Chapter 1

Introduction

INTRODUCTION
1.1 WHAT IS INSURANCE

Insurance is a risk management technique primarily used to hedge against the risk of a
contingent, uncertain loss that may be suffered by those individuals or entities that have
an insurable interest in scarce resources, by transferring the possibility of this loss from
one interested person, persons, or entity to another. The scarce resources referred to here
fall into three divisions: human resources, financial resources, and capital, or tangible
resources. In the context of insurance, scarce resources are also known as "exposures,"
because they are "exposed" to perils, those things, or forces, which cause destruction or
reduction, in the usefulness, or value, of an exposed resource. Human resources are thus
exposed to perils such as illness or death; financial resources to legal judgements that
may result from negligent acts, and capital resources to physical perils such as fire, theft,
windstorm, and vandalism, to name but a few. A hazard is the cause of a peril. It is that
thing or condition which increases the likelihood of a peril. Thus perils and hazards are
identified by the exposure that they threaten. For example a slippery roadway could be
viewed as a financial hazard, capital hazard, or human hazard by automobile owners, and
rightly so, since this condition increases the likelihood of an automobile accident that
might result in an unfavourable legal judgement, automobile damage, and bodily injury.
In the context of commercial trade, insurance is further defined as the equitable transfer
of the risk of a loss, from one entity to another, in exchange for consideration, payment,
in the form of a risk premium. The insurance premium develops at an actuariallydetermined rate. This rate is a factor used to determine the amount of premium to charge
for a certain limit, and type, of insurance on the scarce resource. The premium can further
be viewed as a guaranteed, known, relatively small financial loss to the insured, paid to
the insurer, in exchange for the insurer's promise to compensate (indemnify) the insured
in the case of a loss to the insured resource(s). The insured receives a contract, called
the insurance policy, which details the conditions and circumstances under which the
insured will be indemnified.

Insurance Services

1. Insurance is system by which the losses suffered by a few are spread over many,
exposed to similar risks. Insurance is a protection against financial loss arising on the
happening.
2. An unexpected event. Insurance policy helps in not only mitigating risks but also
provides a financial cushion against adverse financial burden suffered.
Insurance policies cover the risk of life as well as other assets and valuables such as
home, automobiles, and Jewelry.
The functions of Insurance can be bifurcated into two parts:

Primary Functions

Secondary Functions

Other Functions

Primary Functions

Provide Protection: The primary function of insurance is to provide protection

against future risk, accidents and uncertainty. Insurance cannot check the
happening of the risk, but can certainly provide for the losses of risk. Insurance is
actually a protection against economic loss, by sharing the risk with others.

Collective Bearing of Risk: Insurance is a device to share the financial loss of

few among many others. Insurance is a mean by which few losses are shared
among larger number of people. All the insured contribute the premiums towards
a fund and out of which the persons exposed to a particular risk is paid.

Assessment of Risk: Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk. Risk is the basis for determining
the premium rate also
3

Provide Certainty: Insurance is a device, which helps to change from uncertainty

to certainty. Insurance is device whereby the uncertain risks may be made more
certain.

Secondary Functions
Prevention of Losses: Insurance cautions individuals and businessmen to adopt suitable
device to prevent unfortunate consequences of risk by observing safety instructions;
installation of automatic sparkler or alarm systems, etc. Prevention of losses causes lesser
payment to the assured by the insurer and this will encourage for more savings by way of
premium. Reduced rate of premiums stimulate for more business and better protection to
the insured.

Small Capital to cover Larger Risks: Insurance relieves the businessmen from
security investments, by paying small amount of premium against larger risks and
uncertainty.

Contributes towards the Development of Larger Industries: Insurance

provides development opportunity to those larger industries having more risks in
their setting up. Even the financial institutions may be prepared to give credit to
sick industrial units which have insured their assets including plant and
machinery.

Other Functions

Means of Savings and Investment: Insurance serves as savings and investment,

insurance is a compulsory way of savings and it restricts the unnecessary
expenses by the insured's For the purpose of availing income-tax exemptions also,
people invest in insurance.

Source of Earning Foreign Exchange: Insurance is an international business.

The country can earn foreign exchange by way of issue of marine insurance
policies and various other ways.

Risk Free Trade: Insurance promotes exports insurance, which makes the foreign
trade risk free with the help of different types of policies under marine insurance
cover.

1.2 Brief History of Insurance Sector in India

The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360-degree turn witnessed over a
period of almost 190 years. The business of life insurance in India in its existing form
started in India in the year 1818 with the establishment of the Oriental Life Insurance
Company in Calcutta.
Milestone of Life Insurance in India

1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with
the objective of protecting the interests of the insuring public.

1956:245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz.
LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of
India.

The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:

1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact
all classes of general insurance business.

1957 - General Insurance Council, a wing of the Insurance Association of India,

frames a code of conduct for ensuring fair conduct and sound business practices.

1968 - The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.

1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized

the general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companys viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company
Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
On the basis of the risk they cover, insurance policies can be classified into two
categories:

Life Insurance Policies

General Insurance Policies

1.3 Life Insurance in India

Life is very fragile and death is a certainty. We cannot control the uncertainties of life.
But, we can cover the risks surrounding us. Life insurance, simply put, is the cover for
6

the risks that we run during our lives. It protects us from the contingencies that could
affect us.
Life insurance is not for the person who passes away, it for those who survive. It is the
responsibility of every bread earner to guard against the events that could affect the
family in the unfortunate circumstance of his / her demise. Thus, having a life insurance
policy is very vital. Before going for a life insurance policy it is imperative that you know
about various types of life insurance policies. Major among them are:

Endowment Policy

Whole Life Policy

Term Life Policy

Money-back Policy

Joint Life Policy

Group Insurance Policy

Loan Cover Term Assurance Policy

Pension Plan or Annuities

Unit Linked Insurance Plan

General Insurance, (India)

General Insurance provides much-needed protection against unforeseen events such as
accidents, illness, fire, burglary et al. Unlike Life Insurance, General Insurance is not
meant to offer returns but is a protection against contingencies. Almost everything that
has a financial value in life and has a probability of getting lost, stolen or damaged can be
covered through General Insurance policy.
7

Property (both movable and immovable), vehicle, cash, household goods, health,
dishonesty and also one's liability towards others can be covered under general insurance
policy. Under certain Acts of Parliament, some types of insurance like Motor Insurance
and Public Liability Insurance have been made compulsory.
Major insurance policies that are covered under General Insurance are:

Home Insurance

Health Insurance

Motor Insurance

Travel Insurance

1.4 Insurance Companies (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

Aviva Life Insurance

Bajaj Allianz

Birla S un Life Insurance

HDFC Standard Life Insurance

ICICI Prudential

ING Vysya

Kotak Mahindra

LIC

Max New York Life Insurance

Metlife India Insurance

Reliance Life Insurance

SBI Life Insurance

Shriram Life Insurance

Tata AIG Life Insurance

1.5 Effects OF Insurance

Insurance can have various effects on society through the way that it changes who bears
the cost of losses and damage. On one hand it can increase fraud, on the other it can help
societies and individuals prepare for catastrophes and mitigate the effects of catastrophes
on

both households and societies. Insurance can influence the probability of losses

through moral hazard, insurance fraud, and preventive steps by the insurance company.
Insurance scholars have typically used moral hazard to refer to the increased loss due to
unintentional carelessness and moral hazard to refer to increased risk due to intentional
carelessness or indifference. Insurers attempt to address carelessness through inspections,
policy provisions requiring certain types of maintenance, and possible discounts for loss
mitigation efforts. While in theory insurers could encourage investment in loss reduction,
some commentators have argued that in practice insurers had historically not aggressively
9

pursued loss control measures - particularly to prevent disaster losses such as hurricanes because of concerns over rate reductions and legal battles. However, since about 1996
insurers began to take a more active role in loss mitigation, such as through building
codes.
Insurers' business model
Underwriting and investing
The business model is to collect more in premium and investment income than is paid out
in losses, and to also offer a competitive price which consumers will accept. Profit can be
reduced to a simple equation: Profit = earned premium + investment income - incurred
loss - underwriting expenses.
Insurers make money in two ways:
1

Through underwriting, the process by which insurers select the risks to insure and
decide how much in premiums to charge for accepting those risks;

By investing the premiums they collect from insured parties. The most
complicated aspect of the insurance business is the actuarial science of
ratemaking (price-setting) of policies, which uses statistics and probability to
approximate the rate of future claims based on a given risk. After producing rates,
the insurer will use discretion to reject or accept risks through the underwriting
process.

At

the

most

basic

level,

initial

ratemaking

involves

looking

at

the frequency and severity of insured perils and the expected average payout resulting
from these perils. Thereafter an insurance company will collect historical loss data, bring
the loss data to present value, and comparing these prior losses to the premium collected
in order to assess rate adequacy. Loss ratios and expense loads are also used. Rating for
different risk characteristics involves at the most basic level comparing the losses with
"loss relativities" - a policy with twice as money policies would therefore be charged
twice as much. However, more complex multivariate analyses through generalized linear
10

modelling are sometimes used when multiple characteristics are involved and a univariate
analysis could produce confounded results. Other statistical methods may be used in
assessing the probability of future losses.
Upon termination of a given policy, the amount of premium collected and the investment
gains thereon, minus the amount paid out in claims is the insurer's underwriting profit on
that policy. Underwriting performance is measured by something called the "combined
ratio" which is the ratio of expenses/losses to premiums. A combined ratio of less than
100 percent indicates an underwriting profit, while anything over 100 indicates an
underwriting loss. A company with a combined ratio over 100% may nevertheless remain
profitable due to investment earnings.
Insurance companies earn investment profits on "float". Float, or available reserve, is the
amount of money on hand at any given moment that an insurer has collected in insurance
premiums but has not paid out in claims. Insurers start investing insurance premiums as
soon as they are collected and continue to earn interest or other income on them until
claims are paid out. The Association of British Insurers (gathering 400 insurance
companies and 94% of UK insurance services) has almost 20% of the investments in
the London

Stock

Exchange.

In

the United

States,

the

underwriting

loss

of property and casualty insurance companies was $142.3 billion in the five years ending
2003. But overall profit for the same period was $68.4 billion, as the result of float. Some
insurance industry insiders, most notably HankGreenberg, do not believe that it is forever
possible to sustain a profit from float without an underwriting profit as well, but this
opinion is not universally held.
Naturally,

the

float

method

is

difficult

to

carry

out

in

an economically

depressed period. Bear markets do cause insurers to shift away from investments and to
toughen up their underwriting standards, so a poor economy generally means high
insurance premiums. This tendency to swing between profitable and unprofitable periods
over time is commonly known as the underwriting, or insurance cycle.
1.6 Life Insurance
11

There are various kinds of insurance available in the market. In this particular project we
are concentrating on life insurance. Life insurance ensures that your family will receive
financial support in your absence. Put simply, life insurance provides your family with a
sum of money should something happen to you. It protects your family from financial
crises.
In addition to serving as a protective cover, life insurance acts as a flexible money-saving
scheme, which empowers you to accumulate wealth-to buy a new car, get your children
married and even retire comfortably. Life insurance also triples up as an ideal tax-saving
scheme.
Major risk a family is exposed due to death of the breadwinner of a family
In the above circumstance, the source of income comes to an end but not the expenses.
They remain, as they were earlier before the death of the breadwinner of the family.
Just in case, the income doesn't remain the same as earlier, the family has to downgrade
their standard of living. This kind of situation may affect the future of the family
drastically. To overcome all these risks, life insurance is mandatory for everyone who has
any dependant on his or her income besides any kind of liability like a home loan or
a personal loan or any other loan. In case of death of the insured, the money, which is
received from the Life

Insurance Company, is paid to the bank or the financial

institution from where the loan is taken.

The

next

question

is

how

much

insurance

should

one

take?

To put that in simple words, the sum assured should be large enough to take care of your
entire family expenses along with your liabilities if any and also should fulfill all the
goals of your children's future or buying a home for your family or any other goal you
have. This is quite a sophisticated process and you should take professional help to know
how much sum assured you need. To have a fair idea of your life insurance requirement,
you can do the calculations on our site on our life insurance planner calculator. but before
you go ahead to buy a life insurance plan for yourself, we would suggest you to take
some kind of professional help. Taking a lower sum assured than your requirement means
that you are not adequately insured and in case of death, your family will have to make
12

some kind of compromises either in regular expenses or for the goals you had set for your
family.
In case you have taken reverse route, like going in for more Insurance than you need,
implies that you are paying more premiums that is actually not needed. You can use this
money somewhere else to plan for some other goals you have for your future.
Need for Life Insurance
Today, there is no shortage of investment options for a person to choose from. Modern
day investments include gold, property, fixed income instruments, mutual funds and of
course, life insurance. Given the plethora of choices, it becomes imperative to make the
right choice when investing your hard-earned money. Life insurance is a unique
investment that helps you to meet your dual needs - saving for life's important goals, and
protecting

your

assets.

Let us look at these unique benefits of life insurance in detail.

Life insurance is the only investment option that offers specific products tailor-made for
different life stages. It thus ensures that the benefits offered to the customer reflect the
needs of the customer at that particular life stage, and hence ensures that the financial
goals of that life stage are met. The table below gives a general guide to the plans that are
appropriate for different life stages.

Life Stage

Primary Need

Life Insurance Product

13

Young & Single

Young & Just

Asset creation
Asset creation &

Wealth creation plans

Wealth creation and mortgage

married
Married with

protection
Children's education,

protection plans
Education insurance, mortgage

kids

Asset creation and

protection & wealth creation

Middle aged

protection
Planning for retirement

plans
Retirement solutions &

with grown up

& asset protection

mortgage protection

kids
Across all life-

Health plans

Health Insurance

stages

14

Chapter 2
COMPANY PROFILE

15

LIFE INSURANCE CORPORATION OF INDIA

The Life Insurance Corporation of India (LIC) ( ) is the largest
state-owned life insurance company in India, and also the country's largest investor. It is
fully owned by the Government of India. It also funds close to 24.6% of the Indian
Government's expenses. It has assets estimated of 13.25 trillion (US$295.48 billion). It
was founded in 1956 with the merger of 243 insurance companies and provident
societies.
Headquartered in Mumbai, financial and commercial capital of India, the Life Insurance
Corporation of India currently has 8 zone Offices and 113 divisional offices located in
different parts of India, around 3500 servicing offices including 2048 branches, 54
Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located
in different cities and towns of India and has a network of 13,37,064 individual agents,
242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011)
for soliciting life insurance business from the public.
The slogan of LIC is "Zindagi ke saath bhi Zindagi ke baad bhi" ( ,
) which means "during life and after life".

2.2 HISTORY
The Oriental Life Insurance Company, the first corporate entity in India offering life
insurance coverage, was established in Calcutta in 1818 by Bipin Bernard Dasgupta and
others. Europeans in India were its primary target market, and it charged Indians heftier
premiums. The Bombay Mutual Life Assurance Society, formed in 1870, was the first
native insurance provider. Other insurance companies established in the preindependence era included
Bharat Insurance Company (1896)
16

United India (1906)

National Indian (1906)

National Insurance (1906)

Co-operative Assurance (1906)

Hindustan Co-operatives (1907)

Indian Mercantile

General Assurance

Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It witnessed
Indias First War Of independence, adverse effects of the World War I and World War II
on the economy of India, and in between them the period of worldwide economic crises
triggered by the Great depression. The first half of the 20th century also saw a heightened
struggle for Indias Independence. The aggregate effect of these events led to a high rate
of bankruptcies and liquidation of life insurance companies in India. This had adversely
affected the faith of the general public in the utility of obtaining life cover.
The Life Insurance Act and the Provident Fund Act were passed in 1912, providing the
first regulatory mechanisms in the Life Insurance industry. The Indian Insurance
Companies Act of 1928 authorized the government to obtain statistical information from
companies operating in both life and non-life insurance areas. The subsequent Insurance
Act of 1938 brought stricter state control over an industry that had seen several
financially unsound ventures fail. A bill was also introduced in the Legislative Assembly
in 1944 to nationalize the insurance industry.
Past Chairmen
Messrs. H.M.Patel, Gopalkrishnan, M.R.Yardi, M.R.Bhide, T.A.Pai, K.R.Puri, Jacob
Mathen, J.R.Joshi, A.S.Gupta, R.Narayanan, N.K.Shinkar, M.G.Diwan, K.P.Narasimhan,
N.N.Jambusaria,

J.Salunkhe,

N.M.Govardhan,

G.Krishnamurthy,

S.B.Mathur, R.N.Bharadwaj, Atul Shukla and Tai Salas Vijayan.

17

G.N.Bajpai,

2.3 NATIONALIZATION
In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners of
private insurance companies. In the ensuing investigations, one of India's wealthiest
businessmen, Ram Kishan Dalmia, owner of the Times of India newspaper, was sent to
prison for two years. Eventually, the Parliament of India passed the Life Insurance of
India Act on 1956-06-19, and the Life Insurance Corporation of India was created on
1956-09-01, by consolidating the life insurance business of 245 private life insurers and
other entities offering life insurance services. Nationalization of the life insurance
business in India was a result of the Industrial Policy Resolution of 1956, which had
created a policy framework for extending state control over at least seventeen sectors of
the economy, including the life insurance.
2.4 CURRENT STATUS

LIC building, at Connaught Place, New Delhi, designed by Charles Correa, 1986.
Over its existence of around 50 years, Life Insurance Corporation of India, which
commanded a monopoly of soliciting and selling life insurance in India, created huge
surpluses, and contributed around 7 % of India's GDP in 2006.
The Corporation, which started its business with around 300 offices, 5.6 million policies
and a corpus of INR 459 million (US$ 92 million as per the 1959 exchange rate of
roughly Rs. 5 for a US $, has grown to 25000 servicing around 350 million policies and a
corpus of over 8 trillion (US$178.4 billion).

18

2.5 AWARDS AND RECOGNITION

The Economic Times Brand Equity Survey 2010 rated LIC as the No. 4 Service Brand of
the Country. Though in the year 2010 is ranked at 4, the organization is consistently
among the top rated service company of the India.
According to The Brand Trust Report 2011, LIC is the 8th most trusted brand of India.

2.6 ROLES OF LIC

1. Largest insurance company in India- 55% shares in 2010, monopoly for 50 years,
insurance is not an option but necessity in current times.
2. Largest institutional investor.
3. Covers different economic sections of the society.
4. Largest insurer in rural areas.
5. Help in channelizing money of NRIS through schemes-currency policy.
6. One of the biggest employers.
7. Funds to private sector.
8. Social service with profit.

2.7 OBJECTIVES OF LIC

Spread life insurance widely and in particular to the rural areas and to the socially and
economically backward classes with a view to reaching all insurable persons in the
country and providing them adequate financial cover against death at a reasonable cost.
1

Maximize mobilization of peoples savings by making insurance linked savings

adequately attractive.

Bear in mind, in the investments of funds, the primary obligation to its policy
holders, whose money it holds in trust. Without losing sight of the interest of the
19

community as a whole; the finds to be deployed to the best advantage of the

investors as well as the community as a whole, keeping in view national priorities
and obligations of attractive return.
3

Conduct business with utmost economy and with the full realization that the
moneys belong to the policy holders.

Act as trustees of the insured public in their individual and collective capacities.

Meet the various life insurance needs of the community that would arise in the
changing social and economic environment.

Involve all people working in the corporation to the best of their capabilities in
furthering the interests of the insured public by providing efficient service with
courtesy.

Promote amongst all agents and employees of the corporation a sense of

participation, pride and job satisfaction through discharge of their duties with
dedication towards achievement of corporate objectives.

2.8 PREMIUM
There are 5 modes of premium payment methods in LIC of India. LIC of India provides
rebates on the premium to be paid based on the mode of payment made by the policy
holder. The highest rebate is given to the yearly mode.
Quarterly: The premium has to be paid every 3 months in a policy year. Usually there are
no rebates given for this mode of premium payment.
Half yearly: The premium amount has to be paid every 6 months of the policy year.
Usually rebates are given to this kind of payment. However the rebate percentage varies
according to the policy.

20

Yearly: This most welcomed mode of payment by LIC of India. The highest rebate is
given to this mode of payment since it eases the managing and accounting processes of
the company for the particular policy holder.
Monthly: The policy premium has t be paid every month of the policy year. A 5%
percentage of the premium amount has to be paid extra for this mode of premium. This is
not the recommended form of premium payment since it increases the overhead for both
the policy holder as well as the insurance company.
Salary savings scheme (SSS): In this mode of premium payment the policy premium will
be deducted from the salary of the policy holder every month automatically. The
difference between monthly mode and this mode is that the extra premium has not to be
paid in this mode of premium. For selecting this mode of premium the organization in
which the policy holder is working should support this practice.
Ways of paying LIC premium
Usually the premium payment for the LIC policies is made in three different ways. They
are:1

Payment through the LIC agent from whom the policy was bought: This is
most widely used method for paying the premium. The agents will remind
the policy holders when the due period is near. This avoids the lapse of
policies and increases the income of the corporation. But it is not sure that
all agents will remind near by the due time. According to the corporation it
is the sole responsibility of the policy holder to pay the premium on time.
However the corporation will also send a letter to the policy holder when
the due period is near.

Payment through the LIC branch offices: If the policy holder has decided
to pay the premium by himself he can pay the premium at any LIC branch
office across India. All the branches are interconnected through the
network. The policy holder will get the computer generated receipt as soon
as he pays the premium.

21

Online Payment: According to me this is the most easiest and comfortable

mode of premium payment. There is no working hours restriction in this
way of premium payment. The payment can be made round the clock. If
you have a credit card or internet banking account this is the most
preferred way. For this you should get registered in the LIC website and
enrol your policies there. Proper guidelines are given in the LIC site.

Late fee or fine for delayed payment of premium in LIC

If the premium amount is not paid on the due date then the policy is considered to be a
lapsed policy. However the policy can be revived within six months of the policy
lapsation paying a small amount as the interest.
So how the delayed payment interest is calculated?
LIC considers the delay of 1 month 14 days as one month. 1 month 15 days to 2 months
14 days as 2 months and like that. A delay of just 15 days will also be considered as a
delay of one month. And the fine will be charged at the rate of 8%

2.9 Four major Policies of LIC

In LIC we have two basic products and 290 combinations attached to these products. As
we had limited time period so we were trained about 4 policies during our training which
are as follows:
1. JEEVAN SARAL POLICY
JEEVAN SARAL LIFE INSURANCE POLICY BY LIC

Feature of plan: This plan contains good feature of the conventional plans and
the flexibility of unit linked plans. It provides higher cover, smooth return,
liquidity and considerable flexibility. In this plan one has to choose the premium
he wants to pay whereas in normal plans one chooses the S.A. under this plan
death cover will be same irrespective of age at entry and term. The sum payable at
maturity however differs for different entry age and terms. This plan is very
22

appropriate for employees seeking life cover through salary savings schemes.
Surrender value: the policy can be surrender after it has been in force for at least
3 full years. The surrender value will be the greater then guaranteed surrender
value or special surrender value as given below:
Guaranteed surrender value (GSV): the GSV will be equal to the 30% of the
total amount of premium paid excluding the premium for the first year and all the
extra premiums and premium for accident / term riders.

Special surrender value (SSV): the special surrender value under the policy
shall be paid as the sum of (a) and (b) gives as under:

Discounted value or accumulated value, as the case may be, of the

following: 80% of maturity S.A. if 4 years premium have been paid, 90%
of the maturity S.A. if or more years but less then 5 years premiums have
been paid and 100% of the maturity S.A. if 5 or more years premium have
been paid.

The loyalty additions, if any as announced while declaring the results of the
corporation's valuation as on 31st march, immediately preceding the date of
surrender.
Auto cover: the plan offers auto cover of 12 month after the policy has been in
force for a period of 3 years or more.
Flexible term: the policyholder can choose a maximum term but can surrender at
any time without any surrender penalty or loss.
Partial surrenders: the plan will allow partial surrender from 4th year onwards
subject to certain conditions for which please refer to policy document. Due to
23

existence of the flexible term and partial surrender the policyholder will enjoy a
lot of liquidity under the plan. The plan also provides for 15 days free look
period".
Optional rider: term assurance rider, accidental death and disability benefit rider
is available by the payment of an addition premium.
Maturity sum assured (MSA): has to be calculated on the basic premium only,
before mode rebate & death accident benefit.
Death benefit S.A. will be 250 times the monthly basic premium. To arrive at
DAB we have to calculate death benefit S.A. e.g. if yearly premium is Rs.6000
The death benefit S.A. = 6000/12 x 250 = 1,25,000 for this DAB will be @
Re.1per thousand which come out to be Rs.125
Plan parameters
Age at entry: Min.12 yrs (completed) Max. 60 yrs (NBD)
Maturity age: Min.70 yrs
Term: Min.10 yrs Max. 35 yrs
Min. premium
Age 12 to 49:Rs.250 P.M
Age 15 to 60: Rs.400 P.M
Max. Premium: No. Limits
Premium in
Multiples: Rs.50 p.m.
Mode of payment: YLY/ HLY/ OLY/ SSS
Accident benefit: Re. 1extra per
(max. 50 Lac inclusive all plan)
Policy loan: yes @ 10.5%
Housing loan: yes
Assignment: yes
24

Revival: yes Surrender of policy: yes

Term: yes
Underwriting condition
Form no: 300/340
Age proof: Std/ NSAP-1
Female lives category: I/II/III
Non-medical (Gen): Allowed
Non-medical (Prof): Allowed
Non-medical (special): Allowed
Actual sum assured: Basic SA
Risk coverage: Death benefit S.A. + return of premium paid + LA (if any)
Dating back @ 8%: Allowed
Benefit
Maturity benefit: Maturity sum assured (MSA) + Loyalty additions, if any
Death benefit: 250 times the monthly premium + Return of premiums
(Excluding extra/rider premium and first year premium),+ the Loyalty Addition, if
any
Example: Mr. Ashok is 25 years old and is working in auto industry. He opts for
Jeevan Saral plan for 15 years term and chooses monthly basic premium of
Rs.500/- after adding DAB premium of Rs.510 (500 x 250 = 1,25,000 x 1/1000 x
1/12 = 10 + 510). On maturity he will receive Rs.97655/- as maturity sum assured
(MSA) + Loyalty Addition which will be decided by the corporation. If he dies
after 4 years, his nominee will get Rs.1,25,000 (250 x 500) + premium paid for 4
years - first year premium = 1,25,000 + 24,480 - 6120 = 1,43,360/- + Loyalty
Addition, if any

25

2. JEEVAN TARANG POLICY

JEEVAN TARANG LIFE INSURANCE POLICY BY LIC

Features of plan: Jeevan Tarang plan (plan No.178) is introduced w. e. f 17th

march 2006. The plan is a whole life plan, which provides annual survival benefit
at a rate of 5.5 %
Of the sum assured for life time after the chosen accumulation period
Accumulation period:
The plan offer three accumulation periods - 10, 15 and 20 years. A proposer may
choose.
Plan parameters
Age at entry: min.0 yrs. (LBD) max 60 yrs. (NBD)
Premium payment
Ceasing age: 70 yr. (NBD)
Age up which
Life cover available: 100 yrs. (completed)
Min. age at the end
Of accumulation period: 18 yrs. (completed)
Sum assured: min. 1 Lac max. no. limit
Premium
In multiples: Rs.5000
Accumulation period: 10,15,20, yrs
Mode of payment: YLY/ HLY/ QLY/ SSS/ MLY/ SP
Accident benefit: Re. 1 extra per
(max. 50Lacs inclusive 1000 S.A. all plan)
Policy loan: yes
Housing loan: yes
Assignment: yes
Revival: yes

26

Term rider: yes

CIR: yes
Underwriting condition
Form no: 300/340/360
Age proof: std./ NSAP- 1.2.3
Female lives category: I/II/III
Non-medical (gen): allowed
Non-medical (proof): allowed
Non-medical (special): allowed
Actual sum assured: basic SA
Dating back: allowed @ 9% p.a.
BENEFITS:
Survival benefit

The vested simple reversionary bonuses will be payable in one lump sum
on survival to the end of the selected accumulation period.

5 % of the sum assured will be payable on survival to the end of each

year after the accumulation period. The first survival benefit will be
payable on survival to one year after the accumulation period is over.

Maturity benefit:

The sum assured, along with vested reversionary bonus is payable in case
of death of the life assured during the accumulation period.

In case of death before commencement of risk when the life assured is

aged less than or equal to 12 years, the premiums paid will be returned
without any interest. There will be no death benefit either for the basic

27

sum assured or for simple reversionary bonuses since, in such case, the
risk for life cover commences after 2 years from the death of taking of the
policy anniversary coinciding with or immediately following the date on
which life assured completes 7 years of age , whichever is later. After the
commencement of risk, the normal death benefit as stated above is
payable.

The sum assured along whichever along with loyalty addition, if any
payable in case of death of the life assured any time after the accumulation
period.

Optional

riders

(available

during

the

accumulation

period

only)

Accident benefit rider option (allowed for regular premium policies only):
Accident benefit option will be available under the plan by the payment of
conditional premium. Accident benefit rider shall be available for an amount not
exceeding the sum assured under the basic plan subject to an overall limit of
Rs.50Lakh taking all existing policies of the life assured under individual as will
as group schemes including those with in- built accident benefit taken with the
corporation and other insurance companies and the accident benefit rider sum
assured the new proposal into consideration. This benefit is available under
regular premium policies only and it is available under premium policies.
Term assurance rider option: term assurance as optional rider will be available
under this plan during the accumulation period. The premium for this option are
payable during the premium paying term and an amount equal to term assurance
sum assured will be payable on death during the accumulation period. The
maximum cover for rider will be Rs.25Lakh under all policies of the life assured
with the corporation taken together. The terms and condition applicable to this
rider will be as mentioned in circular Ref: Act l/1909/4 dated 24th October 2003.
Critical illness rider option: an amount equal to critical illness rider sum assured
will be payable in case of diagnosis of defined categories of critical illness during
28

the accumulation period subject to certain term and conditions. The maximum
cover for this rider will be Rs.5Lakh under all policy all policy of the life assured
with the corporation taken together. The term and conditions applicable to this
rider will be as mentioned in circular Ref: Act l/1906/4 dated 8th October 2003
and Act l/2034/4 dated 13th September 2005.

Premium waiver benefit option under critical illness rider: this is an optional
Benefit under regular premium policy which may be opted in case of the
following.
1

The critical illness under has been opted for, and

The sum assured under the basic plan is equal to the critical Illness rider
sum assured

The chosen accumulation period is such that the premium payment ceases
on or before the policy anniversary at which the life assured completes 60
years (nearest birthday) of age in case the life assured is diagnosed with
any of the critical Illnesses covered under the policy, the life total future
premium (i.e. premium for sum assured under the basic plan and the
premium policy is in full force. All there optional rider benefit mentioned
above shall be available during accumulation period only.

Occupation extra: plan can be allowed to persons employed in hazaedous

occupation subject to charging appropriate occupation extra for basic sum
assured, TA and CI rider sum assured the factor to be applied to each Re.1/- per
annum occupation extra premium under single premium policies will be the same
as applying to single premium policies Table 48, i.e., 8.30, 11.15 and 13.35 for
accumulation period 10, 15 and 20 years respectively.

29

Paid-up & surrender vales (GSV SSV): In case of regular premium policies, if
after at lest there full year's premium have been paid and any subsequent premium
be not duly paid, this policy shall not be wholly void, but the sum assured by it
shall be reduced to such a sum, called paid-up sum assured, as shall bear to the
total number of premiums originally stipulated in the policy. The policy so
reduced shall thereafter be fore from all liabilities for payment of the within
mentioned premium, but shall not be entitled to the future bonuses. The existing
vested reversionary bonuses, if any, shall remain attached to the reduced paid-up
policy.

In the event of death of life assured during the accumulation period, the reduced
paid-up sum assured as defined above, along with vested reversionary bonus, if
any, shall be payable. No survival benefit will be payable for a reduced paid-up
policy. Provided the life assured is then alive, the vested bonuses and the reduced
paid-up sum assured as defined above shall be payable at the end of the
accumulation period.

3. JEEVAN ANAND POLICY

JEEVAN ANAND LIFE INSURANCE POLICY BY LIC

Features of plan: Jeevan Anand plan is the combination of whole life policy and
endowment insurance policy the plan provides the per-decided S.A. and bonus at
the end of the stipulated PPT, but the risk cover on the life continues till death.
This policy is suitable for the people of all ages and social groups. The
30

policyholder will be benefited by giving protection to their families from a

financial setback that may occur owing to their demise The amount assured if not
paid by reason of his death earlier will be payable at the end of the endowment
term where it can be invested in an annuity provision for the rest of the
policyholder's of this plan is moderate premiums,

high liquidity, saving

oriented.
Premiums are usually payable for the selected term of years or until death if it
occurs during the term period. Accident benefit is available during engaged in
hazardous occupations attracting occupational extra.
Plan parameters
Age at entry: Min.18 yrs Max. 65 yrs.
PPT maturity age: Max. 75 yrs
Sum assured: Min. 100000 Max. No. Limit
S.A. in multiples: 5000
Term: Min.5 yrs Max. 57 yrs
Mode of payment: YLY/HLY/QLY/SSS/MLY
Accident benefit: Incl. in. T.P.
Policy loan: yes
Housing loan: yes
Assignment: yes
Revival: yes
Surrender of policy: yes
Term rider: N.A.
CIR: yes
UNDERWRITING CNDITION
Form no: 300 (rev.)
Age proof: std/ NSAP- 1,2,3
31

Female lives category: I/II/III

Non-medical (Gen): Allowed
Non-medical (Prof): Allowed
Non-medical (special): Allowed
Actual sum assured: Basic SA

Risk coverage: SA+ Bonus

Dating back @ 8%: Allowed
BENEFITS
Maturity benefit: S.A. +Bonus + FAB, if any is at the end of the premium paying
term (PPT)

Death benefit:
If death occurs during the premium paying term S.A. + Bonus +FAB, if any is
payable and premium payment is ceased. An extra amount equal to the S.A. is
payable if death occurs after the premium paying term. No bonus is paid on death
after the premium paying term.
Accident benefit: The double accident benefit is available during the premium
paying term and thereafter up to age 70. The premium for this has been built into
the tabular premium rate.
Example: Mr. Sharad Panwar 25 years , opts for Jeevan Anand policy for 20
years with S.A. Rs.1 Lac. He has to pay annual premium of Rs.5490/- on
maturity, Mr. Sharad Panwar will get Rs. 1,98,000 /- (S.A. + Bonus as per 2005
rates i.e. Rs.43 per thousand per annum which become 43 x 100 x 20 = 86,000/-).
Even after the premium paying term is over, risk cover continues till the death of

32

Mr. Sharad Panwar.

But if, Mr. Sharad Panwar dies at the age of 65 years his nominee will get an
additional amount equal to the S.A. i.e. Rs.1 Lac in cash, Mr. Sharad Panwar dies
during premium paying term his nominee will receive Rs. 1Lac + accumulated
Bonus.

4. JEEVAN ANURAG POLICY

JEEVAN ANURAG LIFE INSURANCE POLICY BY LIC

Feature of plan: Jeevan Anurag is a with profit plan specifically designed to take
care of the educational needs of children. The plan can be taken by a parent on his
or her own life benefits under the plan are payable at pre-specified duration
irrespective of whether the life assured survives to the end of the policy tremor
dies during the term of the policy. In addition, this plan also provides for an
immediate payment of basic S.A amount on the life assured during the term of the
policy. This plan is not allowed when occupation extra chargeable and to pregnant
ladies.
15 - Days cooling- off period: if you are not satisfied with the "term and
conditions of the policy you may return the policy to us within 15 days.
Paid up value: if at least three full year's premiums have been paid in respect of
this policy, any subsequent premium be not duly paid, this policy shall not be
wholly void, but the S.A. by it shall be reduced to such a sum, called the paid-up
value, as shall bear the same ration to the full S.A. as the number of premium
actually paid shall bear to the total number of premium originally stipulated in the
33

policy. The policy so reduced shall thereafter be free from all liabilities for
payment of the within mentioned premium, but shall not entitled to the future
bonuses.

Guaranteed surrender value: this policy can be surrender for cash after the
policy is kept in force by payment of premiums for at least three years. The
guaranteed surrender value allowable under this plan for all modes, except the
premium mode will be equal to 30% of the premium paid excluding the premiums
paid for the first year and all extra premiums and the premiums paid for optional /
rider benefits. In case of single premium mode, the guaranteed surrender value
will be 90% of the premiums paid excluding all extra premiums and the
premiums paid for optional/ rider benefits.
Critical illness rider benefit: critical illness rider benefit will be available for an
amount not excluding the S.A. under the basic plan subject to overall cover of
5lakh under all polices of the life assured with the corporation taken together.
If premium waiver benefit is opted for then in case of diagnosis by any of the
critical illnesses condition covered under the policy, the total future premiums in
respect of the policy will be waived S.A under such polices will not exceed
Rs.5lakh.

Plan parameters
Age at entry: Min.20 yrs (NBD) Max.60yrs (NBD)
Maturity age: Max.70 yrs. (NBD)
Term: Min.5 yrs for S.P & 10 yrs for regular Max. 25 yrs
Sum assured: Min.50000 Max. No Limit
S.A in multiples: 5000

34

Premium paying: policy term or

Term (PPT): policy term-3
Mode of payment: YLY/ HLY/QLY/SSS/MLY and single premium
Accident benefit: Allowed (with extra premium)
Policy loan: yes @ 10.5%
Housing loan: yes
Assignment: yes
Revival: yea
Surrender of policy: yes
Term rider: yes
CIR: yes
Underwriting condition
Form no: 300
Age proof: std/ NSAP-1 (WR 5Lac)
Female lives category: I/II/III
Non-medical (Gen): Allowed
Non-medical (Prof): Allowed
Non-medical (special): Allowed
Actual sum assured: 1.5 times of S.A
Dating back @ 8%: Allowed
BENEFIT
Maturity benefit: payment of the basic S.A at the start of every year during last 3
policy years before maturity. At maturity 40% of the along with reversionary
bonus declared from time to the full term and the terminal bonus if any shall be
payable
Death benefit: payment of an amount equal to S.A. under the basic plan
immediately on the life assured is paid to the nominee. No. Premiums are payable
thereafter. An amount equal to 20% of the basic S.A. at the start of every year
35

during last 3 policy years is paid to the nominee. In addition he will also get 40%
of the basic S.A + Accured Reversionary bonus for the full term & terminal
bonus, is any is also paid.
Accident benefit: accident death and disability benefit will be available for an
amount not exceeding the S.A under the basic plan subject to overall cover of 50
lack under all policy of the life assured with the corporation taken together.
Example: Mr. Tushar Kapoor aged 35 years opted for jeevan anuurag plan, S.A 2
Lac, for a term of 15 years. He pays an annual premium of Rs.15323 /- if the
policy is in full force, Mr. Tushar Kapoor Will get 20% of S.A i.e. Rs.40000/- at
the start of 31th, 14th & 15th policy year and the balance 40% of S.A i.e.
Rs.80000 will be given at the end of 15th year along with reversionary bonuses
declared from time to time for the full term, plus terminal bonus, if any shall be
payable. in case Mr. Tushar Kapoor dies during 10th year his nominee will
receive

Rs.2

lakh.

No premiums are payable thereafter Moreover the nominee will get Rs.40000 /- at
the start of 31th, 14th & 15th policy year and on maturity Rs.80000 +
Reversionary Bonus + terminal bonus, if any.

36

Some Other Policies are:LIFE INSURANCE POLICY LIST

1

Aam Admi Bima Yojana lic policy

Amulya Jeevan-I lic policy

Anmol Jeevan-I lic policy

Bima Bachat lic policy

Bima Nivesh 2005 lic policy

CDA Endowment Vesting At 18 lic policy

CDA Endowment Vesting At 21 lic policy

Child Career Plan lic policy

Child Future Plan lic policy

10 Educational Annuity Plan lic policy

11 Fortune Plus lic policy
12 Gratuity Plus lic policy
13 Group Critical Illness Riderlic policy
14 Group Gratuity Scheme lic policy

37

15 Group Insurance Scheme in Lieu Of EDLI lic policy

16 Group Leave Encashment Schemelic policy
17 Group Mortgage Redemption Assurance Scheme lic policy
18 Group Savings Linked Insurance Scheme lic policy
19 Group Super Annuation Scheme lic policy
20 Group Term Insurance Schemes lic policy
21 Health Plus lic policy
22 JanaShree Bima Yojana (JBY) lic policy
23 Jeevan Aadhar lic policy
24 Jeevan Akshay-V lic policy
25 Jeevan Amrit lic policy
26 Jeevan Anand lic policy
27 Jeevan Anurag lic policy
28 Jeevan Bharati lic policy
29 Jeevan Kishore Jeevan Chhaya lic policy
30 Jeevan Madhur lic policy
31 Jeevan Mitra(Double CoverEndowment Plan) lic policy
32 Jeevan Mitra(Triple CoverEndowment Plan) lic policy

38

33 Jeevan Nidhi lic policy

34 Jeevan Pramukh lic policy
35 Jeevan Saathi lic policy
36 Jeevan Saral lic policy
37 Jeevan Shree-I lic policy
38 Jeevan Surabhi-15 Years lic policy
39 Jeevan Surabhi-20 Years lic policy
40 Jeevan Surabhi-25 Years lic policy
41 Jeevan Tarang lic policy
42 Jeevan Vishwas lic policy
43 Komal Jeevan lic policy
44 Market Plus I lic policy
45 Marriage Endowment lic policy
46 Money Plus-I lic policy
47 Mortgage Redemption lic policy
48 New Bima Gold lic policy
49 New Janaraksha Plan lic policy
50 New Jeevan Dhara-I lic policy

39

51 New Jeevan Suraksha-I lic policy

52 Profit Plus lic policy
53 Shiksha Sahayog Yojana lic policy
54 The Convertible Term Assurance Policy lic policy
55 The Endowment Assurance Policy lic policy
56 The Endowment Assurance
57 Policy-Limited Payment lic policy
58 The Money Back Policy-20 Years lic policy
59 The Money Back Policy-25 Years lic policy
60 The Whole Life Policy lic policy
61 The Whole Life Policy- Limited Payment lic policy
62 The Whole Life Policy- Single Premium lic policy
63 Two Year Temporary Assurance Policy lic policy
2.10 SELLING TECHNIQUE
After we were taught of the policies we had to start our work to sell them. And learn the
skills which were the main objective of our training. For the same we were taught of
SPANCO. It is a smiley being introduced which tells us about the different marketing
skills it consists of 6 main steps which were as follows:

40

SPANCO

1. Suspecting:
It is the first step. In this we have generate a list of people whom we know and suspect
that they may be interested to get a policy. The list may consist of friends, relatives,
neighbours etc. Everyone who we may suspect that she or he would may be interested to
buy a policy.
2. Prospecting:
Next comes prospecting. This is a step in which we will filter the list generated in the first
step and take out the eligible people from the list of suspected ones.
3. Appointment: After prospecting the eligible people we would approach them to get
appointments and so that we can have a detailed conversation regarding our products.
4. Negotiation:

41

Now we would have a detailed conversation with the customer regarding our product, its
features, benefits, etc. All the details attached to our product are being discussed with the
customer.
5. Close the sale:
After negotiating we would close the sale by getting a cheque from the customer n taking
all the details regarding the form from the customer.
6. Offers:
Now we would be leaving promising the customer to let him know about our future
products and offers duly.
This was all about spanco we worked on according to the same and had achieved great
success during our internship process. We learn many things like approaching people,
getting appointments, negotiating with them.

CHAPTER 3
42

OBJECTIVES

Objectives of the Project

Primary objectives

Study will be conducted on Brand Image of LIC.

An attempt will also be made to study the viewpoint of policyholders and further
to suggest the modalities to improve the efficiency of LIC.

Secondary objectives

To find out the advantages of the policies offered by LIC over various companies.
43

An attempt will also be made to study the differentiating strategies adopted by

LIC to win the customers.

The report gives the brief background of the sector and proceeds to highlight the
short comings of the existing setup and players. The benefits of liberalized sector
are enumerated. The report also tries to identify the market potential for insurance
products and the strategy that can we employed to exploit the same. The stress is
also given on knowing the awareness level of general public.

44

CHAPTER 4
SWOT ANALYSIS

STRENGTHS
1. Largest state-owned life insurance company in India, and also the country's largest
investor.
2. Has over 2000 branches across all parts of India and more than 10,00,000 agents.
3. With Largest fund base it is the biggest investor in India.
4. Have over 115,000 employees across India.
45

5. According to The Brand Trust Report, LIC is the 8th most trusted brand of India.
6. LIC has subsidiaries like LIC Housing Finance Limited, LIC Cards Services Limited.

WEAKNESSES
1. It has an image of a Government agency and hence lacks innovation.
2. Being a Government agency, red tape and bureaucracy causes problem.
3. Managing a huge workforce during economic crisis meant overburdened due to
salaries.

OPPORTUNITIES

1. Use of Technology to provide effective services to cater to urban population.

2. Government Schemes implementation.

THREATS

1. Economic crisis.
2. Entry of new NBFCs in the sector.
3. Varying Government policies.

HYPOTHESIS TESTING
At this stage, it is important to know that when a hypothesis is tested, there are four
possibilities:
1.
2.
3.
4.

Hypothesis is true but our test leads to its rejection.

Hypothesis is false but our test leads to its acceptance
Hypothesis is true and our test leads to its acceptance
Hypothesis is false and our test leads to its rejection.
46

In any hypothesis testing the researcher runs the risk of committing type I and type II
error.
CHI SQUARE TEST:
A chi-squared

test,

also

referred

to

as chi-square

test or

test,

is

any statistical hypothesis test in which the sampling distribution of the test statistic is
a chi-squared distribution when the null hypothesis is true. Also considered a chi-squared
test is a test in which this is asymptotically true, meaning that the sampling distribution
(if the null hypothesis is true) can be made to approximate a chi-squared distribution as
closely as desired by making the sample size large enough.
H0 = There is no significance relationship between the made of income group and
preference of LIC.
H1 = There is a significance relationship between the made of income group and
preference of LIC.

CHI SQAURE TEST

FORMULA:

X2

(O E)2
E

O = Observed frequency
E = Expected frequency
47

CHI SQAURE TEST

FORMULA:

X2

(O E)2

E
O = Observed frequency
E = Expected frequency

INCOME

Preference of

Preference of other

CATEGORY

LIC

LIC Companies

Low income group

Middle Income group
High Income group
Total

10
21
4
35

0
9
6
15

TOTAL
10
30
10
50

Chi square test

Ei =
Row Total X Column Total
Grand Total

INCOME

Preference of
Preference of LIC

other LIC

TOTAL

10 x 35

Companies
10 x 15

10

Low income group

50

50

Middle Income group

=7
30 x 35

=3
30 x 15

CATEGORY

48

30

50

50

= 21
10 x 35

=9
10 x 15

50

50

=7

=3

High Income group

ROW

COLUMN

FREQUENC

10

(O E) 2

OE

(O E)2

Y
1
1
2
2
3
3

1
2
1
2
1
2

O
10
0
21
9
4
6

E
7
3
21
9
7
3

3
-3
0
0
-3
3

9
9
0
0
9
9

1.2
3
0
0
1.2
3

TOTAL =

8.4

Chi square test continued

According to the table the degree of freedom is 2 i.e. (3 1) (2 1) and the critical value
of X2 is 5.991 since the value lies above the table value, the null hypothesis is rejected i.e.
there is a significant relationship between income group and preference of respondents.

Do not reject null hypothesis

reject null hypothesis

49

16.91

CHAPTER 5
50

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
Research comprise defining and redefining problems, formulating hypothesis or
suggested solutions; collecting, organizing and evaluating data; making deductions and
reaching conclusions; and at last carefully testing the conclusions to determine whether
they fit the formulating Hypothesis.
In short, the search for Knowledge through Objective and Systematic method of finding
solutions to a problem is Research.
5.1 RESEARCH OBJECTIVES
OBJECTIVE means the purpose for which the research has been conducted. We have to
clearly define the objective of the project to be made. This is the first and the most
important part of the Research Methodology.
The primary objective of my research is to study, understand and critically analyse the
selling strategies of LIC.
51

Other secondary objectives are as follows:

To study the insurance sector as a whole.

To study the general profile of the organization and to study its various products.

To study the market position of the company by analyzing the market.

To study the functioning of insurance companies.
To study the customers preference towards the insurance sector.

To know the customers preference towards the company and the various selling

strategies adopted by the company.

5.2 RESEARCH DESIGN
Descriptive research
Descriptive research includes Surveys and fact-finding enquiries of different kinds. The
major purpose of descriptive research is description of the state of affairs, as it exists as
the present. The main characteristic of this method is that the researcher has no control
over the variables; he can only report what has happened or what is happening.
5.3 DATA SOURCES
This project consists of two parts:Primary Data
The second part of the study has been done using an exploratory research process and a
structured questionnaire was developed for this purpose. For the collection of primary
data this was the only method used. The reason I used this method is because a need was
felt for the free influx of information about the products. Also this method allowed the
use of skills gained in class.
Secondary Data
The first part is a study of the insurance company, LIC using secondary data sources. This
secondary information has been sourced from the internet and from business related
magazines and newspapers.
5.4 QUESTIONNAIRE DESIGN / FORMULATION
Questionnaires: - A questionnaire consists of a set of questions presented to respondent
for their answers. It can be Closed Ended of Open Ended
52

Open Ended: - Allows respondents to answer in their own words & are difficult to
Interpret and Tabulate.
Close Ended: - Pre-specify all the possible answers & are easy to Interpret and Tabulate.
TYPES OF QUESTIONS USED IN THIS PROJECT
Close ended Questions
To know the choice of the people regarding various matters.
Dichotomous Questions
Which has only two answers Yes or No

Multiple Choice Questions

Where respondent is offered more than two choices. This is done to know the
choice of the customers regarding different matters.
5.5 SAMPLE DESIGN
The population considered for the purpose of the survey was people residing in Uttar
Pradesh, Shamli.
Sample Extent
Shamli
Time Frame
8 weeks
Sampling Technique Used
Since the information required was of a very technical nature and also looking at the
scope of the project and the extent of the target segment, the sampling technique
employed was Judgmental Sampling. I administered the questionnaires.

53

Sample Size
I have restricted the sample size to 60 respondents. This was done keeping in mind the
time constraints and the fact that I felt that this number would be enough to serve the
information needs required to show the trends.
5.6 LIMITATIONS OF THE RESEARCH:

The only limitation in this survey was that I could not conduct a

survey on a big scale, due to the time constraint.

Most of the contents collected were difficult to understand because it

was new for me to work in this field.

It was tricky and time consuming to understand the mysteries of

marketing.
Response of customers could be biased.

CHAPTER 6
DATA ANALYSIS AND
INTERPRETATION
54

QUESTIONNAIRE ANALYSIS
Q1. What is your Gender?

Gender

24%

76%

Male

Female

Interpretation:64% of the respondents are male and 36% of the respondents are female.
Q2. What is your Age?

55

Age
18-30 Yrs.

30-40 Yrs.

40-50 yrs.

Above 50 yrs.
7%

37%

23%

33%

Interpretation:-7 % of the respondents are age between 18-30 years of age, 23% of the
respondents are between the age group of 30 to 40 years, 33% of the respondents are the
age between 40-50 years, 27% of the respondents are above age 50 years.
Q3. What is your Occupation?

Occupation
Private Job

Government Job

Business

Retired

12%
36%
38%
14%

Interpretation:- 36% of the respondents are engaged in the Business, 14% are retired,
and 38% of the respondents are in Govt. service while 12% of the respondents are private
job.
Q.4 What is your Educational Qualification?

56

Education
Up to senior Secondary

Under Graduate

Post graduate

PHD

10%

15%

30%

45%

Interpretation:- 15% of the respondents have education up to Senior secondary, 30% of

the respondents are under Graduates or pursuing graduation, and 45% of the respondent
are post graduate while 10% of the respondents are post graduate.
5. What is Annual family Income?

Annual Family Income

21%

3%
40%

36%

8,00,000

12,00,000

50000

Above 10 lac

Chart-5
Interpretation:- 40% of the respondents fell under the annual family income of below
8,00,000, 36% of the Respondents are in between annual family income of 12,00,000 and
21% of the respondents are in between annual family income of 5,00,000 while 3% of the
respondents fell in the annual family income of above 10,00,000.
57

According to you, which have played a major role in the field of lifeinsurance companies?
13

14
12

10

10

10

8
Pvt.Employees

Govt.Employees
5

5
3

Bussiness Man
2

0
LIC

HDFC

ICICI

Others

Interpretation - From the above table, it is found that from the given three Sector Private,
Govt. And Business 10 out of 20 (50%), 13 out of 20 (72%), 10 out of 20 (50%), are in the
favour of LIC, 5 out of 20 (25%), 3 out of 20 (12%) and 5 out of 20 (25%) are in favour of
HDFC, 3out of 20 (12%), 3 out of 20 (12%) and 4 out of 20 (20%) are in favour of ICICI ,
whereas only 2 out of 20 (10%), 2 out of 20 (10%) 1 and out of 20 (5%) favour other
companies.
9

Which insurance companies have been successful to make strong public base
by advertisement?

58

16
14

14
12

12

12

10
Pvt.Employees

Govt.Employees
Bussiness Man

6
4

4
3

0
LIC

HDFC

ICICI

Others

Interpretation - From the above table, it is found that from the given three Sector Private,
Govt. And Business 12 out of 20 (55%), 14 out of 20 (72%), 12 out of 20 (55%), are in the
favour of LIC, 3 out of 20 (15%), 2 out of 20 (10%) and 4 out of 20 (20%) are in favour of
HDFC, 4out of 20 (20%), 3 out of 20 (15%) and 3 out of 20 (15%) are in favour of ICICI ,
whereas only 1 out of 20 (5%), 1out of 20 (5%) 1 and out of 20 (5%) favour other
companies.
10 Which Insurance company has gained massive public support in the current
fiscal year?

59

16
14

14
12

12
10

10

Pvt.Employees

Govt.Employees
Bussiness Man

3
2

2
1

0
LIC

HDFC

ICICI

Others

Interpretation - From the above table, it is found that from the given three sector
Private, Govt. And Business 12 out of 20 (36%), 14 out of 20 (42%), 10 out of 20 (30%),
are in the favour of LIC 3 out of 20 (9%), 2 out of 20 (6%) and 5 out of 20 (12%) are in
favour of HDFC and ICICI, whereas only 2 out of 20 (6%), 2 out of 20 (6%) 1 and out of
20 (3%) favour other companies.
11 Do you think insurance policy is in the direction of public welfare?

60

18

16

16
14

13

12

12
10
8

Yes

No

4
2
0
Category 1

Category 2

Category 3

Interpretation - The above table shows that from private sector 13 out of 20 (30%) agree
and 7 out of 20 (21%) disagree, from govt. sector 16 out of 20 (48%) think it right but 4
out of 20(12%) dont think it so and from business man 12 out of 20 (36%) are in favour
of the above statement but 8 out of 20 (24%) dont favours it.
12 Is Retirement bond or Pension policy launched by the number of private
player as well as public Sector Company in the direction of secured old?

20

18

18
16

15
13

14
12

YES

10
7

8
6

2
0
Pvt.Emp.

Govt. Emp.

61

Business man

NO

Interpretation - It is obvious from the above table that 15 out of 20 (45%), 18 out of 20
(54%) and 13out of 20 (39%) from the given three think retirement bend or pension
policy a legitimate step in the direction of secure old age but 5 out 20 (15%), 2 out of 20
(6%) and 7 out 20 (21%) dont agree with the opinion of the majority class.

13 Do you think that risk coverage factor included in Insurance policy attracts
general public towards the policy?
18
16

16
14
12

12
11

10
8

9
8

No

6
4

4
2
0
Pvt. Emp.

Yes

Govt, Emp.

Business Man

Interpretation - From the above table it is found that 12 out of 20 (36%) from Private
sector 16 out of 20 (48%). From Govt. sector and 11 out of 20 (33%) thinks risk coverage
factor attractive but rest 8 out of 20 (24%), 4 out of 20 (12%) and 9 out 20 (27%) from
the above them sector dont think it so encouraging towards saving trend whereas 3 out
of 20 (9%), 2 out of 20 (6%) and 4 out of 20 (12%) dont think it so.59.

62

14. What according to you, the term plan that only covers risk and doesnt cover
maturity benefit on survival at the end of the term provides security cover over
policy holders or a smart way of accumulative money from policy holders?
16

15

14
12
10

12

11
9

8
6

Sec Curvurity
Accumulative Money

4
2
0
Pvt. Emp.

Govt. Emp

Business Man

Interpretation - It is obvious from the above data that 11 out of 20 (33%), from the Pvt.
Sector, 15 out of 20 (45%) from Govt. sector and 12 out of 20 (36%) think term plan as a
security cover but 9 out of 20 (27%), 5 out of 20 (15%) and 8 out of 20 (24%) from the
three respective group think it as a way of accumulating money insurance company.

15. Do you think that the arrival of so many private companies in this insurance
sector envisage a lot of choice to policy holder?

63

20
18

18
16

16

16

14
12
10

Yes

No

8
6
4

4
2

2
0
Pvt. Emp.

Govt. Emp.

Business Man

Interpretation - From analyzing the above data it is found that 16 out of 20 (48%) from
Pvt. Sector, 18out of 20 (54%) from Govt. sector and 16 out of 20 (48%) think that the
arrival of private players envisage a lot of choice to policy holder. But 4 out of 20 (12%),
2 out of 20 (6%) and 4 out of 20 (12%) dont think it so.

16. Do you agree that customer-centricity and transparency are the buzzwords for
success in this evolving industry?

64

25

20

20

19

18

15
Yes
No

10

5
2
0
Pvt. Emp.

1
0
Govt. Emp.

Business Man

Interpretation - From this above data, it is found the 18 out of 20 (54%) from Pvt.
Sector and 20 out of 20 (60%) from Govt. Sector 19 out of 20 (57%) from Business men
agree with this statement whereas only 2 out of 20 (6%) from Pvt. Sector and 1 out of 20
(3%) from Business men do not agree with this statement.

65

CHAPTER 7
Findings And Recommendations

66

FINDINGS OF THE RESEARCH

Insurance sector is the most booming sector in India now-a-days.

The insurance sector helps in increasing the employment opportunities in India.

Although there are a lot of private insurance companies but the main share is still for
the only public insurance company that is LIC.

Privatization has led to a great impact on the insurance industry.

LIC is one of the oldest private insurance Companies in India.

There are a lot of new companies entering in the insurance making it more competitive.

A very less percentage of Indian population is insured till yet.

Selling is a very important concept in insurance sector.

Its important for any insurance company to choose an appropriate selling strategy for
its products.

There are many opportunities still to be availed by the private sector insurance
companies.

67

RECOMMENDATIONS

In the modernized well advanced hi-tech approach to the customer every possible
facilities and effort to build up the confidence of the rising policy holders towards.
Insurance companies, to complete one another nothing is left to recommend. But some
recommendations that are intensely felt and highly required for insures to sustain in the
market. These are as follows:

a) More and more transparency should be ascertained between insurers and policy
holders.
b) Particularly, in the emerging boom in the insurance company, every insurance
company should be customer centered, and well versed in the handling
of problem and grievances of the policy holders.
c) Each and Every product launched by the Insurance Company should be in favor
of increasing need of policy holders.
d) The no. of people holding health insurance policy was very low and
the reason behind this is that the people are not awarded of the
difference between the health and life insurance policy. So company
should work to make people aware of the same.
e) Majority of people consider the Insurance premium paid by them as
reasonable. This is not true. Agents should work and clarify the
people about the difference between the two.

IRDA should be more and more responsible to the insurance sector by determining some
standard. It should be mandatory to every insurer to make more and more responsible and
responsive to the policy holders so that comprehensive understanding may be developed
among policy holders. It may be beneficial on both sides.

68

CHAPTER 8
Lessons Learnt

Lessons Learnt
69

1.
2.
3.
4.

LIC is a well renowned company people easily get willing to invest.

LIC is not left behind in the present race of advertisement.
Private insurers have restricted reach to the customers.
LIC has vast market and very firm grip on its traditional customers and monopoly

of life insurance products.

5. Bank assurance - that allows life insurers to leverage on the risk product through
bank network, was adopted by private players. But LIC was also not left behind as
picking up majority stake in the corporation Bank and large equity stake in the
Oriental Bank of Commerce.

70

CHAPTER 9
Bibliography/ Appendices

BIBLIOGRAPHY
71

Brochures / Information Booklets

Product List L.I.C.

Product List L.I.C.

L.I.C. Annual Report, 2006
ICICI Annual Report, 2006
HDFC Annual Report, 2006
Malhotra Committee Report on Reforms in the Insurance Sector, 1993.
The Insurance Regulatory and Development Authority Bill, 1999.

Newspapers / Magazines

The Economic Times

The Insurance Times

Insurance Post

BOOKS

Dr. Gupta S.P& Dr. Gupta M.P., Business Statistics by Addition 2004, New Delhi,

WEBSITES

w.w.w.liclndia.com

www.lrdaindia.org.com

www.indiainfoline.com

www.icici.com

Appendices
72

Questionnaire on Customer Perception for Mutual Funds in Delhi-NCR.

Dear Respondent,
Greeting for the day!
Please spare a few minutes for filling this form for the purpose of completion of Summer
Training Program.
Confidentiality of respondent is assured.

1. What is your Gender?

Male
Female
2. What is your Age?
18-30 Yrs.
30-40 Yrs.
40-50 yrs.
Above 50 yrs.

3. What is your Occupation?

Private Job
Government Job
Business
Retired

4. What is your Educational Qualification?

Upto senior Secondary
Under Graduate
Post graduate
PHD

73

5. What is Annual family Income?

Below 10,00,000
10,00,000 20,00,000
20,00,000-40,00,000
Above 40,00,000

6. According to you, which have played a major role in the field of life-insurance
companies?
LIC
HDFC
ICICI
Others
7. Which insurance companies have been successful to make strong public base by

advertisement?
LIC
HDFC
ICICI
Others

8. Which insurance company has gained massive public support in the current
fiscal year?
LIC
HDFC
ICICI
Others
9. Do you think insurance policy is in the direction of public welfare?
Yes
No

10. Is retirement bond or pension policy launched by the number of private player as well
as public sector Company in the direction of secured old?
Yes
No

74

11. Do you

think that risk coverage factor included in Insurance

policy

attracts

general public towards the policy?

Yes
No

12. What according to you, the term plan that only covers risk and doesnt cover
maturity benefit on survival at the end of the term provides security cover over
policy holders or a smart way of accumulative money from policy holders?
Security Cover
Accumulative Money

13. Do you think that the arrival of so many private companies in this insurance
sector envisage a lot of choice to policy holder?
Yes
No
14. Do you agree that customer-centricity and transparency are the buzzwords for
success in this evolving industry?
Yes
No.
15. Do you think that the arrival of so many private companies in this

insurance sector envisage a lot of choice to policy holder?

Yes
No

16.Do you

agree that customer-centricity

and transparency are

buzzwords for success in this evolving industry?

Yes
No

75

the

Thanks for your kind Cooperation!

76