- among the top private banks in India.HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.Intel net Global: BPO services for international customers.CIBIL: Credit Information Bureau India Limited.HDFC Chubb: Upcoming Private companies in the field of General Insurance.
  11. 11. HDFC Mutual Fund. HDFC Helps to search properties in all major cities in India HDFC securities STANDARD LIFE Standard Life is Europe‟s largest mutual life assurance company. Standard Life, which has been in the life insurance business for the past 175 years is a modern company surviving quite a few changes since selling its first policy in1825. The company expanded in the 19th century from kits original Edinburgh premises, opening offices in other towns and acquitting other similar businesses. Standard Life Currently has assets exceeding over £ 70 billion under its management and has the distinction of being accorded “AAA” rating consequently for the six years by Standard and Poor. SNAPSHOT Founded in 1875, company supporting generation for last 179 years. Currently over 5 million Policy holders benefiting from the servicesoffered. Europe‟s largest mutual life insurer.JOINT VENTUREHDFC Standard Life Insurance Company Limited was one of the first companies to begranted license by the IRDA to operate in life insurance sector. Reach of the JV playeris highly rated and been conferred with many awards. HDFC is rated „AAA‟ by bothCRISIL and ICRA. Similarly, Standard Life is rated „AAA‟ both by Moody‟s andStandard and Poor‟s. These reflect the efficiency with which HDFC and Standard Lifemanage their asset base ofRs. 15,000 Cr and Rs. 600,000 Cr. respectively. HDFCStandard Life Insurance Company Ltd was incorporated on 14th August2000. HDFC isthe majority stakeholder in the insurance JV with 81.4% staple and Standard of as astaple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture. HDFCStandard Life Insurance Company Ltd. Is one of India‟s leading Private Life Insurance
  12. 12. Companies, which offers a range of individual and group insurance solutions? It is ajoint venture between Housing Development Finance Corporation Limited (HDFCLtd.) India‟s leading housing finance institution and the Standard Life AssuranceCompany, a leading provider of financial services from the United Kingdom. Both thepromoters are well known for their ethical dealings and financial strength and are thuscommitted to being a long-term player in the life insurance industry- all-importantfactors to consider when choosing your insurer.BUSINESS GROWTH Track Record so farThe gross premium income of HDFC, for the year ending March 31, 2007stood at Rs.2,856 crores and new business premium income at Rs. 1,624crores.The company hascovered over 8,77,000 lives year ending March 31, 2007.Company also declared our5th consecutive bonus in as many years for our‟ with profit‟ policyholders.KEY STRENGTH Financial ExpertiseAs a joint venture of leading financial services groups. HDFC standard Life has thefinancial expertise required to manage long-term investments safely and efficiently.1. Range of Solutions: HDFC SLIC has a range of individual and group solutions, which can be easily customized to specific needs. These group solutions have been designed to offer complete flexibility combined with a low charging structure.2. Strong Ethical Values: HDFC SLIC is an ethical and Cultural Organization. False selling or false commitment with the customers is not allowed.3. Most respected Private Insurance Company: HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World Class Magazine Business World for Integrity, Innovation and Customer Care.
  13. 13. CORPORATE OBJECTIVEVisionThe most successful and admired life insurance company, which means thatweare the most trusted company, the easiest to deal with, offer the bestvalue formoney, and set the standards in the industry.The most obvious choice for all.Values Integrity Innovation Customer centric People Care One for all Teamwork Joy SimplicityPRODUCTS & SERVICESThe right investment strategies wont just help plan for a more comfortabletomorrow -- they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, lifeinsurance plans are created keeping in mind the changing needs of family. Its lifeinsurance plans are designed to provide you with flexible options that meet bothprotection and savings needs. It offers a full range of transparent, flexible andvalue for money products. HDFC SLIC products are modern and contemporaryunitized products that offer unique customer benefits like flexibility to choosecover levels, indexation and partial withdrawals. (Source:
  14. 14. PLANS THAT ARE OFFERED BY HDFC STANDARDSLIFEINSURANCEIndividual Products 1. Protection Plans: A person can protect his family against the loss of his income or the burden of a loan in the event of his unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Protection range includes our 2. Investment Plans: HDFC SLIC‟s Single Premium Whole of Life plan is well suited to meet long term investment needs. This provides attractive long term returns through regular bonuses. 3. Pension Plans: Pension Plans help to secure financial independence even after retirement. Pension range includes 4. Personal Pension Plan, Unit Linked Pension, Unit Linked Pension Plus. Savings Plans: Savings Plans offer a flexible option to build savings for future needs such as buying a dream home or fulfilling your children‟s immediate and future needs.Savings range includes Endowment Assurance Plan, Unit Linked Endowment, Unit Linked Endowment Plus, Unit Linked Endowment Plus II, Money Back, Unit Linked Enhanced Life Protection II, Childrens Plan. Linked Young Star, Unit Linked Young Star Plus, Unit Linked Young Star plus II.Group ProductsHDFC Standard Life has the most comprehensive list of products forprogressiveemployers who wish to provide the best and most innovativeemployee benefitsolutions to their employees. It offers different products for different needs of
  15. 15. employers ranging from term insurance plans for pure protection to voluntaryplans such as superannuation and leave encashment. HDFC SLIC offers thefollowing group products to esteemed corporate clients:Social Product Development Insurance Plan Development Insurance plan is aninsurance plan which provides life cover to members of a Development Agencyfor a term of one year. On the death of any member of the group insured duringthe year of cover, a lump sum is paid to those member beneficiaries to help meetsome of the immediate financial needs following their loss.MARKETING PROBLEMSThe old and out dated technique of tele marketing is used to prospect customers.More modern techniques must be adopted. The company must sponsor shows andgive presentations in corporate houses. The financial health check must beperformed for every prospect to assess his/her true financial position and needs.Some of the advisors skip this vital step and the prospect ends up with a plan theydo not appreciate and soon surrender or discontinue.Some of the main problems in marketing the policies are:Large amount of competition (18 players in the market) other brands are welladvertised and have higher recall value.Face competition from banks and mutual fundsHigh premium policies are difficult to marketIncorrect perception about insuranceInterested prospects might have a lack of time and postpone investmentsCustomers get defensive if you could callShort term plans are available only at large premiumCustomers do not have risk appetite to invest in sharesSome prospects have already invested and are not interested in further investments
  16. 16. Consumers don‟t want to undertake medical examinationsLarge amount of documentationCustomers do not like their money locked up for many yearsLack of awareness about the unit linked funds in the marketNo money back plan present in the product portfolioSUGGESTIONS FOR IMPROVEMENTAdvertise about the company and its products – it motivates individuals topurchase insuranceCreate a positive perception about insuranceSpeak about the good features a plan offers like high returns, life cover, taxbenefits, indexation, and accident cover while prospecting customersTry to sell the product/plan which the consumer requires and not the plan where the advisors benefit is higherImprove the efficiency in operationsBring out policies with small premiums payable for short periods of time – Rs. 5000 – Rs. 10000 per annum for 10 yearsAttract the youth of India with higher returns on investment as returns are the motivating factor which influence purchase of insurancePromote insurance in colleges and corporate housesPromote HDFC SLIC as an Indian Company to build trustHDFC SLIC could have a brand ambassador or a mascot to promote its servicesShould have partial withdrawals from the first year onwardsTap the rural market where there is large potentialDiversify product portfolioMake products more straight forward – reduce complexities