CHAPTER.

INTRODUCTION TO INSURANCE

Every risk involves the loss of one or other kind. In older time, the contribution by the
person was made at the time of loss. Today, only one business, which offers all walks of
life, is insurance business. Owing to growing complexity of life, trade and commerce,
individual and business firms and turning to insurance to manage various risks. Every
individual in this world is subject to unforeseen uncertainties which may make him and
his family vulnerable. At this place, only insurance helps him not only to survive but
also recover his loss and continue his life in a normal manner. Insurance is an important
aid to commerce and industry. Every business enterprise involves large number of risks
and uncertainties. It may involve risk to premises, plant and machinery, raw material
and other things. Goods may be damaged or may be destroyed due to fire or flood.
Some risk can be avoided by timely precautions and some are unavoidable and are
beyond the control of a business. These unavoidable risks can be protected by
insurance.

In simple terms “Insurance is a co-operative device to spread the loss caused by a

particular risk over a number of persons, who are exposed to it and who agree to insure
themselves against the risk “Insurance may be defined as form of contract between
two parties (namely insurer and insured or assured) whereby one party (insurer)
undertakes in exchange for a fixed amount of money (premium) to pay the other party
(Insured), a fixed amount of money on the happening of certain event (death or
attaining a certain age in case of life) or to pay the amount of actual loss when it takes
place through the risk insured (in case of property)

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TERMINOLOGY USED IN DEFINITION OF INSURANCE

Insurer or insurance company – The agency involved in Insurance business is known as

insurer

Insured/ Assured – The person who gets his property/life insured is known as insured

Policy - The agreement or contract which is put in writing is known as a Policy

Premium – The consideration in return of which the insurer undertakes to make goods
the loss or give a certain amount in case of life insurance is known as premium

NATURE OF INSURANCE

Following are the main characteristics of insurance which are applicable to all types
of insurance (life, fire, marine and Life Insurance).

1. Sharing of Risks - Insurance is a device to share the financial losses which may occur
to individual or his family on the happening of certain events

2. Co-operative Device – Insurance is a co-operative device to spread the loss caused

by a particular risk over a large caused by a particular risk over a large number of
persons who are exposed to it and who agree to insure themselves against the risk.

3. Value of Risk – Risk is evaluated at the time of insurance. There are several methods
of valuing the risk. Higher the risks, higher will be premium

4. Payment on Contingency -If the contingency occurs, payment is made; payment is

made only for insured contingency. If there is no contingency, no payment is Made.

5. Amount of Payment of Claim - The amount of payment depends upon the value of
loss occurred due to the particular insured risk. The insurance is there up to that

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 amount. In life insurance insurer pay a fixed sum on the happening of an event or
within a specified time period...

6. Insurance is different from Charity - In charity, there is no consideration but

insurance is not given without premium

7. Large number of Insured Person - Insurance is spreading of loss over a large

number of persons. Larger the number of persons, lower the cost of insurance and
amount of premium and incase lower the number of persons, higher the cost of
insurance and amount of premium.

ORIGIN OF INSURANCE

Whenever there is uncertainty there is risk. We do not have any control over
uncertainties which involves financial losses. The risk may be certain events like
death, pension, retirement or uncertain events like theft, fire, accident,
etc.Insurance is a financial service for collecting the savings of the public and
providing them with risk coverage. It comes under service sector and while
marketing this service due care is taken in quality product and Employees
satisfaction. The main function of the Insurance is to provide protection against
the possible chances of generating losses. 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 two
centuries

3
BRIEF HISTORY OF THE INSURANCE SECTOR

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

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 Life Insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first Life Insurance company established in the
year 1850 in Calcutta by the British.

Some of the important milestones in the Life Insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of Life Insurance business.

1957: Life Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.

4
1968: The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.

1972: The Life Insurance Business (Nationalization) Act, 1972 nationalized the Life
Insurance business in India with effect from 1st January 1973. 107 insurers
amalgamated and grouped into four companies’ viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a
company. INSURANCE SECTOR

The opening up of Insurance sector was a part of the on going liberalization in the
financial sector of India. The changing face of the financial sector and the entry of
several companies in the field of life and non life Insurance segment are one of the
key results of these liberalization efforts. Insurance business by way of generating
premium income adds significantly to be the GDP.

Over the past three years, more than thirty companies have expressed interest in
doing business in India. The IRDA (Insurance Regulatory Development Authority) is
the regulatory authority, which looks over all related aspects of the insurance
business. The provisions of the IRDA bill acknowledge many issues related to
insurance sector.

The IRDA bill provides guidance for three levels of players - Insurance Company,
Insurance brokers and Insurance agent. Life Insurance sector is one of the key areas
where enormous business potential exists. In India currently the life insurance
premium as a percentage of GDP is 1.3 % against, 5.2 per cent in the US.Life
Insurance is another segment, which has been growing at a faster pace. But as per
the current comparative statistics.

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Life Insurance Business, Life Insurance Corporation (GIC) and its four subsidiaries
viz. New India Insurance, Oriental Insurance, National Insurance and United India
Insurance, are doing major business. The Life Insurance Industry has been growing
at a rate of 19 percent per year.

The entry of several private insurance companies, particularly international

insurance companies, through joint ventures, will speed up the process of insurance
mobilization. The competition will unleash new schemes and benefits, which will
give consumers a better Chance to save as well as insure. The regulatory system in
India is relatively new and takes some more time to make the Insurance sector a
perfectly competitive one.

Insurance Regulatory Authority of India issued regulations on 15 subjects which

included appointed. Actuary, actuarial report, Insurance agents, Solvency margins,
re-insurance, registration of Insurers, and obligation of insurers to rural and social
sector, investment and accounting procedure. The reform in Insurance in India is
guided by factors like availability of a variety of products at a competitive price,
improvement in the quality of Employees services etc.

Also the employment opportunities in the Insurance sector wil1 increase as major
players set their business plans in India. The policy of the government to open up
the financial sector and the Insurance sector is expected to bring greater FDI inflow
into the country.

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INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend
its future, direction. The Malhotra committee was set up with the objective of
complementing the reforms initiated in the financial sector.

In 1994, the committee submitted the report and some of the key recommendations
included:

STRUCTURE:

1.Government stake in the insurance Companies to be brought down to 50%.

2. Government should take over the holdings of GlC and its subsidiaries so that these
subsidiaries can act as independent corporations.

3. All the insurance companies should be given greater freedom to operate.

COMPETITION:

I. Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to

enter the industry.

2. No Company should deal in both Life and Life Insurance through a single entity.

3. Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.

4. Postal Life Insurance should be allowed to operate in the rural market.

5. Only one State Level Life Insurance Company should be allowed to operate in each
state

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REGULATORY BODY:

1. The Insurance Act should be changed.

2. An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent.

INVESTMENT:

1. Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.
2. GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time.)

EMPLOYEES SERVICE:

1. LIC should pay interest on delays in payments beyond 30 days.

2. Insurance companies must be encouraged to set up unit linked pension plans.
3. Computerization of operations and updating of technology to be carried out in
the insurance industry.
The committee emphasized that in order to improve the Employees

Services and increase the coverage of the insurance industry should open up to
competition. But at the same time, the committee felt the need to exercise caution
as any failure on the part of new players could ruin the public confidence in the
industry.

8
INSURANCE REGULATORY AUTHORITY

On the recommendations of the Malhotra Committee, government has set up an

interim Insurance Regulatory Authority (IRA), with a view to activate an insurance
regulatory apparatus essential for proper monitoring and control of the insurance
industry. The IRA is headed by a chairman who is also Controller o0f insurance and
chairman of TBC. The other members of the IRA, not exceeding seven in number of
whom not more than three shall serve full time, shall be nominated by the central
government.

INSURERS:
Insurance industry, as on 1.4.2000, comprised mainly two players: the state
insurers.

LIFE INSURES
• Life Insurance Corporation of India (LIC) General Insurers

GENERAL INSURES
• Life Insurance Corporation of India (GIC) (with effect from Dec ‘2000, a national
reinsurer)

4 I’S OF INSURANCE SERVICE

The 4 I’s refers to the different dimensions/ characteristics of any service. Unlike
pure product, services have its own characteristics and its related problems. So the
service provider needs to deal with these problems accordingly. The service
provider has to design different strategies according the varying feature of the
service.

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These 4 I’s can be broadly classified as:

• Intangibility

• Inconsistency

• Inseparability

• Inventory

Intangibility: Insurance is a guarantee against risk and neither the risk nor the
guarantee is tangible. Hence, insurance rightly come under services, which are
intangible. Efforts have been made by the insurance companies to make insurance
tangible to some extent by including letters and forms

Inconsistency: Service quality is often inconsistent. This is because service personnel

have different capabilities, which vary in performance from day to day. This problem
of inconsistency in service quality can be reduced through standardization, training
and mechanization.

Inseparability: Services are produced and consumed simultaneously. Consumers

cannot and do not separate the deliverer of the service from the service itself.
Interaction between consumer and the service provider varies based on whether
consumer must be physically present to receive the service.

Inventory: No inventory can be maintained for services. Inventory carrying costs are
more subjective and lead to idle production capacity. When the service is available
but there is no demand, cost rises as, cost of paying the people and overhead
remains constant even though the people are not required to provide services due
to lack of demand.In the insurance sector however, commission is paid to the agents
on each policy that they sell.

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SOME PLAYERS IN THE INDUSTRY:

Life Insurance Life Insurance

Life Insurance Corporation of India. Life Insurance Corporation of India.

1. Oriental Insurance Company Ltd.
2. New India Assurance Company Ltd.
3. National Insurance Company Ltd.
4. United India Insurance Company Ltd.

New Entrants

ICICI Prudential Life Insurance Ltd. Bajaj Alliaz Life Insurance Company Ltd.

Tata AIG Life Insurance Corporation Ltd. Reliance Life Insurance Company Ltd.

ING Vysya Life Insurance Corporation Ltd. Tata AIG Life Insurance Company Ltd.

Om Kotak Mahindra Life Insurance Royal Sundaram Alliance Insurance Company

Corporation Ltd. Ltd.

RELIENCE LIFE INSURANCE Life Insurance

HDFC Standerd Life Insurance Company Ltd Company Ltd.

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IMPORTANCE OF INSURANCE

The world we live in is full of uncertainties and risks. Individuals, families, businesses,
properties and assets are exposed to different types and levels of risks. These include
risk of losses of life, health, assets, property, etc. While it is not always possible to
prevent unwanted events from occurring, financial world has developed products that
protect individuals and businesses against such losses by compensating them with
financial resources. Insurance is a financial product that reduces or eliminates the cost
of loss or effect of loss caused by different types of risks.

Apart from protecting individuals and businesses from many kinds of potential risks,
the Insurance sector contributes significantly to the general economic growth of the
nation by providing stability to the functioning of businesses and generating long-term
financial resources for the industrial projects.

Among other things, Insurance sector also encourages the virtue of savings among
individuals and generates employments for millions, especially in a country like India,
where savings and employment are important.

Let’s understand in detail how and why Insurance as a sector is key to development of
any economy.

Provides Safety and Security to Individuals and Businesses: Insurance provides

financial support and reduces uncertainties that individuals and businesses face at
every step of their lifecycles. It provides an ideal risk mitigation mechanism against
events that can potentially cause financial distress to individuals and businesses. )

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Generates Long-term Financial Resources: The Insurance sector generates funds by
way of premiums from millions of policyholders. Due to the long-term nature of these
funds, these are invested in building long-term infrastructure assets (such as roads,
ports, power plants, dams, etc.) that are significant to nation-building. Employment
opportunities are increased by big investments leading to capital formation in the
economy.

Promotes Economic Growth: The Insurance sector makes a significant impact on the
overall economy by mobilizing domestic savings. Insurance turn accumulated capital
into productive investments. Insurance also enables mitigation of losses, financial
stability and promotes trade and commerce activities those results into sustainable
economic growth and development. Thus, insurance plays a crucial role in the
sustainable growth of an economy.

Provides Support to Families during Medical Emergencies: Well-being of family is

important for all and health of family members is the biggest concern for most. From
elderly parents to newborn children, medication and hospitalization play important
role while ensuring well-being of families. Rising medical treatment costs and soaring
medicine prices are enough to drain your savings if not well prepared. Anyone can fall
victim to critical illnesses (such as heart attack, stroke, cancer etc.) unexpectedly.

And rising medical expense is of great concern. Medical Insurance is a policy that
protects individuals financially against different type of health risks. With a Health
Insurance policy, an insured gets financial support in case of medical emergency.

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Spreads Risk: Insurance facilitates moving of risk of loss from the insured to the insurer.
The basic principle of insurance is to spread risk among a large number of people. A
large population gets insurance policies and pay premium to the insurer. Whenever a
loss occurs, it is compensated out of corpus of funds collected from the millions of
policyholders.

BENEFIT OF INSURANCE CAN BE DIVIDED INTO THESE CATEGORIES -

1. Benefits to Individual

2 Benefits to Business or Industry

3. Benefits to the Society

1. BENEFITS TO INDIVIDUAL

(a) Insurance provides security & safety: Insurance gives a sense of security to the
policy holder. Insurance provide security and safety against the loss of earning at death
or in old age, against the loss at fire, against the loss at damage, destruction of
property, goods, furniture etc.

(b) Encourage Savings: Life insurance is best form of saving. The insured person must
regularly save out of his current income an amount equal to the premium to be paid
otherwise his policy get lapsed if premium is not paid on time.

(c) Providing Investment Opportunity: Life insurance provides different policies in

which individual can invest smoothly and with security; like endowment policies,
deferred annuities etc. There is special exemption in the Income Tax, Wealth Tax etc.
regarding this type of investment

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2. BENEFITS TO BUSINESS OR INDUSTRY

(a) Shifting of Risk: Insurance is a social device whereby businessmen shift specific
risks to the insurance company. This helps the businessmen to concentrate more on
important business issues.

(b) Assuring Expected Profits: An insured businessman or policyholder can enjoy

normal expected profits as he would not be required to make provisions or allocate
funds for meeting future contingencies.

(c) Improve Credit Standing: Insured assets are easily accepted as security for loans by
the Insurance Companys and financial institutions so insurance improve credit standing
of the business firm

(d) Business Continuation – With the help of property insurance, the property of
business is protected against disasters and chance of closure of business is reduced

3. BENEFITS TO THE SOCIETY

(a) Capital Formation: As institutional investors, insurance companies provide funds

for financing economic development. They mobilize the saving of the people and invest
these saving into more productive channels

(b) Generating Employment Opportunities: With the growth of the insurance business,
the insurance companies are creating more and more employment opportunities.

(c) Promoting Social Welfare: Policies like old age pension scheme, policies for
education, marriage provide sense of security to the policyholders and thus ensure
social welfare.

(d) Helps Controlling Inflation: The insurance reduces the inflationary pressure in two
ways, first, by extracting money in supply to the amount of premium collected and
secondly, by providing funds for production narrow down the inflationary gap.

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FUNCTIONS OF INSURANCE

Functions of insurance can be divided into parts;

I Primary functions.

II Secondary functions.

PRIMARY FUNCTIONS

1. Certainty of compensation of loss: Insurance provides certainty of payment at

the uncertainty of loss. The elements of uncertainty are reduced by better
planning and administration. The insurer charges premium for providing
certainty.

2. Insurance provides protection: The main function of insurance is to provide

protection against risk of loss. The insurance policy covers the risk of loss. The
insured person is indemnified for the actual loss suffered by him. Insurance thus
provide financial protection to the insured. Life insurance policies may also be
used as collateral security for raising loans.

3. Risk sharing: All business concerns face the problem of risk. Risk and insurance
are interlinked with each other. Insurance, as a device is the outcome of the
existence of various risks in our day to day life. It does not eliminate risks but it
reduces the financial loss caused by risks.

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SECONDARY FUNCTIONS

1. Prevention of losses: The insurance companies help in prevention of losses as

they join hands with those institutions which are engaged in loss prevention
measures. The reduction in losses means that the insurance companies would be
required to pay lesser compensations to the assured and manage to accumulate
more savings, which in turn, will assist in reducing the premiums.

2. Providing funds for investment: Insurance provides capital for society.

Accumulated funds through savings in the form of insurance premium are
invested in economic development plans or productivity projects.

3. Insurance increases efficiency: The insurance eliminates the worries and

miseries of losses. A person can devote his time to other important matters for
better achievement of goals. Businessman feel more motivated and encouraged
to take risks to enhance their profit earning. This also helps in improving their
efficiencies.
4. Solution to social problems: Insurance takes care of many social problems. We
have insurance against industrial injuries, road accident, old age, disability or
death etc.

5. Encouragement of savings: Insurance not only provides protection against risks

but also a number of other incentives which encourages people to insure. Since
regularity and punctuality pf payment of premium is a perquisite for keeping the
policy in force, the insured feels compelled to save.

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PRINCIPLES OF INSURANCE

The basic principles which govern the insurance are -

1. Principle of utmost good faith: A contract of insurance is a contract of Uberrimae

Fidei’ i.e., of utmost good faith. Both insurer and insured should display the utmost
good faith towards each other in relation to the contract. In other words, each
party must reveal all material information to the other party whether such
information is asked or not. There should not be any fraud, non-disclosure or
misrepresentation of material facts.

2. Principle of Insurable Interest: This principle requires that the insured must
have an insurable interest in the subject matter of insurance. Insurance interest
means some pecuniary interest in the subject matter of contract of insurance.
Insurance interest is that interest, when the policy holders get benefited by the
existence of the subject matter and loss if there is death or damage to the
subject matter.

3. Principle of Indemnity: This principle is applicable in case of fire and marine

insurance only. It is not applicable in case of life, personal accident and sickness
insurance. A contract of indemnity means that the insured in case of loss against
which the policy has been insured, shall be paid the actual cost of loss not
exceeding the amount of the insurance policy. The purpose of contract of
insurance is to place the insured in the same financial position, as he was before
the loss.

4. Principle of Contribution: The principle of contribution is a corollary to the

doctrine of indemnity. It applies to any insurance which is a contract of indemnity.
So it does not apply to life insurance. A particular property may be insured with
two or more insurers against the same risks.
18
 The right of contribution arises when:

(a) There are different policies which related to the same subject matters;

(b) The policies cover the same period which caused the loss;

(c) All the policies are in force at the time of loss; and

(d) One of the insurers has paid to the insured more than his share of loss.

5. Principle of Subrogation: The doctrine of subrogation is a collorary to the

principle of indemnity and applies only to fire and marine insurance. According to
doctrine of subrogation, after the insured is compensated for the loss caused by
the damage to the property insured by him, the right of ownership to such
property passes to the insurer after settling the claims of the insured in respect
of the covered loss.

6. Principle of Causa Proxima: Causa proxima means proximate cause or cause

which, in a natural and unbroken series of events, is responsible for a loss or
damage. The insurer is liable for loss only when such a loss is proximately caused
by the peril insured against. The cause should be the proximate cause and can
not the remote cause. If the risk insured is the remote cause of the loss, then the
insurer is not bound to pay compensation. The nearest cause should be
considered while determining the liability of the insured. The insurer is liable to
pay if the proximate cause is insured.

7. Principle of Mitigation of Loss: An insured must take all reasonable care to

reduce the loss. We must act as if the property was not insured.If a house is
insured against fire, and there is accidental fire, the owner must take all
reasonable steps to keep the loss minimum.

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TYPE OF INSURANCE

Insurance cover various types of risks and include various insurance policies
which provide protection against various losses.

There are two different views regarding classification if insurance:-

I. From the business point of view; and

II From the risk points of view

I.BUSINESS POINT OF VIEW

The insurance can be classified into three categories from business point of view

1. Life insurance;

2. Life Insurance; and

3. Social Insurance.

1. Life Insurance: The life insurance contract provide elements of protection and
investment after getting insurance, the policyholder feels a sense of protection
because he shall be paid a definite sum at the death or maturity. Since a definite
sum must be paid, the element of investment is also present. In other words,
life insurance provides against pre-mature death and a fixed sum at the maturity
of policy. At present, life insurance enjoys maximum scope because each and
every person requires the insurance.Life insurance is a contract under which one
person, in consideration of a premium paid either in lump sum or by monthly,
quarterly, half yearly or yearly installments, undertakes to pay to the person (for
whose benefits the insurance is made), a certain sum of money either on the
death of the insured person or on the expiry of a specified period of time.

20
Life insurance offers various polices according to the requirement of the
persons -

- Term Assurance

- Whole Life

- Endowment Assurance

- Family Income Policy

- Life Annuity Joint Life Assurance

- Pension Plans

2. Life Insurance: The Life Insurance includes property insurance, liability insurance
and other form of insurance. Property insurance includes fire and marine
insurance. Property of the individual and business involves various risks like fire,
theft etc. This need insurance Liability insurance includes motor, theft, fidelity
and machine insurance

Types of Life Insurance policies available are -

- Health Insurance

- Medi- Claim Policy

- Personal Accident Policy

- Group Insurance Policy

- Business Insurance

- Fire Insurance Policy

- Travel Insurance Policy etc.

21
 3. Social Insurance: Social insurance provides protection to the weaker sections of
the society who is unable to pay the premium. It includes pension plans,
disability benefits, unemployment benefits, sickness insurance and industrial
insurance.

II. RISK POINTS OF VIEW

The insurance can be classified into three categories from Risk point of view

1. Property Insurance

2. Liability Insurance

3. Other forms of Insurance

1. Property Insurance: Property of the individual and business is exposed to risk of

fire, theft marine peril etc. This needs insurance. This is insured with the help of:-

(i) Fire Insurance

(ii) Marine Insurance

(iii) Miscellaneous Insurance

(i) Fire Insurance: Fire insurance covers risks of fire. It is contract of

indemnity. Fire insurance is a contract under which the insurer agrees to
indemnify the insured, in return for payment of the premium in lump sum or
by instalments, losses suffered by the him due to destruction of or damage to
the insured property, caused by fire during an agreed period of time. It
includes losses directly caused through fire or ignition. There are various types
of fire insurance policies.

- Consequential loss policy - Valued policy

- Valuable policy etc. - Comprehensive policy

22
 (ii)Marine Insurance: Marine insurance is an arrangement by which the insurer
undertakes to compensate the owner of the ship or cargo for complete or
partial loss at sea. So it provides protection against loss because of marine
perils. The marine perils are collisions with rock, ship attack by enemies, fire
etc. Marine insurance insures ship, cargo and freight.

The following kinds of marine policies are -

- Voyage policy

- Time policy

- Valued policy

(iii) Miscellaneous Insurance: It includes various forms of insurance including

property insurance; liability insurance, personal injuries are also insured. The
property, goods, machine, furniture, automobile, valuable goods etc. can be
insured against the damage or destruction due to accident or disappearance
due to theft.

Miscellaneous insurance covers

- Motor

- Disability

- Engineering and aviation risks

2. Liability Insurance: The insurer is liable to pay the damage of the property or to
compensate the loss of personal injury or death. It includes fidelity insurance,
automobile insurance and machine insurance.

The following are types of liability Insurance:-

23
 - Third party insurance

- Employees insurance

- Reinsurance

3. Other forms of Insurance: It include export credit insurance, state employee

insurance etc. whereby the insurer guarantees to pay certain amount at the
happening of certain events.

The following are other form of Insurance-

- Fidelity Insurance

- Credit Insurance - Privilege Insurance

SWOT ANALYSIS OF INSURANCE SECTOR

[1] STRENGTHS:

1. New Products- A range of new products had been launched to cater to different
segments of the market, while traditional agents were supplemented by other channels
including the internet and Insurance Company branches.

2. Business Growth- These developments were instrumental in propelling business

growth, in real terms, of 19% in life premiums and 11.1% in non life premiums between
1999 and 2003.

3. Rise in per capita Income- India has a large population with an increase in its per
capita income.

4. Emerging Middle Income Group- India’s middle income group is rapidly increasing
and would be emerging as a profitable market.

24
[2] WEAKNESS:

1. Low investment- India is among the lowest-spending nations in Asia in respect of

purchasing insurance (China, which spent USD 36.3 per capita on insurance products &
Indian spent USD 16.4)

2. Dominance of Public sector- Even after the liberalization of the insurance sector, the
public sector Insurance companies have continued to dominate the insurance market.

3. Promotion as a Barrier- In the long run, other forms of non-price competition like
aggressive advertisement wars are likely to lead increasing costs, eventually harming
the interests of the consumers.

4. Old tariff structure- A key challenge for India’s non-life insurance sector will be to
reform the existing tariff structure. From a pricing perspective, the Indian non-life
segment is still heavily regulated

5. Limited facilities- Reinsurance is only provided by GIC. Therefore limited facilities

hamper the insurance sector.

[3] OPPORTUNITIES:

1. Creation of stronger demand- India’s improving economic fundamentals will support

faster growth in per capita income in the coming years, which will translate into
stronger demand for insurance products.

2. Strong future growth- Strong growth can be sustained for 30–40 years before the
market reaches saturation. There is plenty of room for growth in personal accident,
health and other liability classes.

3. Rise in Income and Awareness- Rising household income and risk awareness will be
the key catalysts to spurring more demand for these lines of business in the future.

25
4. Health insurance- Health insurance could potentially have an important role in
driving insurance market development forward.

5. Rural sectors- The largely underserved rural sector holds great promise for both life
and non-life insurers

[4] THREATS:

1. Economic threats- Between 1985 and 2003, economic losses in India due to natural
catastrophes averaged around USD 1.2 billion or 0.4% of GDP every year.

2. Natural Perils- Floods were the main peril, accounting for 40% of cumulative losses
over the period, followed by storms (35%) and earthquakes (20%).

26
 CHAPTER.2

REVIEW OF LITRETURE ON INSURANCE

M.K. Brady and C.J. Joseph, “Some New thoughts on Conceptualizing Perceived Service
Quality; A Hierarchical Approach”, Journal of Marketing, Vol. 65, 2001, pp.34-47. M.K.
Brady and C.J. Joseph58 (2001) in their article titled, “Some New Thoughts on
Conceptualizing Perceived Service Quality; A Hierarchical Approach” have concluded
that evidence proved that Employeess form service quality perceptions on the basis of
the three primary dimensions: interaction, environment and outcome and Employeess
based their evaluation of these primary factors on their assessment of three
corresponding sub factors. The combination of all these constitute the Employeess’
overall perception of the service quality.

Shobhit and Sanjay Shukla, “Failure of Private Insurance Players in Rural Areas- An
Analysis”, Insurance Industry-The Current Scenario, ICFAI University Press, Hyderabad,
2005, pp.9-19. Shobhit and Sanjay Shukla (2005) conducted a study in Lucknow city and
its adjoining rural areas to expose the reasons for the failure of insurance players of
private sector in attaining a significant share in the rural market. The study revealed
that there is a major difference in the objectives and expectations between rural and
urban policyholders. Rural population showed high bias towards low premium and
maximum risk coverage. In rural areas private players have not achieved much success.
The private players have not been able to provide policies preferred by rural people.
In urban areas, for the conservative consumers insurance is a tax saving device. In
urban areas consumers belonging to the middle income group prefer policies of public
sector players and only high income group preferred private sector players.

27
Srinivasan K. K. “Changes in the Insurance Market Globally-Regulators’ Perspectives”,
IRDA Journal, October 2006, pp.12-15. Srinivasan K.K. (2006) in his article attempts to
identify the key areas of change that require the regulator’s urgent attention. The
regulator has to be supportive of industry development.
The regulator also has to play a positive role in enhancing international
competitiveness of the players. The regulator also has to monitor the rural and social
obligations of the insurers.

Khansili, Dinesh Chandra, “A New Way of Thinking-Innovation in Product and Pricing by

the LIC”, IRDA Journal, Vol.11, No. 6, May 2004, pp.25-26 . Khansill (2004) examines the
innovation in product design and pricing by LIC. Innovation in life insurance market is
attributed to the 37 initiatives taken by new private companies. The private life
insurance companies have joint venture partners from countries operating in US, UK,
Germany, Canada and Australia. The practices of the life insurance market of these
countries are reflected in the products made available in our country by private life
insurance companies.
Reddy, Appi V., Marketing of Life Insurance Services, Printwell Publishers, Jabalpur,
1998 Reddy (1994) in his study makes a comprehensive analysis of marketing
programmes of LIC of India to market its products to different segments of Employeess.
He has examined the problem on the basis of evaluation of the perception of different
Employeess’ segments in respect of different components of marketing mix that are
essential to meet the 39 challenges posed by intangibility in service-provider-
Employeesinteraction and Employees involvement in service consumption and
production.

28
The results of the study suggest that policies with profit plans account for about ninety
percent of the total policies sold and policies without profit plans account for about ten
percent of the same. Segmentwise analysis of preference of policies also suggest that
majority of Employeess in all segments prefer policies with profit plans. Analysis of
motives for buying insurance policies indicates that risk coverage is the most important
motive in the selection of life insurance policies.

Lect. D.ramkumar(2003), “Relationship Marketing – The new mantra for life insurance
sector”. Department Of Management Studies, N.M.S.S. Vallaichamy Nadir College,
Nagamalai, Madurai studied the role of relationship marketing in life insurance sector.
In today’s impersonal marketplace, Employees satisfaction, retention and loyalty are
rapidly become the thing of the past. Relationship marketing brings them back to the
forefront, providing easy-to-apply solutions and strategies for establishing meaningful
bonds with Employeess and turning them into reliable, life-long partners. Relationship
marketing can be defined as the process to “identify and establish, maintain and
enhance and, when necessary, terminate relationships with Employeess and other
stakeholders at a profit so that the objective of all parties involved are met; and this is
done by mutual exchange and fulfillment of promises”. The important objectives of
relationship marketing are to acquire new Employeess, maintain and enhance existing
relationships with existing Employeess, reactivation of ex-Employeess, and handling of
Employees terminations.

29
Dr. Ch.rajesham (2004), “changing scenario of India insurance sector”, department of
commerce & Business Management, University P G college, Kakatiya University
Khammam, Andhra Pradesh revised that insurance sector has not only been playing a
leading role within the financial system in India but also has significant socio-
economical function, making inroads into the interiors of the economy and is being
considered as one of the fast developing area in the Indian financial sector too. It has
also been facilitating economic development with an objective to build an efficient,
effective and a stable insurance business in India as well as a strong base

to both the needs of the real economy and socio-economic objective of the country. It
has been mobilizing long term saving through life- insurance to support economic
growth and also facilitating economic development, insurance cover to a large segment
of people, while the non-life insurance and reinsurance firms in India are main
providers of risk financing for manmade disasters and natural catastrophes. Thus, both
life insurance and non-life insurance are found playing a significant role in avoiding or
facing the risk of life and business enterprises and also aiding to certain extents for
their smooth sailing.

J.Mehra (2005), “innovations in life insurance industry”, the financial express, new delhi
studied that economic growth in the emerging markets has time and again outpaced
the developed and industrialized countries. Alongside the rising importance of
emerging economics, their life insurance sectors are also drawing more attention. It’s
been four years since the life insurance sector was opened up for private players in
India.

30
The reasons that prompted the government to bring in reform in this sector are well
known. While the public sector life insurance companies made enormous contribution
in the spread of awareness about insurance, and expanded the market, it was
recognized that their reach was still limited, the range of product offered restricted to
the services to the consumer inadequate.
It was also felt that the rapid economic growth witnessed in the 90s couldn’t be
sustained without a thriving insurance sector.
Today, the private accounts for nearly 20% of the market. The market share of the
private players has to be seen in the context of this enlarged market. There has been a
flurry of private players providing a wide range of innovation products, services and
customized solutions.

Keerthi, P. and Vijayalakshmi, R., “A Study on the Expectations and Perceptions of the
Services in Private Life Insurance Companies, SMART Journals, Vol. 5, 2009. A study
conducted by Keerthi, P. and Vijayalakshmi, R. (2009)90 “A Study on the Expectations
and Perceptions of the Services in Private Life Insurance Companies” reveals that the
policyholders’ expectations are well met in the case of certain factors reacting to
service quality. But in the case of other variables, there exists a significant gap which
means that policyholders have experienced low levels of service as against their
expectations. If all the players in the Life insurance industry focus on the effective
delivery of services, they can win the hearts of Employeess and anticipate their
increased market share.

31
Ramanathan, K.V., A Project on “A Study on Policyholders Satisfaction with Special
Reference to Life Insurance Corporation of India, Thanjavur Division, Bharathidasan
University, 2011. Research has resulted in the development of a reliable and valid
instrument for assessing Employees perceived service quality, awareness level, and
satisfaction level of Employeess towards life insurance industry. Here, service quality
needs to be measured using a six dimensional hierarchal structure consisting of
assurance, competence, personalized financial planning, corporate image, tangibles
and technology dimensions.

This would help the service managers to efficiently allocate resources, by focusing on
important dimensions first. There is no right and wrong in 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.

R.S. Arora,“Marketing of Services: A Study of LIC in Jalandhar Division”, Ph.D. Thesis

Submitted to Guru Nanak Dev University, Amritsar, 2008. R.S.Arora64 (2008) in his
thesis entitled, “Marketing of Services: A Study of LIC in Jalandhar Division” has
explained that service quality to be a multidimensional construct. The research
indicated that the five dimensional structure of service quality was not only industry
specific but also country specific. The results also showed that out of the seven factors
used to define service quality, responsiveness had the strongest correlation and was
the best predictor of the overall quality.

32
Product conveniencewas found to have the greatest influence on Employees
satisfaction followed by assurance and tangibility. The results regarding the
intermediaries showed that the agents attached 56 more weight to all aspects as
compared to Insurance Company employees. The agents gave more importance to
good Employees service and regular updating of knowledge, whereas the Insurance
Company employees stressed more on providing objective information.

No significant difference was found in the demands of Employeess of both agents and
Insurance Company employees. The data analysis revealed that agents had better
success rate as compared to the Insurance Company employees in selling products and
that agent’s perceived lower competitive pressure than Insurance Company
employees.

R. Kumar, “Performance Evaluation of Life Insurance Companies: A Study of Post-

Reform Period”, Ph.D. Thesis Submitted to Punjabi University, Patiala, 2010. R.
Kumar65 (2010) in his thesis entitled, “Performance Evaluation of Life Insurance
Companies: A Study of Post-Reform Period” has explained that the public sector
exhibited higher underwriting losses in the post-reform period than the pre-reform
period. The higher investment return of the public sector Life Insurance companies
compensated their underwriting losses. The author had suggested that
Productivity of the private insurers was higher than the public insurers due to their hi-
tech environment and modern technology features supported by them. The study
suggested methods to improve the performance of these companies.

33
V. Singla, “Impact of Service Quality on Employees Loyalty: A Study of Hotel Industry in
Punjab and Chandigarh”, Ph.D. Thesis Submitted to Punjabi University, Patiala, 2010.
Singla 66 (2010) in her thesis entitled, “Impact of Service Quality on Employees Loyalty:
A Study of Hotel Industry in Punjab and Chandigarh” has modified the SERVQUAL scale
to include six dimensions. The gap scores were significant for a number of attributes
and these attributes were different for different categories of hotels.

The performance was found to be below the expectations of the Employeess. So, they
were 57 unable to deliver the service according to Employeess’ expectation. The study
also showed that the managers over estimated and were also too self-assured about
the delivery of a particular service. Lastly, the study had suggested measures for
improving Employees loyalty.

34
 CHAPTER.3

RESEARCH AND METHDOLOGY

[

Reliance Life Insurance in India plays a major prerequisite for the healthy economic
growth of a country. The economic significance of any development programmer
cannot be assessed without proper reference to Insurance Sector development. In
study efforts are made to examine in detail the Employees satisfaction toward
Company. The objective with which this study is taken up and the methods by which
the secondary data is required to be collected are discussed in this chapter.

OBJECTIVE OF THE STUDY

The study would focus on the collection of data from the desired sample size with a
view to attain the following stated objectives:

1. To study and analyze the present level of job satisfaction of the employees in
Reliance life insurance company ltd.

2. To study about factors relating to job satisfaction of employees.

3. To study about the Causes of job satisfaction/dissatisfaction

4. To study about the consequences of job satisfaction / dissatisfaction

5. To study about the strategies to improve your job satisfaction.

35
SCOPE OF THE STUDY

To understand the relations maintained by the Reliance Insurance Company with

its Employees. Ever increasing competition and declining margins have driven firms to
discover the Employees as the basic element in their business equation Insurance as a
sector has shown tremendous growth in recent years. People now are becoming more
secured in terms of their life as well as their money. They want a profitable benefit out
of their investment. There is a need to know the companies’ efforts towards convincing
the Employees about their Job and to know how to create loyal employees. Insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20
per cent annually and presently is of the order of Rs 450 billion.

LIMITATIONS OF THE STUDY

Certain hindrances faced during the project work were:

1. Many employees were extremely occupied in their assignments/responsibilities

and therefore could not spare time for the interview/personal interaction

2. The time allotted for the study was limited.

3. Some employees expressed their inability to come forward for interviews.

36
 CHAPTER.4

RELIENCE LIFE INSURANCE OVERVIEW

Few men in history have made as dramatic a contribution to their country’s economic
fortunes as did the founder of Reliance, Shri. Dhirubhai H Ambani. Fewer still have left
behind a legacy that is more enduring and timeless.

As with all great pioneers, there is more than one unique way of describing the true
genius of Dhirubhai: The corporate visionary, the unmatched strategist, the proud
patriot, the leader of men, the architect of India’s capital markets, the champion of
shareholder interest.

But the role Dhirubhai cherished most was perhaps that of India’s greatest wealth
creator. In one lifetime, he built, starting from the proverbial scratch, India’s largest
private sector enterprise.

When Dhirubhai embarked on his first business venture, he had a seed capital of barely
US$ 300 (around Rs 14,000). Over the next three and a half decades, he converted this
fledgling enterprise into a Rs 60,000 crore colossus—an achievement which earned
Reliance a place on the global Fortune 500 list, the first ever Indian private company to
do so.

Dhirubhai is widely regarded as the father of India’s capital markets. In 1977, when
Reliance Textile Industries Limited first went public, the Indian stock market was a place
patronised by a small club of elite investors which dabbled in a handful of stocks.

37
Undaunted, Dhirubhai managed to convince a large number of first-time retail
investors to participate in the unfolding Reliance story and put their hard-earned
money in the Reliance Textile IPO, promising them, in exchange for their trust,
substantial return on their investments. It was to be the start of one of great stories of
mutual respect and reciprocal gain in the Indian markets.

Under Dhirubhai’s extraordinary vision and leadership, Reliance scripted one of the
greatest growth stories in corporate history anywhere in the world, and went on to
become India’s largest private sector enterprise.

Reliance Life Insurance Company Limited

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of India’s leading
private sector financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital Ltd.
has interests in asset management, life and general insurance, private equity and
proprietary investments, stock broking and other financial services.Reliance Life
Insurance is another step forward for Reliance Capital Limited to offer need based life
insurance solutions to individuals and corporate in India.

RELIANCE GROUP HOLDINGS

Company history

Reliance Group Holdings has grown from a small office data-processing equipment firm
in 1961 into a major insurance and financial-services group in one generation under
one chief. The holding company is best known for its insurance group, which includes

38
separate subsidiaries for property and casualty insurance, life insurance, and title and
mortgage insurance. Reliance's insurance operations constitute the nation's 27th-
largest property and casualty operation. The parent company also includes a
development subsidiary in commercial real estate. Reliance's international consulting
group contains several subsidiaries in energy, environment, and natural resources
consulting. A financial arm invests in other businesses, primarily television stations.

By the time he received a bachelor of science degree in economics from the University
of Pennsylvania's Wharton School of Finance in 1959, Saul Steinberg was already in the
business of leasing computers, then a new concept. In 1961, at age 22, Steinberg
founded the Leasco Data Processing Equipment Corporation. The company grew
rapidly, expanded its capabilities, and in 1965 went public.

By 1968, Leasco sought to diversify its fields of business. Among its major purchases in
the last two years of the 1960s was Reliance Insurance Companies of Philadelphia,
which included Reliance Insurance Company and its subsidiaries. Leasco bought 91% of
Reliance in September 1968, and the balance in winter 1981. Reliance insurance had
been writing insurance since 1817, officially incorporating in 1820, and became the
company's largest subsidiary.

Reliance Insurance started as the Fire Association of Philadelphia in 1817, organized by

5 hose and 11 engine fire companies. It became the nation's first association of
volunteer fire departments. Its office was the front room of Caleb Carmalt, one of the
founders. The association first met in his house on September 17, 1817. Michael Fox,
president of Diligent Engine Company, was elected chairman. The new group took the

39
place of several previous associations that had never succeeded because of internal
squabbles among members.

The association started with no money, and trustees pledged their property as security.
The founders agreed not to pay dividends until the company accumulated $15,000 in
capital. The original 13 trustees agreed that dividends should go to the unpaid firemen.
As a benefit, members received a 5% discount on their own property fire insurance. In
addition to underwriting fire insurance, the association served as mediator between its
member engine and hose companies; as rivals to get to a fire first to collect the
commission, fire companies often damaged each other's equipment and assaulted each
other.

The association adopted a fire mark with a fireplug attached to a hose and the initials
F.A. on both sides for homeowners to place on their facades to let firefighters--and
potential arsonists--know the houses were insured. Samuel Bleight, a storeowner with
a weaving business in his basement, bought the first policy for his three-story building.
The company took ten risks its first year.

The first time the association applied to the state legislature for a charter, it failed after
the representative from Philadelphia stated that "the petitioners were men unworthy
of public confidence and destitute alike of public spirit and mental worth." Association
members immediately launched a successful campaign to defeat the representative in
his next bid for reelection. Existing insurance companies also fought the charter. They
"may have feared the Fire Association's influence on their own business, though they
gave as their real cause of opposition . . . the fact that the new organization was
without cash capital," according to The Fire Association of Philadelphia, a corporate

40
history published in 1917 to celebrate its first century. On March 27, 1820, the
governor of Pennsylvania signed a charter for The Trustees of the Fire Association of
Philadelphia.

The company wrote 29 risks the first year of its charter. Business grew steadily, and by
1832, it wrote 583 policies. Although the first companies joined the association without
charge, it subsequently imposed an entrance fee. By November 1829, 44 companies
were members. By 1850, the association amassed a surplus of $100,000.

That year, the Great Fire of Philadelphia started at a store and spread to a warehouse
where it caused an explosion and created panic. The fire spread so fast that it could be
seen across the Delaware River in Trenton, New Jersey, and tremors were felt in
Wilmington, Delaware. The largest fire in Philadelphia history up to that time, it
destroyed 367 buildings, killed between 17 and 33 people, some drowning after
jumping into the river. More than 100 people were reported injured, and losses were
valued at $1.5 million, of which the association owed about $100,000, enough to wipe
out the surplus it had accumulated.

Business got a boost as a result of the Great Chicago Fire of 1871. The association soon
developed a field of agents to write policies across the country. For the first two years,
shareholders received dividends twice a year of $5 a share, which increased gradually
to $10 in 1876.

As the company history reported, the association was able to pay large claims promptly
when they came due. These included $309,000 after the great Baltimore Fire in 1904
and $1.84 million following the 1906 San Francisco Earthquake and Fire. By 1917, the
association reported business of $4 million a year.
41
PRINCIPAL SUBSIDIARIES:
 Reliance Insurance Company
 Reliance National Insurance Company
 General Casualty Companies; Reliance Surety Company
 Reliance Reinsurance Corporation
 United Pacific Life Insurance Company
 United Pacific Reliance Life Insurance Company of New York
 United Pacific Financial Services
 Commonwealth Land Title Insurance Company
 Transamerica Title Insurance Company etc.

ACHIEVEMENTS
 RLIC has been one of the fast gainers in market share in new business premium
amongst the private players with an incremental market share of 4.1% in the
Financial Year 2007-08 – from 3.9% in April 07 to 8% in Feb 08. ( Source: IRDA)

 Also continues to be amongst the fast growing Private Life Insurance Companies
with a YOY growth of 195% in new business premium as of Mar’08.

 A Company that has crossed 1.7 Million policies in just 2 years of operation, post
takes over of AMP Sanmar business.

 Initiated Express Life – and Unique ’Over the Counter’ sales process for Unit
Linked Insurance Policies in the Industry.

 Accomplished a large distribution ramp-up in the Industry in a short span of time

by opening 600 branches in 10 months taking the overall branch network above
740.

 RLIC continues to be one of the two Life Insurance companies in India to be

certified ISO 9001:2000 for all the processes.

 Awarded the Jamnalal Bajaj Uchit Vyavahar Puraskar 2007- Ceritificate of Merit
in the Financial Services category by Council for Fair Business Practices (CFBP).
It’s largest private sector enterprise

42
VISION
Empowering everyone live their dreams.

MISSION
Create unmatched value for everyone through dependable, effective, transparent
and profitable life insurance and pension plans.

OUR GOAL
Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:

 Emerge as transnational Life Insurer of global scale and standard

 Create best value for Customers, Shareholders and all Stake holders

 Achieve impeccable reputation and credentials through best business practices.

ABOUT THE PRODUCTS

Solutions for Individuals

Reliance Life Insurance is here with Solutions for Individuals, a series of plans that will
help customers make wise investments, protect their family, secure child’s future and
even chalk out a plan for customer’s retirement.

43
PLANS
Protect the family even when the customer is not around by investing in Reliance
Protection Plans. Choose a limited period plan or a lifetime protection plan depending
on customers’ needs.In today’s uncertain world, there could be calamity at every step
of the life. It is up to the customer to ensure that his family stays protected
always.Reliance Protection Plans helps customers do exactly the same.

Protection Plans

 Reliance Term Plan

 Reliance Simple Term Plan

 Reliance Special Term Plan

 Reliance Credit Guardian Plan etc.

Savings & Investment Plans

[[

Reliance Savings & Investment Plans help customer to set aside some money to achieve
specific goals in life, which means that customer can enjoy life and provide for his
family’s daily needs.In life, customer has always given his family whatever they have
wanted. Yet, there are some promises he has to fulfill, such as taking his family for a
vacation, or buying that dream house..

Savings & Investment Plans

 Reliance Super Invest Assure Plan

 Total Investment Plan I - Insurance

 Reliance Wealth + Health Plan

 Reliance Automatic Investment Plan etc.

44
Retirement Plans

Invest today in Reliance Retirement Plans and save money to enjoy life even after
retirement. Customer will never have to depend on another person or make any
compromises to maintain his current lifestyle.The customer is a young and earning
individual. The income he earns allows him to enjoy life, his only worry being whether
he will be able to continue the same lifestyle after retirement.

Retirement Plans

 Total Investment Plan II - Pension

 Reliance Golden Years Plan

 Reliance Golden Years Plan Value etc.

Child Plans

Save systematically and secure child’s future needs by investing in Reliance Child Plans.
Customer can always be there for his child when he or she needs him.Being a parent is
one of the joys of life. The child looks up to the parent and depends on him for love,
protection and support. Parents want to provide the child with the best in life.

Child Plans

 Reliance Super Invest Assure Plan

 Reliance Child Plan

 Reliance Secure Child Plan

 Reliance Wealth + Health Plan

45
Benefits to employees

 Opportunities for lateral growth within the company

 Performance management system based on the balanced scorecard model
 Exposure to extensive learning and developmental initiatives (that includes a
state of the art e-learning platform and strategic partnerships with international
leaders for special developmental programs)

 Annual awards in recognition of exemplary performance

A stimulating and high energy environment with regular interactive, fun events and
challenging contests

46
 CHAPTER.5

JOB SATISFACTION OF EMPLOYEES IN RELIENCE LIFE INSURANCE

COMPANY

What is job satisfaction?

Job satisfaction is one’s attitude towards his job (positive or negative). Satisfaction in
work and the work environment is the basic constituent of employee job satisfaction.
Employee attitudes and values influence their behaviour. Positive outlook and backup
from HR helps modify behaviour resulting in higher performance levels.

Crucial
HR must ensure pursuance of right assignment by the employee at the recruitment and
selection stage itself. HR should consider value systems as key credentials along with
abilities and experience to be compatible with that of the organization.
Organizations, which give due recognition to the perceptions, attitudes, motivation and
learning abilities of employees, successfully create an efficient workforce. Efficient
workforces identify themselves with the organization’s mission and aid in its success.

How to achieve?

Attitudes influence behaviour and are the indicators of potential problems an

organisation might encounter. HR must help employees to cope with frustrations and
sustain job satisfaction.

47
Motivated employees stay on for long to achieve their goals. Job responsibilities,
achievements, growth, self-fulfillment and recognition enhance job satisfaction levels.
A candid interaction of managers with employees helps develop good relationships.
Continuous coaching and genuine appreciation by the managers also enhances job
satisfaction.
‘A happy worker is a productive worker’. The Hawthorne studies conducted at an
electrical plant in Chicago from 1924-1932 revealed that employee morale and
satisfaction increase productivity. Since then, management has pursued the topic of job
satisfaction, as it is believed to enhance performance, reduce absenteeism, retain
qualified workers and establish smooth employment relations.

Two-Factor Theory (Motivator-Hygiene Theory)

Frederick Herzberg’s two factor theory (also known as Motivator Hygiene Theory)
attempts to explain satisfaction and motivation in the workplace. This theory states
that satisfaction and dissatisfaction are driven by different factors – motivation and
hygiene factors, respectively. Motivating factors are those aspects of the job that make
people want to perform, and provide people with satisfaction, for example
achievement in work, recognition, promotion opportunities. These motivating factors
are considered to be intrinsic to the job, or the work carried out. Hygiene factors
include aspects of the working environment such as pay, company policies, supervisory
practices, and other working conditions.

While Hertzberg's model has stimulated much research, researchers have been unable
to reliably empirically prove the model, with Hackman & Oldham suggesting that

48
Hertzberg's original formulation of the model may have been a methodological artifact.
Furthermore, the theory does not consider individual differences, conversely predicting
all employees will react in an identical manner to changes in motivating/hygiene
factors. . Finally, the model has been criticized in that it does not specify how
motivating/hygiene factors are to be measured.

Measuring job satisfaction

There are many methods for measuring job satisfaction. By far, the most common
method for collecting data regarding job satisfaction is the Likert scale (named after
Rensis Likert). Other less common methods of for gauging job satisfaction include:
Yes/No questions, True/False questions, point systems, checklists, and forced choice
answers. This data is typically collected using an Enterprise Feedback Management
(EFM) system.

The Job Descriptive Index (JDI), created by Smith, Kendall, & Hulin (1969), is a specific
questionnaire of job satisfaction that has been widely used. It measures one’s
satisfaction in five facets: pay, promotions and promotion opportunities, coworkers,
supervision, and the work itself. The scale is simple, participants answer either yes, no,
or can’t decide (indicated by ‘?’) in response to whether given statements accurately
describe one’s job.

The Job in General Index is an overall measurement of job satisfaction. It is an

improvement to the Job Descriptive Index because the JDI focuses too much on
individual facets and not enough on work satisfaction in general.

49
Other job satisfaction questionnaires include: the Minnesota Satisfaction Questionnaire
(MSQ), the Job Satisfaction Survey (JSS), and the Faces Scale. The MSQ measures job
satisfaction in 20 facets and has a long form with 100 questions (five items from each
facet) and a short form with 20 questions (one item from each facet). The JSS is a 36
item questionnaire that measures nine facets of job satisfaction. Finally, the Faces Scale
of job satisfaction, one of the first scales used widely, measured overall job satisfaction
with just one item which participants respond to by choosing a face.

Relationships and practical implications

Job Satisfaction can be an important indicator of how employees feel about their jobs
and a predictor of work behaviours such as organizational citizenship, absenteeism, and
turnover. Further, job satisfaction can partially mediate the relationship of personality
variables and deviant work behaviors.

One common research finding is that job satisfaction is correlated with life satisfaction.
This correlation is reciprocal, meaning people who are satisfied with life tend to be
satisfied with their job and people who are satisfied with their job tend to be satisfied
with life. However, some research has found that job satisfaction is not significantly
related to life satisfaction when other variables such as network satisfaction and core
self-evaluations are taken into account. With regard to job performance, employee
personality may be more important than job satisfaction. The link between job
satisfaction and performance is thought to be a spurious relationship; instead, both
satisfaction and performance are the result of personality.

50
Factors affecting job satisfaction

Job satisfaction can be influenced by a variety of factors, e.g. the quality of one's
relationship with their supervisor, the quality of the physical environment in which they
work, degree of fulfillment in their work, etc.. Numerous research results show that
there are many factors affecting the job satisfaction. There are particular demographic
traits (age, education level, tenure, position, marital status, years in service, and hours
worked per week) of employees that significantly affect their job satisfaction.

Satisfying factors motivate workers while dissatisfying ones prevent. Motivating factors
are achievement, recognition, the job conducted, responsibility, promotion and the
factors related to the job itself for personal development. Motivating factors in the
working environment result in the job satisfaction of the person while protective ones
dissatisfy him/her.

Maslow connects the creation of the existence of people's sense of satisfaction with
the maintenance of the classified needs. These are: physiological needs (eating,
drinking, resting, etc.), security needs (pension, health insurance, etc.), the need to love
(good relations with the environment, friendship, fellowship, to love and to be loved),
need to self-esteem (self-confidence, recognition, adoration, to be given importance,
status, etc.) need of self-actualization (maximization of the latent [potential] power and
capacity, development of abilities, etc.).

51
Similarly, by some researchers, gender is also found to have an influence on job
satisfaction. Besides, Wahba has found out that male librarians give more importance
to personal development and free decision making in their jobs than the female
librarians, and the female librarians are more dissatisfied than the male librarians.
Job satisfaction and devotion to the job, affected each other reciprocally, and they have
great impact upon performance. The most significant of the factors affecting
performance are economical, technical, socio-political, cultural and demographical
ones.
However, most efforts to improve performance seem to center on improving the
conditions surrounding the work. These are worthwhile efforts, but they usually result
only in short-term improvements in attitudes and productivity, and the situation often
returns quickly to normal.

There is no strong acceptance among researchers, consultants, etc., that increased job
satisfaction produces improve job performance -- in fact, improved job satisfaction can
sometimes decrease job performance. For example, you could let workers sometime sit
around all day and do nothing. That may make them more satisfied with their "work" in
the short run, but their performance certainly doesn't improve. The individual's
willingness to get a result, his/her endeavour and expectation of maintaining the result
will push him/her to show the highest performance.

Job satisfaction varies a lot. (Researches suggests, the higher the prestige of the job,
the greater the job satisfaction). But, many workers are satisfied in even the least
prestigious jobs. They simply like what they do. Most workers like their work if they

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have little supervision. The least satisfied workers are those in service occupations and
managers that work for others. Ethnic and religious orientation is associated to work
attitudes, and job satisfaction is related to education.
The difference between the results that the individual desire and those s/he
maintained will affect his/her satisfaction. There is a consistent relationship between
the professional status and the job satisfaction. High levels of job satisfaction are
observed in those professions which are deemed of good standing in the society.
The workers usually compare their working conditions with the conditions of the
society, under the variable of social conditions

In today’s competitive environment organizations thrive and survive on their human

resources. Values, attitudes, perceptions and behavior, which form these resources,
influence employee performance. It is a key factor in realizing organizational and
individual goals that in turn greatly depends on individual’s self-motivation and job
satisfaction.

Measures of job satisfaction

Unlike other psychometric tools, used to test a sample of behavior, measures of job
satisfaction are prone to subjectivity. However a battery of tests can be conducted to
make accurate predictions. One approach is the Global Measure, which measures the
overall satisfaction of the job. The second approach is the Facet Measure where
satisfaction is measured on each aspect of the job.

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Causes of job satisfaction/dissatisfaction

Since job satisfaction is subjective to individual experience and expectation, personality

often plays an influential role. Stable personality traits could influence satisfaction or
dissatisfaction at work. Type A’ personalities tend to be more aggressive, set high
standards for themselves and therefore are more susceptible to job dissatisfaction. In
contrast, Type B’s seem to be more relaxed and, this may reflect on their attitudes
towards work. Today, there is an increasing interest in the concept of the ‘person –job-
fit’ theory. The managerial implications are that people who get themselves into the
right job that fit their attitudes and personalities seem to be more satisfied.
The characteristics of the job may also influence one’ is attitude towards it. This could
include the physical environment like lighting, temperature and space. Work, when too
difficult or easy can lead to dissatisfaction. Reward is viewed as satisfactory only when
it is equitable and is in line with expectations. A friendly and supportive group at work
is conducive to job satisfaction.

Absenteeism and Turnover:

This causes tremendous cost and loss of investment. An interesting finding is that
absenteeism followed by negative feedback like, loss of pay might lead to
dissatisfaction and in turn a high rate of absenteeism.

Commitment:
Organizations today have expressed a lack of loyalty and commitment from employees
and hence are unable to retain qualified professionals.

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In today’s competitive world, management needs to continuously emulate practices
that will attract and retain a highly qualified and skilled workforce. Dissatisfied
employees may be forced to work due to unemployment or insecurity, but this is not in
the interests of the long-term success of the organization. Dissatisfaction may be
expressed in other forms like internal conflicts, poor interpersonal relations, low trust,
and stress leading to workplace conflict, violence and low productivity.

Though job satisfaction is difficult to measure and is dependent on a number of factors,

management may reduce levels of dissatisfaction and control workplace conflicts
through common objectives like career development, training, appropriate rewards
and improvements in the quality of working life.

Job Satisfaction: Strategies To Make Work More Gratifying

Stress mounts when work is no longer satisfying. Here's a look at the underlying causes
and ways you can boost your job satisfaction.

You dreamed about an ideal job in which you'd be motivated, inspired, respected and
well paid. And for a while, your job may have been all that.

But now it seems the honeymoon is over. You've lost your job satisfaction, and you find
it harder and harder to get through the workday. And that means your stress is
mounting. Learn what you can do to reignite your job satisfaction and reduce your
stress.

The link between work approach and job satisfaction

Work is often approached from three perspectives. Usually all three perspectives are
important for job satisfaction, but one is often the priority:

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  It's a job. If you approach work as a job, you focus primarily on the financial
rewards. In fact, the nature of the work may hold little interest for you. What's
important is the money. If a job with more pay comes your way, you'll likely
move on.

 It's a career. If you approach work as a career, you're interested in advancement.

You want to climb the career ladder as far as possible or be among the most
highly regarded professionals in your field. You're motivated by the status,
prestige and power that come with the job.

 It's a calling. If you approach your job as a calling, you focus on the work itself.
You work less for the financial gain or career advancement than for the
fulfillment the work brings.

One approach isn't necessarily better than the others. But it's helpful to reflect on why
you work if you're unsatisfied with your job and are ready to move on. Think about
what originally drew you to your current job, and whether it may be a factor in your
lack of job satisfaction.

Strategies to improve your job satisfaction

Depending on the underlying cause of your lack of job satisfaction, there may be
several ways to increase your job satisfaction.

Set new challenges : If you're stuck in a job because of lack of education or a downturn
in the economy, it doesn't mean your work has to become drudgery. With a little
imagination, you can create new challenges and make the best of the job you have.
Here are some ideas that may help.
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 Improve your job skills. Imagining yourself in your dream job, you might envision
yourself as an excellent project manager — a confident communicator and a
highly organized person. Why not work on these skills in your present job?

 Develop your own project. Take on a project that can motivate you and give you
a sense of control. Start small, such as organizing a work-related celebration,
before moving on to larger goals. Working on something you care about can
boost your confidence.

 Mentor a co-worker. Once you've mastered a job, you may find it becoming
routine. Helping a new co-worker or an intern advance his or her skills can
restore the challenge and the satisfaction you desire.

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 CHAPTER.6

SUGGESTION AND CONCLUSION

SUGGESTIONS

Each and every employee should be provided proper training. The person who needs
training should be properly interviewed about the kind of training he requires for his
job. This would enable the employees to perform better which will further lead to
satisfaction.

A good promotion policy provides satisfaction because with every promotion the social
status and recognition of persons improves. Therefore adequate opportunities should
be given to each and every employee for promotion and promotion should also be
given after certain duration.

1. While giving promotion a proper balance should be made between seniority and
merit that means while giving promotion seniority and merit both should be
taken into consideration.

2. Proper feedback should be given to the employees for their overall development
and better future prospects.

3. The activity and potential of the employees should be given more consideration
rather than other factors.

4. Team spirit should be encouraged among the employees for better coordination,
to achieve individual as well as organizational goals.

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CONCLUSION

In a nutshell, the general perceptions of the employees have been put in the balance
sheet form. Here the liabilities are the areas of concern and assets are the areas of
which the company should be proud.

First chapter comprises introduction about Indian Insurance Industry, its development,
technology more particularly e-channels. The Indian Insurance Industry is explained
under various reforms taken place, phases of transformation and role of technology in
Insurance gains more attention. Chapter highlights various Functions along with
benefits to Employeess and Insurance. The Insurance Regulatory and Development
Authority Act, 1999 is an act to provide for the establishment of an Authority to protect
the interests of holders of insurance policies, to regulate, promote and ensure orderly
growth of the insurance industry and for matters connected therewith or incidental
thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation
Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the
monopoly of the Life Insurance Corporation of India (for life insurance business) and
General Insurance Corporation and its subsidiaries (for general insurance business).

There are also shown History of Insurance Industry in India, How Insurance get started
in India. Functions of Insurance also given in first chapter, what is the function of an
insurance industry. SWOT Analysis of Insurance Industry is also describe in first chapter.
Strength of insurance industry means things that make insurance industry stronger.

There also include weakness of insurance industry, in which are insurance industry are
weak and how to make strong insurance industry of India.

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Opportunities to insurance industry to expand industry, and also threat to insurance
industry. It also explain the Principals of Insurance , Changes in Insurance system and
services, Impact of IT in Insurance, opportunities, emerging challenges and issues faced
in adopting Insurance technology.Second chapter reviews the literature about all the
aspects of study. Various researches have been taken at national and international
levels. Many studies have been conducted on computerization of Insurance sector,
Impact of Information Technology in the Insurance Industry. Benefits of IT enabled
Insurance services. Fourth chapter explains the research methodology of the study.

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 BIBLIOGRAPHY

NAME OF BOOKS

 “Relationship Marketing”- Lect. D. Ram Kumar (2003) the new mantra of

Insurance Sector.
 “A new way of thinking innovation in product and Pricing by the LIC”- Dinesh
Chandra(2004) IRDA Journal.
 “Changing Scenario of India Insurance Sector”- Dr. Ch. Rajesham (2004)
Department of commerce & Business Management.
 “Innovation in life Insurance Industry”- J Mehra (2005) The Financial Express.
 “Performance Evaluation of General Insurance Companies”- R Kumar (2010)
 Marketing Management”- Philip Kotler, Kevin Lane Keller, Abraham Koshy,
Mithileshwar Jha- 13th Edition A South Asian Perspective
 “Marketing Management”- Arun Kumar, N Meenakshi

WEBSITES
 www.reliancelife.co.in
 www.licindia.com
 www.google.com
 www.Reliancelife.com

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