SUMMER TRAINING PROJECT REPORT

AVIVA LIFE INSURANCE CO. LTD.

Submitted in partial fulfillment For the requirement of the award of Bachelor of Business Administration (BBA)

FINANCIAL BOOM IN INSURANCE SECTOR DUE TO PRIVATE PLAYERS FOR AVIVA LIFE INSURANCE IN NEW DELHI

Training Supervisor

Submitted by: Enrolment No.: BBA 3rd Year Session- 200-20

ACKNOWLEDGEMENT
The success of my research report would not hint at any one individual, but it was a consolidated effort on the part of all who contributed to this report. I am thankful to for providing me an opportunity to gain both theoretical and practical knowledge in the field of Marketing and extending their full support. Last but not the least, I would like to thanks my parents and friends for their moral support throughout the project.

EXECUTIVE SUMMARY
This project aims at providing information regarding insurance sector and how emergence of private players proved to be a boom to this sector. Chapter 1 explains about the concept of insurance, its purpose and need in contemporary world. This chapter also includes origination of insurance; its nationalization in India; benefits; advantages; basic principles that make insurance remain a popular and fair arrangement; mechanism; governing legislation over insurance. IRDA (Insurance Regulatory and Development authority) governs insurance industry. Its duties, powers and functions are mentioned. Chapter 2 is all about the main as well as sub objectives of the organization and what are their research methodologies. Chapter 3 is about a brief comparison between private players and LIC. Chapter 4 includes the analysis of data being collected regarding the Aviva Life Insurance Co. Ltd. over other private players. In chapter 5 findings are based on data analysis presented in earlier chapter and in the later half of this chapter recommendations are given. Chapter 6 is the conclusion made on the basis of this project. New players are leading the sector due to their strategic management and tailor made projects. People opting for Aviva plans are more as compared to other private players but the latter are gaining momentum in the market day by day.

CONTENTS
Chapter 1.0 INTRODUCTION 1.1 1.2 1.3 1.4 1.5 Insurance Industry Overview Profile of Aviva Life Insurance Co. Ltd. Problems of the Organization Competition Information S.W.O.T- Analysis

Chapter 2.0 OBJECTIVES AND METHODOLOGY 2.1 2.2 2.3 2.4 2.5 Significance Managerial Usefulness of the study Research Objective Scope of the study Research Methodology

Chapter 3.0 CONCEPTUAL DISCUSSION Chapter 4.0 DATA-ANALYSIS Chapter 5.0 FINDING AND RECOMMENDATIONS Chapter 6.0 CONCLUSIONS ANNEXURES BIBLIOGRAPHY

CHAPTER 1.0 INTRODUCTION

1.1 1.2 1.3 1.4 1.4 Insurance Industry Overview Organization profile of Aviva Competition Information Problems of the Organization S.W.O.T- Analysis

INTRODUCTION 1.1 OVERVIEW OF INSURANCE INDUSTRY

1.1.1 Insurance?
Every asset has a value for its owner and for those who are benefited with the existence of that asset. Insurance is concerned with the protection of economic value of assets. All of us are interested in the creation of assets because: i. ii. iii. iv. All assets have values. They yield income to the owner. They meet some other needs of the owner. They may provide satisfaction of some needs and also yield income to the owner. Every asset has normally an expected lifetime. During this period, it is expected to perform and provide income/comfort to the owner. The owner, being aware of this, plans the things in such a way that by the time the expected lifetime of the asset expires, he is ready with the funds required for its replacement. In this way, he ensures that the value or income from the asset is not lost. Well, this appears to be a fine arrangement provided the asset completes its expected lifetime. All assets carry the risk of being destroyed or damaged. But all assets may not necessarily get destroyed or damaged. Only in a few instances, the probability turns out to be true and the assets gets actually lost or destroyed by accident or some other unfortunate event before the compilation of its expected lifetime. The owner and those deriving benefits from the asset will suffer because the arrangement to make available its substitute is not yet ready.

Insurance is helpful in mitigating such adverse consequences. To sum up, assets are insured, as they are likely to be lost or made non-functional through an accidental occurrence. Insurance does not protect the assets. This means that insurance cannot prevent loss to the assets due to perils. Nor can insurance avoid the occurrence of perils. It only compensates, may not be fully, the economic or financial loss resulting to the asset from such damage or destruction.

1.1.2 BRIEF HISTORY OF INSURANCE 1.1.2.1 The beginning

The beginning of insurance business is traced to the city of London. It started with the marine business. Marine traders, who used to gather at Lloyds coffee house in London, agreed to share losses to goods during transportation by ship. Marine related losses included: Loss of ship by sinking due to bad weather in high seas. Goods in transit by ship robbed by sea pirates. Loss of or damage to the goods in transit by ship due to bad weather in high seas. The first insurance policy was issued in England in 1583.

1.1.2.2 Life insurance in India

In India, insurance started with life insurance. It was in early 19th century when the Britishers on their postings in India felt the need of life insurance cover. It started with English Companies like, The European and the Albert. The first Indian insurance company was the Bombay Mutual Assurance Society Ltd., formed in 1870.

In the wake of the Swadeshi Movement in India in the early 1900s, quite a good number of Indian companies were formed in various parts of the country to transact insurance business. To name a few :: Hindustan Co-operative and National Insurance in Kolkata; United India in Chennai; Bombay Life, New India and Jupiter in Mumbai and Lakshmi Insurance in New Delhi.

1.1.2.3 Nationalization of life insurance in India

In 1956, life insurance business was nationalized and LIC of India came into being on 1.9.1956. the government took over the business of 245 companies (including 75 provident fund societies) who were transacting life insurance business at that time. Thereafter, LIC got the exclusive privilege to transact life insurance business in India. Relevant laws in India were amended in 1999 and LICs monopoly right to transact life insurance business in India came to an end. At the close of financial year ending 31.3.2004, twelve new companies were registered with the Insurance Regulatory & Development Authority(IRDA) to transact life insurance business in India.

1.1.3 What is Life Insurance?

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. The first organized 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.

1.1.4 Purpose and need for insurance

Assets are likely to be destroyed or made non-functional due to accidental occurrences called perils. Assets can, therefore, be insured. A few examples of perils are: fire, floods, breakdowns, lighting and earthquakes. Perils are the events. Risks are the consequential losses or damages. Possibility of damage to asset caused by any peril is the risk that asset is exposed to. Risk means uncertainty or unpredictability about future loss or damage, which may or may not happen. This refers to the losses, which may happen suddenly and unexpectedly. This is because of uncertainty about the risk that insurance plays the role. Insurance become relevant only if there are uncertainties of occurrences of event leading to losses. Insurance is done against the contingency of the happening of such events. No uncertainty- No insurance.

1.1.5 Benefits of Life Insurance 1.1.5.1 Replacement of Income

Life insurance products can provide support to the family and take care of the family's financial requirements. It provides a lump sum or periodic payments to help replace the income stream, in case of an unfortunate event or an untimely demise of the breadwinner.

1.1.5.2 Lifestyle Maintenance

Life insurance products can help you build a corpus to protect and maintain your lifestyle against fluctuations in your future income

1.1.5.3 Costs of Education

You need to support your child with a sound educational background, to help your child achieve his/her dreams. Life insurance products can help you fulfill these needs, whether you are there or not.

1.1.5.4 Retirement Expenses

Retirement is an age when an individual has fulfilled almost all his responsibilities and looks forward to relaxing. Life insurance products can help you lead a secure and tension free retired life by ensuring that you get guaranteed pension.

1.1.5.5 Mortgage and Debt protection

With increasing consumerism and ever-rising demands, loans and debts are now part of life. Life insurance products help you ensure that your family is not unduly burdened with their repayments, in case of an unfortunate event or an untimely demise of the breadwinner.

1.1.5.6 Hardships Protection

Life insurance provides a sense of security to the income earner and to his/her family. Buying life insurance frees the individual from various unnecessary financial burden that can otherwise make one spend sleepless nights.

1.1.6 Life Insurance vs. Other Investments

Most investment options make your money work harder, but there are no substitutes to life insurance. Because only a life insurance policy gives you both - risk cover against your life, as well as returns on your money invested Life insurance allows long tem savings to be made in a relatively painless manner because of the low and convenient investments made through premiums. Moreover, it encourages 'forced thrift' which means the insured is made to pay premiums and save money which he/she may not do in the regular course of life. Should you require loans, say for building a house, it can be easily obtained against a life insurance policy. Amongst the most known benefits of Life Insurance is the savings on your income taxes. Life insurance cannot be compared with any other form of investment as life insurance gives you a life long benefit and returns on your money when it is most required. Insurance premiums are linked to age of the life insured and the earlier you buy, the lower are the premium requirements. Besides, the money stays invested for a longer time and thereby maximizing your returns through the power of rupee compounding. So, a life insurance policy is an ideal tool to gain security and ensure savings. Most importantly it provides you with that unique sense of security and peace of mind that no other form of investment provides.

1.1.7 Advantages of life insurance

Secured targeted saving-a uniqueness Life insurance is not merely an investment or a saving device much more than that. In any other investment or saving avenue, like bank deposits, savings certificates or mutual funds or shares and stocks etc., amount of funds available at any time will not be more than the amount saved, appreciation or interest earned till then. In life insurance, the amount available is the one that one wished to have at end of the savings period which may range upto 30 or even more years. Life insurance has advantages over the other forms of savings: o Facility of nomination and assignment makes the claim settlement easy on death. o Life insurance involves compulsory savings. o Tax benefits-on premium paid as well as the amount received by way of claim. o Protected against court attachments. o Loans can be raised against a life insurance policy.

1.1.8 Certain Basic Principles That Make Insurance Remain a Popular and Fair Arrangement
People are exposed to risks the consequences of which are difficult to be borne by an individual.

No person should be in position to make the risk happen and take advantage. This means that the occurrence has to be random, accidental and nodeliberate of the insured person i.e. the losses must happen suddenly and creation unexpectedly.

1.1.9 Mechanism of Insurance

The concept of insurance is thatPeople exposed to the same risk come together and agree to share a loss collectively if any one of their members suffers it from that risk. The insurance companies play the role of implementing this conceptThey bring together people exposed to similar risk. They collect members contribution in advance in the shape of premiums and create a fund out of which the losses are paid. In the event of breadwinners death, the family income stops suddenly. The family income may also stop on retirement of the breadwinner. Life insurance covers the above contingencies and provides relief to the family in the event of death or retirement of the breadwinner. Variable needs for life insurance can beI. Providing financial security for the family. II. Provision for education, marriage etc. of children. III. Post-retirement income for self and dependents.

IV. Special needs like Medical Expenses.

1.1.10 Governing legislation

Insurance is a federal subject in India and the legislation that governs insurance in India is: The Insurance Act, 1938; and The IRDA Act.

1.1.11

Insurance Regulatory & Development Authority

Insurance Regulatory and Development Authority (IRDA) was constituted in 1999

by an Act of Parliament to protect the interests of the policyholders and to regulate, promote and ensure orderly growth of the insurance industry. IRDA consists of a ten member team that comprises a Chairman, five whole-time members and four part-time members. IRDA allows registration of new players in the insurance field. It also has the authority to renew, modify, withdraw, suspend or cancel such registration. IRDA ensures protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance. It specifies requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents. After creation of IRDA, insurance sector has seen tremendous growth. Before IRDA came into force there were only players in the insurance field, namely, Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). Since then 13 new players have entered in the insurance sector.

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1.1.11.1 Composition of Authority under IRDA Act, 1999

As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority The Authority is a ten member team consisting of Chairman; Five whole-time members; Four part-time members,

(All appointed by the Government of India)

1.1.11.2 Duties, Powers and Functions of IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA. (1) Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. (2) Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include, a. issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; b. protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;

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c. specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; d. specifying the code of conduct for surveyors and loss assessors; e. promoting efficiency in the conduct of insurance business; f. promoting and regulating professional organizations connected with the insurance and re-insurance business; g. levying fees and other charges for carrying out the purposes of this Act; h. calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business; i. control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938); j. specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries; k. regulating investment of funds by insurance companies; l. regulating maintenance of margin of solvency; m. adjudication of disputes between insurers and intermediaries or insurance intermediaries; n. supervising the functioning of the Tariff Advisory Committee;

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o. specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause (f); p. specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and q. exercising such other powers as may be prescribed

Indian Life Insurance Joint Ventures Foreign Entity

AIG Allianz Aviva Life Cardiff ING Life New York Life Met Life Old Mutual Prudential Standard Life Sun Life

Local Company/Venture
Tata Bajaj Dabur State Bank of India Life Vysya Max J & K Bank, Pallonji Group & others Kotak Mahindra ICICI HDFC Birla

Future Planning and Insurance

Every insurance plan revolves around the financial consequences of a premature death. Obviously, the consequences are too large to ignore and cannot be totally covered by an individual's personal resources. Basically, life insurance is nothing but a contract where the insured party or the purchaser of insurance pays a premium that protects him against specific losses. When planning your life insurance portfolio, you must consider your family's recurring needs like medical expenses, house rent, provision costs for instance as well as long-term needs that involve reinstating your family's set standard of living and their future such as higher education and marriages.

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Throughout our living existence, we are faced by numerous risks - failing health, financial losses, accidents and even fatalities. Insurance addresses all these uncertainties on financial terms. Change is perhaps, the only static constant within the dynamics of life and risks always move in tandem within a changing environment. Life insurance is more of a hedging mechanism rather than a real investment avenue. It is essentially a mechanism that eliminates risks primarily by transferring the risk from the insured to the insurer. The insurance industry in particular has been subjected to numerous changes in the last few decades since the need for insurance is more evident now than earlier. People's spending patterns are changing and more & more resources are needed for immediate consumption. In fact, we recommend that you review your needs and insurance portfolio from time to time, say every 2-3 years. During the days of yore, the Joint family system had provided protection in case any unfortunate incidents were to occur to any individual of the family. But after the advent of industrialization, joint families have split into single nuclear families. The support of the extended family cannot be counted upon anymore. Doesn't this lack of a unified support system enhance the risks an individual is subjected to and intensify his or her need for insurance?

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1.2

COMPANY PROFILE

Aviva is UKs largest and the worlds fifth largest insurance Group. It is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world. With a history dating back to 1696, Aviva has a 40 million-customer base worldwide. It has more than 364 billion of assets under management. In India, Aviva has a long history dating back to 1834. At the time of nationalization it was the largest foreign insurer in India in terms of the compensation paid by the Government of India. Aviva was also the first foreign insurance company in India to set up its representative office in 1995. In India, Aviva has a joint venture with Dabur, one of India's oldest, and largest Group of companies. A professionally managed company, Dabur is the country's leading producer of traditional healthcare products. In accordance with the government regulations Aviva holds a 26 per cent stake in the joint venture and the Dabur group holds the balance 74 per cent share. With a strong sales force of over 28,000 Financial Planning Advisers (FPAs), Aviva has initiated an innovative and differentiated sales approach to the business. Through the Financial Health Check (FHC) Avivas sales force has been able to establish its credibility in the market. The FHC is a free service administered by the FPAs for a needbased analysis of the customers long-term savings and insurance needs. Depending on the life stage and earnings of the customer, the FHC assesses and recommends the right insurance product for them. Aviva pioneered the concept of Bancassurance in India, and has leveraged its global expertise in Bancassurance successfully in India. Currently, Aviva has Bancassurance tieups with ABN Amro Bank, American Express Bank, Canara Bank, Centurion Bank of Punjab, The Lakshmi Vilas Bank Ltd. and Punjab & Sind Bank, Co-operative Banks in Gujarat, Rajasthan, Jammu & Kashmir, Bihar, West Bengal, Andhra Pradesh and Maharashtra and regional Banks. 15

When Aviva entered the market, most companies were offering traditional life products. Aviva started by offering the more modern Unit Linked and Unitised With Profit products to the customers, creating a unique differentiation. Avivas products have been designed in a manner to provide customers flexibility, transparency and value for money. It has been among the first companies to introduce the more modern Unit Linked products in the market. Its products include: whole life (LifeLong), endowment (LifeSaver, EasyLife Plus), child policy (Young Achiever) single premium (LifeBond and LifeBond Plus), Pension (PensionPlus), Term (LifeShield), fixed term protection plan (Freedom LifePlan) and a tax efficient investment plan with limited premium payment term (LifeBond5). Aviva products are modern and contemporary unitised products that offer unique customer benefits like flexibility to choose cover levels, indexation and partial withdrawals. Avivas Fund management operation is one of its key differentiators. Operating from Mumbai, Aviva has an experienced team of fund managers and the range of fund options includes Unitised With-Profits Fund and four Unit Linked funds: - Protector Fund, Secure Fund, Balanced Fund and Growth Fund. Aviva has 156 Branches in India (including rural branches) supporting its distribution network. Through its Bancassurance partner locations, Aviva products are available in close to 500 towns and cities across India. Aviva is also keen to reach out to the underprivileged that have not had access to insurance so far. Through its association with Basix (a micro financial institution) and other NGOs, it has been able to reach the weaker sections of the society and provide life insurance to them. DABUR Founded in 1884, Dabur is one of India's oldest and largest group of companies with consolidated annual turnover in excess of Rs 1,899 crores. A professionally managed company, it is the country's leading producer of traditional healthcare products. 16

Partners At Aviva we are committed to helping our customers get 'Kal par Control' and make the most out of their lives. It is our constant endeavour to ensure that our customers have easy access to Aviva products and services at all times. Aviva has pioneered bancassurance in the country through its tie-ups with 22 leading private and nationalized Banks in the country. Aviva also focuses on bancassurance worldwide and has a proven track record of successful bancassurance relationships. It has 40 major partnerships with leading banks across the globe. Aviva is a leading bancassurer in countries such as France, Italy, Spain, Australia and New Zealand. ABN AMRO Bank ABN AMRO is a prominent international bank with European roots and a clear focus on consumer and commercial banking gaining a competitive edge on the chosen markets and client segments. ABN AMRO Bank (India) ventured into the Indian market in 1920 primarily to finance the diamond trading business and evolved by mid 1990s into a fastest growing retail bank and a well-respected wholesale bank. The Bank is recognized as one of the most successful consumer banking outfits in the county, known for its innovation and aggression. ABN India consumer banking pioneered the distribution of third party financial products like mutual funds, bonds and life insurance. Aviva's relationship with ABN India commenced in June 2002 under which the bank introduces its customers to Aviva for insurance and provides access to its affluent customer base across the country through its operations in 21 branches at 14 locations. American Express Bank American Express Company is a diversified worldwide travel and financial services company founded in 1850. It is the worlds largest single card issuer, based on purchase

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volume generated of nearly 55 million cards worldwide. Present in India since 1921, American Express provides high quality travel related and financial services in India. Aviva Life Insurance entered into a strategic alliance with American Express for distribution of Life Insurance in June 2002 to offer top-of the line saving-cum-protection plans to Amex bank and card customers. Aviva offers tailor-made investment solutions to the high net worth clients of the Wealth Management channel. The retail card segment is being tapped through outbound calling to the Amex card holders. The American Express Inbound call centre also pitches Aviva products to its callers. The Lakshmi Vilas Bank Ltd The Lakshmi Vilas Bank Ltd, based out of Karur, is among the top private banks in India. It has 221 branches with a customer base of 1.2 million, across 10 states. Currently Aviva products are sold across 204 branches of LVB. CANARA BANK Canara Bank is one of the largest retail banks in India with 2,513 branches spread across 25 States and 4 Union Territories. The customer base of Canara Bank exceeds 27 million. With a net profit of INR 1110 Crores, deposits of over INR 96,908 Crores, 47389 employees for the year ending Mar 2005, Canara Bank is truly a Bank to be reckoned with for the sheer magnitude of coverage it offers its clients. Canara Bank has tied up with Aviva as a Corporate Agent for its Life Insurance Products. Aviva products are currently offered in 1030 Canara Bank branches in 103 Cities. Punjab & Sind Bank Punjab & Sind Bank was established in the year 1908. Based on the principles of social commitment to the people, help the farmers, and the weaker sections of the society to raise their standard of living and play a significant role in the development of the country. Even

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after 96 years of its inception, Punjab & Sind Bank stands committed to honor the high ideals of its founding fathers. Punjab and Sindh Bank has a network of 759 branches and 132 extension counters all over the country with close to 9,765 employees. 42 per cent of its branches are in the rural and semi urban areas. In line with spirit of liberalisation the Bank has laid special emphasis on International banking, Hire purchase, Leasing, Tele-banking and Credit card facilities. The bank has also started their Rural Development Division, High Tech Agricultural Branches, Specialised Locker Branches, Industrial Finance and SSI branches, besides Housing Finance Branch for the convenience of its customers. Centurion Bank of Punjab Centurion Bank of Punjab is a new generation private sector bank offering a wide spectrum of retail and corporate banking products and services. It holds leadership positions in retail two-wheeler loans and commercial vehicle loans. It has been among the earliest banks to offer a technology-enabled customer interface that provides easy access and superior customer service. RBI has approved the merger between Centurion Bank and Bank of Punjab effective from October 1st, 2005. The merged entity, named Centurion Bank of Punjab, has a strong nationwide franchise of 241 branches and extension counters and 389 ATMs. With strengths in the retail, SME and agriculture businesses the bank is well poised to capture the opportunities that exist in the Indian market. The combined banks 3,500 employees will continue to provide support and an enhanced banking experience to our customers, as part of a bigger, stronger bank. IndusInd Bank IndusInd Bank Ltd., is one of the leading new-generation private-sector banks in India, commenced operations in 1994 and had a net worth of Rs.866 crore as at March 31, 2006. As of date, the Bank has a network of 148 branches and 87 offsite ATMs spread over 118 geographical locations in 24 states and Union Territories. 19

Recently the Bank received licenses for opening 19 new branches across the country. With this the network will now increase to 180 branches by March-April 2007. Internationally, the Bank has a representative office each in Dubai and London. The Bank also enjoys strategic alliances with Union National Bank, Abu Dhabi in the UAE and Doha Bank in Qatar. These strategic alliances encompass a wide range of banking services, including deposit accounts, remittance business, loans, wealth management advisory, distribution of third party products, trade finance, global banking, and investment banking including corporate finance. PRODUCTS & SERVICES The right investment strategies won't just help you plan for a more comfortable tomorrow -- they will help you get Kal Par Control. At Aviva, life insurance plans are created keeping in mind the changing needs of you and your family. Our life insurance plans are designed to provide you with flexible options that meet both protection and savings needs. We offer our customers a full range of transparent, flexible and value for money products that include whole life (LifeLong), endowment (LifeSaver, EasyLife Plus), child policy (Young Achiever) single premium (LifeBond, LifeBond Plus), Pension (PensionPlus), Term (LifeShield), fixed term protection plan (Freedom LifePlan) and a 5 year recurring premium investment cum protection plan (LifeBond5). Aviva products are modern and contemporary unitised products that offer unique customer benefits like flexibility to choose cover levels, indexation and partial withdrawals. We also offer you a choice of investment options. You can choose between our Unit Linked Fund or our With Profits Fund. The With Profits Fund guarantees that the selling price of the units will never fall. The unit value of this fund is increased by crediting bonuses on a daily compounding basis. The fund provides investment security to your capital.

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The Unit Linked Fund is designed to provide relatively more progressive capital growth wherein you automatically receive the benefit related to the investment performance of the fund. Under Unit Linked Fund, on some of our products we offer a choice of fund options: Protector Fund: Progressive returns on your investment by investing higher element of assets in debt securities, with minimum exposure to equities. The fund comprises of debt securities in the range of 60-100%, equities in the range of 0-20% and money market and cash in the range of 0-20%. Secure Fund: The investment objective of this fund is to provide progressive return on your investment with a minimum guarantee on maturity. The fund comprises of debt securities in the range of 50-100%, equities in the range of 0-20% and money market and cash in the range of 020%. Initially the equity exposure will be 10 %. Growth Fund: The investment objective of this fund is to provide high capital growth by investing higher element of assets in the equity market. The fund will comprise of debt securities in the range of 0-50%, equities in the range of 0-85% and money market and cash in the range of 0-20%. Initially the equity exposure will be 75%. Balanced Fund: The investment objective of this fund is to provide capital growth by availing opportunities in debt and equity markets and providing a good balance between risk and return. The fund comprises of debt securities in the range of 50-90%, equities in the range of 0-45% and money market and cash in the range of 0-10%.

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Aviva also offers a whole range of group insurance products and corporate solutions. We have a dedicated team that works with corporates across the country. PURE PROTECTION PRODUCTS Aviva Life Insurance offer the following policies to take care of our protection needs Life Long Life Shield

LIFE LONG LifeLong is designed to suit your individual requirements, no matter which life stage you are at, and changes as your needs change during your entire life. For the same premium, you can opt for a higher life cover (protection) and lower savings or lower life cover and higher savings. The choice of protection-savings mix is yours, and the decision can be based on your priorities and age. You can also cover your spouse under the same policy without any additional expense through a joint life policy (first death basis). LifeLong offers a With Profits or 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest 100% of your premiums either in With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in each selected unit linked fund must be 10%. LIFESHIELD Insurance Term Pure LifeShield is a low cost life insurance plan which guarantees to pay a lump sum amount in case of your death during the term of the policy. LifeShield can be purchased for any life between 18 to 55 years of age. However, the maximum age of the life insured at expiry of the policy is 65 years. The minimum and maximum policy terms are 5 years and 40 years, 22

respectively. The minimum annual premium is Rs.2,000 and the minimum sum insured is Rs.500,000. The sum insured of the policy can be increased (only upto 40 years of age) once by 50% (subject to maximum increase of Rs.1,000,000) during the term of the policy, without submitting any evidence of good health, if: child. This option to increase the sum insured is available if the policy has been accepted on standard rates. It can be exercised only when outstanding term of the policy is at least 5 years and the policy is inforce for full sum insured PURE SAVINGS PRODUCTS Aviva Life Insurance offer the following savings policies Easy Life Plus Young Achiever Life Bond 5 Life Bond Life Saver Life Long Pension Plus Save Guard Life Bond Plus Save Guard Junior Life saver Plus Freedom Life Plan You decide to increase the sum insured within three months of your marriage. You decide to increase the sum insured within three months of the birth of your

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Easy Life Plus

EasyLife Plus is a simple, unit-linked endowment plan with the benefit of life protection. By choosing an appropriate premium level and term, you can match the maturity date of the plan to a specific savings need such as your childs education, wedding or any other financial need. EasyLife Plus also offers an extra protection against accident without requiring you to undergo any medical examinations. EasyLife Plus offers a With Profits or 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest 100% of your premiums either in With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in each selected unit linked fund must be 10%. Young Achiever

Child policy YoungAchiever is a regular premium life insurance product designed to meet the financial needs of your children- be it higher education, marriage, establishing themselves while starting a career or a business, or any other need. Through this policy, you save regularly to meet your children's needs, and at the same time their financial needs are taken care of should something unfortunate happen to you. YoungAchiever can be purchased on the life of any one of the parents with the child as the nominee. YoungAchiever offers a With Profits or 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest 100% of your premiums either in With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in each selected unit linked fund must be 10%.

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Life Bond

LifeBond 5 is an investment plan where you pay premiums only for 5 years and get investment returns with maximum tax benefits. This unit-linked plan gives you the flexibility that you, as a smart investor, seek both at the time of investment and at maturity. LifeBond 5 offers 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest your premiums in any one fund or in a combination of funds. The minimum allocation in each selected fund must be 10%. LifeBond is a unit linked, Single Premium Whole Life plan, designed to provide you the maximum benefit of investment returns and tax benefits. You can gift LifeBond to your newborn and provide financial security when he/ she needs it. Also, you can cover your spouse under the same policy without any additional expense through a joint life policy (second death basis). LifeBond offers a With Profits Fund and 3 unit linked funds, which give you the flexibility of choosing how your money should be invested in terms of risk and security of return on investment. Life saver

Life Saver is a unit linked endowment plan designed to meet your specific long-term savings needs such as education and wedding costs for your children, with the added reassurance of a life cover to meet those costs in the unfortunate event of your death before the policy matures. You can take LifeSaver on single life or jointly with your spouse (first death basis). LifeSaver can be purchased on any life between 18 to 65 years. However, for any rider cover the maximum entry age is 55 years. LifeSaver offers a With Profits or 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest 100% of your premiums either in With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in each selected unit linked fund must be 10%.

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Pension plus

Pension Plus is a tax efficient, personal pension plan that is designed to help you earn a regular income, even after you stop working. Through this plan, you build a fund till you retire which provides you financial security after retirement. Pension Plus can be purchased for any life between 18 to 65 years of age. The minimum age at maturity is 40 years and the maximum age at maturity is 70 years. You have the option of either paying regular premiums or paying a single premium. The minimum annual premium is Rs. 6,000 for regular premium and Rs 1,00,000 for a single premium option. The minimum policy term is 5 years. A With Profits Fund or 3 unit linked funds; Secure, Growth and Balanced Funds. Save Guard

SaveGuard is a simplified, unit-linked endowment plan. It is specially designed to help you save for important milestones like your childs education and marriage, building a house or even creating a retirement fund. It also provides financial protection for your dependants in the unfortunate event of your demise. SaveGuard offers life insurance as well as an investment opportunity without requiring you to undergo any medical examinations. SaveGuard offers 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest your premiums in any one fund or in a combination of funds. The minimum allocation in each selected fund must be 10%. Life Bond plus

LifeBond Plus is a unit linked, Single Premium Endowment plan, designed to provide you the maximum benefit of investment returns and tax benefits.The entry age is 18 to 65 years (last birthday) and in case rider is opted, the maximum entry age is 55 years. The policy terms is 5 to 25 years (maximum age at maturity 70 years).A With Profits Fund or 3 unit linked funds; Secure, Growth and Balanced Funds. 26

SaveGuard Junior

SaveGuard Junior is a simplified, unit-linked endowment plan, which covers your childs life. It is specially designed to help you save for important milestones in your childs life like education, setting up a business or marriage. SaveGuard Junior offers an investment opportunity as well as life insurance without requiring you to undergo any medical examinations. SaveGuard Junior offers entry ages from 0 to 17 years, a choice of policy terms, from 10 to 30 years as well as an option of investing in any or a combination of 3 unit-linked funds. SaveGuard Junior also offers a guarantee that the units invested in the Secure Fund will not be less than the price they were bought at plus 3% interest compounded annually. LifeSaver Plus is a Unit Linked endowment plan designed to meet your future savings requirements besides offering a higher life cover. The plan offers full Sum Assured in addition to the Fund Value as death benefit in case of your unfortunate death, thereby providing a higher financial protection to your family. You can also opt for the Systematic Transfer Plan. The plan provides a guaranteed addition at maturity. In addition, the Plan offers a minimum guarantee on maturity on the funds allocated towards the Secure Fund. LifeSaver Plus

LifeSaver Plus can be purchased for any age between 0 to 60 years. However, in case any rider is opted for the maximum entry age is 55 years. You can also choose the premium payment term separately from the policy term so that you can match your paying capacity to your financial goals. You have the freedom of choosing from 4 Unit Linked Funds: Protector, Secure, Growth and Balanced Funds and the option of investing through the Systematic Transfer Plan. In addition, you get a minimum 2% Guaranteed Addition at maturity and have the choice of increasing or decreasing your premium amount whenever you like. Freedom Life Plan

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Freedom LifePlan is a unit-linked limited premium paying endowment plan with guaranteed loyalty additions. This unit linked plan gives you the flexibility to customise the plan to suit your individual needs and alter it subsequently with your changing needs. You can take Freedom LifePlan on single life or jointly with your spouse (first death basis). Freedom LifePlan offers 3 Unit Linked investment fund options, which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest your premiums in any one fund or in a combination of funds. The minimum allocation in each selected fund must be 10%.

1.3

PROBLEMS OF THE ORGANIZATION

Service delivery / Logistics perception is weak Negative Environment Top management takes large amount of time to approve high value loan borrowers.

1.4

COMPETITION INFORMATION

1.4.1 Insurance Companies in India Before insurance sector was opened to the private sector Life Insurance Corporation (LIC) was the only insurance company in India. After the opening up of Insurance sector in India there has been a glut of insurance companies in India. These companies have come up with innovative and flexible insurance policies to cater to varying needs of the individual. Opening up of the Insurance sector has also forced the Lic to tighten up its belt and deliver better service. All in all it has been a bonanza for the consumer. Major Life insurance Companies in India are:

Bajaj Allianz Birla S un Life Insurance

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HDFC Standard Life Insurance ICICI Prudential ING Vysya Kotak Mahindra LIC MetLife India Insurance Reliance Life Insurance SBI Life Insurance Shriram Life Insurance Tata AIG Life Insurance

Bajaj Allianz Bajaj Allianz is a joint venture between Allianz AG one of the world's largest insurance companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the world. Bajaj Allianz is into both life insurance and general insurance. Allianz Group is one of the world's leading insurers and financial services providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries with almost 174,000 employees. Bajaj group is the largest manufacturer of two-wheelers and three-wheelers in India and one of the largest in the world. Today, Bajaj Allianz is one of India's leading and fastest growing insurance companies. Currently, it has presence in more than 550 locations with over 60,000 Insurance Consultants.

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Birla Sun Life Insurance Birla Sun Life Insurance Company Limited is a joint venture between Aditya Birla Group and Sun Life Financial of Canada. Aditya Birla Group is an Indian multinational conglomerate with presence in India, Thailand, Indonesia, Malaysia, Philippines, Egypt, Canada, Australia and China. Sun Life Assurance, Sun Life Financial's primary insurance business, is one of the leading insurance companies of the world and ranks amongst the largest international financial services organizations in the world. The Group has presence in several countries such as Canada, United States, Philippines, Japan, Indonesia, India and Bermuda. HDFC Standard Life Insurance HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC Ltd., India's largest housing finance institution and Standard Life Assurance Company, Europe's largest mutual life company. It was the first life insurance company to be granted a certificate of registration by the IRDA on the 23rd of October 2000. Standard Life, UK was founded in 1825 and has experience of over 180 years. Companies. The company is rated as "very strong" by Standard & Poor's (AA) and "excellent" by Moody's (Aa2). HDFC Standard Life's cumulative premium income, including the first year premiums and renewal premiums is Rs. 672.3 Crores for the financial year, Apr-Nov 2005. So far the company has covered over 11,00,000 individuals and has declared 5th consecutive bonus in as many years for its 'with profit' policyholders. ICICI Prudential Life Insurance

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ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI was established in 1955 to lend money for industrial development. Today, it has diversified into retail banking and is the largest private bank in the country. Prudential plc was established in 1848 and is presently the largest life insurance company in the UK. ICICI Prudential is curently the No. 1 private life insurer in the country. For the financial year ended March 31, 2005, the company garnered Rs 1584 crore of new business premium for a total sum assured of Rs 13,780 crore and wrote nearly 615,000 policies. ING Vysya Life Insurance ING Vysya Life Insurance Company Limited is a joint venture between Vysya Bank and ING Group of Holland, the world's 4th largest financial services group, with presence across 50 countries, and a heritage of over 150 years. ING Vysya Life Insurance Company Private Limited entered the private life insurance industry in India in September 2001. With in a short span of time ING Vysya Life Insurance has registered an impressive growth. The company currently has over 10,000 active advisors working from 75 branches (in 30 cities) across the country and over 2300 employees. Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between Kotak Mahindra Bank Ltd.(KMBL), and Old Mutual plc. Kotak Mahindra is one of India's leading financial institutions and offers a range of financial services such as commercial banking, stock broking, mutual funds, life insurance, and investment banking. Old Mutual was established more than 150 years ago and offers a diverse range of financial services in South Africa, the United States and the United Kingdom. The company is listed

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on the London Stock Exchange with a market capitalization and has its headquarters in London.

Life Insurance Corporation of India (LIC) Life Insurance Corporation of India (LIC) is an autonomous body authorized to run the life insurance business in India with its Head Office at Mumbai. It has been established by an act of the Parliament and started functioning from 1/9/1956. LIC is the biggest insurance player in the country. Out of the total premium of Rs 3766 crore generated by the insurance industry through group business in the year 2005-06, LIC alone accounted for Rs 3051 crore. In the financial year 2005-06, LIC has grown at 30.68%. In respect of number of lives insured, LIC has shown a growth of over 152%. In respect of number of schemes, LIC has a growth of 2%. LIC's market share in number of individuals covered and number of policies stands at 77% and 81%, respectively. MetLife India Insurance MetLife India Insurance Co. Pvt Ltd is a joint venture between MetLife Group and its Indian partners. The Indian partners include J&K Bank, Dhanalakshmi Bank, Karnataka Bank, Karvy Consultants, Geojit Securities, Way2Wealth, and Mini Muthoothu. Met Life Group has presence in America and Asia and has an experience of over 137 years in providing financial services. The MetLife companies are the number one life insurer in the U.S. with approximately US $2.8 trillion of life insurance in force. MetLife serves 88 of the top one hundred FORTUNE 500 companies. MetLife entered Indian insurance sector in 2001. Reliance Life Insurance

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Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai Ambani Group. The company acquired 100 per cent shareholding in AMP Sanmar Life Insurance Company in August 2005. Taking over AMP Sanmar Life provided Reliance Life Insurance a readymade infrastructure and a portfolio. AMP Sanmar Life Insurance was a joint venture between AMP, Australia and the Sanmar Group. Headquartered in Chennai, AMP Sanmar had over 90 offices across the country, 9,000 agents, and more than 900 employees. SBI Life Insurance SBI Life Insurance is a joint venture between the State Bank of India and Cardif SA of France. SBI Life Insurance is registered with an authorised capital of Rs 500 crore and a paid up capital of Rs 350 crores. State Bank of India is the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has a network of over 14,000 branches across the country, the largest in the world. Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone's leading Bank. BNP is one of the oldest foreign banks with a presence in India dating back to 1860 Shriram Life Insurance Shriram Life Insurance Company Ltd is a joint venture between the Chennai-based Shriram Group and the South African insurance major Sanlam. The company launched its operations in India in December 2005. Shriram Life has set a target of achieving a premium income of Rs 110 crore during the first year of operations. While focussing largely on the strong network of over 65,000 agents and distribution network of more than 550 branches, Shriram Life is also

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contemplating bancassurance alliances with couple of banks.1.3.14 Tata AIG Life Insurance Tata AIG Life Insurance Company Limited is a joint venture between Tata Group and American International Group, Inc. (AIG). Tata Group is one of the oldest and leading business groups of India. Tata Group has had a long association with India's insurance sector having been the largest insurance company in India prior to the nationalization of insurance. The Late Sir Dorab Tata, was the founder Chairman of New India Assurance Co. Ltd., a group company incorporated way back in 1919. American International Group, Inc is the leading U.S. based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. AIG has one of the most extensive life insurance networks in the world.

1.5

SWOT ANALYSIS

Both Strengths and Weaknesses are inherent with the company while Opportunities and Threats are usually outside factors, which affect the existence of the company at large. Let us make the SWOT Analysis for Life Insurance Corporation:

1.5.1 Strengths
The early bird advantage More penetration in the rural parts of India The trust they have created so far

Established agency network during the last decades The incomparable supremacy in the number of agents More awareness among the people

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1.5.2 Weaknesses
The marketing approach is not that much professional The sluggishness of the activities has given at times a bad repute As a public company lacks sincerity and activeness.

1.5.3 Opportunities
As people become more internet savvy, the Ad. Expenditure will come down as the prospective clients can be approached through net. The high growth rate of Indian Economy The penetration of Insurance in rural area is minimal. The Government policies are offering more and more rebates on the insured amount and such a scenario will help more people getting interested in itThe people are becoming more aware of Insurance and started considering it.

1.5.4 Threats
Now as India is on the brim of emerging out as an economic power center, stringent laws can be expected in the coming future. As the number of agents are considerably huge, efficient management of all the field force need greater strain and effort The aggressive style of marketing by the private players is a threat to LIC More and more companies are coming into the field and the existing ones have to struggle hard to keep the customers loyal and to get more customers

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Chapter 2.0 OBJECTIVES AND METHODOLOGY

1. 2. 3. 4. 5. Significance Managerial usefulness of the study Objectives Scope of the study Research Methodology

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2.1

SIGNIFICANCE
The main significance of the study is the reasons of salaried people taking up Insurance Services pertaining to Life Insurance

2.2

MANAGERIAL USEFULNESS OF THE STUDY

This project is very useful to study about the reasons of salaried people taking up insurance services pertaining to life insurance.

2.3

MAIN OBJECTIVE
To study the reasons of salaried people taking up Insurance Services pertaining to Life Insurance To know the Most Preferred Policy. To study the types of benefits provided by Insurance Services.

2.4

SCOPE OF THE STUDY

2.5

RESEARCH METHODLOGY
1. Research and Design a. Explanatory Research 2. Data collection method a. Primary Research

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i. Questionnaire ii. Focus Group Interview b. Secondary Research i. Journal/Brochure of IRDA ii. Published Reports iii. Internet 3. Sampling Plan a. Sampling unit employed people having salary between Rs. 10000 Rs. 40000 per month. b. Sampling size 90-120 people c. Sampling procedure non probability judgement sampling 4. Data collection instrument a. Questionnaire b. Focus group interview 5. Analysis a. Though a detailed study was planned but due to time constraint it was restricted to around 90-120 people only.

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CHAPTER 3.0 Conceptual Discussion

3.1 Private Insurers vs. LIC 3.2 Private players and Government monopoly in insurance

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CONCEPTUAL DISCUSSION
3.1 Private insurers vs. LIC
Private players in the life insurance business are growing at a scorching pace. Within three years of their inception, they have seized about 14 per cent of the market. Compare this to new generation private-sector banks, which took nine years for 20 per cent share in the Indian banking industry. And after seven years in the industry, in 2000, private mutual funds accounted for just 9 per cent of a market that had been dominated by the Unit Trust of India. There's another dimension to the insurance numbers game. While the private insurance companies have attained 13 to 14 per cent share of the overall insurance market, their share in the key metros (Mumbai and Delhi) is as high as 30 to 40 per cent. "We have to struggle to complete a deal in the metros now, because policyholders are comparing products and asking for better deals," says S B Mathur, chairman of the Life Insurance Corporation of India. Private insurance companies are essentially joint ventures with global insurance companies holding a maximum of 26 per cent stake. The foreign partners are investing heavily in the Indian market and, thereby, driving sales, because they see India emerging as one of the biggest markets in the Asian region. "India will become the biggest market for us in the next three to four years," predicts Dan Bardin, Prudential Corporation Asia managing director south Asia and greater China. Private players have certainly done their bit to increase the penetration levels of insurance, mainly by creating alternative distribution channels--such as associations with banks, brokers and corporate agents.

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"Our bancassurance channel--with tie-ups with four banks--contributes almost 70 per cent of our total sales," says Aviva CEO Stuart Purdy. OM Kotak Mahindra Life, which is ranked eighth among private players, is also leaning towards alternative distribution channels that will contribute to 45 per cent of total sales, in line with the contribution from its tied agency force. In sharp contrast, most of the LIC's policies continue to be sold through its tied-agency network. The state life corporation acknowledges that it is unable to maintain its lead in some metros: penetration by the private-sector insurers has come of age and they are giving the LIC a run for its money. The multi-channel approach adopted by private insurance companies has proved to be a boon in terms of costing and their ability to capture business. Earlier, most private insurance companies focused their energies on the top 20 cities. Today they are moving to smaller cities. "The potential in smaller cities is increasing and companies are moving to smaller cities and towns because these are increasingly becoming more prosperous with a rise in agricultural income. With the increase in buying power, this has fuelled growth opportunities for us". AMP Sanmar, another private player, has tied up with various chit funds and transport finance companies in the country, where it is selling life policies on the back of fixed deposits and bonds. A senior company official cites the example of Vijaywada where a significant portion of the income is derived from farming activities. "The rural populace is managing their money well and no longer keeping it under their beds. They have mobile phones and have opened bank accounts. They are not very different from their urban counterparts when it comes to purchasing life insurance covers," he points out.

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And that's making the private sector optimistic about its future in the Indian insurance market. "We [private insurers] are becoming an alternative to LIC. If a customer has already bought an LIC plan, his second policy is likely to be bought by the private insurance sector on account of various reasons--more specifically flexibility and transparency," says OM Kotak Mahindra Life CEO Shivaji Dam. Perhaps this partly explains why the LIC has increased its advertising spend multifold since the insurance sector was privatised. Its ad spend more than doubled to Rs 81 crore (Rs 810 million) in fiscal 2003, against Rs 37 crore (Rs 370 million) in 1999-2000, prior to the industry being privatised. Of course, the private insurance sector has also been steadily increasing its ad spend, from Rs 29 crore (Rs 290 million) in fiscal 2001 when the industry opened up, to Rs 92 crore (Rs 920 million) the following year. In fiscal 2003, private insurers spent Rs 143 crore (Rs 1.43 billion) on advertising. But it's not the increased spend on advertising alone that has helped private players in grabbing market share. One of the key differential factors responsible for their growing market is the 150,000-odd life insurance advisors of the private insurance companies. "The private insurance agents sell better than their counterparts at the LIC. Life insurance advisors of private sector insurance companies adopt the need-based selling approach, unlike the LIC's agency force that pushes the number of policies," says Dam. This also gets reflected in the average sum assured by private insurance companies being higher than that of the LIC. Policies sold by the private players tend to be of a higher value. For instance, Birla Sun Life's average premium stands at Rs 24,500, while that of OM Kotak Mahindra Life is equally high at Rs 20,400. Against this is the LIC's average premium of Rs 3,200. Of course, there's also a difference in the target client of the private and the state-run insurance companies. While the private players are targeting the upper middle-class and

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high net-worth individuals, the LIC aims for the masses through its 2,048 branches spread across semi-rural and rural towns. Meanwhile, private insurance companies are capitalising on global relationships. "Business deals are often a call away since we capitalise on AIG's global relationship with multinational companies such as GE and Kodak," says Tata AIG Life Ian Watts. OM Kotak has gone a step further and tied up with Swiss Life International so that it can capitalise on the latter's relationship with 300 multinational subsidiaries and affiliates. But it's not as if LIC has lost out on group insurance. The insurance major's group business reached new heights in fiscal 2004, recording a 119 per cent growth in new premium income and 50 per cent increase in the number of lives covered. Still, new business income for private companies has grown at 146 per cent in fiscal 2004, compared to the 18 per cent average industry growth in new premium income for the same period. "The key in product sales lies in offering unbundled and transparent products that give customer value," points out Dam. The biggest draw in insurance in fiscal 2004 was unit-linked plans. Ninety-five per cent of the policies sold by Birla Sun Life and over 80 per cent of the 436,000 policies sold by ICICI Prudential were unit-linked plans. And even though the LIC was late (January 2004) in pushing its unit-linked product "Bima Plus", it managed to mop up a premium income of Rs 373 crore (Rs billion) with the sale of just under 1.7-lakh unit-linked policies, the highest sales figure in the industry. The advantage with unit-linked plans is that they offer policyholders transparency in terms of costs, annual returns and bonus calculations. With many companies guaranteeing the capital investment (some like Birla Sun Life even guarantee 3 per cent assured returns on its unit-linked plans), the interest in unit-linked plans only increased.

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And the switch from traditional products to unit-linked plans gained momentum as the Sensex climbed higher: the returns on such policies are linked to the equity market. "The stock market has helped to a certain extent and has contributed to our growth and performance," agrees Birla Sun Life CEO Nani Javeri. Aviva has shown a compounded aggregate growth rate of 36 per cent since the inception of its fund. Returns on OM Kotak's balanced and growth funds stand at 31.79 to 43.25 per cent respectively. Dam claims that OM Kotak has sold several policies of Rs 25-50 lakh (Rs 2.5-5 million) since the "savvy investor thinks it best to invest in unit-linked products." He adds: "Growth is coming faster in insurance companies with unit-linked plans."

3.2 Private players and Government monopoly in insurance

About 48 years after the business was first nationalized, the Government kept its word and issued the first life insurance certificate of registration today to the HDFC-Standard Life combine. Two certificates were also issued to Reliance General Insurance Company and Royal-Sundaram Insurance for the general insurance business; this had been nationalized in 1972. So, from next year Indians across the country can hope to get their life and other insurance done from private sector companies offering a host of new and different products. To cite one example, foreign insurance firms sell insurance policies to guard directors of companies against possible lawsuits and prosecution of their firms. Similarly, with more private players, it's very likely that insurance policies will be increasingly linked with pension plans -- the pension business, however, has not been opened up to private players as yet. With just 5 per cent of India's population insured, private insurance firms have been very keen that the market be opened up to them at the earliest. Opening up of the insurance

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sector has also been a big demand of countries like the US since a host of US firms are also allying with Indian firms to access the market. Apart from HDFC, Reliance and Royal-Sundaram, three other companies -- ICICIPrudential Life Insurance, Aviva Life Insurance and IFFCO-Tokyo Marine General Insurance Company -- have been given in-principle approval for registration. Speaking to The Indian Express, HDFC Chairman Deepak Parekh said the insurance firm would have a soft launch of its products in December and a formal launch in January. Deepak Satwalekar, Managing Director of the insurance joint venture, said the company would be offering a host of new products -- the exact types would be decided by what their market research threw up. ``As in the case of HDFC, we'll give consumers the products they want,'' he added. HDFC's insurance venture will have a paid up capital of Rs 168 crore, 81.6 per cent of which will be owned by HDFC and the rest by Standard Life. The Insurance Regulatory Development Authority (IRDA) had earlier announced that the first batch of licences would be granted by Diwali. So far, 10 companies have applied for an insurance licence. Public sector banks, including SBI, Punjab National Bank, Bank of Baroda, Canara Bank, Bank of India and Corporation Bank are also preparing to enter the insurance market -- these banks have the advantage of their existing customer base and a huge branch network as well. The Bill to open up the insurance sector was first conceived and moved by the United Front Government when P. Chidambaram was Finance Minister. This Bill was, however, defeated by the BJP which voted against it. When it came to power, the BJP came up with a similar legislation but restricted the equity share of foreign insurance firms to 26 per cent -- in addition, another 14 per cent could be held either by foreign institutional investors or NRI-controlled overseas corporate bodies.

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The BJP's Bill, too, faced problems for a while with the swadeshi brigade opposed to it and the equity share of foreign insurance firms (earlier, the equity proposed for them was 40 per cent) had to be whittled down to get their support. Dalip Verma, managing director, Tata AIG General Insurance Company, is an insurance industry veteran with over 26 years of experience. He has been spearheading AIGs entry into the general insurance business right from 1996, when he joined as the chief operating officer of AIG India. Since December 2000, he has been at the helm of affairs at AIGs joint venture company with the Tata group. Prior to joining AIG, Mr Verma spent 19 years with the state-run New India Assurance Company. In an exclusive interview with Papiya De of The Financial Express, Mr Verma discusses the changing dynamics of the general insurance business in India and Tata AIGs role in it. Excerpts. There seems to be greater rush amongst the private sector players to get into life insurance business vis-a-vis general insurance. Why? I dont think there has been any conscious effort to do so. There are 12 general insurance companies and 15 life insurance companies. Out of this, eight in general insurance and 14 in life insurance are private sector companies. Therefore, in India, there is really no big difference. India is still at a very nascent stage with a $8-9 (Rs 400-450) per capita expenditure on insurance, out of which $2 to $2.5( Rs 100-150) will be on general insurance. Even in some of the neighbouring countries like Thailand, Malaysia, Phillipines etc. the per capita spend is significantly higher. How big is the general insurance market in India? What kind of growth rates has it been witnessing? This year the market was somewhere close to Rs 15,000 crore, roughly $3 billion. The sector has been growing steadily between 10 and 12 per cent. The private sector players have been witnessing much better growth rates for obvious reasons.

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The private sector would command about 9.5 to 10 per cent of the market and I would say that it has been a rather good start for us because, to reach a figure of 10 per cent of the overall industry in other liberalised markets has taken much longer. Which is a more preferred route of selling general insurance - is it the agency route or bancassurance model? Traditionally, in India general insurance was more bought than sold. General insurance was purchased because it was compulsory to do so. With the private sector coming in, general insurance policies are now being sold and every player is looking all possible channels to sell their products. Globally, bancassurance has been successful in certain countries like UK and France but has had a mixed run in Germany and the US. Typically life insurance products are more suited to the bancassurance model. At Tata AIG, we will look at all modes of distributing our products. Brokers, who can source products from a cross-section of players, and solicit insurance on behalf of the insured, have been successful and we would look at this option too. We are also looking at corporate agents to sell a range of our products. We have tieups with HSBC and Thomas Cook in India. How stiff is the competition in the marketplace? India is a big market. Prior to nationalisation, there were 106 general insurance companies and 250 life insurance companies, today there are only 12. Competition is good for the consumers and good for the companies as well. It helps in increasing awareness and creating a market. How difficult is it to compete with a behemoth like GIC? GIC has a distribution network that cannot be replicated overnight. It is spread across four companies and 4000 branches and it will be a part of the Indian economy. We are trying to create a niche with our superior services. We have a 24 hour call centre, new products and we go and sell our products right at the customers doorstep. Which segments of general insurance are you targetting? We are present in all lines of the general insurance business. We have motor and overseas 47

travel, specialised liability product for the infotech sector and several tariff products. We cannot really singleout any segment. We are set out to build a balanced book in business and we have so far succeeded in doing that. Motor products, for instance, commands 35 per cent of all general insurance products, and our portfolio reflects that trend. You had a target of breaking even in the fourth year of your operations. How far or close are you to your target? We will break even within three-and-a-half years of operation. Normally a life insurance company takes around 7-8 years to break even and for general insurance companies the figure stands between three and four years. In a market where everyone is betting on superior customer service, what will be Tata AIGs USP? I believe a good thing does not get bad just by repeating it. We intend to provide superior service and shorten the claim settlement time considerably. In pre-liberalisation days, a motor claim would take anywhere around six months before it got settled, we have brought it down to around three weeks. We also have a 24 hour customer service cell to lodge complaints, buy products (in certain areas) and submit claims. Servicing claims will be one of the crucial determinants to success. How important is pricing in the general insurance business? India is a very price sensitive market. However, 65 per cent of the business is in tariff, where pricing is still determined by the government. It is going to change over the next few years. In non-tariff products like personal accident etc there is a lot of pressure on pricing. Companies will have to be reasonable while determining a pricing structure because, across the globe, there are instances of companies going bust while playing the game of undercutting state-run companies.

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Insurance: Good times to continue

The life insurance industry has been a dynamic one since the entry of the private players into the insurance market. Customer focus and product innovation have taken centre stage, which, one has to say, has been a departure of sorts from the days gone by. Last year was no different for this sector; it saw a lot of activity in the year.

Budget changes
The most significant event of the year for the insurance sector was the increase in tax benefits on life insurance plans. Earlier, the benefits on premium payments stood at Rs 70,000 for the year; these were brought within the consolidated Section 80C banner to Rs 100,000. This limit includes Section 80CCC pension plan tax benefits upto a maximum of Rs 10,000.

ULIPs form a major portion of new business

Unit-linked insurance plans (ULIPs) continued to rule the roost; taking off from where they had left last year. For many life insurance companies, ULIPs accounted for more than half of new business.

Mis-selling still continues

ULIPs have been aggressively marketed by life insurance companies. ULIPs as a product, has been a valuable addition for the insurance seeker. But many insurance agents have 'sold' ULIPs without really understanding the individual's needs, his risk profile or the fundamentals of asset allocation. At Personalfn, we believe that equities are equipped to do better in the long run compared to their fixed return counterparts like bonds and G-secs. But at the same time, we also believe that individuals should make investments in ULIPs in tune with their risk profile and asset allocation. Recently, the Insurance Regulatory and Development Authority has come out with certain guidelines for ULIPs. It has proposed a compulsory 3-year lock-in period for ULIPs.

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In other words, individuals will not be allowed to withdraw any money from their ULIP 'account' for the first 3 years. The primary intention behind this is to preserve the identity of life insurance (and therefore ULIPs) as a long-term savings option. The IRDA has also specified that the minimum tenure for ULIP policies be 5 years and that a ULIP have a 'sum assured' and not be totally linked to the markets. In addition, the IRDA has also proposed that life insurance agents be given separate training for selling ULIPs as ULIPs demanded better understanding than that currently prevalent in the industry. The guidelines will be effective from June 2006. These guidelines by way of 'restructuring' the product, will help in protecting the interests of individuals and also go a long way in curbing the malpractices currently prevalent in the life insurance industry.

Term plans still not being 'sold'

Term plans are the purest form of life insurance available. Despite a term plan being a must in every individual's portfolio, they continue to remain poor cousins to savings based plans (life insurance with a maturity benefit). Blame the many unscrupulous agents for this. Individuals need to ensure that their financial portfolio consists of a term plan, which will help the overall long-term financial planning cause.

Endowment plans still being 'bought'

Individuals continue to be 'enticed' by endowment plans for the maturity benefits and the 'safety' that they provide. While such plans do have an insurance element, the returns that they offer hardly manage to beat inflation, leave alone help individuals plan their finances effectively. We do believe that from a long-term perspective, individuals need to look at other more efficient means of savings like tax saving mutual funds or ULIPs. However, as always, the same should be in line with their asset allocation and risk appetite.

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Pension funds on the anvil?

The interest rate offered on EPF has been brought down from 9.50% to 8.50%. The EPF being long-term savings, the rate cut has made the need for the setting up of pension funds even more acute. While the process of putting up the pension fund regulatory and development authority (PFRDA) has been initialised, the pace needs to pick up so that individuals can park their pension monies with a body, which will make their money work harder for them as compared to the earlier scenario.

Strategies for 2006

A term plan is life insurance in its purest form. Individuals should buy a term plan before considering other types of life insurance. This becomes necessary in light of the fact that such plans offer the much-needed insurance cover at a low cost. Come June 2006 and ULIPs will emerge in a more transparent and unambiguous form due to the changes proposed by the IRDA. Having said that, insurance seekers on their part need to gain a better understanding of ULIPs and find out how well it fits into their financial planning exercise. We could also see more options being introduced in the pension funds segment. This can give a boost to retirement planning and help individuals plan effectively for their retirement.

Private firms boost insurance sector growth

Led by private players ICICI Lombard, Bajaj Allianz and Iffco-Tokio, general insurance industry grew by an impressive 15 per cent in the first quarter of 2005-06 even as National Insurance and Reliance General continued to decline in business. Except Reliance General, the new players gave a tough fight to the established players in all departments of business to capture 26 per cent of market share.

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The non-life insurance industry, consisting of five public and eight private players, grew by 14.75 per cent at Rs 5,504 crore in premium collection till June 2005, as per figures released by regulator IRDA.

Market leader New Indias premium grew by 9.18 per cent to Rs 1,176 crore till June and cornered a market share of 21.37 per cent. Kolkata-based NIC regained its second slot despite posting 5.85 per cent decline in premium collection at Rs 935 crore till the first three months of this fiscal and had a market share of 16.98 per cent. Delhi-based Oriental was at the third spot after logging 11.26 per cent growth in premium income at Rs 933.5 crore and a market share of 16.96 per cent. Chennai-based United India grew by 4.3 per cent at Rs 895 crore till June and had 16.26 per cent of market share. Export Credit Guarantee Corporation recorded 18.52 per cent growth in premium collection at Rs 134 crore. It had a market share of 2.44 per cent. Among the private players, ICICI Lombard performed excellently by recording 92 per cent growth in premium at Rs 423 crore while Bajaj Allianz grew by 51.7 per cent at Rs 319 crore. ICICI Lombard is well ahead of other private players with a market share of 7.69 per cent while Bajaj Allianz has 5.8 per cent of the market. Iffco Tokio is in the third spot among new players by collecting Rs 236 crore in premium income (4.29 per cent).

Private insurance comes of age

The numbers tell the story. In five years, private insurers have cornered more than a fourth of the total life insurance market with a share of 26.18 percent. And it does not end there.

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Swiss Re, one of the world's largest re-insurance firms, estimates that real life premiums will grow by a staggering 300 per cent or at a 15 per cent compound annual growth rate in the next 10 years. Moreover, industry watchers believe private life insurers can grow at around 37 per cent till 2011, and achieve a market share of new business around 55-60 percent by financial year 2008-09. Premium income in financial year 2004-05 was Rs 18,700 crore (Rs 187 billion). One of the key factors that has contributed to the success of private players has been the introduction of the unit linked insurance policy. Unit Linked Insurance Plans, which marry investment and insurance and account for as much as 70-80 percent of premium incomes for top players, have attracted the "younger, affluent Indian" who is keen to dabble in the stock market and at the same time buy an insurance product. Thus, insurers have cashed in on the increasing participation of individuals in the stock market. Says Shikha Sharma, CEO, ICICI Prudential, "Some of the more educated people have opted for ULIPs because they find it easier to understand than the traditional endowment products. In that sense, there is a new customer base." According to Deepak Satwalekar, managing director, HDFC Standard Life, the company' growth has been faster after it launched ULIPs. He believes that HDFC Standard Life will continue to be the best-selling product for some time to come. Ticket sizes, too, are becoming bigger: the average premium per policy was nudging Rs 11,000 in the first quarter of 2005-06, up sharply from Rs 6,000 in 2003-04. The other reason why private life insurers have done well and in some sense scored over their mutual fund counterparts is the strong distribution network they have built. HDFC is now present in 480 towns, while Bajaj Allianz is in 400 towns. Says Sam Ghosh, CEO of Bajaj Allianz, "Our strategy has been to penetrate the tier-II towns where the costs are lower and the mutual funds have virtually no presence.'

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Satwalekar believes that mutual funds have not focused on expanding their reach as much as insurers have. Sharma feels that effective use of tied agents -- where an agent is affiliated with only one insurer, compared with the mutual fund industry where wealth managers and banks are the main advisers -- has also helped insurers. Besides, insurers have also used the banking channel -- ICICI Prudential has seven bank assurance partners. In fact, owing to their strong customer focus, insurers have actually managed to extract high fees and upfront charges from customers. Satwalekar, however, contends that the maturity value for an insurance product is superior to that of a mutual fund over a 25-year period. Within the private sector, there has been some churn. In the initial years, it was ICICI Prudential and Birla Sunlife which were ahead, the latter having been the first to launch ULIPs. Today, ICICI Prudential retains its premier position (7.26 per cent). The company's strategy is to target volumes, as evident from its aggressive marketing. Bajaj Allianz (5.94 per cent), the star of 2004-05, which now occupies the second spot, has set its sights on the the tier-II cities where Life Insurance Corporation is the main competitor. HDFC Standard Life (3.11 per cent), which started out slowly, has based its strategy on the 'quality plank' and has moved up steadily to the third place. Says Satwalekar, 'We have been accused of being conservative, but in a long-term business like insurance, there are no short-cuts.'

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Life Insurance FAQs

Q How do I take out a loan on my policy? A Loan Value is the amount of cash value that can be borrowed on a policy. A policyowner may be able to make a loan against the cash value of the policy, based on the type of policy owned. A loan allows access to the cash value of the policy, while still maintaining the insurance coverage. When a loan is made against a policy, the death benefit is generally reduced by the amount of the loan plus any interest that is owed. Loan interest rates vary and specific provisions are generally explained in the policy itself. A loan form or written request signed by the policy owner must be sent to a Service Center if: The policy owner requests that the loan check be sent to a temporary address. There is a change of address pending when the loan is requested. The policy is company owned. Signatures of two officers and their titles will be required for corporations and the sole proprietor's signature will be required for sole proprietorships. The proceeds of the loan are being transferred to a bank. The policy has multiple owners. The policy is owned by a trust. The policy is assigned.

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Q Who is a Beneficiary? A This is the person or other party designated to receive life insurance or annuity proceeds upon the death of the insured. The beneficiary is named when a policy is taken out and can be changed at the request of the policy owner. A contingent beneficiary is the party designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured. In order to change the beneficiary of a policy, the current policy owner must fill out a form with the necessary information and return it to the Service Center. Q How do I change Dividend option on a Policy? A In order to change the dividend option on a policy, the policyowner must send a signed, written request or fill out a form with the necessary information and return it to the Service Center. Generally, a policyowner can withdraw dividends from a policy by calling a Service Center. However, in certain instances, a form or written request signed by the policyowner will be required. A dividend withdrawal form or written request signed by the policyowner must be sent to a Service Center if: There is a change of address pending when the dividend withdrawal is requested. The policy is company owned. Signatures of two officers and their titles will be required for corporations and the sole proprietor's signature will be required for sole proprietorships. The proceeds of a dividend withdrawal are being transferred to a bank. The policy has multiple owners. The policy is owned by a trust. The policy is assigned.

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Q What is Income Tax Withholding? A Since the enactment of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), sometimes it has been required to withhold Federal and sometimes State (depending on the state of record of the policyowner) income taxes from certain taxable distributions. Generally, payees are permitted to elect not to have income taxes withheld from designated distributions. Q How do I report a death? A Upon the death of an insured, a Service Center, General Office, or Sales Office must be contacted and advised of the name of the insured, the date and cause of death, and the name, address, and telephone number of the person who should be contacted. A claimant's statement and additional information on how to file a death claim is then sent to the appropriate person. Q What is Taxable Gain? A Under the tax law, certain distributions from life insurance policies result in taxable income to the policyowner. If a distribution is taxable, the amount the policyowner is taxed on is limited to the "gain" in the policy, which generally equals the policy's cash surrender value less the premiums paid. The following distributions and other transactions may result in taxable income to the policyowner: partial withdrawals, policy surrenders and lapses, and certain dividends. In addition, loans from policies that have been classified "modified endowment contracts" may result in taxable income to the policyowner. Q I have changed my name, how do I update this information? A To change the name on a policy, the current policy owner must send a signed form, a written request, and a copy of a marriage certificate or other court document to the Service Center. Q How can the ownership of a policy be changed?

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A To change the ownership of a policy, the current policyowner must fill out a Transfer of Ownership/Designation of Successor Owner form (obtained from the Service Center) and return it to the Service Center. Q What is Cash Surrender Value? A This term refers to the amount payable to the permanent life policy owner upon surrender of the policy. It is equal to the current Cash Value, less any surrender charges that may apply, any monthly contract charges, and any outstanding loans and accrued interest. Q What is Surrender Charge? A During the surrender charge period of a permanent life policy, an amount of money that is deducted from a policy's Total Accumulation Value if you: Surrender your policy. Decrease the face amount of your policy.

Q How much life insurance do I need? A At no charge to you, a agent professionally trained and experienced can help you analyze your needs and recommend an appropriate amount of insurance to meet your needs. Q What is Whole Life Insurance? A This is life insurance that remains in force during the lifetime of the insured, provided premiums are paid as specified in the policy. Whole Life provides a guaranteed premium, a guaranteed death benefit, and a guaranteed cash value. While a Whole Life policy is in force you may take out a policy loan against the cash value or receive the cash value (less any policy loans and accumulated interest) should you need to surrender the policy. In addition, a Whole Life policy can pay dividends, which may be used to enhance both the 58

death benefit and the cash value or may be used to reduce your premium payment. Dividends are not guaranteed and policy loans accrue interest and reduce the death benefit. Q What is Term Insurance? A This is life insurance, which pays a death benefit provided the insured dies during a specified period and premiums are paid as designated in the contract. No death benefit is payable if the insured survives past the end of the term. Since premiums paid are used entirely to cover the cost of insurance, there is no cash value on a term insurance policy. Premiums may increase or decrease, depending on the type of term insurance owned. Q Where does my invested money goes? A Under the Act passed i.e. IRDA Government takes 85% of your money and the rest 15% is invested by the company in India under the guidance of the Government. Q- What is Universal Life Insurance?? A- This is adjustable life insurance that allows flexible premium payments,* pays the life insurance benefit if the insured dies before the maturity date, and pays the cash value if the insured is living at the maturity date. A flexible premium is one that may be paid at a scheduled or unscheduled time. When a premium is paid, an expense charge is immediately deducted and the balance is placed in a cash value fund to earn interest at the current rate. Each month, all insurance expense charges necessary to keep the policy in force are paid internally from the cash value, regardless of whether or not the premium was paid. The cost of insurance will increase each year on the policy anniversary based on the attained age of the insured. This is a nonparticipating policy on which no dividends are payable.

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Q- What is Variable Universal Life Insurance? A- This is a form of universal life insurance that combines the premium and death benefit flexibility of traditional universal life insurance and the investment flexibility and risks of variable life insurance. These products are considered securities because the policy owner assumes investment risk associated with the variable investment divisions, whose performance will fluctuate with market conditions. Variable Universal Life is offered by prospectus only, which contains complete information about the product including charges and expenses. Q- What, exactly, is a "mutual insurance company"? A- Unlike a stock company, a mutual insurance company, such as Aviva Life, does not offer shares of stock on public exchanges. Rather, it is operated and maintained for the benefit of its members, or policy owners. All policy owners have the right to vote for the Company's Board of Directors and to receive a fair share of the dividends declared by the Board each year. Q- What products and services does Aviva Life offer? A- On the insurance side, Aviva Life and its affiliates offer traditional life insurance and annuities. On the investment side, Aviva Life and its affiliates provide institutional asset management and trust services and, through a subsidiary, Aviva LIFE Securities Inc. (member NASD/SIPC), provide an array of securities products and services such as institutional and retail mutual funds, including 401(k) products.

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CHAPTER 4.0 Data Analysis

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DATA ANALYSIS
4.1 Data gives figures of ranking of insurance company according to the respondents. Table 1

Company Name
LIC Aviva ICICI Prudential OM Kotak Mahindra HDFC Total

Number of respondents
45 40 10 3 2 100

Share (%)
45 40 10 3 2 100

3% 2% 10%
LIC Aviva

Fig. 9
45%

ICICI Prudential OM Kotak Mahindra

Interpretation: 40% people Aviva of the have policy

40%

HDFC

and is ranked number one by that percent of respondent.

4.2 Data gives figures of benefits of insurance cover perceived by respondents. Table 2

Benefits
Cover Future Uncertainty Tax Deductions

Number of respondents
55 20

Share (%)
55 20

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Future Investment Total

25 100

25 100

25%

Cover Future Uncertanity Tax Deductions Future Investment

55%

20%

Fig. 10

Interpretation: 55% of the respondents believe that covering future uncertainty is the biggest benefit of insurance policy. 20% and 25% of them believe that other benefits are tax deduction and future investment.

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4.3 Data provides features of insurance policy which attracted the respondents the most. Table 3

Features
Money Back Guarantee Larger Risk Coverance Easy Access to Agents Low Premium Reputation of Company Total

Number of respondents
15 37 7 30 11 100

Share (%)
15 37 7 30 11 100

11%

15%

Money Back Guarantee Larger Risk Coverance

30% 37% 7%

Easy Access to Agents Low Premium Reputation of Company

Fig. 11 Interpretation: Majority of the respondent found larger risk conversance as the most attracted feature of their policy.

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4.4 Data provides type of policy respondents are holding Table 4

Policy Type
Life Policy Non Life Policy Both Total

Number of respondents Share (%)

60 25 15 100 60 25 15 100

15% Life Policy

25% 60%

Non - Life Policy Both

Fig. 12

Interpretation: 60% of the respondents have life insurance policy while 15% have both life and non life insurance policy.

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4.5 Data provides various instruments of Insurance. Table 5

Instrument
Protection Investment Tax Great Returns Risk Management Total

Number of respondents
75 10 6 5 4 100

Share (%)
75 10 6 5 4 100

5% 4% 6% 10%
Protection Investment Tax Great Returns

75%

Risk Managem ent

Fig. 13

Interpretation: 75% of the respondents say protection is most important.

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4.6 Data provides how many people are aware of Private Participators. Table 6

Awareness
Yes No. Total

Number of respondents
80 20 100

Share (%)
80 20 100

20% Yes

No 80%

Fig. 14

Interpretation: 80% of the respondents are aware of private participators.

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CHAPTER 5.0 FINDINGS & RECOMMENDATIONS

5.1 5.2 Findings Recommendations

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5.1 FINDINGS
The project study report has the following findings with it: Almost 75% of respondents have an insurance policy. People have more number of life insurance policies as compared to non life insurance. Only 80% people are aware that Insurance has been opened for Private Participators. Due to increased in consumerism new product is launched everyday thus non life/general insurance business is also going to have boom period. Due to the increasing concern of people towards their health/life the life insurance business has good prospects. Majority of the respondent believed that larger risk conversance 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. Majority of the respondent preferred to have Aviva policies than other private companies. Not many people know about the IRDA Act. Majority of the respondents believe that covering future uncertainty is the most important benefit of an insurance policy. Protection is the most important instrument of insurance followed by investment, tax, greater returns and risk management.

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5.1.1 Life insurance industry grows 21%. Sources are:

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 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), Aviva (1.44 per cent) and MNYL (1.14 per cent).

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5.2 RECOMMENDATIONS
There are certain flaws existing in this working of the insurance industry. There are some of the recommendation I come across while doing this thesis. It will help to make insurance more important sector in todays economy. The need of the hour is to devise a comprehensive strategy that will help the firms face the challenges of the future. The financial service industry around the world over is undergoing a major transformation. It is very important that trained marketing professionals who are able to communicate specific features of the policy should sell the policy. From the research I could find out that people are not aware about the policies and features of insurance. Therefore LIC and ICICI are recommended to shed light on policies and explain the benefits, thus increasing the awareness. The penetration of insurance in India is around 22%. This indicates that a vast majority of rural population is not covered. The market player needs to explore this untapped potential through their marketing and sales network. The returns of the policies are not properly managed and never given in time. So, these areas must be looked at. Pricing of insurance products, as empirically available in India, shows that pricing is not in consonance with market realities. Life Insurance premium is generally perceived, as being too high while general insurance (especially motor insurance) is priced too low. Some insurance products, which are not available in India, should, be introduced in market. There are areas for new product development like Industry all risk policies; large projects risk cover, Risk beyond a floor level, extended public and product liability cover.

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Insurance companies will also have to get savvy in distribution. Enhanced marketing thus will be crucial. Already many companies have full operation capabilities over a 12-hour period. Facilities such as customer service center are already into 24-hour mode. These will provide services such as motor vehicle recovery. Technology will also play an important role on the market.

The lines of distinction between banks insurance companies and brokerages are getting blurred. The future seems to belong to financial supermarkets that will offer a host of services and products to the consumer. In the next millennium all these activities would play a crucial role in the overall development and maturity of the insurance industry.

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CHAPTER 6.0 CONCLUSIONS

I have drawn various conclusions from this study. There has been tremendous change in the insurance history. And with it there has been continuous growth in this sector both in Indian as well as world context. The opening up of the insurance sector has changed the whole look of the industry. While the various companies in order to face the competition is coming with new strategies. New players are leading the sector due to their strategic management and tailor made projects. From the research also I conclude that though the awareness and people opting for Aviva plans are more as compared to other private players but the latter are gaining momentum in the market day by day. The primary reasons for buying an insurance policy, whether life or non-life is to protect us from vagaries of life. We do not invest in insurance for returns; rather we invest in it for regrettable necessities. Though a large proportion of policies available in the country provide for returns, but nobody is looking for returns to the inflation rate. So what does insurance offer, perhaps peace of mind, but even that takes time, due to poor claim performance. The demand for insurance is likely to increase with rising per-capita incomes, rising literacy rates and increase of the service sector, as has been seen from the example of several other developing countries. In fact, opening up of the insurance sector is an integral part of the liberalization process being pursued by many developing countries. Insurance is an Rs.400 billion business in India and yet its spread in the country is relatively thin. Insurance as a concept has not been able to make headway in India. There has been a strong fall in insurance business in recent years. Furthermore, it can be observed that non-life business is not increasing as strongly as life business. On the other hand, growth fluctuations have been relatively small with growth rates varying between 1% and 5%.

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Life insurance business by contrast achieved average growth rates of 6%, although the actual rates ranged from 0% to 13%. This shows on the one hand the increasing significance of life insurance as an instrument for old age provisions and on the other hand indicates the sensitivity of life insurance to changes in the institutional and economic environment. The current state of insurance distribution in India is still in flux. On one hand, insurers are awaiting regulations to be approved for brokerages and bancassurance to be truly launched. On the other hand they are trying the corporate model of intermediaries in addition to the traditional models in the market. There is no right and wrong in all this. The success of marketing insurance depends on understanding the social and cultural needs of the target population, and matching the market segment with the suitable intermediary segment. In addition a major segment of the Indian population has low disposable income, meaning that every penny won will be obtained after a lot of persuasion and the expected value for money is high. All intermediaries can't sell all lines of business profitably in all markets. There should be clear demarcation in the marketing strategies of the company from this perspective. Clients should also receive price differentials for using different channels. This is not a new concept, as the Public sector Property & Casualty companies are giving discounts in lieu of agency commission. The channel composition should not be homogeneous but should reflect the larger society. For example: Agents from different economic, social strata and different age and gender. Bancassurers ranging from multinational banks to micro credit lending agencies. Brokers stretching from corporate to NGOs to milk co-operatives.

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These intermediaries need to be empowered with the right learning, training and sales tools and technology enablers. Coupled with the right product mix, this will help the insurers to survive and flourish in this competitive market. Let us conclude with a story of a retired postal clerk who became a success story for selling postal savings and insurance in his village in Punjab in Northern India. The person is the father of my colleague, who is a retired postal employee and took up agency for postal savings and insurance to supplement his meager retirement earnings. Today 10 years later he is one of the top agents selling postal savings and insurance in his village, assisted by his illiterate wife and grandson (a seven year old computer literate) doing all the administrative work from home on a small Personal computer using a package (developed by our friend who is a programmer) to handle his client portfolio! The entire village population trusts him with the investment advices that he doles out and has no qualms in handing over small amounts of cash to him for depositing in the post office. He is their trusted customer care or financial consultant. This we feel is the essence of distribution of financial products in India. So lets conduct this business with utmost economy with the spirit of trusteeship; thereby making insurance widely popular.

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ANNEXURES 1. QUESTIONNAIRE
1. Are you employed? Yes No { } { }

2. Do you think that Insurance is important? Yes No { } { }

3. Do you have any insurance policy? Yes No { } { }

4. Which insurance policy do you have? Life Non Life Both { } { } { }

5. Do you know about Aviva? Yes No { } { }

6. Do you know about Aviva Life Insurance? Yes No { } { }

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7. Can you rank these in terms of importance? (5 Most Important, 4 Important, 3 Necessary, 2 Not Important, 1 Least Important) Life Auto Property Fire Theft Any Others (Pls. Specify) 8. In your Opinion, Insurance is an instrument for a. Saving Taxes { } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree b. Safe Investment { } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree c. Risk Management { } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree d. Greater Returns { } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree e. Protection { } Strongly Agree { } Agree { } Indifferent { } Disagree { } Strongly Disagree 9. Do you have insurance from any Private Player? Yes No { } { } { }5 { }5 { }5 { }5 { }5 { }5 { }4 { }4 { }4 { }4 { }4 { }4 { }3 { }3 { }3 { }3 { }3 { }3 { }2 { }2 { }2 { }2 { }2 { }2 { }1 { }1 { }1 { }1 { }1 { }1

10. Are you aware as to how many private Life Insurance Companies have set up the operations in the country? _______________________________________________________________ _______________________________________________________________ _______________________________________________________________

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11. Which companies insurance policy you prefer the most (rank them)? a) b) c) d) e) f) Aviva L.I.C ICIC Prudential OM Kotak Mahindra HDFC Standard Life { } { } { } { } { }

Any Other ______________________ (Please Specify)

12. Are you aware of any Act Passed for Insurance? Yes No Yes No { } { } { } { }

13. Do you know anything about IRDA (Insurance Regulatory & Development Authority)?

14. For how many years do you have insurance policy? a) b) c) d) <5 years 5 10 years { } { }

10 15 years { } Any Other ______________________ (Please Specify)

15. What do you think are the benefits of insurance cover? a) b) c) d) Cover Future Uncertainty Tax Deductions Future Investment { } { } { }

Any Other ___________________ (Please Specify)

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16. Which feature of your policy attracts you to buy it (rank them)? a) b) c) d) e) f) Low Premium Larger Risk Coverance Money Back Guarantee Reputation of Company Easy Access to Agents{ } Any Other ______________________ (Please Specify) { } { } { } { }

17. Your monthly house hold income? a) b) c) d) <10,000 10,000 20,000 20,000 30,000 30,000 40,000 { } { } { } { }

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BIBLIOGRAPHY BOOKS
C.R Kothari, Research Methodology R. K. Trivedi, Investment Prospects M. N. Mishra, Principles of Insurance Nalini Trivedi and Paul, Insurance Theory and Practice

INTERNET
http://www.irdaindia.org http://www.iloveindia.com http://www. avivaindia.com

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