OVERVIEW

With an annual growth rate of 15-20% and the largest number of life
insurance policies in force, the potential of the Indian insurance industry is huge.
Total value of the Indian insurance market (2004-05) is estimated at Rs. 450
billion (US$10 billion). According to government sources, the insurance and
banking services' contribution to the country's gross domestic product (GDP) is
7% out of which the gross premium collection forms a significant part. The funds
available with the state-owned Life Insurance Corporation (LIC) for investments
are 8% of GDP.

Till date, only 20% of the total insurable population of India is covered under
various life insurance schemes, the penetration rates of health and other non-life
insurances in India is also well below the international level. These facts indicate
the of immense growth potential of the insurance sector.

The year 1999 saw a revolution in the Indian insurance sector, as major structural
changes took place with the ending of government monopoly and the passage of
the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry
restrictions for private players and allowing foreign players to enter the market
with some limits on direct foreign ownership.

Though, the existing rule says that a foreign partner can hold 26% equity in an
insurance company, a proposal to increase this limit to 49% is pending with the
government. Since opening up of the insurance sector in 1999, foreign investments
of Rs. 8.7 billion have poured into the Indian market and 21 private companies
have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled

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fledgling private insurance companies to sign up Indian customers faster than
anyone expected. Indians, who had always seen life insurance as a tax saving
device, are now suddenly turning to the private sector and snapping up the new
innovative products on offer.

The life insurance industry in India grew by an impressive 36%, with premium
income from new business at Rs. 253.43 billion during the fiscal year 2004-2005,
braving stiff competition from private insurers. This report "Indian Insurance
Industry: New Avenues for Growth 2012", finds that the market share of the state
behemoth, LIC, has clocked 21.87% growth in business at Rs.197.86 billion by
selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest
the fall in its market share, as private players grew by 129% to mop up Rs. 55.57
billion in 2004-05 from Rs. 24.29 billion in 2003-04.

Though the total volume of LIC's business increased in the last fiscal year (2004-
2005) compared to the previous one, its market share came down from 87.04 to
78.07%. The 14 private insurers increased their market share from about 13% to
about 22% in a year's time. The figures for the first two months of the fiscal year
2005-06 also speak of the growing share of the private insurers. The share of LIC
for this period has further come down to 75 percent, while the private players have
grabbed over 24 percent.

There are presently 12 general insurance companies with four public sector
companies and eight private insurers. According to estimates, private insurance
companies collectively have a 10% share of the non-life insurance market.

Though the focus of this market research report is on the potential growth on the
Indian Insurance Sector, it also talks about the market size, market segmentation,
and key developments in the market after 1999. The report gives an instant

2
overview of the Indian non-life insurance market, and covers fire, marine, and
other non-life insurance. The data is supplied in both graphical and tabular format
for ease of interpretation and analysis. This report also provides company profiles
of the major private insurance companies.

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BACKGROUND

Life Insurance in India was nationalised by incorporating Life Insurance

Corporation (LIC) in 1956. All private life insurance companies at that time were
taken over by LIC.

In 1993 the Government of Republic of India appointed RN Malhotra Committee

to lay down a road map for privatisation of the life insurance sector. While the
committee submitted its report in 1994, it took another 6 years of political climate
building, and the enabling legislation was passed in the year 2000 amending the
Insurance Act of 1938 and legislating Insurance Regulatory and Development
Authority Act of 2000 - the principal legislations for insurance industry - and the
same year the newly appointed insurance regulator - Insurance Regulatory and
Development Authority [www.irdaindia.org] started issuing licenses to private life
insurers.

The origin of insurance is very old .The time when we were not even born;
man has sought some sort of protection from the unpredictable calamities of the
nature. The basic urge in man to secure himself against any form of risk and
uncertainty led to the origin of insurance.
The insurance came to India from UK; with the establishment of the Oriental Life
insurance Corporation in 1818.The Indian life insurance company act 1912 was
the first statutory body that started to regulate the life insurance business in India.
By 1956 about 154 Indian, 16 foreign and 75 provident firms were been
established in India. Then the central government took over these companies and
as a result the LIC was formed. Since then LIC has worked towards spreading life
insurance and building a wide network across the length and the breath of the
country. After the liberalization the entrance of foreign players has added to the
competition in the market.

4
The General insurance business in India, on the other hand, can trace its roots to
the Triton Insurance Company Ltd., the first general insurance company
established in the year 1850 in Calcutta by the British. In 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. In 1972 The General
Insurance Business (Nationalization) Act, 1972 nationalized the general insurance
business in India with effect from 1st January 1973. It was after this that 107
insurers amalgamated and grouped into four companies viz. the National
Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental
Insurance Company Ltd. and the United India Insurance Company Ltd. GIC
incorporated as a company.

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LIST OF LIFE INSURERS (AS ON MAR 06)

Today (Mar 06), apart from Life Insurance Corporation, the public sector life
insurer, there are 14 other private sector life insurers, most of them joint ventures
between blue blooded Indian groups and global insurance giants.

Life Insurer in Public Sector

1. Life Insurance Corporation of India

Life Insurers in Private Sector

1. ICICI Prudential Life Insurance

2. HDFC Standard Life
3. Birla Sunlife
4. SBI Life Insurance
5. Kotak Old Mutual Life Insurance
6. Aviva Life Insurance
7. Reliance Life Insurance
8. Bajaj Allianz Life
9. Tata AIG Life
10. Metlife India Life Insurance
11. ING Vysya Life Insurance
12. Max Newyork Life Insurance
13. Sahara Life Insurance
14. Shriram Life Insurance

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Legislative Framework

2 Principal legislations:

Insurance Act, 1938 – This covers provisions relating to forming insurance

company, its registration, renewal of registration, capital requirements, Investment
norms, provisions relating to management, assignment, nomination, true and
proper disclosure, misrepresentation, accounts, solvency margin, opening of
offices etc

Insurance Regulatory and Development Authority Act of 2000 – It is a small

legislation which basically contains provisions relating to the insurance regulator.

Subordinate Regulations

Apart from the above legislations, there are a host of subordinate legislations
notified by the IRDA covering various activities of insurance companies, some of
which are:

• Advertisement regulations – regulates publicity material

• Agency and broker licensing regulations – regulates such intermediaries
• Regulations and Guidelines for Corporate Agents
• Investment regulations – regulates the investment activities and specifies
types of investments, limits, investment policy and investment committee;
• Regulations for protection of policyholders
• Regulations on financial statements, specifying detailed guidelines for the
preparation of financial statements by insurance companies
• Guidelines for approving products of insurance companies
• Guidelines for minimum norms for unit linked products

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 • Regulations on valuation of assets and liabilities and solvency margin
requirements

Foreign Direct Investment (FDI) Policy in Insurance Sector

As per the current (Mar 06) FDI norms, foreign participation in an Indian
insurance company is restricted to 26.0% of its equity / ordinary share capital. The
Union Budget for fiscal 2005 had recommended that the ceiling on foreign holding
be increased to 49.0%. However, the matter is still under discussions.

Commission / Intermediation fees

• The maximum commission limits as per statutory provisions are:

o Agency commission for retail life insurance business:

 40% for 1st 10 yrs, 35% thereafter for 1st year premium
 7.5% - yr 2, 7.5% - yr 3 and 5% - thereafter

o Agency commission for retail pension policies:

 7.5% for 1st year premium and 2.5% thereafter

• Maximum broker commission - 30%

• Referral fees to banks – Max 55% for regular premium and 10% for single
premium.

• However, the above commission may be further subject to the product wise
limits specified by IRDA while approving the product.

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 With such a large population and the untapped market area of this population
Insurance happens to be a very big opportunity in India. Today it stands as a
business growing at the rate of 15-20 per cent annually. Together with banking
services, it adds about 7 per cent to the country’s GDP .In spite of all this growth
the statistics of the penetration of the insurance in the country is very poor. Nearly
80% of Indian populations are without Life insurance cover and the Health
insurance. This is an indicator that growth potential for the insurance sector is
immense in India. It was due to this immense growth that the regulations were
introduced in the insurance sector and in continuation “Malhotra Committee”
was constituted by the government in 1993 to examine the various aspects of the
industry. The key element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient and competitive
financial system suitable for the requirements of the economy was the main idea
behind this reform.
Since then the insurance industry has gone through many sea changes .The
competition LIC started facing from these companies were threatening to the
existence of LIC.since the liberalization of the industry the insurance industry has
never looked back and today stand as the one of the most competitive and
exploring industry in India. The entry of the private players and the increased use
of the new distribution are in the limelight today.
The use of new distribution techniques and the IT tools has increased the scope of
the industry in the longer run.

INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and
RBI Governor was formed to evaluate the Indian insurance industry and give its
recommendations. The committee came up with the following major provisions
 P rivate Companies with a minimum paid up capital of Rs.1bn should be
allowed to enter the industry

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Foreign companies may be allowed to enter the industry in collaboration with
the domestic companies
?Only one State Level Life Insurance Company should be allowed to operate in
each state
It was after this committee came into affect the regulatory body for insurance
sector was formed with the name of IRDA

IRDA: The IRDA since its incorporation as a statutory body has been framing
regulations and registering the private sector insurance companies. IRDA being an
independent statutory body has put a framework of globally compatible
regulations.

IMPACT OF LIBERALIZATION
The introduction of private players in the industry has added to the colors in the
dull industry. The initiatives taken by the private players are very competitive and
have given immense competition to the on time monopoly of the market
LIC.Since the advent of the private players in the market the industry has seen
new and innovative steps taken by the players in this sector. The new players have
improved the service quality of the insurance. As a result LIC down the years have
seen the declining phase in its carrer.The market share was distributed among the
private players. Though LIC still holds the 75% of the insurance sector but the
upcoming natures of these private players are enough to give more competition to
LIC in the near future. LIC market share has decreased from 95% (2002-03) to 81
%( 2004-05).The following companies has the rest of the market share of the
insurance industry.

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 With the initiation of the deregulation in the Indian insurance market, the monopoly of big
public sector companies in life insurance as well as general (non-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 have 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. Having said that, public sector insurance companies such as LIC
and New India Assurance are registered impressive double-digit growths, which reflects on the
overall health of the Indian insurance sector.

OmKotak M ahindra
2%
M ax New Y ork Ing Vyasa
2% 1% AM P Sanmar
AVIVA 1%
HDFC Standard
2% M ETLIFE
2% TATA AIG
1%
2%
SBI Life
Bajaj Allianz 3%
3%

Birla Sun Life

4%

LIC
ICICI Prudential
72%
5%

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THE INDIAN INSURANCE INDUSTRY

The Indian insurance industry is segmented into two distinct markets: the life
insurance market and the non-life, or general, insurance market. The history of life
insurance in India can be traced from 1818.

Some of the important milestones in the life insurance business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian
soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance
company started its business.
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 are 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 crores from the Government of
India.

THE KEY FEATURES OF LIFE INSURANCE INDUSTRY

Nomination: -When one makes a nomination, as the policyholder you continue to

be the owner of the policy and the nominee does not have any right under the
policy so long as you are alive. The nominee has only the right to receive the
policy monies in case of your death within the term of the policy.

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Assignment :-If your intention is that your policy monies should go only to a
particular person, you need to assign the policy in favor of that person

Death Benefit: -The primary feature of a life insurance policy is the death benefit
it provides. Permanent policies provide a death benefit that is guaranteed for the
life of the insured, provided the premiums have been paid and the policy has not
been surrendered.

Cash Value: -The cash value of a permanent life insurance policy is accumulated
throughout the life of the policy. It equals the amount a policy owner would
receive, after any applicable surrender charges, if the policy were surrendered
before the insured's death.

Dividends: -Many life insurance companies issue life insurance policies that
entitle the policy owner to share in the company's divisible surplus.

Paid-Up Additions: -Dividends paid to a policy owner of a participating policy

can be used in numerous ways, one of which is toward the purchase of additional
coverage, called paid-up additions.

Policy Loans: -Some life insurance policies allow a policy owner to apply for a
loan against the value of their policy. Either a fixed or variable rate of interest is
charged. This feature allows the policy owner an easily accessible loan in times of
need or opportunity.

Conversion from Term to Permanent: -When in need of temporary protection,

individuals often purchase term life insurance. If one owns a term policy,
sometimes a provision is available that will allow her to convert her policy to a
permanent one without providing additional proof of insurability.

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Disability Waiver of Premium

Waiver of Premium is an option or benefit that can be attached to a life insurance

policy at an additional cost. It guarantees that coverage will stay in force and
continue to grow.

THE BENEFITS OF LIFE INSURANCE

Risk cover: -Life Insurance contracts allow an individual to have a risk cover
against any unfortunate event of the future.

Tax Deduction: - Under section 80C of the Income Tax Act of 1961 one can get
tax deduction on premiums up to one lakh rupees. Life Insurance policies thus
decrease the total taxable income of an individual.

Loans: - An individual can easily access loans from different financial institutions
by pledging his insurance policies.

Retirement Planning: - What had provided protection against the financial

consequences of premature death may now be used to help them enjoy their
retirement years. Moreover the cash value can be used as an additional income in
the old age.

Educational Needs: - Similar to retirement planning the cash values that flow
from ones life insurance schemes can be utilized for educational needs of the
insurer or his children.

ROLE OF LIFE INSURANCE IN THE GROWTH OF THE ECONOMY

The Life Insurance Industry has an enviable track record among public sector
units. It has a Consistent profit and dividend paying record accompanied by a
steady growth in its financial resources. Through investments in the Government

14
sector and socially- oriented sectors the Industry has contributed immensely to the
nation's development. The industry is recognized as one of the largest financial
Institutions in the country. The ventures initiated by the industry in the areas of
Mutual Fund, Housing Finance has done exceedingly well in recent years. To
protect the country's foreign exchange reserves, the reinsurance arrangement are
so organized that maximum retention is made possible within the country while at
the same time protecting interests of the policy holders.

INDIA AGAINST THE GLOBAL MARKETS

India is an under-insured market India’s insurance market is still at an early stage

of development. This is reflected in low penetration rates and low premiums per
capita.

Insurable population – only 10% of India’s population have life insurance

According to ING only 10% of the population is insured, which represents around
30% of the insurable population. This suggests more than 300m people, with the
potential to buy insurance, remain uninsured

Global perspective – India ranks 19th on the global stage

India represents only around 0.66% market share (ranked 19th) of global insurance
premiums. As of 2004 the largest markets in size are the US (50x bigger than
India), Japan and the UK. Out of the Asian countries (ex Japan), South Korea is
the largest insurance market, Comprising 2.12% of global premiums, followed by
China with 1.61%.

While insurance continues to reach out to the masses, India’s insurance

penetration (premiums as a percentage of GDP) still remains very low at 3.2%.

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This can be split between life penetration of 2.6% and non-life of 0.6%. On the
world stage, penetration rates are significantly below developed markets such as
the US (9.4%), UK (12.6%) and Australia (8%). Compared with Asian markets,
India still falls well short of its nearest peers with countries such as Japan, South
Korea and Taiwan having some of the highest penetration rates in the world
(between 9% and 14%). Nevertheless, despite current low spend on insurance, the
trends in India remain positive. Since the opening up of the market to foreign
players in 2000, penetration has more than doubled from 1.5%. With foreigners
gaining momentum and building the insurance, coupled with India’s favorable
macro overlay, we expect penetration rates to continue to expand.

FUTURE OF LIFE INAURANCE SCHEMES

The Indian Life insurance sector will register a high growth rate in the future years
to come says the report prepared by Fitch Ratings. This will be due to the
innovative products, better distribution network, better services coupled with other
never-before changes that have taken place in the insurance sector. The report laid
stress on branding, customer service and tailor made products that will assume
importance besides information technology that will become vital to bring down
costs in the future. Also data warehousing, ensuring effective cross selling will
grown in importance to exploit the largely unexploited market.

In Nov 2005 the Indian Life insurance industry saw a growth of 46 %. This rally is
expected to continue as people realize the importance of risk management. The
private sector players are expected to grow with their innovative and profitable life
insurance schemes.

INSURANCE REGULATORY AUTHORITY

On the recommendation of Malhotra Committee, an Insurance Regulatory

Development Act (IRDA) passed by Indian Parliament in 1993. Its main aim was

16
to activate an insurance regulatory apparatus essential for proper monitoring and
control of the Insurance industry. Due to this Act several Indian private companies
have entered into the insurance market, and some companies have joined with
foreign partners. In economic reform process, the Insurance Companies has given
boost to the socio-economic development process. The huge amount of funds that
are at the disposal of Insurance Companies are directed as desired avenues like
housing, safe drinking water, electricity, primary education and infrastructure.
Above all the policyholders gets better pricing of products from competitive
insurance companies.

Liberalization

The opening up of Insurance sector was a part of the ongoing liberalization in the
financial sector of India. The domain of State-run insurance companies was
thrown open to private enterprise on December 7, 1999, with the introduction of
the Insurance Regulatory and Development Authority (IRDA) Bill. The opening
up of the sector gave way to the world known names in the industry to enter the
Indian market through tie-ups with the eminent business houses. What was once a
quiet business is becoming one of the hottest businesses today.

Post liberalization

The changing face of financial sector and the entry of several companies in the
field of Life Insurance segment are one of the key results of these liberalization
efforts. Insurance business by way of generating premium income adds
significantly to the GDP. Despite the fact that the market is vast in India for the
Insurance business, the coverage is far less compared with the international
standards. Estimates show that a meager 35-40 million, out of a population of 950
million, have come so far under the umbrella of the insurance industry. The
potential market is so huge that it can grow by 15 to 17 per cent per annum. With

17
the entry of private players, the Indian Insurance Market may finally be able to
make deeper penetration in to newer segments and expand the market size
manifold. The quality of service will also improve and there will be wide The Life
insurance market in India is likely to be risky in the initial stages, but this will
improve in the next three to five years Therefore, it may be advantageous to be a
second-round entrant. In the Life insurance market the need risk assessment
systems and data that are the key to success in the Life insurance market are
significantly underdeveloped in India even today.

MAJOR MARKET PLAYERS

Presently there are 15 Life insurance companies in the country. There is only one
public sector company LIC and the rest 14 are private sector. Although LIC has
been dominating the Life Insurance business since past few years the private
players have now started to take the momentum.

Major market players

Birla Sun Life Insurance Company

Birla Sun Life Insurance Company is a 74:26 joint venture between Birla group
and Sun Life Financial. It is a private sector company. The company was
registered on 31/1/2001. The market share for first the eight months of FY 2005-
06 is 1.84%.

HDFC – Standard

HDFC standard is a 74:26 joint venture between HDFC and Standard Life. It is a
private sector company. The company was registered on 23/10/2000. The market
share for the first eight months of FY 2005-06 is 2.96%.

ICICI Prudential Life Insurance

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ICICI Prudential Life is a 74:26 joint venture between ICICI and Prudential. It is a
private sector company. The company was registered on 24/11/2000. The market
share for the first eight months of FY 2005-06 is 7.11%.

Life Insurance Corporation of India (LIC)

Life Insurance Corporation of India is a 100% government held Public Sector

Company. Being the first to be established LIC is the forerunner in the Life
Insurance sector. The market share for the first eight months of FY 2005-06 is
73.91%.

OM Kotak Mahindra old Mutual

OM Kotak Mahindra is a 74:26 joint venture between Kotak Mahindra bank and
Old Mutual. It is a private sector company. The company was registered on
10/1/2001. The market share for the first eight months of FY 2005-06 is 0.71%.

Royal Sundaram

Royal Sundaram marks the coming together of Sundaram Finance, one of India’s
most respected and trusted finance companies, and Royal and Sun Alliance, one of
the largest insurance groups in the world.

Max New York Life

Max New York Life is a 74:26 joint venture between J & Bank, Pallonji & Co and
MetLife. It is a private sector company. The company was registered on 6/8/2001.

The market share for the first eight months of FY 2005-06 is 1.32%.

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AMP SANMAR

Amp Sanmar was purchased by Reliance group in 3Q2005. It was registered as a

private sector insurance company on 3/1/2002.The market share for the first eight
months of FY 2005-06 is 0.54%.

Aviva Life Insurance India

Aviva Life insurance is a 74:26 joint venture between Aviva and Dabur. It is a
private sector company. The company was registered on 14/5/2002. The market
share for the first eight months of FY 2005-06 is 1.12%.

ING Vysya Life insurance

ING Vysya Life Insurance is joint venture between Exide (50%), Gujarat Cements
(14.87%), Enam (9.13%) and ING (26 %). It is a private sector company. The
company was registered on 2/8/2001. The market share for the first eight months
of FY 2005-06 is 0.63%.

Met Life India

Met Life India is a 74:26 joint venture between 74:26 JV between J & Bank,
Pallonji & Co and MetLife. It is a private sector company. The company was
registered on 6/8/2001. The market share for the first eight months of FY 2005-06
is 0.40%.

Allianz Bajaj Life Insurance Co.

Allianz Bajaj Life Insurance Company is a 74: 26 Joint venture between Bajaj
Auto limited and Allianz AIG. The company was registered on 3/8/2001. The
market share for the first eight months of FY 2005-06 is 6.12%.

SBI Life Insurance Company Ltd:

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SBI Life Insurance Company is a 74: 26 Joint venture between SBI and Cardiff
S.A. The company was registered on 31/3/2001.It is a private sector company. The
market share for the first eight months of FY 2005-06 is 1.52%.

The TATA AIG Group

TATA AIG group is a 74:26 JV between Tata Group and AIG. It belongs to the
private sector. The company was registered on 12/2/2001. The market share for
the first eight months of FY 2005-06 is 1.78%.

Sahara India Life Insurance Company Ltd.

First Wholly Indian Owned Private Life Insurance Company. The Company
commenced operations from 30th October 2004.

Shriram life insurance company Ltd

Shriram Life is a recent entrant into the life insurance sector It is a 74:26 joint
venture between the Shriram group through its Shriram Financial Holdings and
Sanlam Life Insurance Limited, South Africa. The company expects to start
operations soon.

PRODUCT RANGE

Life insurance is all about making sure your family has adequate financial
resources to make those plans and dreams come true. It provides financial
protection to help your family or business to manage after your death.

Whole life policies - Cover the insured for entire life. The insured does not
receive money while he is alive; the nominee receives the sum assured plus bonus
upon death of the insured.

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Endowment policies - Cover the insured for a specific period. The insured
receives money on survival of the term and is not covered thereafter.

Money back policies - The nominee receives money immediately on death of the
insured. On survival the insured receives money at regular intervals during the
term. These policies cost more than endowment with profit policies.

Children's policies - The nominee receives a guaranteed amount of money at a

pre-determined time and not immediately on death of the insured. On survival the
insured receives money at the same pre-determined time. These policies are best
suited for planning children's future education and marriage costs.

Annuities/Pension schemes - are policies that provide benefits to the insured

only upon retirement. If the insured dies during the term of the policy, his nominee
would receive the benefits either as a lump sum or as a pension every month.

Since a single policy cannot meet all the insurance objectives, one should have a
portfolio of policies covering all the needs.

THE MAJOR DISTRIBUTION CHANNELS

Retail Banks

While a lot of bank relationships with insurance companies have been established,
life insurance sales have been slower than one would expect he primary bank
insurance activities have been the distribution of annuities, credit life, and direct
marketing insurance. Banks are failing to incorporate successful sales tactics used
to sell other financial services like investments.

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Full-Service Brokers

Brokerage firms have gained much of the institutional and personal trust business
lost by the banks. These firms have steadily captured assets, primarily at the
expense of the banks. The number of non-bank trust companies has increased in
recent years as independent trust companies have emerged and more
broker/dealers are integrated services. Insurance companies view full-service
brokers as a potentially new distribution channel as well.

Discount Brokers and Online Financial Services

Direct sales of life insurance are growing rapidly, but many of the traditional full-
serve players seem to be letting it go. Across all financial services, consumers are
expressing a willingness to deal with a variety of providers on the web. Web sites
are starting to pop up offering consumer insurance products especially designed
for distribution over the web.

Independent Advisors

To gain a better understanding of the demand amongst independent advisors for

trust services and to gain a better feel for how independent advisors handle trust
services, a research was performed with independent advisors across several
broker/dealers and custodians. The interviews revealed that demand is greatest for
living trusts among independent advisors, followed by demand for corporate
trustee services.

Life Insurance Agents, CPAs, & Lawyers

Independent insurance agents represent a number of companies and can research

these companies’ products to find the right combination for their clients.
Independent agents & insurance producer groups are growing in prevalence.

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Although producer groups are in their infancy, their emergence may potentially be
realignment in the distribution of financial services. Independent shops realized
that by pooling production and funding a central support office, they had increased
buying power.

PERFORMANCE

A robust 36 per cent increase in business by country's largest insurer LIC and
strong performance by most of the private players pushed the overall life insurance
growth to 46 per cent in April-November 2005. With competition intensifying, the
14 life-insurers collected Rs 16,604 crores in new premium in the first eight
months of 2005-06 compared to Rs 11,337 crores in the year ago period,
according to data compiled by regulator IRDA. State-owned Life Insurance
Corporation gave a tough fight to private players, who were fast increasing their
market share, to collect Rs 12,271 crores in new premium by selling over 1.3
crores policies.

LIC also improved its market share to 73.91 per cent from 73.82 per cent a month
ago as two private players - Birla Sunlife and SBI Life - continue to see fall in
business. As market continues to grow and more new players enter the space, LIC
has rolled out innovative products and doing aggressive marketing to attract more
business.

The 13 private players led by ICICI Prudential and Bajaj Allianz are leaving no
stones unturned to expand business by netting more policyholders to increase their
market share. Among private players, ICICI Prudential ranked at the top by
collecting about Rs 1,180 crores after logging 73 per cent growth, followed by
Bajaj Allianz, which increased business by 264 per cent to collect Rs 1,016 crores
in premium. ICICI Prudential had a market share of 7.11 per cent while Bajaj
Allianz increased its market pie to 6.12 per cent.

24
HDFC Standard Life had a market share of 2.96 per cent, followed by Birla
Sunlife (1.84 per cent), Tata AIG (1.78 per cent), SBI Life (1.52 per cent), Max
New York Life (1.32 per cent) and Aviva (1.12 per cent). Other players -- Kotak
Mahindra Old Mutual, ING Vysya, AMP Sanmar, Met Life and Sahara Life --
each had less than one per cent of the market.

HDFC Standard collected Rs 491 crores in premium income till November,

followed Birla Sunlife (Rs 305 crores), Tata AIG (Rs 296 crores), SBI Life (Rs
252 crores), Max New York Life (Rs 219 crores) and Aviva (Rs 186 crores).

In group insurance, LIC continued to dominate with a market share of about 81.32
per cent by covering 8.638 million lives till November this fiscal. Among the
private insurers, SBI Life was at the top with a market share of 5.27 per cent,
followed by Tata AIG (4.16 per cent), ICICI Prudential (2.34 per cent), Met Life
(1.9 per cent), Aviva (1.16 per cent) and Bajaj Allianz (1.14 per cent).

First Year Premium Underwritten By Life Insurers For The Period Ended
November 2005

Sl.No Insurer Market Sahre(%)

1 LIC 73.91
2 Bajaj Allianz 6.12
3 ING Vysya 0.63
4 AMP Sanmar 0.54
5 SBI Life 1.52
6 Tata AIG 1.78
7 HDFC Standard 2.96
8 ICICI Prudential 7.11
9 Birla SunLife 1.84
10 Aviva 1.12
11 Kotak Mahnidra Old Mutual 0.71
12 Max New York 1.32

25
13 Met Life 0.40
14 Sahara Life 0.06

26
COMPANY PROFILES
PUBLIC SECTOR

The life insurance sector was nationalized and consolidated into the LIC in
1956, jointly with the general insurance sector. Since then, the LIC has been a
monopoly operator, charged with the tasks of making life insurance available
throughout the country, particularly in rural areas, and mobilizing savings by
providing attractive insurance products. On the first count, LIC has been fairly
successful. Having built up a large regional distribution network comprising some
2,000 branches, rural areas now account for over 40 percent of new policies.
However, the Indian insurance market, with an estimated $5 in annual premiums
paid per capita, has not made a significant contribution to savings mobilization.

Like other long-term saving instruments, life insurance has experienced a relative
decline recently, mainly owing to the comparatively low interest rate paid on life
insurance funds. The LIC is subject to similar, although somewhat less restrictive
portfolio allocation constraints as pension funds. Some 75 percent of annual
portfolio investments must be allocated to government securities or socially
oriented purposes, while the remaining 25 percent can be invested in private sector
debt. The average yield has remained low, reaching only 12 percent in the early
1990s. In addition, high administrative costs, related to high staffing levels and
insufficient computerization, have dampened profitability.

Based on far-reaching recommendations by the Malhotra Committee, the

government has been considering plans to open the insurance sector to private
competitors, including those from abroad, within the next four years. So far, an

27
Insurance Regulation Authority has been set up to establish rules for the broader
market structure. In order to prevent private competitors from focusing exclusively
on profitable, specialized (urban) markets, the Malhotra Committee recommended
that new entrants be obliged to cover to some extent rural sectors and to contribute
to the financing of socially oriented projects. It also recommended strengthening
the LIC's competitiveness by lowering the current mandatory investment norm to a
level that allowed portfolio allocation more in line with international levels.

"To conduct the business with utmost economy with the spirit of trusteeship; to
charge premium no higher than warranted by strict actuarial considerations; to
invest the funds for obtaining maximum yield for the policy holders consistent with
safety of capital; to render prompt and efficient service to policy holders thereby
making Insurance widely popular."

15 mn policies for individuals were issued by LIC in 98-99 in India, with 750,000
mn of sum assured. The average value, thus of s.a was Rs. 50000.

35% of the policies were between 10000 to 25000 and 34% for 25000 to 50000.
The elite, over 100000 of s.a were 6% of the total policies.

Of the above figure, 8 mn policies came from the rural area with the s.a being
360,000 mn, thus making the average s.a. in rural areas as Rs. 45000.

Assuming that each policy was per person, then we have a total of 15 mn or 0.015
bn people insured against life calamities. That is 1.5% of the population.

Assuming a 10% growth in number of policies and s.a, then in the year 99-00 we
have 16.5 mn policies and a sum assured of atleast 820,000 mn. This covers 1.65
% of India's population, which crossed the one billion mark on May 11, 2000. Last
year the population grew by 15.6 million. The rate of growth is 1.64% per annum.

28
The company in 98-99 had on its rolls 628,000 agents of which 600,000 were
active agents. The average revenue per active agent in 98-99 was Rs. 1.26 mn. The
company has nearly 0.2 mn agents who have done business of over 1 million so
far. The average monthly gross salary provided by LIC to a Development Officer
was Rs.1900.

The insurer with over 124000 employees is looking to leverage itself in the new
insurance environment. Given its strong branch network, skilled and experienced
employees, almost half a century of experience in the India insurance sector and
highly quality training centres, the incumbent is strongly poised to take the newer
players in the sector.

29
OPERATIONS

Operate All Over India

Corporate Office: Mumbai

Zonal Offices -7

Divisional Offices -100

Branch Offices-2048

Agents - 10,02,149

30
 PRIVATE SECTOR

ICICI PRUDENTIAL

Welcome to ICICI Prudential. Welcome to life. We are a joint venture

between ICICI, the leading financial services provider in India, and Prudential plc
of U.K., one of the finest life insurance companies in the world. Together we
provide you with an extensive range of insurance products to suit your various
needs at various life stages. We aim to keep you covered. At every step in life.

Our policies are need-specific and address particular age groups. This means that
no matter where in life you are, we offer specific products to suit your needs for
savings, protection and retirement.

Our products can be categorized into the following:

• Savings Plans
• Protection Plans
• ICICI Pru LifeTime
• Retirement Plans

Savings Plans:

Most endowment policies are a good way of saving for the future. Select one
which best suits your needs:

ICICI Pru Single Premium Bond: This policy combines savings with life cover
and is an ideal plan for a one-off investment with reasonable returns and the added
benefits of insurance protection. It is a good way to use that windfall or that huge
bonus.

31
ICICI Pru Save’n’Protect: This is a traditional endowment savings plan that
offers both savings and protection. This is a fixed term policy and at the end of the
term, you get extended free insurance cover for five years and 50% of the sum
assured. This is in addition to the life cover, guaranteed additions and vested
bonuses that you get during the term period.

ICICI Pru CashBak: This is a policy is for every milestone in life. This is an
endowment savings plan that allows you to get back substantial survival benefits
without having to wait till the maturity date. A three-in-one plan, it clubs liquidity,
savings and protection.

Protection Plans:

We all hope to live a full life…till a ripe old age. But what if something
unfortunate befalls us. Such an occurrence completely disrupts life for all those
who are financially dependent on us. We offer a comprehensive range of
protection benefits.

ICICI Pru LifeGuard: This is a policy specially designed to provide insurance at

a low cost. It offers protection to your family, should something unfortunate befall
you.

32
 HDFC STANDARD LIFE INSURANCE CO.

.
PRODUCT PROFILE:

SAVING PLAN
Children’s Plan
Children’s Plan is designed to provide al lumpsum to the child to maturity.
It also provides financial security to the child in the future, even in case of the
insured parent’s unfortunate death during the policy term. Children’s plan receives
simple reversionary bonuses, which are usually added annually. This is a flexible
plan with three option for you to choose from, depending on your requirements.

Options that are available with this plan.

Option On the death of the On maturity
insured parent during the
policy term
Maturity Benefit Plan Future premium waived
and the policy continues
till maturity.
Accelerated Benefit plan Sum assured + bonuses On the survival of the
paid and the policy stops. insured parent to the
maturity date, sum
assured + bonuses paid.
Double Benefit plan Sum assured paid, future Sum assured + bonuses
premiums waived, and paid.
the policy continues till
maturity.

33
 Tax Benefits
The premiums you pay will be eligible for tax relief under Section 88 of the
Income Tax Act, 1961. The benefits received under the policy are eligible for tax
relief under Section 100 (10D) of the income tax act, 1961.

Eligibility
The eligibility ages for the life assured under the plan are as follows:
Minimum Age At Entry 18 years
Maximum Age at Entry 60 years
Maximum Age at Maturity 75 years
Minimum Term: 10 years Maximum term: 25 years

Payment options
You have the choice of paying the premium either in yearly, half – yearly or
quarterly modes, depending on your convenience.

Money back plan

It is a participating (with profits) insurance plan that offers the following
features:
Payment of cash lumpsums, each of which is a proportion of the basic sum
assured, at 5 year intervals during the term of the policy. (please refer to the
table given below.)

On survival up to maturity, a payment equal to the basic sum assured plus

any bonus additions less the cash lumpsums paid earlier is provided.

34
 In case of the unfortunate death of the life assured within the term of the
policy, the basic sum assured plus any bonus additions is provided. This is over
and above the earlier payouts.

Schedule of cash lumpsum

(as % of basic sum assured)
Total Number of years from policy date
policy
Term
5 10 15 20 25
10 40%
15 30% 30%
20 25% 25% 25%
25 20% 20% 20% 20%
30 15% 15% 15% 15% 15%

Other benefits
You can add the following optional benefits to customize your policy to
suit your needs:
Critical illness (CI) Benefit provides an amount, equal to the sum assured
chosen under this optional benefit, an diagnosis of any one of the 6
common critical illness. The sum assured is payable if you survive for 30
days after the date of he claim.
Once such a claim has been met, no further Critical illness benefit is payable.
However, your basic policy continues even after we pay a claim on this benefit.

Additional Term Benefit (ATB) provides an additional amount, equal to the

sum assured chosen under this optional benefit, in case of your unfortunate
death.

35
 Accidental Death benefit (ADB) provides an additional amount, equal to
the sum assured chose under this optional benefit, in case of your
unfortunate death:
- due to an accident, and
- within 90 days of the accident.
· Waiver of Premium (WOP) Benefit waives the premium for you in case
you become totally disabled. The waiver is applicable during the period
of total disability.

All optional benefits must be selected at the outset of your plan.

Tax Benefits
Tax benefits described in Section 88, Section 80D and Section 10 (10D) of the
income Tax Act
Applicable to premium paid for CI and WOP.

Eligibility
This plan can be taken an a single life basis or a joint life (first claim) basis.
The eligibility ages are as follows:
Basic Basic policy with optional benefits
policy
CI ATB ADB WOP
Min. age of entry 12 18 18 18 18
Max. age of entry 60 55 60 55 50
Max. age of expiry 75 70 75 65 60

Min. term : 10 years

Payment options
You have the choice of paying your premium either in yearly, half – yearly
or quarterly modes, depending on your convenience.

36
 Endowment Assurance Plan
It is a participating (with profits) insurance plan that offers the following
features:
Provides financial support to the family by way of a lumpsum payment in
case of the unfortunate death of the life assured within the term of the policy.
Provides a lumpsum payment to the life assured on survival up to maturity.
The lumpsum mentioned is the basic sum assured plus any bonus

Other benefits
You can add the following optional benefits to customize your policy to
suit your needs:

Critical illness (CI) Benefit provides an amount, equal to the sum assured
chosen under this optional benefit, an diagnosis of any one of the 6
common critical illnesses. The sum assured is payable if you survive for 30
days after the date of the claim. Once such a claim has been met, no further
Critical illness Benefit is possible. However, your basic policy continues
even after we pay a claim on this benefit.

Additional Term Benefit (ATB) provides an additional amount, equal to

the sum assured chosen under this optional benefit, in case of your
unfortunate death.
Accidental Death Benefit (ADB) provides an additional amount, equal to
the sum assured chosen under this optional benefit, in case of your
unfortunate death:

- due to an accident, and

- within 90 days of the accident.

37
 · Waiver of Premium (WOP) Benefit waives the premium for you in case
you become totally disabled. The waiver is applicable during the period of
total disability.
All optional benefits must be selected at the outset of your plan.

Tax Benefits
Tax benefits described in Section 88, Section 80D and Section 10 (10D) of
the income Tax Act are applicable.
Applicable to premium paid for CI and WOP.

Eligibility
This plan can be taken an a single life basis or a joint life (first claim) basis.
The eligibility ages are as follows:
Basic Basic policy with optional benefits
policy
CI ATB ADB WOP
Min. age of entry 12 18 18 18 18
Max. age of entry 60 55 60 55 50
Max. age of expiry 75 70 75 65 60

An Impeccable track record across the globe in providing security and cover
for you and your family...

We, at Bajaj Allianz, realise that you seek an insurer who you can trust your hard
earned money with.

38
Allianz AG with over 110 years of experience in over 70 countries and Bajaj
Auto, trusted for over 55 years in the Indian market, together are committed to
offering you financial solutions that provide all the security you need for your
family and yourself.

Bajaj Allianz brings to you several innovative products, the details of which you
can browse in this section.

Key Achievements in FY 2004-05 :

• Races past GWP of over Rs. 1001 Cr, with growth of over 357% over previous
year’s GWP of Rs. 219 Crores

• FYP of Rs 860 cr a 380% growth over last year’s FYP of Rs 179 cr.

• Rocketed to No. 2 position as against No 6 at the end of last financial year

amongst pvt Life Insurance cos., with a clear lead of Rs 240 cr

• Fastest growing insurance company with 380% growth

• Market share jumps almost 4 times from 0.95 % to 3.39 % amongst all life
Insurance cos.

• Increased its product portfolio from 7 to 19 simple and flexible products

• Launched complete suite of employee benefit solutions (Group products for

corporates)

39
 The Tata Group ( www.tata.com) is one of India's best-known industrial
groups with an estimated turnover of around US $14.25 billion (approximately
2.6% of India's GDP). With more than 220,000 employees across 91 major
companies, it is also India's largest employer in the private sector. The Tata Group
pioneered several firsts in Indian industry firsts, including: India's first private
sector steel mill, first private sector power utility, first luxury hotel chain and first
international airline, amongst others. Recently, the Tata Group's pioneering spirit
has been showcased by companies such as Tata Consultancy Services (TCS),
Asia's largest software and services company, and Tata Motors, the first car maker
in a developing country to design and produce a car from the ground up.

The Tata Group stable of brands also includes many national and some
internationally renowned product and service brands, including Tata Indica, Tata
Indigo, Indigo Marina, Tata Safari, Tata Indicom, the Taj Group of Hotels
(Luxury, Business and Leisure), indiOne, Tata Tea, Tetley, Tata Salt, Tata
Steelium, Tata Shaktee, Tata Tiscon, Tata Bearings, Titan, Tanishq, Voltas and
Westside.

By combining ethical values with business acumen, globalization with national

interests and core businesses with emerging ones, the Tata Group aims to be the
largest and most respected global brand from India whilst fulfilling its long-
standing commitment to improving the quality of life of its stakeholders.

Tata AIG Life Insurance Company Ltd. "Tata AIG Life" offers a broad array of
life insurance products to individuals, associations and businesses of all sizes, with
a wide variety of additional coverage to ensure our customers can find an

40
insurance product to meet their needs.

Tata AIG Life is a joint venture of the Tata Group and American International
Group, Inc. (AIG).

AIG

American International Group, Inc. is the world's leading international insurance

and financial services organization, with operations in more than 130 countries
and jurisdictions. AIG member companies serve commercial, institutional and
individual customers through the most extensive worldwide property-casualty and
life insurance networks of any insurer. In the United States, AIG companies are
the largest underwriters of commercial and industrial insurance and AIG American
General is a top-ranked insurer. AIG's global businesses also include retirement
services, financial services, and asset management. AIG's financial services
businesses include aircraft leasing, financial products, trading and market making.
American General Finance leads AIG’s growing global consumer finance business
in the United States. AIG also has one of the largest U.S. retirement savings
businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset
management for the individual and institutional markets, with specialized
investment management capabilities in equities, fixed income, alternative
investments and real estate. AIG's common stock is listed in the New York Stock
Exchange and ArcaEx, as well as the stock exchanges in London, Paris,
Switzerland and Tokyo.

Management

Trevor Bull – Managing Director

41
Mr. Trevor Bull joined Tata AIG Life as Managing Director in January 2006.
Prior to this, Trevor was Senior Vice President and General Manager at American
International Assurance in Korea.

Trevor has over 28 years of experience in the life insurance industry and has spent
considerable time working in Japan and Britain. His experience covers an array of
skills at various authority levels including Director, Regional Executive, Senior
Line Management and Project Management. Additionally, Trevor has acquired
keen insights into Unit Linked, conventional life and health insurance/ reinsurance
and all major products & distribution channels.

A proud father of two boys and one girl, he aligns his hobbies with theirs and
connects with them through a game of tennis or football regularly.

Insurance is not about something going wrong. It's often about things going
right. One of the wonders of human nature is that we never believe anything can
actually go wrong. Surely, life has its share of ifs. At Birla Sun Life however, we
believe it has its equally pleasant share of buts as well. We at Birla Sun Life stand
committed to helping you realise those happy moments which make a life. Be it
living the same lifestyle in your post retirement days or providing a secure future
for your loved ones, in case something happens to you.

42
 SBI LIFE INSURANCE COMPANY LTD.

SBI

State Bank of India (SBI) started its business way back in 1806 as Bank of Bengal.
Today SBI is the largest bank in the country with more than 9000 branches. It has
seven associate banks and together they have 30% of the Indian market share.

It has the distinction of being the strongest and amongst the most profitable bank
in the country. Networth of SBI as on March 2000 stood at Rs. 12146 crore (US$
2784 mn) and it has a deposit base of Rs 19,680.3 crore (US$45,121mm).

The insurance venture, SBI-Life, is a step aimed at being a universal bank as it

already has subsidiaries for housing finance, merchant banking, mutual funds and
primary dealership in government papers and factoring businesses.

CARDIF

BNP Paribas, which is one among the three largest banks in Europe, is the holding
company of Cardif. BNP's presence in India dates as far back as 1860 and has 9
branches here.

Cardif, the insurance arm of BNP Paribas was set up in 1973 that specializes in
long-term savings, protection products and creditor insurance. In 1999 its premium
income stood at US$ 4 billion, with assets worth over US $ 23 billion under its
management

43
Cardiff based in France, has the expertise for selling insurance products through
banks and has operations in over 20 countries.

JOINT VENTURE

India's largest bank SBI and Cardiff S.A a leading insurer in France came together
to form SBI Life. It would be a 74:26 venture; with Cardif the foreign partner
contributing 26% in the paid capital of Rs. 250 crore.

SBI would market the insurance products through select branches of SBI and its
seven associate banks. Mr. R. Krishnamurthy is the CEO of SBI Life.

44
Life Insurance is a contract providing for payment of a sum of money to the
person assured or, to the person entitled to receive the same, on the happening of a
certain event.
A family is dependent for its food, clothing and shelter on the income brought by
the family's breadwinner. The family is secure so long as this breadwinner is alive
and is capable of earning. A sudden death (or disability) may leave the family in a
financially difficult situation. Uncertainty of death is inherent in human life and
this uncertainty makes it necessary to have some protection against the financial
loss arising from untimely death. Life insurance offers this protection.
The earliest type of life insurance was started by the Greeks and Romans.
Contributions were made by all surviving members for the burial cost of a
member. In case of the death of a member the cost of burial was made out of the
contributed fund.
In the 17th century, the Tontine Annuity system was introduced where
associations of individuals were formed without any reference to age, and a fund
was created by equal contributions from each member. The sum collected was
invested, and at the end of each year the interest was divided among the survivors.
The last remaining survivor received both the year's interest and the entire amount
of the principal.
The first organised life insurance company was founded in 1759 in Philadelphia,
in North America. Subsequently, over the past three centuries, numerous life
insurance companies sprung up, making life insurance a popular tool for
protection coupled with investment.

45
WORLD'S SIXTH-LARGEST INSURANCE GROUP

Core purpose

Our overriding goal is to provide prosperity and peace of mind for our customers.

Business strategy

To achieve this goal, we need to be a clear leader in helping our customers grow
their wealth and protect their assets and their health.

The group’s activities are organised into two strategic areas:

Long-term savings and fund management – Offering a superior range of long-

term savings, investment and protection products in markets that offer significant
opportunities for growth.

General insurance, health and related services – Providing a broad range of

competitive motor, property, health and related insurance services to individuals
and small to medium-sized enterprises in chosen markets.

Strategic priorities

To meet our objectives, our strategic focus is on:

• Understanding and meeting the evolving needs of our customers;

• Building profitable businesses in selected areas where we have, or can

achieve, market leading positions;

46
 • Working closely with business partners to deliver efficient and effective
distribution channels;

• Using brands to widen our leading positions;

• Delivering growth organically and through carefully selected acquisitions

designed to increase shareholder value;

• Using our scale to deliver benefits, including cost-competitiveness;

• Attracting, motivating and retaining talented people who are committed to

Aviva’s values and ambitions.

These strategies set out the overall high-level direction of the group. Individual
business units subsequently select those strategic options that are relevant to their
individual markets.

Aviva is the world’s sixth-largest insurance group and the largest insurance
services provider in the UK. We are one of the leading providers of life and
pension products in Europe and are actively growing our long-term savings
businesses in Asian markets, Australia and the USA. Our main activities are long-
term savings, fund management and general insurance. We have premium income
and investment sales of £35 billion‡ and £317 billion of assets under management.
We have 59,000 employees~ serving 30 million customers.

Financial performance 2005

• £2,528 million IFRS profit before tax attributable to shareholders*

• £2,904 million EEV operating profit**

• £35.0 billion worldwide sales‡

• 27.27 pence full year dividend

• 15.0% return on capital employed†

• £14.9 billion equity shareholders’ funds≠

47
Strength and highlights 2005
• We have a balanced portfolio that benefits from diversification of
distribution, products and geography.

• We continue to focus on managing the business to create value for

shareholders and customers.

• We have delivered another strong performance from our international long-

term savings businesses.

• Bancassurance goes from strength to strength, with total sales up 22%.

• The acquisition of RAC has created a powerful new force in insurance and
motoring services.

• Commitment to new combined operating ratio target of 98% demonstrates

our confidence in sustaining our excellent general insurance results.

Business mix by worldwide sales

1Long-term savings and fund management# 71%

2General insurance 29 %

Facts and figures

• Aviva is the world's sixth-largest insurance group.

• The largest insurance services provider in the UK.

• One of the leading providers of life and pensions products in Europe.

• Actively growing in the long-term savings markets of Asia, Australia and

the USA.

• The largest UK-based active fund manager.

48
 • £35 billion premium income and investment sales‡.

• £317 billion assets under management.

• 30 million customers worldwide.

• 59,000 employees worldwide, including 39,000 in the UK~.

• Aviva has a presence in more than 25 countries.

• Aviva’s business mix is 71% long-term savings and fund management,

29% general insurance and health, based on worldwide sales‡.

• Aviva has about 679,000 ordinary shareholders, of whom approximately:

o 97% are individuals, holding 11% of shares

o 2% are banks and nominee companies, holding 85% of shares

o 1% are pension fund managers, insurance companies and other

corporate bodies, holding 4% of shares.

• The group was created by the merger of CGU and Norwich Union in May
2000, and has been known as Aviva since July 2002. CGU came from the
merger of Commercial Union and General Accident in 1998. Through its
founder companies, Aviva can trace its history back for over 300 years.

* On an International Financial Reporting Standards (IFRS) basis.

** From continuing operations, including long-term savings result on a European
Embedded Value (EEV) basis before amortisation of goodwill.
†
Return based on opening equity shareholders’ funds on an EEV basis.
‡
From continuing operations, including share of associates’ premiums.
≠
On an EEV basis.
#
Present value of new business premiums plus investment sales.
##
Net written premiums from continuing operations.
~
Total number of staff employed at 31 December 2005.

49
MARKETING STRATEGIES BY INSURANCE COMPANIES

THE domestic life insurance industry has reported a healthy growth of over 51 per cent in
premium underwritten for the nine-month period of the current fiscal ended December
2005.

As per the statistics prepared by the Insurance Regulatory and Development

Authority (IRDA), the industry underwrote a premium of Rs 19,893.38 crore for
the nine-month period under review compared to Rs 13,153.12 crore in the
corresponding period of the previous fiscal.

ICICI Prudential retained leadership in private sector with a market share of 7.19
per cent with a growth of 72.73 per cent in premium underwritten at Rs 1,429.55
crore (Rs 827.61 crore). Bajaj Allianz reported highest growth of 301.3 per cent in
premium underwritten at Rs 1,367.04 crore (Rs 340.65 crore) and stood second in
the private sector with a market share of 6.87 per cent.

Birla Sun Life is the only life insurance player in the industry that suffered a
negative growth in premium collections. The company underwrote premium of Rs
362.88 crore during the period under review compared to Rs 387.32 crore in the
corresponding period of the previous fiscal, a fall of 6.31 per cent.

Provate insurers' growth: The private sector posted a growth of 91.16 per cent in
premium collections at Rs 5,424.1 crore (Rs 2,837.46 crore) to garner a total
market share of 27.27 per cent. Life Insurance Corporation of India, with a growth
of 40.27 per cent, in premium underwritten at Rs 14,469.27 crore (Rs 10,315.65
crore), has ended up with a market share of 72.73 per cent.

The individual segment of the industry dominated in premium collections at Rs

16,971.49 crore (Rs 10,814.04 crore), while group premiums stood at Rs 2,921.89

50
crore (Rs 2,339.07 crore), contributing 85.31 per cent and 14.69 per cent,
respectively.

In terms of number of policies sold, the industry reported a growth of 27.45 per
cent by selling 1.78 crore policies (1.39 crore).

While the private sector posted a growth of 64.41 per cent to garner a market share
of 12.46 per cent, LIC reported an increase of 23.5 per cent in number of policies
sold with a market share of 87.54 per cent.

Though LIC is far behind the private sector in terms of growth in premium
underwritten and number of policies sold during the nine months period under
review, it has reported a growth of 208.79 per cent in number of lives covered
under group schemes, while the private sector witnessed a growth of 39.58 per
cent under this segment.

LIFE INSURANCE FIGURES (2005)

Life insurance industry grew by 21 per cent with LIC and 13 private players
mopping up Rs 4,437 crore in the first three lean months of 2005-06, according to
agency reports.

Private players expanded business by 73 per cent while state-owned Life

Insurance Corporation grew by 10.2 per cent.

Fueled by aggressive growth, the private players have now cornered over 25 per
cent of the life insurance market till June 2005 compared to 17.61 per cent a year
ago in terms of premium income from fresh businesses, as per data released by
regulator IRDA.
LIC continues to shed ground as its market share came down to 74.87 per cent till

51
June 2005 as against 82.39 per cent during the corresponding period last year.

LIC mopped up Rs 3,322 crore in premium income during April-June this fiscal
by selling 33.86 lakh policies.

To arrest the decline in market share, LIC is planning to engage a large chunk of
its 60,000 odd Class-III staff in selling products and is focusing on widening
policyholders base rather than run after a niche segment.

ICICI Prudential topped the chart of private players with a market share of 7.53
per cent after logging a business growth of 51 per cent at Rs 334 crore.

Bajaj Allianz was second with a market share of 4.18 per cent followed by HDFC
Standard (3.2 per cent), Tata AIG (1.93 per cent), Birla Sunlife (1.84 per cent),
SBI Life (1.69 per cent), Max New York (1.44 per cent) and Aviva (1.14 per cent).

52
 Birla Sunlife Insurance Sector, 2005 LIC
2% ICICI Prudential
TATA AIG SBI Life Max New York
Aviva Bajaj Allianz
2% 2% 1%
1% Others HDFC Standard
2%
TATA AIG
HDFC Standard
3% Birla Sunlife
SBI Life

Bajaj Allianz Max New York

4% Aviva
Others
ICICI Prudential
8%
LIC
75%

Source: Indiainfoline

The size of the market has grown and the size of the insurable population in
India is indeed vast and the existing player has managed to cover about one-fourth
of it. The opportunities before the players are therefore a plenty in terms of target
audience. The falling interest rates, the collapse of many small-time financial
institutions, the scope for entering related areas like banking and pensions in a bid
for synergy and the promise of e-commerce are some of the other opportunities
knocking at the doors of the insurance majors.
There is a probability of a spurt in employment opportunities. A number of web-
sites are coming up on insurance, a few financial magazines exclusively devoted to
insurance and also a few training institutes being set up hurriedly. Many of the
universities and management institutes have already started or are contemplating
new courses in insurance. Health insurance, which is still in its infancy, is also
likely to get a major boost, ultimately leading to improvement in the quality of
medical treatment and facilities in the country.

53
Life insurance has today become a mainstay of any market economy since it offers
plenty of scope for garnering large sums of money for long periods of time. A
well-regulated life insurance industry which moves with the times by offering its
customers tailor-made products to satisfy their financial needs is, therefore,
essential if we desire to progress towards a worry-free future.

SIGNIFICANCE OF THE LIFE INSURANCE IN INDIA

The Indian life insurance industry is rapidly evolving and has emerged as one of the
fastest developing emerging markets for life insurance in the world. The industry has
become fiercely competitive with the entry of the private sector companies, including
major multinational insurers, after sector deregulation. It has opened up a range of
untapped opportunities for the new entrants into the industry, as the potential market for
buyers is high since India has a low insurance penetration and high growth rates. Also,
India has traditionally been a high savings oriented country with a large middle class that
can afford to buy life, health, and disability insurance as well as pension plan products.
Just the middle-income segment of the population is estimated at 31.2 crores (312
million). The following are other key features of the industry in India:

• In 2005-06, the life insurance sector grew by 41%, while in terms of new business
premium income the sector recorded a growth of 35%.

• Within just 5 years of deregulation in the industry, the private life insurers have
been able to garner an impressive 28.6% of the market and in the process the
companies have recorded phenomenal business growth rates.

• India’s share of the world’s life insurance business has doubled within 5 years
since liberalization, raising India’s global ranking to 17 in 2006 from 20 in 2000.

• From 0.5% of the world’s life insurance business in 2000, India today accounts
for 1.02% of the world’s premium reflecting that the insurance business in India
has more than doubled within just 5 years.

• In 2003, life insurance density (i.e., premium per capita) was just US$12.9 as
against the global density of US$267.1.

54
l l

• An average Indian spends US$22.7 a year on buying life insurance as against a

world average of US$299.5. India’s ranking in per capita spending on insurance is
78, a ranking that puts it far behind countries such as Namibia, Tunisia and
Morocco.

• Life insurance penetration (i.e., premium as percentage of GDP) in India was

2.26% as against the global penetration level of 4.59 %.

• Nonetheless, insurance as a business is growing faster than India’s gross domestic

product. Life insurance premiums, which accounted for 1.77% of the country’s
GDP in 2000, contributed 2.53% to the GDP for the 2005-06 fiscal year.

• An expert group of the Confederation of Indian Industry (CII) has projected that
in the next 10 years by 2016, the size of the Indian insurance market will grow to
Rs 145,000 crores. This translates into an average annual growth of over 19.6%.

• CII expects an exponential growth in the pension business which is projected to

rise at 29% per annum, effectively translating into an expansion of over 12 times
over a period of 10 years by 2016. The premium business from pension schemes
is projected to grow by 22.5% within the same period.

55
 OBJECTIVES OF THE STUDY

• To be able to understand the scenario of insurance sector.

• To be aware about the present scenario of the general insurance

• To be able to study the strategies adopted by public and private general

insurance companies..

• To study the market share and customer perception regarding the life

insurance companies.

56
 RESEARCH METHODOLOGY

NEED OF THE STUDY

A thriving insurance sector is of vital importance to every modern
economy. First because it encourages the savings habit, second because it provides
a safety net to rural and urban enterprises and productive individuals. And perhaps
most importantly it generates long-term ingestible funds for infrastructure
building. The nature of the insurance business is such that the cash inflow of
insurance companies is constant while the payout is deferred and contingency
related.

This characteristic of their business makes insurance companies the biggest

investors in long-gestation infrastructure development projects in all developed
and aspiring nations. This is the most compelling reason why private sector (and
foreign) companies, which will spread the insurance habit in the societal and
consumer interest, are urgently required in this vital sector of the economy.
Our main motto is to study the public and private sector life insurances

57
SCOPE OF THE STUDY
Main objective or the scope of the study of this project is to study the public
like LIC and private life insurance like Bajaj Allianz, ICICI Prudential, HDFC
Standard Life, Max New York, Sun Birla Life.

RESERCH DESIGN

After research objectives the second stage of research calls for developing
the most efficient plan for gathering the needed information. Designing a research
plan includes decisions on data sources, research approaches, research instrument
& sampling plan.

PRIMARY DATA

The primary data is the data gathered for a specific purpose or specific
research report. I have collected primary data with help of questionnaires from the
users (consumer) of public like LIC and private life insurance like Bajaj Allianz,
ICICI Prudential, HDFC Standard Life, Max New York, Sun Birla Life.

SECONDARY DATA

The secondary data is the data, which already exists & was collected for
some other purpose. The secondary data 1 have used in my research report is
basically collected from the business magazines, journals & websites of trade
organizations.

58
RESEARCH APPROACH

Primary data can be collected in four ways: Observation. Focus groups,

Surveys & Experiments. My approach to the research is survey based, as it is best
suited to know customer preferences & practices...

SAMPLING DESIGN

The first step in developing any sample design is to clearly define the set of
objects, as my study is exploratory, the sampling design includes three decisions
i.e. sampling unit, Sample size & Sampling procedure.

SAMPLING UNIT

In this research report the sampling unit includes the data collection of consumers.

SAMPLING SIZE

The sample size of my research is 50 consumers. Large samples give more

reliable results that is why I tried my best to cover more users (consumer) of
public like LIC and private life insurance like Bajaj Allianz, ICICI Prudential,
HDFC Standard Life, Max New York, Sun Birla Life.

Sample Size —100

Sample Unit – users (consumer) of public like LIC and private life
insurance like Bajaj Allianz, ICICI Prudential, HDFC Standard Life, Max
New York, Sun Birla Life.

Area of Survey — Patiala.

59
INTERPRETATION AND ANALYSIS

QNo. 01 DO YOU KNOW ABOUT THE TERM INSURANCE?

Yes 94%
No 6%
Total 100%

No
6%

Yes
No

Yes
94%

Out of 100 persons from which I asked this question 94 said that they know about
the term life Insurance, remaining saying they do not know about the term life
Insurance.
The awareness about Insurance in Patiala is good but the private players have to
try hard to get the share in insurance sector as there is place for growth.

60
 (II) Do you have a insurance policy?

Yes 74%
No 26%
Total 100%

No
26%

Yes
No
Yes
74%

Out of 100 persons, 74 said that they have a life insurance policy. Remaining 26
did not have a life insurance policy. The percentage is quite exciting but this type
of figure may not be the representative of the whole city as people were not very
cooperative in revealing about their experience towards insurance.

61
(III) Which will you prefer?

LIC 60%
HDFC 6%
ICICI 10%
BAJAJ ALLIANZ 13%
TATA AIG 4%
MAX LIFE 7%
TOTAL 100%

Max Life
TATA AIG 7%
4%

Bajaj Allianz
13%

ICICI LIC
10% LIC
60% HDFC
HDFC
ICICI
6%
Bajaj Allianz
TATA AIG
Max Life

It has been seen from the fact that LIC still capturing the insurance market, rest
competitors are trying their best to arise. In this fashion, LIC market share has
been dropped 20 – 25 % from the last two years. It is just the better incentives,
better services and better approach has made them to get firmed in the market.

62
(IV) Why you prefer?
BETTER SERVICE 50%
MORE INCENTIVES 24%
GOOD REPUTATION 26%
TOTAL 100%

Good
Reputation
26%
Better
Services
More 50%
Incentives Better Services
24% More Incentives
Good Reputation

Out of 100 Persons we have asked 50 have said for better services, 24 said for more
incentives and 26 said for good reputation.

63
(V). OF WHICH COMPANY DO YOU HAVE LIFE INSURANCE
POLICY AND PENSION SCHEMES?

LIC 32%
HDFC 12%
BAJAJ ALLIANZ 16%
ICICI PRUDENTIAL 14%
MAX NEW YORK 10%
OTHERS 16%
TOTAL 100%

16%
32%
10%

14%
12%
16% LIC
HDFC
BAJAJ ALLIANZ
ICICI PRUDENTIAL
MAX NEW YORK
OTHERS

As the graph reveals LIC still dominate the market, remaining shared by private
player. The data show the grip of LIC on Indian Life Insurance market. But the
same is the opportunity for private player. They have to present innovative product
to challenge the leadership of LIC

64
(VI). WHY DO YOU INVEST IN LIFE INSURANCE?
SAVING 52%
RISK 25%
TAX EXEMPTION 15%
ANY OTHER 8%
TOTAL 100%

8%

15%

saving
risk
52% taxexemption
Any other

25%

As revealed by the graph 52% people invest in Life Insurance for saving purpose.
This shows the difference between the attitude of foreign country and India. In
foreign countries life insurance is used primarily for risk avert purpose. The Indian
insurance player has not been able to change the mindset of people. So they have
to make more effort towards it. As saving & risk are the two main purposes of Life
Insurance, companies should introduce policies covering both the issues.

65
(VII). How many persons of your family are insured?

ALL 13%
NONE 42%
ONE OE MORE 45%
TOTAL 100%

13%

ALL
45%
NONE
ONE OR MORE
42%

In our survey 13% of people told that all the member of their family have Life
Insurance Policy. While 42% people told that no member of their family has life
Insurance policy.
45% people told that one or more than one person of their family is insured.

66
VIII). Who influence your decision of selecting pension scheme policy?

AGENT 48%
FRIENDS 32%
ADVERTISEMENT 12%
OTHERS 8%
TOTAL 100%

8%

12%

Agent
48% Friend/relatives
Advertisement
Any other

32%

48% of people told that the agent was the influencing power for their
selection of Life insurance policy. This reveals the importance of life insurance
agent in this industry.32% of people said that friends or relatives were the
influencing power behind their decision. Only 12% people said that the
advertisement was the influencing power. This shows that the advertisement
works only as reminder for the consumer.

67
(IX) What percentage of your salary do you invest in pension schemes?

UPTP 5% 42%
5 TO 10% 33%
10 TO 20% 18%
MORE THAN 20% 7%
TOTAL 100%

7%

18%
42% upto 5%
5 to 10%
10 to 20%
more than 20%

33%

42% of the people invested up to 5% of their income into life insurance, while
33% invested up to 10%. 18% of people invested up to 15%of their income into
their policy. While only 7% people invest more than 20% into life insurance. As
42% of people invest only up to 5%, there is great potential for growth.

68
(X) Are you aware of these insurance policy terminologies?

KNOW DON’
KNOW
MONEY BACK PLAN 54% 46%
CHILD PLAN 30% 70%
PENSION PLAN 45% 55%
ENDOWMWNT PLAN 12% 88%
TOTAL 100% 100%

100% 88%
90%
80% 70%
70% 55%
60% 54%
46% 45% Know
50%
40% 30% Don't know
30%
20% 12%
10%
0%
an

an

n
an

la
pl

pl

pl

tP
ck

i ld

on

en
ba

ch

i
ns

nm
ey

Pe

w
on

do
M

En

This question reveals the awareness of people about various plans. People
are most aware about money back plan while they are most unaware about
Endowment plan. Only 12% people are aware about Endowment plan.

69
 (XI) Do you think life insurance should be made compulsory as non life insurance is?

YES 86%
NO 14%
TOTAL 100%

14%

Yes
No

86%

In my survey 86% of people said that Life Insurance should be made

compulsory while 14% told that it should not be made compulsory as non life
insurance (vehicle) is.

70
 (XII) What is the mode for paying the Life Insurance Premium by you?

YEARLY 16%
HALF YEARLY 50%
QUATERLLY 24%
MONTHLY 10%
TOATL 100%

Monthly
Yearly
10%
16%

Yearly
Quarterly Half Yearly
24% Quarterly
Monthly

Half Yearly
50%

In Patiala 16 of people pay their life insurance yearly, while 50 pay their
life insurance half yearly. As for 10 people may not have surety of income they
think that monthly payment is the safest option and 24 people pay insurance
quaterly.

71
 FINDINGS

Out of 100 persons from which I asked this question 94 said that they know
about the term life Insurance, remaining 6 saying they do not know about the term
life Insurance.
The awareness about Insurance in Patiala is good but the private players have to
try hard to get the share in insurance sector as there is place for growth.
Out of 100 persons, 74 said that they have a life insurance policy.
Remaining 26 did not have a life insurance policy. The percentage is quite exciting
but this type of figure may not be the representative of the whole city as people
were not very cooperative in revealing about their experience towards insurance.

It has been seen from the fact that LIC still capturing the insurance market, rest
competitors are trying their best to arise. In this fashion, LIC market share has been
dropped 20 – 25 % from the last two years. It is just the better incentives, better services
and better approach has made them to get firmed in the market.
Out of 100 Persons we have asked 50 have said for better services, 24 said for
more incentives and 26 said for good reputation.
As the graph reveals LIC still dominate the market, remaining shared by
private player. The data show the grip of LIC on Indian Life Insurance market. But
the same is the opportunity for private player. They have to present innovative
product to challenge the leadership of LIC
As revealed by the graph 52% people invest in Life Insurance for saving
purpose. This shows the difference between the attitude of foreign country and
India. In foreign countries life insurance is used primarily for risk avert purpose.
The Indian insurance player has not been able to change the mindset of people. So
they have to make more effort towards it. As saving & risk are the two main
purposes of Life Insurance, companies should introduce policies covering both the
issues.

72
 In our survey 13% of people told that all the member of their family have
Life Insurance Policy. While 42% people told that no member of their family has
life Insurance policy.
45% people told that one or more than one person of their family is insured.
48% of people told that the agent was the influencing power for their
selection of Life insurance policy. This reveals the importance of life insurance
agent in this industry.32% of people said that friends or relatives were the
influencing power behind their decision. Only 12% people said that the
advertisement was the influencing power. This shows that the advertisement
works only as reminder for the consumer.
42% of the people invested up to 5% of their income into life insurance,
while 33% invested up to 10%. 18% of people invested up to 15%of their income
into their policy. While only 7% people invest more than 20% into life insurance.
As 42% of people invest only up to 5%, there is great potential for growth.
This question reveals the awareness of people about various plans. People
are most aware about money back plan while they are most unaware about
Endowment plan. Only 12% people are aware about Endowment plan.
In my survey 86% of people said that Life Insurance should be made
compulsory while 14% told that it should not be made compulsory as non life
insurance (vehicle) is.

In Patiala 16 of people pay their life insurance yearly, while 50 pay their
life insurance half yearly. As for 10 people may not have surety of income they
think that yearly payment is the safest option. And lastly 24people pay insurance
quarterly.

73
 CONCLUSION

I. LIC still has a stronghold on insurance market. The market share of

LIC as on31st March, 2005 around 75%

II. Bajaj Allianz with its market effort trying its best and on the number

2nd slot.

III. The insurance sector is one of the most promising in coming years as

only 70 million of Indian are insured.

IV. 75% of LIC's business is procured by 20% of its ill-trained agent

force. The foreign player, with the domestic partner's strong brand

value, can test the unconventional distribution channels like brokers&

Internet.

V. ICICI Prudential and Standard Life Insurance companies and trying to

provide better services in the competitive market of life insurance.

74
 LIMITATIONS

The report may be beneficial to company. But there are some limitations of the
study.

1. The size of the research may not be substantial.

2. There was lack of time on the part of respondents.
3. There may be some bias information provide by company professionals.
4. As only single cities are surveyed or covered. It does not represent the
overall view of Indian Market.
5. It is very much possible that some of the respondents may have given the
incorrect information.
6. The last but the most important point to that survey was carried through
Questionnaire and the Questions were based on perception. Most important
is positioning. But there may be certain aspects not taken into
consideration.

75
 BIBLIOGRAPHY

Library Resources

• Drucker, Peter F. (1989), "What Business Can Learn From

Nonprofits," Harvard Business Review, Vol (July-August), 88-93.
• Kotler, Philip and Alan R. Andreason (1996), Strategic Marketing
For Nonprofit Organizations, Upper Saddle River, NJ: Prentice Hall,
Inc.
• Insurance Watch Magazine

Internet Resources

• www.irda.com

• www.licindia.com

• www.insurancefinder.com

• www.knowledgedigest.com
www.k

• www.hdfcinsurance.com

• www.birlasunlife.com

76
 QUESTIONNAIRE
Name ___________
(I.) Do you know about the term life insurance? Age ____________
Gender ____________
Yes No Occupation ____________
Contact No. ____________
(II.) Do you have a life insurance or pension scheme policy?

Yes No

(III) Which will you prefer?

LIC HDFC

ICICI Bajaj Allianz

TATA AIG Max Life

(IV) Why you prefer?

Better Services
More Incentives
Good Reputation
(V). Of which company do you have pension scheme policy ?

LIC Any Other Specify ________________

(VI). Why do you invest in pension schemes?

Saving

Risk

Tax Exemption

Any Other

Specify ____________

(VII). How many persons of your family are insured?

All

None

[Insured / total]

77
(VIII). Who influence your decision of selecting insurance policy?
Agent

Friends

Advertisement

Other

(IX) What percentage of your salary do you invest in insurance?

Upto 5%

6 to 10%

10 to 20 %

More than 20%

(X) Are you aware of these insurance policy terminologies?

Money back plan

Child plan

Pension plan

Endowment

(XI) Do you think life insurance should be made compulsory as non life insurance is ?
Agree

Disagree

Neither agrees nor disagrees

(XII) What is the mode for paying the Life Insurance Premium by you?
Yearly

Half Yearly

Quarterly

Monthly

78