My Project Report On Icici Pru



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A PROJECT REPORT ON An analysis of Indian insurance industry with special reference to ICICI PRUDENTIAL PRESENTED BY Prem Prasad Maharana Roll no.: 13771U072039 GUIDED BY Mr.Jayanta Kumar Bihari Faculty of KIIMS,Cuttack Kumari Rosalin H.O.D of KIIMS, Cuttack Session 2007-09 PREFACE The Indian Insurance Industry is broadly segmented into public and private insurance companies. Before year 2000, only public sector insurance companies were allowed to do business in India. But after year 2000, insurance sector was thrown open for private insurance companies as well. But there is now around 12 private life insurance companies and around 9 private non-life insurance companies doing business in India. This report is prepared with an aim to provide an overview of present Indian Insurance Industry. Also with LIC, heading the public life insurance companies and ICICI Prudential heading the private life insurance players, this report also provides a comparative analysis of LIC’s New Jeevan Suraksha-I vs. ICICI’s Forever Life policies. Based on this report, the prospecting insurance customers would get help in choosing the right insurance products for themselves. (ii) CERTIFICATE This is to certify that the project entitled: “An analysis of Indian insurance industry with special reference to ICICI PRUDENTIAL” submitted by ‘Prem Prasad Maharana’, of “Kushagra Institute of Information & Management Science”(KIIMS) towards the partial fulfillment of the degree of “Master Of Finance & Control”(MFC) is a bonafied record of research work carried by him under my supervision. The content of the record in full or in part have not been submitted to any other Institution for award of any degree or diploma. Jayanta Kumari Rosalin (Project Kumar Bihari Guide) (Counter Sign by H.O.D.) (iii) CERTIFICATE This is to certify that the project entitled: “An analysis of Indian insurance industry with special reference to ICICI PRUDENTIAL” submitted by ‘Prem Prasad Maharana’ of “Kushagra Institute of Information & Management Science” (KIIMS) towards the partial fulfillment of the degree of “Master Of Finance & Control” (MFC) is a bonafied record of research work carried by him under the supervision of ‘Mr. Jayanta Kumar Bihari’. The content of the record in full or in part have not been submitted to any other Institution for award of any degree or diploma. Date: 04.09.08 Prof. (Dr.) Ananta Kumar Sahoo (Principal, KIIMS) (iv) DECLARATION I do hereby declare that the project entitle “An analysis of Indian insurance industry with special reference to ICICI PRUDENTIAL” is an original work done by me. This is submitted as a part of fulfillment of the requirement for the degree of Master of Finance & Control (MFC).This is entirely of my own work and this is not submitted to any other Institution or published anywhere before. Date: 04.09.08 Prasad Maharana (KIIMS) Prem Roll No: 13771U0720 3 (v) ACKNOWLEDG EMENT The Project report has been prepared with proper advice and suggestions of many teachers and friends’ .It is my duty to acknowledge all of them for their help and contribution in connection with my project work. First of all I expressed my sincere thanks to my Company guide ‘Mr. Biswajit Sahoo’ for his kind support and co-operation. I expressed my sincere gratitude to my internal guide ‘Mr. Jayanta Kumar Bihari’ for his able guidance. I expressed my gratitude to all the faculty members of our department for their cons tinted support and inspiration in completing this project work. Last but not the least I pay my thanks to all my friends and family members for their kind support and co-operation. (vi) TABLE OF CONTENTS Chapter 1: Introduction 01-36 1.1 Overview of the Industry 10 1.2 Profile of the Organization 16 1.3 Problems of the Organization 33 1.4 S.W.O.T. Analysis of the Organization 34 1.5 Competition Information 35 Chapter 2: Objective & Methodology 37-38 2.1 Significance of the study 37 2.2 Managerial usefulness of the study 37 2.3 Objectives of the study 37 2.4 Scope of the Study 38 2.5 Methodology 38 Chapter 3: Conceptual Discussion 39-49 Chapter 4: Data Analysis 50-53 Chapter 5: Findings & Recommendations 54-55 Annexure 56-62 Bibliography 63 (vii) Chapter – 1 INTRODUCTION The entire effort of human life is to proceed from uncertainty to certainty. The rigmarole of life proceeds with first acquiring the wherewithal to earn a living and then striving for its betterment and ensuring that the comfort and pleasure derived from a physical commodity or a human being continues. It is at the latter stage that the mechanism of Insurance comes in play. The concept of insurance is in essence related to the protection of the economic value of assets. Every asset whether physical or in form of a human being has a value. The asset is built up in the expectation that, either through the income generated there from or some other output, some needs of the individual would be met. For example, in the case of an industry its production is sold and income generated. In the case of a vehicle, it provides comfort and convenience in transportation. 1ST Insurance in India started from 1817.Basically it is divided into two types such as General insurance & Life insurance. After freedom there are 245 companies in India who provide life insurance. In 1956 finance minister ‘C.D.Deshmukh’ seize all those companies. There is only one life insurance company from1956-2000 that is ‘LIC of India’. In 1993 the finance secretary ‘R.N.Malhotra’ introduce IRDA(Insurance Regulatory Development Authority) act. After that private life insurance companies came into existence. HDFC is the 1st private insurance company in India. After that ICICI prudential Life insurance corporation started its operation. From 2001-2008 ICICI place the 1st position among all private insurance company. Now days there are 12 private life insurance companies. As compare to past now a days insurance companies provides not only life cover plan but also provides investment plan. In recent trend there are two type of plan provided by the Life insurance company such as: (1) - Traditional Plan - ULIP (Unit Linked Insurance Plan) Traditional Plan consisting of a long maturity period where as ULIP consists of both insurance and investment having shorter maturity period. Fundamental definition: In the words of ‘D.S. Hansell’, “Insurance accumulated contributions of all parties participating in the scheme.” Contractual definition: In the words of ‘Justice Tindall’, “Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.” Characteristics of insurance: ♦Sharing of risks ♦Cooperative device ♦Evaluation of risk ♦Payment on happening of a special event ♦The amount of payment depends on the nature of losses incurred. ♦The success of insurance business depends on the large number of people insured against similar risk. ♦Insurance is a plan, which spreads the risk and losses of few people among a large number of people. ♦The insurance is a plan in which the insured transfers his risk on the insurer. ♦Insurance is a legal contract which is based upon certain principles of insurance which includes utmost good faith, insurable interest, contribution, indemnity, causes proximal, subrogation, etc. ♦The scope of insurance is much wider and extensive. Functions of insurance: Primary functions: (2) 1. Provide protection: - Insurance cannot check the happening of the risk, but can provide for the losses of risk. 2. Collective bearing of risk: - Insurance is a device to share the financial losses of few among many others. 3. Assessment of risk: - Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. 4. Provide certainty: - Insurance is a device, which helps to change from uncertainty to certainty. Secondary functions: 1. Prevention of losses: - Insurance cautions businessman and individuals to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions. 2. Small capital to cover large risks: Insurance relives the businessman from security investment, by paying small amount of insurance against larger risks and uncertainty. 3. Contributes towards development of larger industries. Other Function: Means of savings and investment: Insurance companies are business houses. The product they sell is financial protection. To succeed and survive, they must cover their costs, which include payments to cover the losses of policyholders, as well as sales and administrative expenses, taxes and dividends. (3) Insurance companies have two sources of income for covering these costs: Premiums and Investment income. The premiums are collected on a regular basis and invested in Government Bonds, Gilt, stocks, mutual funds, real estates and other conservative avenues. However, investment income depends on market conditions, interest rates, economy etc. and varies from year to year. Because of the uncertainty associated with the investment income, insurance companies must generate enough income from premiums to cover the bulk of their expenses. The risk becomes insurable if the following requirements are complied with: ♦The insured must suffer financial loss if the risk operates. ♦The loss must be measurable in money, ♦The object of the insurance contract must be legal. ♦The insurer should have sufficient knowledge about the risks he accepts. Fundamentals of Insurance The fundamental Principles of the Insurance are as follows: ♦Insurable Interest: Insurable interest means the legal right to insure. Insurable Interest is a must and only then the insurance contract is enforceable at law. This principle differentiates a Contract of insurance from wager. Lack of insurable interest renders the contract null and void. For Insurable Interest to exist there must be Property, Rights, Interest, Life or Liability; this must be insured and the Insured should have a legally recognizable relationship thereto. The Insured should be benefited by the safety of the property or is prejudiced by its loss. Insurable Interest may arise in the following manner: (4) 1. Ownership: Absolute ownership entitles the owner to insure the property. This is the commonest method whereby Insurable Interest arises. 2. Partial Interest is also insurable e.g. a mortgagee. A creditor can also insure the life of his debtor but only to the extent of his loan. 3. Administrators and executors i.e. officials appointed by a court of law to take care of a property may also insure the property. 4. Relationship does not automatically constitute insurable interest. The only relationship recognized by law for this purpose is the one between a husband and wife. 5. An employer can insure his employee under a Personal Accident Policy as he has insurable interest in them. ♦Proximate cause: Generally, the claims are payable under insurance policies if they arise out of events which are proximately caused by the insured perils. In other words, the proximate cause of the event has to be peril covered by the policy, so as to constitute a valid claim. ♦Contribution: An insured may have several insurance on the same subject matter. If he recovers his loss under all these insurance, he will obviously make a profit out of loss. This will be an infringement of the principle of indemnity. Common Law has, therefore, evolved the doctrine of contribution whereby the insured is prevented from recovering more than his loss, despite his having several insurance on the subject matter. ♦Subrogation: The principle of indemnity seeks to prevent the insured from making profit out of loss. However, it may so happen that that the insured may recover his loss under his policy and he may also have rights against third parties. If, after the insurance claim (5) is settled, the insured is allowed to enforce his rights against third parties and to retain whatever damages he receives from them, he will certainly make a profit and the principle of indemnity will be infringed. Common Law has therefore, evolved the doctrine of subrogation as corollary to the principle of indemnity. Subrogation may be defined as the transfer of rights and remedies of the insured to the insurers who have indemnified the insured in respect of the loss. The Common Law right of subrogation is implied an all contracts on indemnity, as it arises only after payment of loss. ♦Utmost Good Faith: In all General Insurance contracts we know that a property or interest or liability or life is offered for insurance and the insured has to take decisions on the acceptance of the proposal. If he decides to accept the proposal a premium commensurate with the risk has to be charged. To enable him to take necessary decision in this regard, the insurer must have certain facts about the risk offered. These facts influence the judgment of the insurer in deciding about the acceptance or otherwise of the risk and the rate of premium to be charged, if accepted. Such facts are known as material facts. Nature of Insurance Contracts When the insured pays the premium and the insurers accept the risks, the contract of insurance is concluded. The policy issued by the insurers is the evidence of the contract. The contract of insurance, like any other contract, for example a contract for the sale of goods, is subject to the general law of contract as embodied in the Indian Contract Act, 1872. According to this Act, a contract must have certain essential features in order to make it legally valid and enforceable. The following are the essential elements: (6) a) Offer and acceptance: Usually, the offer is made by the proposer, and acceptance made by the insurer. b) Consideration: This means that the contract must involve some mutual benefit to the parties. The premium is the consideration from the insured and the promise to indemnity is the consideration from the insurers. c) Agreement between the parties: Both the parties should agree to the same thing in the same sense. d) Capacity of the parties: Both the parties to the contract must legally competent to enter into the contract. For example, minors cannot enter into insurance contracts. e) Legality: The object of the contract must be legal and the contract should not violate any legal requirements. E.g. no insurance can be had for smuggled goods. Risk Reasonable or not, risks are inescapable in business. Every business venture is something of a gamble, because the possibility of loss is as real as the prospects for profits. And even though managers do everything possible to ensure that their business succeed, they cannot guard against every conceivable form of risk. Pure Risk versus Speculative Risk ♦Pure Risk: Events representing the kind of risk that no business can predict or escape, known as Pure Risk, it is the threat of a loss without the possibility of gain. In other words, a disaster such as avalanche or fire is costly for the business it strikes, but the fact that no disaster occurs contributes nothing to a firm's profit. ♦Speculative Risk: It is the type of risk that offers the prospect of making profit - and prompts people to go into business in the first place. Every business accepts the possibility of losing money in order to make money. (7) Approaches to Risk Management Risk Management is the process of reducing the threat of loss due to uncontrollable events. Steps in selecting a risk management approach: ♦To identify all the things those can possibly go wrong. · ♦To consider the probability that an event will occur. Techniques of Risk Management are: 1. Avoiding the Risk: When a company avoids risk, it eliminates the possibility that a particular event will occur. To avoid the possibility of a suit, for example, not to produce any products -which would, of course, eliminate both the threats of a lawsuit and the opportunity to profit. With rare exceptions, avoiding risk entirely is extremely difficult. 2. Reducing Risk: A more practical approach is to reduce the risk by taking precautions. Risk reduction is an important element in most companies' approach to risk management. Typical precautions include putting safety locks on doors to prevent robberies, installing overhead sprinklers to minimize fire damage, and periodic checking motor vehicles to prevent accidents. 3. Assuming risk: Many companies draw on current revenues or set aside a "Contingency Fund" to cover unexpected losses. Setting aside money on regular basis could be cheaper than purchasing insurance. Moreover, the company can earn interest on the reserved cash. Such assumption of risk is also called self-insurance or risk retention. 4. Transferring the risk: Most companies still rely on outside insurance firms for financial protection against catastrophic losses. In buying insurance, companies transfer the risk of loss to an insurance firm, which agrees to pay for certain types of losses. In exchange, the insurance firm collects a fee known as a premium. (8) Insurable and Uninsurable Risks: Insurable risks: An insurable risk - one that an insurable company will cover - Generally meets the following requirements. The peril insured against must not be under the control of the Insured. This means, of course that insurer do not pay for losses that are intentionally caused by an insured, caused at the Insured's direction, or caused with the insured's collusion. For example, a fire insurance policy excludes loss caused by the Insured’s own arson. It does, however, include loss caused by an employee's arson. Losses must be calculable, and the cost of insuring must be economically feasible. To operate profitably, insurance companies must have data on the frequency of losses caused by a given peril. If this information covers a long period of time and is based on a large number of cases, Insurance companies can usually predict quite accurately how many losses will occur in the future. For example, the insurance companies to fix up the rate of premium of Personal Accident Insurance may use the information of the number of people who will die each year in India in accidents. The peril must be unlikely to affect all insured simultaneously. Unless an insurance company spreads its coverage over large geographic areas or a broad population base or different classes of Insurance, a single disaster might force it to pay out all its policies at once. The possible loss must be financially serious to the Insured. An Insurance company could not afford the paperwork involved in handling numerous small claims of a few Rupees each. As a result, many policies have a clause specifying that the insurance company will pay only that part of a loss greater than an amount - the deductible or excess - stated in the policy. The excess represents small losses that the Insured has to absorb. (9) 1.1 OVERVIEW OF THE INDUSTRY Origin of life insurance Life Assurance was born in England when the first policy providing temporary cover for a period of 12 months was issued as easy as 1583 A.D. The Amicable Society started granting fluctuating sum on death since 1705 and a fix sum since 1757, with the development of mortality tables, the life Assurance acquired a scientific character. The Equitable Society founded in 1762 was the first Society established on scientific basis. Origin of life assurance in India In India, after failure of two British companies, the European and the Albert in 1870, which attempted writing business on Indian lives, first Indian Life Assurance Society was formed in the same year called Bombay Mutual Assurance Society Ltd. It was followed by the Oriental Life Assurance Company Limited in 1874, Bharat in 1896 and Empire of India in 1897. The Idea of insurance was born out of a desire of the people to share loss of an individual by many. Originally it restricted to forms other than life assurance. It started with Marine Insurance, where the losses on account of perils of sea were shared by all who were engaged in trade. Reference to some forms of insurance, is found in the codes of Hammurabi, Manu (Manav Dharma Shastra). The word `Yogakshema’ is used in the Rig Veda suggesting that some form of community insurance was practiced by the Aryans in India over 3000 years ago. In India during Buddhist period burial societies existed which were mutual in their character and used to help a family by building a house, protecting the widow, marrying the girls. (10) The Swadeshi Movement of 1905 provided impetus to the formation of several companies such as the `Hindustan Cooperative’, the `United India’, the `Bombay Life’, the `National’. Further in the wake of freedom movement number of companies such as the `New India’, the `Jupiter’ the `Lakshmi’ emerged. The Government began to exercise a certain measure of control on Insurance business by passing the `Insurance Act’ in 1912. For controlling investment of funds, expenditure and management, a comprehensive Act was passed known as `The Insurance Act 1938’. For controlling the affairs, the office of Controller of Insurance was established. The act was extensively amended in 1950. In the year 1955, approximately 170 Insurance Offices and 80 Provident Fund Societies had been registered for transacting Life Assurance business in India. There were, however, no full guarantees to the policyholders. The concept of trusteeship was lacking. Many insurance companies went into liquidation. There were malpractices in insurance business. For achieving the following purposes it was felt necessary to nationalize the insurance business in India. (i) To provide security to the policyholders. (ii) To utilize the funds for nation-building activities. (iii) To avoid cut throat competition. (iv) To abolish mal-practices. (v) To spread the insurance message to the rural areas. The first step in this direction was taken by the Government of India by issuing the Life Insurance (the Emergency provisions) Ordinance, 1956 on 19th January, 1956. The then Finance Minister, Shri C. D. Deshmukh mentioned the purpose of nationalisation as reaching the goal of socialistic pattern of society, rendering genuine service to the (11) people in the rural area. The Life Insurance Corporation Act (Act XXXI of 1956) was passed by the Parliament in June 1956 which came in force on 1st July 1956. The Life Insurance Corporation of India came into existence on 1st September 1956. Insurance Sector Reforms Having looked at the insurance sector, let us look at the efforts made by the government to make the industry more dynamic and customer friendly. To begin with, the Malhotra committee was set up with the objective of suggesting changes that would achieve the much required dynamism. The Malhotra Committee Report 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. In 1994, the committee submitted the report and gave the following recommendations: 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 independentcorporations. ♦All the insurance companies should be given greater freedom to operate. (12) Market Regulations ♦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. 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. 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). (13) Customer Service ♦LIC should pay interest payments beyond 30 days. on delays in ♦Insurance companies must be encouraged to set up unit linked pension plans. ♦Computerization of operations and updating of technology to be carried out in the insurance industry. Overall, the committee strongly felt that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.1 bn. This amount is not very high for foreign firms, as it translates to only about US$25 million. Further, to date it is unclear whether equity should be payable in one go or should be brought in as installments. Also, the foreign equity participation was to be restricted to only 40%.The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body. The industry and analysts find that there is lack of clarity in the following areas:♦Though coverage of rural areas was to be made compulsory, it raises the question as to who would subsidies the rural policies as they would be difficult to service and hence costs will go up. ♦There is some confusion with respect to investments. Where the funds should be invested? Currently 70% of the funds with LIC & GIC are invested in Government securities. Would new entrants be allowed to invest in GOI securities? (14) ♦The report also does not enumerate exit options available to the new entrants. In the event of failure, there should be an arrangement made whereby the other Companies pool in to bail the customers, who in all probability would be middle class individuals. Potentiality of Insurance in Indian Market Marketing inefficiency of general insurers has kept society in dark even when so many personal as well as commercial lines of insurance covers are available for them. Insurers have failed to identify the need of the individual risk factors and thereafter selecting proper market segments and developing demand of these needs by adopting proper marketing mix. There is great scope of commercial line of insurance as we are developing at a very fast rate but the potentiality and scope of personal lines of insurance is vast as this area is still undertapped. Product designing and pricing is also simple and growth of this portfolio is guaranteed in this country which has a base of over 100 crore population, where there are about 25 crore dwellings, 20 crore schools, colleges and educational institutions and about 5 crore small and big shops. But despite this the Indian insurers share in personal line of business is very low or negligible. There are enormous growth opportunities to Indian as well as foreign insurers because of such a huge base of population there is ample scope to introduce the new line of covers as per the changing needs and to increase the per capita share of the insurance. By encouraging risk transfer by investing small portion of the savings of the individuals.By opening up the sector far more opportunities has came up in insurance and reinsurance market. After privatization of this sector presence of the foreign players has also increased. Therefore the insurers, in time to come, will have to change their attitude from selling of the product to marketing of the protection needs of the insured and for this is required is: (15) ♦ Effective product planning ♦ Suitable pricing ♦ Efficient promotion and physical distribution. ♦ Proper physical evidence. ♦ Good and well trained sales force. 1.2 PROFILE OF THE ORGANISATION: ICICI Prudential Life Insurance ICICI Prudential Life Insurance is a joint venture between the ICICI Group and Prudential PLC, of the UK. ICICI started off its operations in 1955 with providing finance for industrial development, and since then it has diversified into housing finance, consumer finance, mutual funds to being a Virtual Universal Bank and its latest venture Life Insurance. Foreign Partner: Established in 1848, Prudential PLC. of U.K. has grown to be the largest life insurance and mutual fund company in U.K. Prudential PLC. has had its presence in Asia for the past 75 years catering to over 1 million customers across 11 Asian countries. Prudential is the largest life insurance company in the United Kingdom (Source: S&P's UK Life Financial Digest, 1998). ICICI and Prudential came together in 1993 to provide mutual fund products in India and today are the largest private sector mutual fund company in India. Their latest venture ICICI Prudential Life plans to take care of the insurance needs at various stages of life. (16) ICICI Prudential Life Insurance was established in 2000 with a commitment to expand and reshape the life insurance industry in India. The company was amongst the first private sector insurance companies to begin operations after receiving approval from Insurance Regulatory Development Authority (IRDA), and in the time since, has taken several steps towards its realizing its goal. The company's wide range of products, distribution strengths and powerful brand has driven its growth across a cross-section of people and cities. As on March 31, 2003, the company had issued nearly 350,000 policies, with a total premium income of over INR 5 billion and a total sum assured in excess of INR 87 billion. Today, the company has established itself as the No. 1 private life insurer in the country. ICICI Prudential Life Insurance Company is a joint venture between ICICI, a premier financial powerhouse and Prudential PLC, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential’s equity base stands at Rs. 4.25 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. As of March 31, 2003, the company had issued nearly 350,000 policies with a sum assured in excess of Rs 8,700 crore and total premium income of over Rs. 500 crore. Today the company is the #1 private life insurers in the country. Company Vision To make ICICI Prudential the dominant Life and Pensions player built on trust by worldclass people and service. (17) This is what ICICI Prudential hope to achieve by: •Understanding the needs of customers and offering them superior products and service •Leveraging technology to service customers quickly, efficiently and conveniently •Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders •Providing an enabling environment to faster growth and learning for ICICI Prudential employees •And above all, building transparency in all ICICI Prudential dealings. The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundary less, Ownership and Passion. Each of the values describes what the company stands for, the qualities of our people and the way we work. We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to ICICI Prudential growth. (18) Board of Directors The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad. Mr. K.V. Kamath, Chairman Mr. Mark Tucker Mrs. Lalita D. Gupte Mr. Danny Bardin Mrs. Kalpana Morparia Mrs. Chanda Kochhar Mr. M.P. Modi Mr. R Narayanan Mr. S.P.Subhedar, (Alternate Director to Mr. Danny Bardin) Mr. Derek Stott, (Alternate Director to Mr. Mark Tucker) Ms. Shikha Sharma, Managing Director Management Team Ms. Shikha Sharma, Managing Director Ms. Anita Pai, Underwriting Chief Operations & Mr. Bill Lisle, Chief Agency Officer (19) Mr. Sandeep Batra, Chief Financial Officer & Company Secretary Mr. Saugata Gupta, Chief – Marketing Mr. Shubhro Resources J. Mitra, Chief Human Mr. V. Rajagopalan, Appointed Actuary Mr. Anil Tikoo, Head - Information Technology Products Insurance Individuals: Solutions for ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its 13 products can be enhanced with up to 4 riders, to create a customized solution for each policyholder. Savings Solutions: ICICI Pru Save n Protect is a traditional endowment savings plan that offers life protection along with adequate returns. ICICI Pru CashBak is an anticipated endowment policy ideal for meeting milestone expenses like a child's marriage, expenses for a child's higher education or purchase of an asset. Protection Solutions: ICICI Pru LifeGuard is a protection plan, which offers life covers at very low cost. It is available in 3 options - level term assurance, level term assurance with return of premium and single premium. (20) Child Solutions: ICICI Pru SmartKid provides guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child's life. Market-linked Solutions: ICICI Pru LifeLink is a single premium Market Linked Insurance Plan which combines life insurance cover with the opportunity to stay invested in the stock market. ICICI Pru.LifeTime offers customers the flexibility and control to customize the policy to meet the changing needs at different life stages. It offers 3 investment options - Growth Plan, Income Plan and Balanced Plan. Retirement Solutions: ICICI Pru ForeverLife is a retirement product targeted at individuals in their thirties. Marketlinked retirement productsICICI Pru LifeTime Pension is a regular premium market-linked pensionplan ICICI Pru LifeLink Pension is a single premium market-linked pension plan. Single Premium Solutions: ICICI Pru AssureInvest is a single premium savings product with life cover for terms of 5, 7 or 10 years. ICICI Pru ReAssure is a retirement product for senior citizens who are on the verge of retirement or have just retired. (21) ICICI Prudential also launched ''Salaam Zindagi'', a social sector group insurance policy targeted at the economically underprivileged sections of the society. Group Insurance Solutions: ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees. ICICI Pru Group Gratuity Plan: ICICI Pru''s group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner. The plan can also be customized to structure schemes that can provide benefits beyond the statutory obligations. ICICI Pru Group Superannuation Plan: ICICI Pru offers a flexible defined contribution superannuation scheme to provide a retirement kitty for each member of the group. Employees have the option of choosing from various annuity options or opting for a partial commutation of the annuity at the time of retirement. ICICI Pru Group Term Plan: ICICI Pru''s flexible group term solution helps provide affordable cover to members of a group. The cover could be uniform or based on designation/rank or a multiple of salary. The benefit under the policy is paid to the beneficiary nominated by the member on his/her death. (22) Flexible Rider Options: ICICI Pru Life offers flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer. 1.Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. 2. Accident benefit: This rider option pays the sum assured under the rider on death due to accident. 3.Critical Illness Benefit: protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death. 4.Major Surgical Assistance Benefit: provides financial support in the event of medical emergencies, ensuring that benefits are payable to the life assured for medical expenses incurred for surgical procedures. Cover is offered against 43 different surgical procedures. (23) About The Partners ICICI Bank (NYSE:IBN) is India’s second largest bank with an asset base of Rs. 106812 crore. ICICI Bank provides a broad spectrum of financial services to individuals and companies. This includes mortgages, car and personal loans, credit and debit cards, corporate and agricultural finance. The Bank services a growing customer base of more than 7 million customer accounts and 5 million bondholders accounts through a multi-channel access network. This includes about 450 branches and extension counters, 1675 ATMs, call centres and Internet banking ( ICICI Bank posted a net profit of Rs.1, 206 crore for the year ended March 31, 2003. ICICI Bank is the only Indian company to be rated above the country rating by the international rating agency Moody''s and the only Indian company to be awarded an investment grade international credit rating. The Bank enjoys the highest AAA (or equivalent) rating from all leading Indian rating agencies. Established in 1848, Prudential plc is a leading international financial services company in the UK, with some US$250 billion funds under management and more than 16 million customers worldwide. Prudential has brought to market an integrated range of financial services products that now includes life assurance, pensions, mutual funds, banking, investment management and general insurance. In Asia, Prudential is UK''s largest life insurance company with a vast network of 22 life and mutual fund operations in twelve countries - China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam. Since 1923, Prudential has championed customer-centric products and services, supported by over 60,000 staff and agents across the region. (24) Insurance Plans Savings Plans: Most endowment policies are a good way of saving for the future. A policy can be designed to make your savings grow and have them available to you at the end of a fixed number of years. Or, a policy could provide you with an income every three or four years. You can browse through these policies to find one that best suits your needs: •SmartKid - a superior way to guarantee your child’s future no matter what the uncertainty. •LifeTime - a complete market-linked insurance plan that adapts itself to your changing protection and investment needs, throughout a lifetime. •Save'n' Protect - a traditional endowment savings plan that offers both high returns and protection. •CashBak - an endowment savings plan that allows you to get back substantial survival benefits without having to wait till the maturity date. Depending on your particular needs, Savings Plans could allow you to do one or more of the following: •Plan For Tangibles: buy that fashionable car, that huge refrigerator, etc. •Plan For A Cosy Nest: by facilitating the purchase of that home you have always dreamt of. (25) •Plan For Milestones: ensure a good education for your children, children's wedding, etc. •Save on Deferred Taxes: because the interest income and maturity benefits of the Policy are tax exempt. •Lifestyle Planning: maintain your lifestyle even if your income was to reduce in the future. •Legacy Creation: buy property; invest in shares, bonds, etc. for your children or grandchildren. •Attain Greater Heights: ensure that your children's education continues undisrupted. Protection Plans We all hope to live a full life till a ripe old age... to ensure our children's sustenance and healthy growth. But what if a sudden disability or illness strikes? Besides the grief and the pain, such an event also completely disrupts life for all the people who are financially dependent on us. Our life insurance policies offer a comprehensive range of protection benefits: •Lifeguard - A low cost-high protection plan that offers protection over a specified period. •Riders - Additional benefits that one can add on to the policy. The rider can be opted for at the time of taking the basic policy. Additional premium is charged for each rider. •An insurance policy can be tailor made to provide protection to you and your loved ones. If something were to happen to you, it can help: •Safeguard Your Better Half: ensure life's continuity for your loved one. (26) •Dear and Near Ones: ensure continuity of lifestyle for your dependents. •Attain Greater Heights: ensure your children's education continues undisrupted. Unforeseen circumstances: bear the cost of fighting an illness, disability, etc. Retirement Plans Most of you picture yourselves enjoying the fruits of labor after retirement, going on your dream vacation, or helping your children's career take wing. But do you realize that financing all this will most likely depend partly on your personal savings? Because personal savings and investments represent a significant source of retirement income for many people, you can never save too much. Currently, you are at a stage where you are juggling many roles, as nurturing parents, dutiful caregivers to elders, supportive life partners, while trying to maintain a career. It is too easy to get carried away handling and solving the day-to-day problems to not look into your retirement needs. It may also seem too far away to be of concern. But a look at the issues below will make the need for some strategic planning at this stage amply clear. Today, thanks to a healthier lifestyle and advances in medicine, the average Indian lives longer. This makes the challenge of accumulating enough money for retirement even more difficult, since it may have to last longer. Also, with the falling interest rate scenario and the rising costs of medical expenses retirement means monetary uncertainty for most of us. More so, because there is also the ever-persistent evil of inflation, which erodes your purchasing power. The graph below illustrates how much Rupees will 10,000/- amount to after some years: (27) Inflation erodes your purchasing power 8000 7000 6000 5000 4000 3000 2000 1000 0 5yr 10yr 20yr 30yr Inflation rate at 10% Inflation rate at 5% Therefore, the message is simple - no matter whether you are 30 or 50, you should start planning early to have a healthy retirement kitty. (See graph below for an illustration) Start early, Gain more 2000000 1800000 1600000 1400000 1200000 1000000 800000 600000 400000 200000 0 Saving Retirement Kitty A B (28) As can be seen the cost of delaying is high. Situation A is when you are saving Rs 10000 annually from the age of 25 to 34 years and Situation B is when you save the same annual amount from the age of 35 to 59 years. As can be seen in the example, even after investing your money for a 2.5 times longer duration, the maturity value in the second case is much lesser (the figures are based on a hypothetical interest rate of 10%). The longer your money is allowed to grow at a compounded rate, the more dramatic will the difference be eventually. Therefore, the message is simple - Put Time on Your Side and Start Early. ICICI Prudential Life Insurance believes in the philosophy of providing meaningful and comprehensive insurance solutions to plan your retirement. Our insurance solutions are the most optimal tools to plan your retirement because they give you Safety, Liquidity, Tax benefits, Health cover and Life protection and thus ensure that you are comprehensively covered. ICICI Prudential offers flexible products for planning your retirement:  ForeverLife - A deferred annuity plan that helps you save for retirement while providing you life insurance protection. LifeLink Pension- A single premium plan which allows you to park a lump sum amount for a secure future. LifeTime Pension - A plan which gives you the twin benefit of market-linked annuity and life insurance cover. ReAssure - A plan that helps you invest your money prudently and safely and offers you the benefit of a regular income while providing you life insurance protection. (29) Depending on your particular needs, our Retirement Solutions could allow you to do one or more of the following: Maintaining the Same Living Standard Post-retirement: Get your retirement monies to earn you the benefit of a regular income while providing life insurance protection. So now you can really enjoy even your post-retirement days. Provide for a Lifetime of Pension: Annuities can play a valuable role in retirement saving. A deferred annuity allows you to accumulate money for retirement on a tax-deferred basis. You are also in control of when you want to begin receiving payments. An annuity gives you a fixed income for life. Protect Your Better Half: If you are married, it is preferable that your retirement plan includes your spouse. The "Joint Life Last Survivor" annuity option in ICICI ForeverLife pays benefits as long as either one of you is living. Investment Plans: Often you may have some investible funds lying idle - a bonus or maybe a windfall. You can either secure your family through insurance or invest it for growth. The need for insurance is crucial but you also want to see your money grow through market investments. But in volatile market conditions how do you secure both? Relax, because now you can hedge your investments with safer investment vehicles that provide you with a diversified portfolio. ICICI Prudential Life Insurance presents a package of Investment Solutions, which provide you high returns, while guaranteeing complete peace of mind. (30) This follows from our understanding that life has many facets and they are manifested through its various needs. Therefore our philosophy is to provide you with comprehensive insurance solutions that cater to your dual needs of earning potentially high returns as well as stay insured for life. Thus we offer you a unique package of Investment Solutions that combine the best of insurance and investment. ICICI Prudential offers flexible solutions for planning your investment.  LifeLink - an investment plan that gives you the flexibility of choosing your investment options while keeping you insured for life. AssureInvest - a single premium endowment plan that gives you potentially high returns coupled with insurance protection. Depending on your particular needs, Investment Plans could allow you to do one or more of the following: •Plan for Tangibles: buy that fashionable car, that huge refrigerator, etc. •Earn Market-linked Returns: earn marketrelated returns while your family remains protected, even in volatile market conditions. •Save on Deferred Taxes: because the interest income and maturity benefits of the Policy are tax exempt. •Lifestyle Planning: maintain your lifestyle even if your income was to reduce in the future. •Legacy Creation: buy property; invest in shares, bonds, etc. for your children or grandchildren (31) Group Insurance Solutions Employee care - the defining edge In this new age of rapid developments and just-in-time methodologies, one big challenge that organizations face is to establish and maintain a competitive edge over others. Today's cutting-edge product or service becomes tomorrow's undifferentiated commodity. In an era of competitive parity, the only asset that makes a decisive difference between corporate success and failure is the quality of human capital. Investment in one’s employees is an investment in the future: Employees are a company’s human capital. Not only do companies care for them, but also provide an environment that fosters a deep and lasting sense of belonging. Employees determine the present and decide the future of a company. Employee benefits have proven to be an excellent tool to optimize the retention of talent and improve an organization’s bottom line. The quality of an organization’s employee benefits establishes and maintains a company's image as a caring employer. Optimum care of employees is a long-term investment that results in a sustained competitive advantage for an organization in the times to come. ICICI Pru Advantage Group Insurance Solutions •An integrated basket of flexible group insurance solutions that offer incomparable flexible benefits. •Sound investment management that focuses on safety, stability and profitability of the portfolio. •Personalized financial planning for your employee that takes care of his/her changing financial needs at every stage of life. (32) •Quality service initiatives and transparency across all operations, promising superlative operational efficiency. Group Gratuity Plan: A plan that helps employers funds their statutory gratuity obligation in a scientific manner. Group Term Assurance: A plan that helps provides affordable cover to members of a group. Group Superannuation Plan: A flexible Defined Contribution Superannuation scheme that provides for a retirement kitty for each member of the group. Contact Information ICICI Prudential Life Insurance Company Limited Registered Office 1089, ICICI Prudential Towers, Appasaheb Marg, PrabhaDevi,Mumbai - 400 051. 1.3 PROBLEMS OF THE ORGANISATION: Multiple players in the life insurance so, ICICI Prudential faces very tough competition from other leaders in the industry. The ICICI Prudential needs to work hard in order to stay competitive insurance market. Further, the ICICI Prudential should appoint professional agent who should be able to provide customer with a comparison of multiple schemes and also explain them in simple terms, so that customer able to make an informed decision. (33) 1.4 S.W.O.T. ANALYSIS Strengths The biggest strength of this organization is the:  Money power, which makes them ignorant about the gestation period. Brand image, Business experience, and Innovative products The agents are very selectively chosen have excellent communication skills. Service quality, which is the crux of their mission. Large network branches which is helped to customer for the payment Weaknesses High targets for financial advisors and for the sales departments. Many competitors in the market offer same product by the little difference in the premium and offerings. Sustainable to risk associated investments in money market. with Try to catch middle-lower level people also. (34) Opportunity Huge market is literally untapped; out of estimated 320 millions insurable markets only 20% of the population is insured. Health insurance and pension schemes, an estimated market potential of approximately $15 billion. ICICI Prudential should give the insurance coverage both to the parent and child so that their life could be covered in both cases. The customer doesn’t mind paying some extra premium for that. Threats Players like Bajaj and Birla Sun life with low premium for the similar plans. Entry of many other private companies with equally strong experience and financial strength of foreign partners making the competition difficult and saturating the urban markets. Current Govt. policies do not encourage gross domestic savings. If the tax liability of the service class rises, the customer will have little money to invest. LIC has woken up from sleep and is following competitive strategies. Its huge surplus in Life Fund gives a capability to lodge Price war. 1.5 COMPETITION INFORMATION: •Bajaj Allianz General Insurance: Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a reputation of expertise, stability and strength. (35) •Birla Sun Life Insurance: The Aditya Birla Group contributes its knowledge of the Indian market while Sun Life Financial contributes global expertise in the areas of protection and wealth management. •HDFC Standard Life Insurance: HDFC and Standard Life have a long and close relationship built upon shared values and trust. Providing long term financial security to policy holders will be the constant endeavor. •ING Vysya Life Insurance: ING, the world’s second largest life insurance company together with Vysya Bank, one of India’s leading private sector banks, forms ING Vysya Life Insurance. •Life Insurance Corporation (LIC): Life Insurance Corporation (LIC) has been one of the pioneering organizations in India who introduced use of Information Technology in their business. •MetLife India: The Metropolitan Life Insurance Company is the number one insurer in the U.S. It is helping build financial independence for its customers. •Oriental Insurance: The Oriental Insurance Company Ltd. (OICL) is one of the leading General Insurance companies in India and is a subsidiary of the General Insurance Corporation (GIC) of India. •Royal Sundaram Alliance Insurance: 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. •Tata AIG Insurance: Life insurance & general insurance for individuals & corporates by Tata AIG. This site will guide you on how to capitalize on opportunities and protect against uncertainties. (36) Chapter 2 OBJECTIVE & METHODOLOGY 2.1 SIGNIFICANCE OF THE STUDY A study of the products and services of the ICICI Prudential Life Insurance will help me understand the difference between its products and that of competitors. Also I will get to know the consumer perception about the various life insurance products available in India 2.2 MANAGERIAL USEFULNESS OF THE STUDY ICICI Prudential Life Insurance has a place in the Insurance sector. The study of its marketing strategies and consumer perception of life insurance product will give me a crucial idea behind the success of the company and the facets of marketing that made the success possible. 2.3 OBJECTIVES OF THE STUDY 1. To Study the marketing strategies of ICICI Prudential Life Insurance 2. To study the consumer perception about the various life insurance products available in India. 3. To analyze the life insurance products of ICICI Prudential Life Insurance Company and compare them with other players in Life Insurance segment. (37) 2.4 SCOPE OF THE STUDY The study is for the products of ICICI Prudential Life Insurance and Consumer Perception of life insurance product will be limited to the New Delhi and NCR only. The information will be based on the company’s website, literature provided by the company and questionnaire analysis. 2.5 METHODOLOGY Primary Sources: Data collected from Insurance companies through verbal Questionnaire Secondary Sources: •IRDA act, 1999 •Handbook of Insurance agents of different Life Insurance companies •Internet websites of IRDA and various Life Insurance companies & various websites. The primary study will be targeted towards the marketers. The study will also include semistructured interview with marketing managers of various Insurance companies who are successfully selling Life Insurance Policies to Indian Consumers. The Secondary Sources will help in tracing the historical framework of Insurance companies of post independent India as well as the preprivatization and post-privatization Insurance environment in India. This secondary study will help in serving the theoretical groundwork for the study. (38) Chapter – 3 CONCEPTUAL DISCUSSION MARKETING CONCEPT SERVICES MARKETS IN FINANCIAL Financial Services Marketing According to ‘Philip Kotler’: “Marketing is a social and managerial process by which individuals and groups obtain what they need want through creating, offering and exchanging products of value with others. This definition of marketing rests on the following core concepts: needs, wants, and demands; products (good, services and ideas); values, cost and satisfaction; exchanger and transactions; relationships and networks; markets; and marketers and prospects". The concept of financial Services Markets is a combination of two different words, Finance and Marketing. In a true sense, it is application of marketing principles in the financial services or conceptualization of marketing in the decision-making process of financial organization. It is a right to say that financial marketing is related to the product, promotion, place, and pricing and people decisions of the financial organizations, which simplify the taste of restructuring of revamping their decisions in tune with the changing business environment. In addition, the financial marketing also includes in it’s the activities related to the behavioral profile of the customers and the marketing information system so that the marketing decision involve more dynamism in it’s to meet the financial and more the customers and (39) market. The right from the making of services product, promotion, place, pricing and people decisions to the study of financial organisations and customers, market conditions and environment become an integral part of financial marketing. Further it also includes in its purview the auditing of marketing strategies so as to make the marketing decisions creative and innovative. In an age of electronic financial services the concept of financial marketing is required to be reviewed. The emerging trends in the word economy indicate recession, the mounting intensity of competition, and the increasing domination of information technologies. Thus we find financial marketing helping an optimal blending of the core and peripheral services. The elimination and inclusion processes it the service mix are done effectively and this simplified the task of formulating and innovating the product mix in tune with the changing expectations of customers. DISTINCTION BETWEEN SERVICES MARKETING AND PRODUCT MARKETING Nature and Role of Goods Marketing In manufacturing, the marketing function plays an important role in the identification of customer’s need. Here customer needs are identified before production. Customers assess the brands promised benefits during consumption, strengthening or weakening brand preference accordingly. In figure below the sequence of the four functional phases are show. It also gives the contributions of postproduction marketing, consumption and word of mouth communications. (40) Nature of Role of Goods Marketing Create Awareness Post-production Marketing Strong Influence Weak Influence Nature and Role of Services Marketing Although both services marketing and goods marketing start with the critical need identification and product design functions, goods generally are produced before it is sold and services generally are sold before it is produced. Moreover, services marketing has more limited influence an customers before the purchase than goods marketing. Figure given below shows the nature and roles of marketing for services. Pre-production Marketing Production Consumption Induce Trial World of Mouth Communication Demonstrate Benifits Build Brand Preference In services, both post sale marketing and word-of-mouth communication has prominent effect in winning customers loyalty. Thus, services marketers can create brand awareness, and include trial before the sale, but they demonstrate benefits and build brand awareness most effectively after the sale. (41) Nature and role of Service Marketing Pre production marketing Create Awareness Induce Trial Word of Mouth Communication Post-production Marketin, Consumption & Marketing Demonstrate Benefits Build Brand Preference Strong Influence Weak Influence MEANING OF INSURANCE The business of insurance is related to the protection of the economic value of assets. Every asset has a value. The asset would have been created through the efforts of the owner, in the expectation that, either through the income generated there from or some other output, some of his needs would be met. In the case of a motorcar, it provides comfort and convenience in transportation. There is no direct income. There is a normally expected lifetime for the asset during which time, it is expected to perform. The owner, aware of this, can so manage his affairs that by the end of that life time, a substitute is made available to ensure that the value or income is not lost. However, if the asset gets lost earlier, being destroyed or made non-functional, through an accident or other unfortunate event, the owner and those deriving benefits there from suffer. Insurance is a mechanism that helps to reduce such adverse consequences. (42) Life Assurance It is the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured (except death by accident only) or the happening of specified any contingencies dependent on human life, like death a specified age. The contract would be subject to the payment of premiums for a term, Non-Life Insurance or General Insurance Even though conventional classification of General Insurance has been in three branches1.Fire Insurance 2.Marine Insurance 3.Miscellaneous (Accident) Insurance, In modern times, it is classified as follows: a)Insurance of Person b)Insurance of Property c)Insurance of Interest d)Insurance of Liability (43) WHY INSURANCE? However there is a normally expected life cycle for every asset during which time it is expected to perform its assigned role. So, a prudent individual can manage his affairs so that by the end of that life cycle, a substitute is in place to ensure continued benefit/comfort. However, if due to an accident or other unfortunate event, the asset gets destroyed or made non- functional, the person deriving benefits there, from suffer. Insurance is the mechanism that helps to soften the impact of such adverse consequences by providing for some monetary substitution to face such unforeseen circumstances. The need of insurance arises from the chances of an accidental occurrence destroying or making an asset non-functional. Such loss producing eventualities are called perils e.g. Fire, floods, breakdowns, lightning, earthquakes, etc However, it has to be remembered that what is being talked about is only a probability of a loss. The protection of Insurance is against a contingency that may or may not happen. A business man always keeps some reserve to meet the future unexpected loss. In our day to day life we also plan for secured future. Similarly to face and to overcome the unexpected risk of life one must have to insure his/her life. (44) THE INSURANCE BUSINESS The business of insurance done by insurance companies (called insurers), is to bring together persons with common insurable interests (sharing the same risks) collecting the share or contribution (called premium) from all of them, and paying out compensations (called claims) to those who suffer. The premium is determined as indicated above with some addition for the expenses of administration. The insurer acts as a trustee for managing the common fund for and on behalf of the community. He has to ensure that nobody is allowed to take undue advantage of the arrangement. In other words the management of the business requires care to prevent entry into the group of people whose risks are not of the same kind, as well as not paying claims on losses which are not accidental. The decision to allow entry is the process of underwriting of risk. Both underwriting and claim settlement have to done with great care. INSURANCE AS A SOCIAL SECURITY TOOL On the eve of the promulgation of the Life Insurance (Emergency Provision) Ordinance the then Finance Minister C.D. Deshmukh said in his broadcast to the nation. "The nationalisation of Life Insurance will be another milestone. In the implementation of the Second Five Year Plan, it is bound to give material assistance. Into the lives of millions in the rural areas, it will introduce a new sense of awareness of building for the future in the spirit of calm confidence which insurance alone can give. It is a measure conceived in a genuine spirit of service to the people. It will be for the people to respond, confound the doubters and make it a resounding success. With this as the guiding light the corporate objectives of the Life Insurance Corporation inter alia sought to achieve the following: (45) •Spread Life Insurance much more widely and in particular to the rural areas and to the socially and economically backward classes with a view to reach all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. •Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. •Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return. •Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. •Act as trustee of the insured public in their individual and collective capacities. The need for these objectives is obvious in the eyes of a family which may have lost its sole bread winner. With his death the family's income dies. The economic condition of the family is affected, unless other arrangements come into being to restore the situation. Life insurance provides such an alternate arrangement. If there was no life insurance the social cost would be reflected in a impoverished family becoming a burden on the Government or taking to anti social means to make both ends meet. Therefore, the life insurance business is complimentary to the state's efforts in social management. Conceptually under a socialistic system it is the responsibility of the State to find resources for providing social security, where as in a capitalistic society, providing for security is largely left to the individuals. The society provides instruments like insurance, which (46) can be used in securing this aim. However the distinction between these systems have got blurred over a period of time, with Socialists leaving individuals to fend for themselves and Capitalist taking the first steps to social security. In India, Article 41 of our Constitution requires the State, within the limits of its economic capacity and development, to make effective provision for securing the right to work, to education and to provide public assistance in case of unemployment, old age, sickness and disablement and in other cases of undeserved want. Part of the State's obligations to the poorer sections, are met through the mechanism of life insurance. In keeping with its social responsibility as an instrument of the Government and as a good business organization LIC has made payments to policyholders amounting to Rs.11,170 crores in 1999-2000 (as against Rs.9,106 crores in the previous year). During the same period, LIC settled 66.42 lacs claims for an amount of Rs. 9211 crores. ROLE OF INSURANCE DEVELOPMENT IN ECONOMIC Insurance benefits society by way of a)Providing relief to the insured from any mishappening. b) Reducing burden of Government providing relief to the senior citizens. in c) Providing funds to Govt. for nation building activities. Direct investments made by LIC serve a twofold purpose. It acts as a major instrument for the mobilization of savings of people, particularly from the middle and lower income groups. These savings are channelled into investments for economic growth thereby creating (47) employment. These savings in turn go into the task of nation building. As on 31.3.2000, the total investments of the LIC exceeded Rs 1,47,000 crores, of which more than Rs. 84, 000 crores were directly in Government (both State and Centre) related securities, nearly Rs.12,000 crores in the securities State Electricity Boards, Rs.16,000 crores in housing loans and Rs.3,000 crores in water supply and sewerage systems: Other investments included road transport, setting up of industrial estates and direct financing of industry. Investments in the corporate sector (shares, debentures and term loans) exceeded Rs. 28,000 crores. LEGISLATIVE AND REGULATORY MATTERS Market consists of buyers, sellers, intermediaries and regulators. There is hardly any market which is not regulated. As between markets, the only difference in the matter of regulation could be in the degree of regulation which is exercised in different markets but every market is regulated without exception. For regulating any market, laws are required to be passed by the appropriate legislature. The market economy has to function within the legal framework. The legal frame work in turn has to undergo changes to take care of the market aspirations and the advancement in technology. Some of the important legislative measures taken up in the insurance sector of the Indian economy are considered herein. LIFE INSURANCE CORPORATION ACT, 1956 Life Insurance business in India was nationalised with effect from 1st September 1956. From this date, the life insurance business transacted by 154 Indian life insurers, the Indian business of 16 foreign insurers and 75 provident societies was taken over by Government of India. Earlier, LIC of India Act had been passed by the Parliament on 18th June 1956 which came into effect from 1st. July 1956. Some of the important provisions of this Act (as amended by IRDA Act 1999) are stated hereafter. (48) Life Insurance Corporation (LIC) was established w.e.f. 19 May 1956, as a body corporate having perpetual succession and a common seal with power to acquire, hold and dispose of property and may by its name sue and be sued in its name. It consists of not more than 16 members appointed by the Government, one of whom shall be appointed as its Chairman. Under Section 30 of the LIC of India Act, from the appointed date i.e. 1 Sept 1956, the corporation shall have the exclusive privilege of carrying on life insurance business in India and that certificate of registration granted to any insurer under the Insurance Act, 1938 shall cease to have effect from the said date. Now the above provisions of Section 30 have been altered by insertion of Section 30A consequent to the enactment of the IRDA Act, 1999. As a result, the exclusive privilege given to the LIC has been withdrawn. (49) Chapter – 4 DATA ANALYSIS Data gives preference of respondents of insurance company. Company’s Name LIC SBI Life Insurance ICICI Prudential OM Kotak Mahindra HDFC Total No.Of Respondent 78 7 10 3 2 100 Share(%) 78 7 10 3 2 100 80 70 No.Of Respondent 60 50 40 30 20 10 0 LIC SBI Life Insurance ICICI Prudential OM Kotak Mahindra HDFC Interpretation 78% of the people have LIC policy and is ranked number one by that percent of respondent. (50) Data gives benefits of insurance cover perceived by respondents. Benefits Cover future Uncertainity Tax Deduction Future Investment Total No. Of Respondent 55 20 25 100 Share(%) 55 20 25 100 60 No. Of Respondents 50 40 30 20 10 0 Cover Future Uncertainity Tax Deduction Future Investment Interpretation 55% of the respondents believe that covering future uncertainty is the biggest benefit of insurance policy20% & 25% of them believe that other benefits are tax deduction & future investment 20% & 25% of them believe that other benefits are tax deduction & future investment (51) Data provides features of insurance policy attracted the respondents. Feature Money Back Guarantee Larger Risk Coverage Easy Access to No. Of Respondent 15 37 7 Share (%) 15 37 7 Agent Low Premium Reputation Of Company Total 30 11 100 30 11 100 Features Of Insurance Policy M oney Back Guarantee Larger Risk Coverage Easy Access to Agent Low Premium Reputation Of Company Interpretation Majority of the respondent found larger risk coverage as the most attracted feature of their policy. (52) Data provides number of insurance policy type respondents. Policy Type Life Policy Non- Life Policy Both No. Of. Respondents 75 25 45 Share (%) 75 25 45 Nature of Policy 80 70 60 50 40 30 20 10 0 Chart Types No. Of. Respondents Life Policy Non-Life Policy Both Interpretation 75% of the respondents have life insurance policy while 45% have both. (53) Chapter 5 FINDINGS AND RECOMMENDATIONS 5.1 FINDINGS The project study report has the following findings: 1. Almost 80% of respondents have an insurance policy. 2. People have more number of life insurance policies as compared to non life insurance. 3. Majority of the respondent preferred/have L.I.C. policy since it was the only option due to complete government control in insurance sector. 4. Majority of the respondents believe that covering future uncertainty is the most important benefit of an insurance policy. 5. Majority of the respondent believed that larger risk coverage of their policy was the main feature of their policy that attracted them to buy that policy though low premium was the next important feature. 6. Due to the increasing concern of people towards their health/life the life insurance business has good prospects. 7. Due to increased in consumerism new product is launched everyday. Thus nonlife/general insurance business is also going to have boom period. 8. ICICI Prudential is the largest private player in the insurance industry in India. It has sold over one lakh fifty thousand policies till date. Besides LIC, ICICI Prudential is facing stiff competition from other private insurance players. 9. Out of total population of 1 billion of country, only 22% have insurance cover. So we can say that there is still large potential for both the public and private companies. Private companies have to give varied customized product to compete with the LIC which is holding about 97% of the total market. (54) 5.2 RECOMMENDATIONS The insurance companies should now try to identify the gap between current level of customer service and customer expectations. Some of the strategies being recommended are as follows:  Product Differentiation: Offering a product that is distinctly different from other products available in the market. Innovativeness: Identifying means of a delightful customer experience. Riders: These are additional offerings along with the main product. Flexibility: The companies should make their products flexible for the convenience of their customer. Hassle Free Service: All bureaucracy in customer interactions should be eliminated. Proper Policy Documentation: Wrong interpretations/ non-awareness of policy document by the customer may have serious implications in the long term and the possibility of the same should be alleviated by the insurance companies. (55) ANNEXURE S (56) QUESTIONNAIRE 1. Are You Employed? [ [ ] Yes ] No 2. Do you have any insurance policy? Yes [ [ ] No ] If Answer of Q.2 is Yes, then proceed else answer Q.8 3. Which insurance policy do you have? Life [ [ [ ] Non-Life ] Both ] 4. Which Company’s Insurance Policy you prefer the most? (Rank them) a) LIC [ ] b) ICICI Prudential [ [ [ [ [ ] c) SBI Life Insurance ] d) ING Vysya Life ] e) Om Kotak Mahindra ] f) TATA AIG Life ] g) Any Other (please specify)________________________ (57) 5. For how many years do you have insurance policy? (Please tick) a)<5YRS b) 5-10 YRS c)10-15 YRS d) Any Other (please specify)_____________________________ 6. What do you think are the benefits of insurance cover? (rank them) a) Cover Future Uncertainty b) Tax Deductions c) Future Investment d) Any Other (please specify)_____________________________ 7. Which feature of your policy attracted you to buy it? (Rank Them) a) Low Premium b) Larger Risk Coverage c) Money Back Guarantee d) Reputation of Company e) Easy Access to Agents f) Any Other (please specify)_____________________________ 8. YOUR MONTHLY HOUSEHOLD INCOME? a) <10k b) 10k-20k c) 20k-30k d) 30k-40k e) Any Other (please specify)_____________________________ (58) 9. Do you really think insurance policy cover in today’s scenario is not essential? _____________________________________ _____________________________________ _____________________________________ _____________________ THANKYOU! NAME: _________________________ ADDRESS: OCCUPATION:___________________ (59) COMPARATIVE ANALYSIS OF MAJOR INSURANCE PLAYERS MONEYBACK POLICIES - 20 Years (Increasing insurance cover, Tax-free money receivable at regular intervals) ALLIANZ BAJAJ Cash care Protect Pack 1,00,000 20 20 6,402 1,28,040 ALLIANZ BAJAJ Cash care Protect Pack BIRLA SUNLIFE Money Back 1,00,000 20 20 6,144 1,22,880 BIRLA SUNLIFE Money Back ICICI PRU Cash Back 1,00,000 20 20 6,818 1,36,366 ICICI PRU Cash Back ING VYSYA Maximizing Life Moneyback 1,00,000 20 20 6,158 1,23,160 ING VYSYA Maximizing Life Moneyback LIC Money Back 1,00,000 20 20 6,564 1,31,280 LIC Money Back OM KOTAK Money Back 1,00,000 20 20 7,495 1,49,900 OM KOTAK Money Back TATA AIG Assure 21 Years Money Saver 1,00,000 21 21 9,369 1,96,749 TATA AIG Assure 21 Years Money Saver (Rs) Sum Assured Term(yrs) Prem. Paying term(yrs) Yrly. Prem. Tot. Prem. (Rs) Death Benefit Min. Cover Year 8 Year 16 1,00,000 1,26,677 160,471 ALLIANZ BAJAJ CashCare Protect Single Cover 10,000Yr 4, 15,000Yr 8, 25,000Yr12, 25,000Yr16 1,00,000 1,48,080 243,854 BIRLA SUNLIFE Moneyback 15,000 Yr 5, 15,000Yr1 0, 15,000Yr 15 217,048 1,00,000 1,36,857 1,87,298 ICICI PRU Cashbak 10,000Yr4, 15,000Yr8, 20,000Yr12, 25,000 Yr16 1,00,000 1,00,000+Bonus 1,00,000 1,46,400 1,92,800 1,00,000 1,56,000 2,12,000 OM KOTAK Money back 20,000Yr5, 20,000Yr10, 20,000 Yr15 1,00,000 1,47,746 2,28,287 TATA AIG Assured 21 Years Money Saver 10,000Yr3, 10,000Yr6, 10,000Yr9, 10,000Yr12, 10,000Yr15, 10,000 Yr18 228,596 ING VYSYA Maximizing Life Moneyback 20,000 Yr 5, 20,000 Yr 10, 20,000 Yr 15 LIC Moneyback 20,000Yr5, 20,000Yr10, 20,000 Yr15 (Rs) Interim Benefits Maturity Benefits On Maturity 130,611 169,112 40,000 + bonus 156,000 130,300 Total amt 205,611 217,048 239,112 100,000+bonus (60) 216,000 190,300 288,596 Rate of return (%) Pre-tax Post-tax 30% Post-tax 20% Post-tax 15% 6.8 11.9 9.9 9.1 5.2 8.2 7.1 6.5 7.0 11.7 9.9 9.1 not indicate not indicate not indicate not indicate 6.5 11.7 9.7 8.8 3.3 8.4 6.4 5.6 4.3 8.6 6.9 6.2 Comparison Of Premium of Money back Policies Age 30 years Policy Term 20 Years PREMIUM SA:1Lac 6280 6592 6158 9099 7120 N.A 5856 SA:2lac 12559 12884 11836 17698 14240 N.A 11412 1 2 3 4 5 6 7 Age 30 years Policy Term 15 Years PREMIUM SA:1Lac 7953 9094 8362 N.A 8890 N.A 7572 SA:2Lac 15906 17888 16244 N.A 16480 N.A 14844 Company 1 2 3 4 5 6 7 LIC ICICI PRU ALLIANZ BAJAJ TATA-AIG OM KOTAK MAX NEWYORK BIRLA SUNLIFE Company LIC ICICI PRU ALLIANZ BAJAJ TATA-AIG OM KOTAK MAX NEWYORK BIRLA SUNLIFE Age 35years Policy Term 20 Years PREMIUM SA:1Lac 6464 6683 6252 9219 7330 N.A 6000 SA:2lac 12928 13067 12024 17938 14660 N.A 11700 1 2 3 4 5 6 7 Age 35 years Policy Term 15 Years PREMIUM SA:1Lac 8089 9160 8432 N.A 9010 N.A 7668 SA:2Lac 16177 18019 16384 N.A 16700 N.A 15036 Company 1 2 3 4 5 6 7 LIC ICICI PRU ALLIANZ BAJAJ TATA-AIG OM KOTAK MAX NEWYORK BIRLA SUNLIFE Company LIC ICICI PRU ALLIANZ BAJAJ TATA-AIG OM KOTAK MAX NEWYORK BIRLA SUNLIFE SA-Sum Assured (61) GUARANTEES ON INSURANCE & PENSION PRODUCTS Current as on March 2006 Company ALLIANZ BAJAJ AVIVA AMP sanmar Birla Sun Life HDFC Standard ICICI Pru ING Vysya LIC MXNYL Metlife OM Kotak SBI Life Tata AIG IRRs/ Guarantees Insurance 2.14% -1.80% FDNA 0.7-1.5% 0.73% 1.7-4.95% 0.70% 4-6% 3.05% 5.5-5.7% -0.04% 0.73-4.7% -2-4.4% Pension NA FDNA FDNA 1-1.5% 1.7-1.9% 3.06% NA 1.3-2% 1.4-1.9% NA 2.10% 4%* 1.3% FDNA - Further Data Not Available # - From April 1, 2003 when 3% guaranteed returns would be provided on all three fund options. * - Guarantees for premiums for first seven years. Pls. note that the above provides a range of returns offered by companies wherever possible. For others returns have been computed for a particular term, age and Sum Assured of an Endowment product. Most of the returns pertain to particular products. (62) BIBLIOGRAPHY •Insurance Advisor’s Manuals and Study Material of ICICI Prudential. •NIS Sparta Ltd. (New Delhi) •Insurance Watch and other Magazines. •Economic Times •Library of College • • • • • (63)