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INTRODUCTION TO LIFE INSURANCE SECTOR

The journey of the life insurance sector through the ages, across continents is fascinating. The
industry which began in a small way, evolved to become a significant part of the financial
services businesses over time. World over, life insurance companies are counted among the
Fortune 500 list, making them one of the mightiest forces to reckon with.
Life insurance as a model of risk management is nearly as old as the Banking industry, or,
perhaps even older. Begun as a community effort, it transformed into a sound business model
over centuries and across continents, adapting it to the winds of social, economic and behavioral
changes.
ORIGIN OF INSURANCE
The beginning of the insurance business is traced to the city of London. It started with the marine
Business. Marine traders, who used to gather at Lloyds coffee house in London, agreed to share
losses to goods during transportation by ship.
Marine related losses included
A) Loss of ship by shrinking due to weather in high seas.
B) Goods in transit by ship robbed by sea pirates.
C) Loss if goods in transit by ship due to bad weather in high seas.
The first insurance police was issued in 1583 in England. In India , insurance began in 1870
with life insurance being transacted by an English company the European and the Albert. The
first Indian insurance company was the "Bombay mutual assurance society Ltd, formed in
1870.In 1956 LIC OF India was nationalized on 1/9/1956.

Some of the important milestones in the life insurance business in India are:
1818:-The British Introduce to India. With the establishment of the Oriental Life
Insurance Company in Calcutta.
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1850:- Non life insurance debuts, with Triton Insurance Company.
1870:- Bombay mutual Life Assurance Society is the first India owned life insurer.
1907:-Indian Mercantile Insurance is the first Indian non life insurer.
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,
with a capital contribution of Rs. 5 crore from the Government of India.
1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973.
1993:-Malhotra Committee, headed by former BBI governor R.N.Malhotra, set up to
draw up a blue print for insurance sector reforms.
1994:-Malhotra Committee recommends re-entry for private players, autonomy to PSU
insurers.
1997:-Insurance regulator IRDA (Insurance Regulatory and Development Authority) set
up.
2000:- IRDA starts giving licenses to private insurers, ICICI Prudential and HDFC
Standard Life first private insurers to sell a policy.
2002:- Banks were allowed to sell insurance plans , as TPAs enter the scene, insurers
start selling non-life claims in the cashless mode


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CURRENT STATUS OF INSURANCE INDUSTRY
The insurance sector in India is nearly 150 years old. It is now in the third phase of its existence.
The first phase was the long-growth phase before the two nationalizations in 1956 and 1971 of
life and general insurance respectively. At that point of time, there were more than 200 life
insurance companies and 108 general insurance companies. They were all private sector insurers
with the exception of one state-owned general insurer.
The new entrants in the life insurance sector have done very well in terms of introducing new
products, customer service standards, documentation, IT support, etc. Innovative and perhaps
aggressive selling techniques too have helped a lot. Ability to settle claims quickly and resolve
disputes are matters central to the sector. While the private sector insurers have rendered good
service and gained the confidence of the consumer, the public sector insurers seem to have upset
a vast section of the insuring public at all levels.
India is now the worlds 10th largest life insurance market. Its motivating to know that its only
life insurance and not other sectors of the BFSI (Banking and Financial Services Industry) that
has achieved this distinction.
As of February 2013, there are 24 life insurance players in the market. Most private insurance
companies are joint ventures with recognized foreign players across the globe. As per current
FDI (Foreign Direct Investment) norms, foreign companies can hold upto 26% of equity stake in
an Indian Insurance Company.


LIST OF LIFE INSURANCE COMPANIES IN INDIA
S. No NAME OF THE COMPANY
1. Bajaj Allianz Life Insurance Company Limited.

2. Birla Sun Life Insurance Co. Ltd

3. HDFC Standard Life Insurance Co. Ltd

4. ICICI Prudential Life Insurance Co. Ltd

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5. ING Vysya Life Insurance Company Ltd.

6. Life Insurance Corporation of India
7. Max Life Insurance Co. Ltd

8. PNB Metlife India Insurance Co. Ltd.
9. Kotak Mahindra Old Mutual Life Insurance Limited
10. SBI Life Insurance Co. Ltd
11. Tata AIA Life Insurance Company Limited
12. Reliance Life Insurance Company Limited.
13. Aviva Life Insurance Company India Limited
14. Sahara India Life Insurance Co, Ltd.
15. Shriram Life Insurance Co, Ltd.
16. Bharti AXA Life Insurance Company Ltd.
17. Future Generali India Life Insurance Company Limited
18. IDBI Federal Life Insurance Company Ltd.

19. Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.
20. AEGON Religare Life Insurance Company Limited.
21. DHFL Pramerica Life Insurance Co. Ltd.

22. Star Union Dai-ichi Life Insurance Co. Ltd
23. India First Life Insurance Company Limited

24. Edelweiss Tokio Life Insurance Co. Ltd.




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FUTURE GROWTH OF INSURANCE
Over the last decade, growth in the life insurance industry has been spurred by insurance
companies launching innovative products, experimenting with different distribution channels,
and using wide-spread publicity and promotional campaigns to market their products. All these
efforts have increased the relevance of life insurance and made it more accessible to customers.
But, after a decade of vibrant growth the industry is at the cross roads now. High costs, defective
distribution models, high employee turnover, lackluster customer delight etc, remain areas of
concern in the future. Further, unlike banking, industry did not develop standard industry
protocols and processes to provide a uniform customer experience.
However with some radical thinking, a few path breaking moves and re-look at the available
opportunities on hand, the industry will be able to overcome the obstacles in the path of its
development and create larger value for all. Increasing penetration in micro insurance, health
insurance, pension, group insurance and going global are the answers. With rural India becoming
a powerful engine of economic growth, insuring the rural and urban poor is becoming a viable
business proposition.
Thus with multiple avenues of sustainable growth, and given that out of 1.2 billion lives 2/3rd is
still uninsured, the industry has strong prospects to push itself out of the recent slowdown and
regain its former sheen.
BENEFITS OF LIFE INSURANCE
Apart from protecting the value of an asset, insurance also works as an effective tool for social
security and economic development.
Social Security
When a family loses an earning member, it loses its income. If this income is not compensated,
the family may get pushed into a lower economic class.
The responsibility of social security is placed on the State (government).As per the regulations
governing the insurance business in India, insurance companies, are obliged to extend the
benefits of insurance to economically weaker sections of the society.
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Economic Development
The country requires investments for its economic growth. All life insurance companies have
huge funds accumulated through the payments of small amounts of premia of customers. These
funds are then invested by the insurers on behalf of customers. Therefore, insurers help mobilize
the savings of customers and channel them as investments for economic growth.
The business of insurance is to:
1) Bring together persons with common insurance interests (sharing the same risks),
2) Collect the share or contribution (called premium) from all of them, and
3) Pay out compensations (called claims) to those who suffer.

VARIOUS TYPES OF INSURANCE


1.Life Insurance
Life insurance is an insurance cover taken for human life. In life insurance, the insured
(customer) agrees to pay a set premium for a certain number of years to the insu
2. Non-life or General Insurance
Types of
Insurance
Life
Insurance
Individual/
Group
Policies
Need Based
Classification
Traditional and
Non-Traditional
Policies
Participating
and Non
Participating
Policies
Premium
Paying
Terms
Non-life or
General
Insurance
Others
Group
Insurance
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General insurance is an insurance cover on a nonlife asset. In this case, the insured needs to
renew the policy every year. Payouts happen if the event insured against occurs. For example: If
an insured vehicle meets with an accident, an insured factory catches fire; insured machinery
breaks down among others.
Types of Life Insurance
There are a number of life insurance plans available in the market that suit different needs
of the customer. Life Insurance policies can be classified in the following ways
1.1 Individual/Group Policies
1.2 Need of Customer
1.3 Traditional and Non Traditional Policies
1.4 Participating and Non Participating Policies
1.5 Premium Paying Terms
1.1 Individual/Group Policies
Life insurance products at the broadest level can be categorized into individual and group
insurance products Individual products are sold to a single policyholder, while group
insurance covers a group of individuals usually members of a common society or employer
among others.
1.2 Need Based Classification
Individual products can be further classified on the basis of the Need of the individual. These
needs could be the need for financial security, or the need to increase wealth through
investments, or the need to provide for financial security in case of any major health related
expenses or the need to provide for post retirement years.

1.3 Traditional Policies and Non Traditional Policies
Traditional policies are those where insurance companies offer a guaranteed maturity benefit.
Thus, the investment risk in the policy is borne by the Insurance Company. Insurance companies
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need to ensure stable returns for these policies by restricting investments to low risk assets. An
annual bonus for policyholders is also declared for these policies by the company.
Unit Linked Insurance Policies are non traditional investment plans. A ULIP provides a
combination of risk cover and investment. A part of the premium paid is utilized to provide
insurance cover to the policy holder while the remaining portion is invested in various equity and
debt schemes (just like it is done for Mutual Funds). ULIP policy holders are allotted units and
each unit has a net asset value (NAV) that is declared on a daily basis. Non Traditional plans are
all non- participating.
1.4 Participating and Non participating policies
Participating policies participate in the bonuses of the company while non-particiapting policies
dont participate in the bonuses of the company.
1.5 Premium Paying Term
Finally, individual insurance policies could also have differing payment terms such as
Single Pay: Herein the individual pays the entire and policy premium upfront in one installment
Regular Pay: Herein the individual pays the policy premium at regular intervals as chosen by
him, viz. monthly, quarterly, half yearly or yearly for the entire duration of the policy period
Limited Pay: Herein the individual pays the policy premium for a limited duration of time, and
receives benefit at the end of the policy period.

Insurance Sector Reforms:
In 1993, Malhotra Committee headed by former Finance Secretary and RBI Governor R.N.
Malhotra was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector. The reforms were aimed at "creating a more efficient and
competitive financial system suitable for the requirements of the economy keeping in mind the
structural changes currently underway and recognizing that insurance is an important part of the
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overall financial system where it was necessary to address the need for similar reforms". In 1994,
the committee submitted the report and some of the key recommendations included:
1) Structure:
Government stake in the insurance Companies to be brought down to 50%.
Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
All the insurance companies should be given greater freedom to operate.
2) Competition:
Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter
the industry.
No Company should deal in both Life and General Insurance through a single entity.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only One State Level Life Insurance Company should be allowed to operate in each
state.
3) Regulatory Body:
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent.
4) Investments:
Mandatory Investments of LIC Life Fund in government securities to be reduced from
75% to 50%
GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time)
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5) Customer Service:
LIC should pay interest on delays in payments beyond 30 days. Computerization of
operations and updating of technology to be carried out in the insurance industry .The
committee emphasized that in order to improve the customer services and increase the
coverage of the insurance industry should be opened up to competition. It was decided to
allow competition in a limited way by stipulating the minimum capital requirement of
Rs.100 crores. The committee felt the need to provide greater autonomy to insurance
companies in order to improve their performance.

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY (IRDA)
The IRDA (Insurance Regulatory and Development Authority) is a corporate body that has the
responsibility of administering the Insurance was responsible for the administration of the
Insurance Act. With the IRDA Act 1999 being put in place, the responsibility was subsequently
handed over to the IRDA. The IRDA is guided by the Insurance Advisory Committee (consisting
of not more than 25 members).
Provisions of the Insurance Act:
The Insurance Act 1938 is the principal act that governs the insurance business in India. It came
into effect on 1st July, 1939 and was subsequently amended in 1950 and, again, in 1999.
The Act includes the following provisions -
Registration of our Insurance Act. Up until 1999 the Controller of company and renewal of
registrations
Capital and solvency margin requirements.
Investment of our assets
Rural and social sector obligations
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Assignment and transfer of policies and nominations
Licensing of our agents and their remunerations
Prohibition of rebates
Protection of our holders interests
Need to regulate the Insurance Industry:
Regulating the insurance industry ensures -
Protection of customer interests
Proper training of the salesperson so as to reduce mis-selling
A level playing field for all the insurance players
Penetration of insurance products by mandating rural obligations for all companies
Responsibilities of the IRDA:
Registration of insurers and licensing of insurance intermediaries
Financial and regulatory supervision
Control and regulation of the premium rates
Protecting the customers interests
Specifying rural and social sector obligations
The Lifecycle of an Insurance Policy
There are various stages through which a typical Insurance policy would pass. These are: \

1. Sale/Policy
Login
2.
Underwriting
3. Policy
Issuance
4. Policy
Servicing
5. Claims
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1. Sale/Policy Login
Herein the customer is explained the policy option in the case of a ULIP, all of these requests of
features and benefits by the insurance the customer are serviced by the Insurer agent/sales person
and the customer agrees to purchase the policy
2. Underwriting
Underwriting is the process through which the insurers take a decision to accept a risk on
predefined terms of agreement and a specified premium. It is a process of identification,
assessment, selection, and classification of risks.
3. Policy Issuance
If the Underwriters feel that the risk is fit to be taken on, then the customer is accepted and the
life insurance policy is issued to the customer.
4. Policy Servicing
Sometimes the customer may change his contact information, or nominee for the policy, or the
customer may want to choose a different fund option in the case of a ULIP, all of these requests
of the customer are serviced by the Insurer.
5. Claims
At the end of policy term or due to the occurrence of the said event, there may be a claim that
arises, at that stage we pay the dues to the customer and the policy is closed
Steps involved in the Sales Process
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1. SUSPECTING - Leading generation (Gathering names of potential customers)
2. PROSPECING - Fixing appointments
3.PROPOSING A SOLUTION - Meeting the customer, Information gathering, financial
planning and solution offering
4. CLOSURE - Concluding the sale and Application form filling.
Each stage of the sales process is extremely critical in finally closing the sale.
Risks in Insurance Business
The underwriter takes into account numerous risks before taking an underwriting decision. These
risks may be
Medical Risks The underwriter needs to consider the customers habits, personal
and family medical history
Financial Risks The underwriter needs to examine the customers need to buy the
insurance coverage, the stability of his/her income, his/her
persistence in paying the premiums, and the net worth of the
customer
Personal Risks The underwriter takes into consideration the customers
occupation, hobbies, location of his/her residence, and some moral
hazard elements

Claims Management
SUSPECTING
PROSPECING
PROPOSING A
SOLUTION
CLOSURE
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A claim on an insurance plan is the demand for the fulfilment of a promise made by the insurer,
to the insured (customer), at the time of finalizing the contract. If the customer has fulfilled
his/her part of the contract, then, insurer is also obliged to do the same.
Types of Claims
There are broadly two types of claims
1. Premature Claims: A premature claim is a claim made on an insurance plan before the
maturity of the plan. These claims can be categorized under death claims and living benefit
claims.
2. Death Claims: Death claims are claims that are paid when an insured individual suffers an
untimely death. These cases need to be handled with utmost care and responsibility because the
fate of the deceaseds family is dependent on this claim. Death claim is attached with the base
plan and rider, if any.
Major Market Players:
1. Life Insurance Corporation of India (LIC)
The Life Insurance Corporation (LIC) was established about 44 years ago with a view to provide
an insurance cover against various risks in life. A monolith then, the corporation, enjoyed a
monopoly status and became synonymous with life insurance. Its main asset is its staff strength
of 1.24 lacs employees and 2,048 branches and over six lakh agency force. LIC has hundred
divisional offices and has established extensive training facilities at all levels. It presently
transacts individual life insurance businesses, group insurance businesses, social security
schemes and pensions, grants housing loans through its subsidiary; and markets savings and
investment products through its mutual fund. It pays off about Rs 6,000crore annually to 5.6
million policyholders.
2. ICICI Prudential Life Insurance
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier
financial powerhouse, and Prudential plc, a leading international financial services group
headquartered in the United Kingdom. Prudential plc established in London in 1848, Prudential
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plc, through its businesses in the UK and Europe, the US and Asia, provides retail financial
services products and services to more than 16 million customers, policyholder and unit holders
worldwide.
3. Birla Sun Life Insurance Company Limited
Birla Sun Life Insurance is the coming together of the Aditya Birla group and Sun Life Financial
of Canada to enter the Indian insurance sector. The Aditya Birla Group, a multinational
conglomerate has over 75 business units in India and overseas with operations in Canada, USA,
UK, Thailand, Indonesia, Philippines, Malaysia and Egypt to name a few.
4 .OM Kotak Mahindra Life Insurance
Established in 1985 as Kotak Capital Management Finance promoted by Uday Kotak the
company has come a long way since its entry into corporate finance. It has dabbled in leasing,
auto finance, hire purchase, investment banking, consumer finance, broking etc. The company
got its name Kotak Mahindra as industrialists Harish Mahindra and Anand Mahindra picked a
stake in the company. Kotak Mahindra is today one of India's leading Financial Institutions.
5 Max New York Life:
Max India Limited is a multi-business corporation that has business interests in telecom services,
bulk pharmaceuticals, electronic components and specialty products. It is also the service-
oriented businesses of healthcare, life insurance and information technology.New York Life has
grown to be a Fortune 100 company and an expert in life insurance. It was the first insurance
company to offer cash dividends to policy owners.With over 3 million policyholders, New York
Life is a leading provider of insurance in a host of countries worldwide.
6. Aviva Life Insurance India:
Aviva Life Insurance India is joint venture between Dabur, one of India's oldest and largest
groups of companies and Aviva. Aviva plc. is UKs largest insurer. In accordance with
government regulations, Aviva holds a 26 percent stake in the new venture and Dabur holds a 74
percent share.
7 .ING Vysya Life Insurance:
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ING Vysya Life Insurance is a joint venture between three pioneers, ING Insurance, ING Vysya
Bank and GMR Group. Over the last 150 years, ING Group has grown to become one of the
largest life insurance organizations in the world. Today it touches the lives of over 50 million
people across 65 countries. It offers a range of financial services including insurance, pensions,
banking and asset management.
8. MetLife India Insurance Pvt. Company:
MetLife India was incorporated as a joint venture between MetLife International Holdings, Inc.,
Jammu & Kashmir Bank, M Pallonji & Co. and other private investors. MetLife India is
headquartered in Bangalore with offices and presence in major Indian cities, and additional 1000
outreach points through its channel partners.
9 . Allianz Bajaj Life Insurance Co.
Allianz Bajaj Life Insurance Co. Ltd. is a joint venture between two leading conglomerates-
Allianz AG, one of the world's largest insurance companies, and Bajaj Auto, one of the biggest 2
and 3 wheeler manufacturers in the world.
10. SBI Life Insurance Company Ltd:
SBI Life Insurance Company Ltd. is a joint venture between India's largest bank, State bank of
India (SBI) & Cardiff S.A., a leading Life Insurance company in France. State Bank of
India(SBI) is a household name, and it stands as the last word for financial strength and security
in the country.

Various Types of Distribution Channels
Insurance companies source their customers and deliver products to them with the help of
distribution partners/ channels. In India, the agency model has been the traditional distribution
channel. However, several new distribution channels are emerging that are aimed at specific
target customers. These channels have their own unique features. Distribution channels are
licensed by the IRDA. To acquire a license to sell, agents have to fulfill certain requirements
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such as minimum qualifications, practical training in insurance subjects, clearing the insurance
examination conducted by the Insurance Institute of India (III) etc.
Need for Distribution Channel
Distribution channels are required to-
Increase insurance awareness and knowledge among individuals
Increase insurance penetration in the country
Improve cost efficiency in distribution of products
Satisfy the needs of more demanding customers
Differentiate on the basis of customer service
There are various types of distribution channels existing in India.
1. Agency
An insurance agent is someone who works on behalf of the insurance company to sell products.
For decades, the agency model has been the only distribution channel for life insurance in India.
Even today, a large proportion of the business is carried out through the agency channel.
2. Corporate Agents (CAs)
Corporate Agent is a concept introduced with a view to take advantage of the presence of a large
number of firms, corporations, banks, non-banking financial institutions (NBFCs), NGOs,
cooperative societies and Panchayats who are in constant contact with individuals. Cas are
corporate entities (usually NBFCs) that source policies for an insurance company with whom
they have a tie-up. They are authorized to source policies for one insurance company only.
3. Potential CAs
Institutions such as ITC who have a high customer base in rural regions
NGOs
Relatively new and untapped NBFCs
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Retailers
4. Bancassurance
The bancassurance channel was introduced in India when the insurance industry was opened up
for private players. In this model, an insurance company, ties up with a bank and offers its
products through the bank branches.
The bank staff sells a range of products including insurance. It is therefore important that
products be simple so that the staff can understand them easily and sell them effectively. Insurer
can utilize the existing branch networks of the bank to sell its products. This offers an
opportunity to have a lower cost model and therefore provide cost effective products to
customers.
As products are being sold to the banks customers, there is already a relationship that exists that
can be further leveraged.
5. Brokers
A broker acts as an intermediary between the insurance companies and the insurance buyer or
customer. Insurance brokers differ from agents. While agents represent the insurance company,
brokers represent the customers.
6. Worksite Marketing
Worksite marketing is the process of distributing individual or group insurance products to
individuals at their place of work on a voluntary, payroll deduction basis.
Under a worksite marketing arrangement, the insurer, approaches an employer to offer its
employees the opportunity to buy insurance coverage at work. If the employer agrees, our sales
representative, i.e., you market the products directly to their employees at their worksite. The
employer implements a payroll deduction plan to deduct the employees premium payments
from their pay checks and submits the same to us.
7. E-sales
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E-sales refer to sales of insurance products through the internet. This channel for the sale of
insurance products is relatively new in India, but is fast catching up with more traditional
methods. For some time, insurance companies have been using online payment gateways to
collect renewal premiums and their websites to solicit sales inquiries for their insurance products,
but it was only late in 2009 that insurance companies in India introduced products that are
exclusively sold via the internet. Because these online products are being sold directly to the end
customer, with no intermediaries, insurance companies can sell these products much cheaper, as
the intermediary commissions are eliminated.

MARKETING OF INSURANCE IN INDIA
Insurance is in a manner of speaking the last frontier in the financial sector to open. It is also a
sector, which leads to benefits across the full spectrum, from the individual who now have wider
choices, to the economy, which see increased savings, to the infrastructure sector, which can
look forward to long term funding being available. In an under-insured economy, newer channels
of distribution have to be utilized to intensify the reach of insurance both in urban and rural
markets. This will create huge employment opportunities not only within insurance companies
but also as agents and consultants of insurance companies.
Marketing Mix Policies
Different companies can choose to position themselves differently and hence the Marketing Mix
is different. However, there are certain common characteristics that one can cull out from the
possible strategies that companies adopt.
Product:
The development of flexible products to suit individual requirements is what will differentiate
the winners from the also-rans. The key to success is in providing insurance solutions, not
standardized insurance products. The concept of riders/optional benefits has already been a huge
innovation brought about by the new players, which has led to customization of products for
individual needs. However, companies may differentiate themselves on the basis of product
segments that they choose to focus on and excel in.
Place:
Different companies may however choose different channels and different geographies to focus
on. The channel options are - tied agency force, corporate agents and brokers and this is an area
where different companies will make different choices. Many companies like HDFC Standard
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Life are focusing on all channels whereas companies like Max New York Life are focusing on
the tied agency force only. Customer interface will be a key challenge for life insurance
companies and includes every that interaction that the customer has with the company, such as
sales, new business underwriting, policy servicing, premium payments, claim processing and so
on. Technology can play a crucial role in delivering the highest standards of service set by the
company and it will be imperative for any serious player to excel in all of these.
Price:
Price is a relevant differentiator only in two segments - pure term insurance and in pure
annuities. Here too, service delivery and financial strength will need to be present at a minimum
acceptable level for price to be a relevant differentiator. In case of savings oriented products,
long-term returns generated are more relevant than just the price of the product. A focus on
generating good investment performance and keeping a tight control on costs help in generating
good long-term maturity value for customers. Norms have been laid down on all of these by
IRDA and adhering to these while delivering good returns will be a challenge.
Promotion and Advertising:
The level of demand is latent and will have to be activated considerably. The market needs to be
developed. Greater awareness of insurance and the need to have it as a protection tool rather than
as a tax planning measure needs to be appreciated by the Indian people. Various communication
tools including advertising, direct marketing and road shows contribute to all this and different
companies take different approaches on these.
















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REVIEW OF LITERATURE


Bhat (2003) says that Insurance is the backbone of a countrys risk management system. Risk is
an inherent part of our lives. The insurance providers offer a variety of products to businesses
and individuals in order to provide protection from risk and to ensure financial security. They are
also an important component in the financial intermediation chain of a country and are a source
of long term capital for infrastructure and long-term projects. The insurance business is broadly
divided into life, health, and non-life insurance. The insurance companies offer life insurance,
pension and retirement income, property insurance, legal liability insurance, etc., to cover these
risks. In addition, they offer several specialized products to meet the specific needs and
requirements of businesses and individuals. The insurance industry is also an integral part of the
financial system. The role of the insurance companies as financial intermediaries is also
considered significant in making these markets efficient by providing liquidity and credit. IRDA
has an important responsibility of regulating this sector. There is a lack of proper guidelines
about the norms of reporting the performance of life insurance organizations.
S Krishnamurthy (2005) says that the life insurance industry saw a growth of 10.48 per cent in
terms of first year premium income and 12.83 per cent in terms of new policies sold. The size of
the market for 2003-04 was Rs. 187.10 billion worth of first year premium income with 28.6
million policies. These are extremely satisfactory statistics but certainly not path- breaking; they
reaffirm the belief that huge potential still remains unexploited.
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Sridhar(2013) says that after the introduction of new IRDA norms as IRDA has cleared over
500 products in line with the new norms, says its Chairman T.S. Vijayan.Reliance Life will
launch over 25 products from next month, says its CEO Anup Rau. From January 1, only
products that conform to the new guidelines announced by the Insurance Regulatory and
Development Authority (IRDA) in the first half of 2013 are allowed for sale.
Jhaveri (2013) says that the Indian market has a lot of potential for insurance products. Some
Western markets that were considered saturated are also realizing the market potential of their
middle and lower classes. In India, even the upper class may not have adequate insurance
coverage. India has a population of 1 billion people consisting of approximately 160-170 million
families.
Indias working population amounts to around .4 billion but a substantial portion of these works
either as landless agricultural labourers or as casual labour with very less disposable income. The
LIC issues 20 million new contracts every year and has 150 million outstanding contracts on its
books. Therefore, it may be concluded that most families who need insurance have a minimum
of one life insurance contract.
Indian insurers have relied a lot on their foreign partners for initiating business and developing
important policies and procedures. Insurance requires special skills in actuarial and underwriting
and these skills are inadequate in India.
Bancassurance Channel as an Alternative- Bancassurance has been proposed as an attractive
alternative to the traditional agency model. It has the potential to offer ready manpower,
customer database, and relationship banking of the bank but it has its challenges in terms of
defining partnership terms, learning, and unlearning. Bancassurance is a format where the
insurance companies offer their insurance products through the distribution channels of a bank
along with a complete range of banking and investment products and services to a common
customer base. It purports to serve the interests of the bank in leveraging its infrastructure and
the insurance company in quick entry and growth. Bancassurance provides the insurance
company an access to a large customer base in a short time and allows it to diversify its channel
risk and reduce unit costs by adding volume with fixed overheads.
23

Bakhshi (2014) says that the market comprises of a large number of products of which
predominant are those that are mandatory. Product Demand- Insurance is a push product.
Insurance cover is procured where it is mandated. With the liberalization of the economy, the
demand for insurance is growing. Drivers for this growth are: (I) Investments in industries and
infrastructure development due to: (a) Increase in demand for goods and services. (b) Increase in
exports with the globalization of the economy. (II)Growth in retail consumption due to: (a)
Increase in per capita income. (b) Growth of retail financing at 35 per cent annually. (c)
Paradigm shift in distribution with multiple channel options. (d) Upward mobility of the
population leading to higher asset ownership. (e) Increasing awareness and penetration of certain
product categories such as liability insurance, health insurance, and overseas travel insurance.


PROFILE OF THE ORGANIZATION

Housing Development Financial Corporation Ltd (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 net worth of the Corporation as on March
31, 2000 stood at Rs. 2,096 crores. HDFC operates through 75 locations throughout the country
with its Corporate Headquarters in Mumbai, India. HDFC also has an international office in
Dubai, U.A.E., with service associates in Kuwait, Oman and Qatar.
Standard Life Group, UK
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 in 1825. The company expanded in the 19th century from its
24

original Edinburgh premises, opening offices in other towns and acquiring 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 past six years by Standard &
Poor.
HDFC Standard Life Insurance Company Ltd:
HDFC Standard Life Insurance Company Ltd. is one of Indias leading private life insurance
companies, which offers a range of individual and group insurance solutions. It is a joint venture
between Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading
housing finance institution and The Standard Life Assurance Company, a leading provider of
financial services from the United Kingdom.
Incorporated on 14th August 2000, it was the first life company to be granted a certificate of
registration by the IRDA on the 23rd of October 2000. HDFC Standard Life is one of the first
companies to be granted license by the IRDA to operate in life insurance sector. HDFC is the
majority stakeholder in the insurance JV with 81.4 % stake and Standard Life has a stake of
18.6%. Mr. Deepak Parekh is the MD and CEO of the venture.
HDFC Standard Life Insurance is a new Indian life insurance company that operates out of 52
locations. It offers clients a range of insurance plans to meet their savings, investment and
protection needs. In the financial year 2002-03, the company registered a year-on-year growth of
over 260%. It is also the first new life insurance company to declare its third successive bonus
for participating policy holders.
In order to survive in the insurance segment, HDFC had to introduce new products. They were
looking for a robust and integrated solution to support the new product. HDFC was also facing
numerous problems with their current systems in terms of performance, reliability and
scalability.
Vision and mission:
25

HDFC Life aims to be the top new life insurance company in the market. This does not just mean
being the largest or the most productive company in the market, rather it is a combination of
several things like-
Customer service of the highest order
Value of money for customers
Professionalism in carrying out business
Innovative products to cater to different needs of different customers
Use of technology to improve service standards
Increasing market share.
Key Values:
SECURITY: Providing long term financial security to our policy holders will be our
constant Endeavour. We will be doing this by offering life insurance and pension
products.
TRUST: We appreciate the trust placed by our policy holders in us. Hence, we will aim
to manage their investments very carefully and live up to this trust.
INNOVATION: Recognizing the different needs of our customers, we will be offering a
range of innovative products to meet these needs. Our mission is to be the best new life
insurance company in India and these are the values that will guide us in this.

Board Members
Mr. Deepak S Parekh Chairman of HDFC Limited.
Mr. Keki M Mistry Managing Director of HDFC Limited.
26

Mr. Alexander M Crombie Group Chief Executive of the Standard Life
Ms. Marcia D Campbell Group Operations Director
Mr. Keith N Skeoch Chief Executive in Standard Life
Mr. Ranjan Pant Global Management Consultant
Ms. Renu S. Karnad Executive director of HDFC Limited


HDFC Life Products:
HDFC Standard Life offers a bouquet of insurance solutions to meet every need. They cater to
both, individuals as well as to companies looking to provide benefits to their employees. This
section gives details of all the products. They have incorporated various downloadable forms and
product details so that we can make an informed choice about buying a policy.
INDIVIDUAL PRODUCTS
Protection Plans
o Term Assurance Plan
o Loan Cover Term
o Assurance Plan
Investment Plans:
Single Premium Whole Life Plan
Pension Plans:
o Personal Pension Plan
o Unit Linked Pension Plan
o Unit Linked Pension Plus
Savings Plans:
27

o Endowment Assurance Plan
o Unit Linked Endowment
o Unit Linked Endowment Plus
o Money Back Plan
o Children's Plan
o Unit Linked Young star
o Unit Linked Young star Plus
GROUP PRODUCTS
o Group Term Insurance
o Group Variable Term Insurance
o Group Unit Linked Plan

Other Companies
o HDFC Trustee Company Ltd.
o GRUH Finance Ltd.
o HDFC Developers Ltd.
o HDFC Property Ventures Ltd.
o HDFC Ventures Trustee Company Ltd.
o HDFC Investments Ltd.
o HDFC Holdings Ltd.
o Credit Information Bureau (India) Ltd
o HDFC Securities
o HDB Financial Services.

Awards and Accolades

28





29







Indias best managed company by Asiamoney magazine - 1995 and 1996
Most competitive Indian company by Euromoney - 1997
One of the 5 best Indian Boards by Business Today -1997
Best presented accounts 1994-95 and 1996-97 (3rd place) - in the SAARC region by the
South Asian Federation of Accounts in the financial sector category
Rated as one of the best companies in India for strategy & management and investor
relations by Asiamoney - 1998
Excellence in service industry by the Indian Institute of Marketing Management & Top
Management Club (Pune) -1998
Shield for the best presented accounts for banks and financial institutions - over 11 times
(8 years in a row)
30

1999 IMC Ramakrishna Bajaj National Quality Award in the service category
CII-EXIM Bank Comendation Certificate for commitment to Total Quality Management
- 2000
Asiamoney declared HDFC as the second best managed company in India - 2001
Euromoney identified HDFC as one of Asias top 10 best managed companies in the
finance sector - 2001
Rated as the Best Non-Banking Financial Company in Asia by Institutional Investor
Research Group 2002.

Market Share of HDFC Life
In line with expectations, life insurance industrys new business volumes in the individual new
business segment remained strong, growing 36% Y-o-Y and 23% M-o-M, in August 2010.
In the individual new business segment, while LIC, ICICI, and HDFC improved WNRP industry
market share (YTD) by 3.8 percentage points, 1.5 percentage points, and 0.7 percentage points,
respectively, Bajaj Allianz (1.8 percentage points), Birla (1.25 percentage points), SBI (1.26
percentage points) and Reliance (0.31 percentage points) lost significantly. At 5mFY11 end,
private insurers market share stood at ~50%.

Here is how Various Life Insurers stack up against each in the Industry as a whole. The
following Data suggests that LIC of India is still the market leader followed by ICICI Prudential,
HDFC Standard Life, SBI, Reliance, Bajaj, Birla Sun Life, Max New York etc.

31


RESEARCH METHODOLOGY
Research always starts with a question or a problem. Its purpose is to question through the
application of the scientific method. It is a systematic and intensive study directed towards a
more complete knowledge of the subject studied. Marketing research is the function which links
the consumer, customer and public to the marketer through information- information used to
identify and define marketing opportunities and problem generate, refine, and evaluate marketing
actions, monitor marketing actions, monitor marketing performance and improve understanding
of market as a process
Marketing research specifies the information required to address these issues, designs, and the
method for collecting information, mange and implemented the data collection process, analyses
the results and communicate the findings and their implication.
RESEARCH DESIGN
A research design is the arrangements of conditions for selection and analysis of data in a
manner that aims to combine relevance to research with economy procedure.
In this report I decided to use exploratory research design.
I have prepared my project as exploratory type, as the objective of the study demands the
answers of the question related to find the potentiality of life insurance.
PROPOSED OBJECTIVES
Some of the objectives of the above research study are as follows:
32

To study relative importance of factors in policy purchase decision.
To explore customers perception towards private insurance companies.
To create positive approach in customers to buy insurance policies of a private company.
To study the buying pattern in insurance sector.
To study and analyse the findings so as to present a clear picture of trends in the
insurance sector.
To know about market share & growth rate of life insurance industry.

SAMPLING TOOLS USED IN RESEARCH
Initially, a rough draft was prepared keeping in mind the objectives of the research. A detailed
study was done in order to know the accuracy of the questionnaire. The final questionnaire was
arrived only after certain important changes were done. Thus , my sampling came out to be
judgemental and convenient .
The sample size was restricted to only 100, which comprises of mainly people from different
regions of Kanpur.

PROPOSED MEDIUM OF DATA COLLECTION
For the above research study , direct interaction with the respondents is required to collect
the customerss perception about private insurance products. Therefore , the proposed medium of
data collection for the research were personal interviews and the questionnaires in order to get
clear response of the customers.

SOURCES OF DATA COLLECTION
The sources of information are both primary & secondary . A well structured questionnaire was
prepared and personal interviews were conducted collect the customerss perception about
private insurance products. After the research methodology, research problem in marketing has
been identified and selected; the next step is together the requisite data.
33

There are two types of data collection method-
primary data
secondary data
Primary data: is that which is collected fresh from respondents for some specific purpose
Secondary data: is one which is already available i.e. they refer to data which have already been
collected and analyzed by someone else.
In this project, I decided secondary data collection method because my study nature does not
permit to apply observational method. In survey approach, I studied about the details of life
insurance sector.
I decided on Secondary data collection method was used by referring to various websites, books,
magazines, journals, and daily newspapers for collecting information regarding project under
study.
PROPOSED RESEARCH HYPOTHESIS
There are two hypothesis for every research , Alternate & Null hypothesis.
Alternate hypothesis is always accepted.
Null hypothesis is always rejected.
In the above study ,
Alternate hypothesis says customers perception affects the demand of private insurance
companies. Majority of the customers are dependent on LIC for insurance Policies , so there
mindset is needed to be changed. A positive thinking must be generated in customers regarding
private insurance companies.
Null hypothesis says customers perception do not affects the demand of private insurance sector.




34






CONTACT FOR DATA ANALYSIS PART AND QUESTIONNAIRES_985507625 CHAUHAN BROTHERS

35

FINDINGS
35% of policy holders are more concentrated on Unit linked plans, it is due to the
reason that the returns on these policies are more compared to the traditional policies.
All the respondents are having insurance policies, which shows that their willingness to
cover his/ her life risk cover and give protection to his/her family.
79% of the respondents would like to invest up to 20% of their annual income in life
insurance and keep the substantial part of the income for their livelihood.
Many customers expect some extra facilities from the Company.
The major competitors are LIC and HDFC Life.
Maximum business comes from financial consultants with aggressive selling.
Most of the respondents are satisfied with attending query, which shows that the
company is capable of understanding the customers attitude & provide optimal
solution.
The customers of HDFC Standard Life are also having policies in the other companies
this indicates that the customers opt for different plans which they prefer in other
companies.
51% of the customers strongly agree that investing in HDFC Standard Life is easy.
79% of the customers would like to recommend HDFC Standard Life to others.
57% of the customers have invested in HDFC Standard Life because of high return on
investments.
Most of the customers have positive attitude towards safety and secured on their
investment.
68% of respondents have positive attitude towards service provided by the company
and 32% of respondents have not in a position to decide the service provided by the
company.
SWOT Analysis of Life Insurance Sector
An analysis of the current scenario of the Life Insurance Sector in India reveals the following
Strengths, Weaknesses, Opportunities and Threats:
Strengths
36

High Savings Rate amongst Indians
Indians have one of the highest savings rate 35% of GDP. A part of these savings flow
into the Insurance sector.
Favourable demographics of the Indian economy
India has a large young population and its dependency ratio is expected to fall to 52% by
2015 and 48% by 2025. 50% of the Indian population is expected to be less than 50 years
of age by 2020, triggering a rapid growth of working population
Availability of large talent pool
The availability of a large pool of mathematical, analytical, financial and IT talent and a
large supply of cheap manpower can make India the insurance back office hub of the
world, transferring operational processes from UK and US
Weaknesses
Poor market perception
Conflict between an agents need to hard sell a product and the true customer need, non
standardization of products and processes to deliver a uniform customer experience and
recent regulatory changes
Strong correlation with Market Volatility
Given that insurance also serves the benefit of investment lead wealth creation,
success of the products and industry has a strong correlation to fluctuations in the
equity market. Insurers however, can provide options to customers that provide
balanced returns despite the volatile markets
Opportunities
Growing incomes and increasing financial literacy
37

With increase in income across the country, Indian customers are also becoming
more conscious about their financial choices and demanding a range of
instruments that will help them meet their financial goals
Governments focus on Financial Inclusion
Government programs of financial inclusion are making available guaranteed minimum
employment and a slew of rural development initiatives. These are opening up windows
of opportunity for basic financial services in the remote corners in India.
Replicating the successful Bancassurance Model
The Bancassurance model has done well in India. This presents a potential opportunity
for the industry to pick principles and learnings from the bancassurance model and apply
them to a range of different distribution channels to improve performance of those
Threats
Competition from other financial service providers such as Banks/Mutual Funds/Pension
Funds/Hedge Funds etc.
In international markets insurance companies are competing with hundreds of other players
such as Banks, Mutual Funds, Pension Funds, Hedge Funds and finance companies. In India too,
this is slowly becoming a reality. It is important that the Indian life insurance companies realize
that every insurance as an investment and every investment is insurance, and thus broad base
their strategy and capabilities to compete with a wider spectrum.
EQUITY SHARE CAPITAL OF LIFE INSURERS
Insurers
As on 31
st

march,
2013
As on 31
st

March, 2014
Foreign
Promoter
Indian
Promoter
FDI (%)
Aviva 2004.90 2004.90 521.27 1483.63 26.00
Bajaj Allianz 150.71 150.71 39.18 111.53 26.00
Bharti Axa Life 1718.65 1807.20 401.60 1405.60 22.22
Birla Sunlife 1969.50 1969.50 512.07 1457.43 26.00
38

HDFC Standard 1994.88 1994.88 518.67 1476.21 26.00
ICICI Prudential 1428.85 1428.94 370.78 1058.15 25.95
IndiaFirst 475.00 475.00 123.50 351.50 26.00
ING Vysya 1464.88 1464.88 1464.88
Max New York 1944.69 1944.69 505.62 1439.07 26.0
Met Life 1969.57 2012.88 523.35 1489.53 26.00
LIC 100.00 100.00 100.00

Interpretation: FDI is equally participated in all the 7 companies.

















39

SUGGESTIONS
Company has to create sense of security among the customers. Because most of the people fear
about security in Private life insurance companies. So, Company has to explain and highlight
about IRDA, which will give support to the private life insurance.
As the competition is increasing the company should use the new emerging methods for
collection of premiums to get the competitive advantage on others.
Service should focus on enhancing the customer experience and maximizing customer
convenience. This calls for effective CRM system, which eventually would create
sustainable competitive advantage and build long lasting relationship.
Whenever company launches new products, company should conduct some Events for
existing customers, which ensures direct interaction with existing customers.
Since the deregulation has been put in to place, the market share of LIC is still higher as
compared to private sector, for this situation more strategies are to be developed to cover
the more market and to expand the business, a private companies has to expand their
branches.
Government has to take some advantageous steps to the growth of private sector as a
single company cannot cover the whole market. So, for that government has to be with
all these private companies that will lead to the coverage of most of the population.
With the liberalization and entry of private companies in insurance, the Indian insurance
sector has started showing signs of significant change. Within a short span of time,
private insurance has acquired 13 per cent of the life insurance market and 14 per cent of
non-life market. However, there is still a huge untapped demand for insurance.
Insurance knowledge is complex. It is the responsibility of the distribution channel to
develop expertise and to provide customers with accurate insurance information
Insurance salespersons should be in a position to advise the customers on the best
available choices in any given circumstance
The distribution channel should also be able to perform the role of a primary underwriter.
This can be done by the salespeople, if they have been trained to make an assessment of
the customers upfront. They can then help in forwarding only the right business to the
company.
40

CONCLUSIONS
The insurance sector will grow steadily rather than rapidly. The law and regulations in place are
adequate to ensure financial strength and solvency of insurers. The insurance sector is
undergoing fundamental transformation and has an important part in the build up of the countrys
economic infrastructure. The insurance regulator will play a key role in laying down the ground
rules and paving the way for the sectors growth and development. But the challenge clearly rests
with the insurers to take the industry to its next level of evolution. In India, the ratio of assets of
insurance companies to those of banks is 3 per cent while the ratio in the US is 10 per cent. This
serves as another indicator of the potential that the industry must live up to.
This shows the scope for private insurance companies have great opportunities to cover the
market and can insure the customer. With the initiation of the deregulation in the Indian
insurance market, the monopoly of big public sector companies in life insurance market has been
broken. New private players have entered the market and with their innovative approaches and
better use of distribution channels and technology, they are eating in to the shares of established
public sector companies in Indian insurance market. Since the deregulation has been put in to
place, the market share of LIC has come down to 71.4% in life insurance market while the
private players have captured around 17% market in the general insurance segment. This report
includes the key private players in the insurance market such as HDFC Life ,ICICI prudential, .
It also includes the leading competitors in the life insurance and general insurance segments
along with their market shares.
But then too ,most of the people are totally dependent on LIC. They do not trust on these private
companies.





41

LIMITATIONS

There were some limitations in that were faced during the research .These were:
The accuracy of the results is limited to the reliability of the tools of investigation and
analysis of data.

The probability of sampling error cant be ruled out as the samples are drawn by
convenience sampling.
The study is based on pre-designed questionnaire, so there is a possibility of error due to
gap between the truth and observation.

Poor responses from some of the respondents also add to ineffective results.

Some questionnaires had to be ignored due to incomplete or invalid information.

The time for the study was insufficient so due to this some problems were faced by me
Lack of experience was also a hurdle for performing the task
The study was dependant on secondary data only, so all the limitations of secondary data
have entered in the stud










42

QUESTIONNAIRE
Dear Sir / Madam,

1.Can you mention the names of Life Insurance company?
________________________________________

2. In which company you have invested?
HDFC Standard life ( ) Tata AIG ( ) ICICI Prudential ( )
LIC of India ( ) MetLife ( ) Others____________
3. What % of your savings would you like to invest in Life insurance Policy annually?

Customer Profile

Name: ____________________________ Age: ______
Address: ____________________________
____________________________
Sex: Male ( )
Female ( )
Marital status: Married ( )
Unmarried ( )
Education: Graduate ( ) Post graduate ( ) Under Graduate ( ) Professional( )
Occupation: Government Employee ( ) Business ( ) Private Employee ( )
Professional ( ) Others ( )
Annual Income: Below1lakh ( ) 1-2 lakhs ( ) 2-3 lakhs ( )
3-4 lakhs ( ) Above 4 lakhs ( )
43

Nothing ( ) Up to 20% ( )
21 % -30% ( ) 31%- above ( )
4. Which policy have you taken from HDFC Standard Life?
Pension plan ( ) Children plan ( ) Protection plan ( )
Investment plan ( ) Unit Link ( ) Other_____________
5. Specify the reason for investing in HDFC Standard Life?
Service ( ) Saving ( )
Tax benefit ( ) Return on investment ( )
6. How did you come to know about HDFC Standard Life?
Periodicals ( ) Family & Friends ( ) Financial Consultant ( )
Advertisement ( ) Others _____________
7. Who influences you, while making purchase decision
(Company / policy decision)?
Friends & Colleague ( ) Family & Relatives ( )
Financial Consultants ( ) Advertisements ( )
Others _____________
8. Would you like to recommend HDFC Standard Life to others?
Yes ( ) No ( )
Reason: _________________________________
__________________________________
9. Is it easy to invest in HDFC Standard Life?
Strongly agree ( )
Agree ( )
Neither agree nor disagree ( )
Disagree ( )
Strongly disagree ( )
44

10. Does HDFC Standard Life maintains good relation with Customer (after sales service)?
Strongly agree ( )
Agree ( )
Neither agree nor disagree ( )
Disagree ( )
Strongly disagree ( )
11. Do you buy HDFC Standard Life products because it gives?
Factors Strongly
agree
Agree Neither agree
nor disagree
Disagree Strongly
disagree
High Return
on
investment

High
Security

Good Service
Tax benefit

12. Which kind of facility do you expect from HDFC Standard Life?
____________________________________________









45

Bibliography
Books:
Marketing Management: Philip Kotler
Marketing Research: Tull and Hawkins
Magazines/Journals:
Insurance watch
IRDA journal
Website:
www.irda.com
www.hdfcinsurance.com