CHAPTER – I

INTRODUCTION

1
Introduction to Insurance
Insurance ensures protection of economic value of assets. Assets are insured
against the risk of being destroyed or made non-functional due to any accidental
occurrence.

The roots of insurance might be traced to Babylonia, where traders were

encouraged to assume the risks of the caravan trade through loans that were repaid
(with interest) only after the goods had arrived safely-a practice resembling bottomry
and given legal force in the Code of Hammurabi (c.2100 B.C.). The Phoenicians and
the Greeks applied a similar system to their seaborne commerce. The Romans used
burial clubs as a form of life insurance, providing funeral expenses for members and
later payments to the survivors.With the growth of towns and trade in Europe, the
medieval guilds undertook to protect their members from loss by fire and shipwreck,
to ransom them from captivity by pirates, and to provide decent burial and support in
sickness and poverty. By the middle of the 14th cent, as evidenced by the earliest
known insurance contract (Genoa, 1347), marine insurance was practically universal
among the maritime nations of Europe.In London, Lloyd’s Coffee House (1688) was a
place where merchants, ship owners, and underwriters met to transact business. By
the end of the 18th century. Lloyd’s had progressed into one of the first modern
insurance companies.In 1693 the astronomer Edmond Halley constructed the first
mortality table, based on the statistical laws of mortality and compound interest, The
table, corrected (1756) by Joseph Dodson, made it possible to scale the premium rate
to age; previously the rate had been the same for all ages.

Insurance developed rapidly with the growth of British commerce in the 17 th and
18th century. Prior to the formation of corporations devoted solely to the business of
writing insurance, policies were signed by a number of individuals, each of whom
wrote his name and the amount of risk he was assuming underneath the insurance
proposal, hence the term underwriter. The first stock companies to engage in
insurance were chartered in England in 1720, and in 1735, the first insurance
company in the American colonies was founded at Charleston, S.C. Fire insurance
corporations were formed in New York City (1787) and in Philadelphia (1794).The

2
Presbyterian Synod of Philadelphia sponsored (1759) the first life insurance
corporation in America, for the benefit of Presbyterian ministers and their dependents.
After 1840, with the decline of religious prejudice against the practice, life insurance
entered a boom period. In the 1830s the practice of classifying risks was begun The
New York fire of 1835 called attention to the need for adequate reserves to meet
unexpectedly large losses; Massachusetts was the first state to require companies by
law (1837) to maintain such reserves. The great Chicago fire (1871) emphasized the
costly nature of fires in structurally dense modern cities. Reinsurance, whereby losses
are distributed among many companies, was devised to meet such situations and is
now common in other lines of insurance.

The Workmen’s Compensation Act of 1897 in Britain required employers to insure

their employees against industrial accidents. Public liability insurance, fostered by
legislation, made its appearance in the 1880s; it attained major importance with the
advent of the automobile. In the 19th century, many friendly or benefit societies were
founded to insure the life and health of their members, and many fraternal orders were
created to provide low-cost, members-only insurance. Fraternal orders continue to
provide insurance coverage, as do most labor organizations. Many employers sponsor
group insurance policies for their employees; such policies generally include not only
life insurance, but sickness and accident benefits and old-age pensions, and the
employees usually contribute a certain percentage of the premium. Since the late 19th
century, there has been a growing tendency for the state to enter the field of
insurance, specially with respect to safeguarding workers against sickness and
disability, either temporary or permanent, destitute old age, and unemployment. The
U.S. government has also experimented with various types of crop insurance, a
landmark in this field being the Federal Crop Insurance Act of 1938. In World War II
the government provided life insurance for members of the armed forces; since then it
has provided other forms of insurance such as pensions for veterans and for
government employees.

Life insurance (or life assurance, especially in the Commonwealth of Nations) is a

contract between an insurance policy holder and an insurer or assurer, where the
insurer promises to pay a designated beneficiary a sum of money (the benefit) in
exchange for a premium, upon the death of an insured person (often the policy
3
holder). Depending on the contract, other events such as terminal illness or critical
illness can also trigger.

Life Insurance is one of the fastest growing sectors in India since 2000 as Government
allowed Private players and FDI up to 26% and recently Cabinet approved a proposal
to increase it to 49%. In 1955, mean risk per policy of Indian and foreign life insurers
amounted respectively to ₹2,950 & ₹7,859[1] (worth ₹15 lakh & ₹41 lakh in 2017
prices). Life Insurance in India was nationalised by incorporating Life Insurance
Corporation (LIC) in 1956. All private life insurance companies at that time were
taken over by LIC. In 1993, the Government of India appointed RN Malhotra
Committee to lay down a road map for privatisation of the life insurance sector.

While the committee submitted its report in 1994, it took another six years before the
enabling legislation was passed in the year 2000, legislation amending the Insurance
Act of 1938 and legislating the Insurance Regulatory and Development Authority
Act of 2000. The same year, newly appointed insurance regulator - Insurance
Regulatory and Development Authority IRDA—started issuing licenses to private life
insurers payment.

The policy holder typically pays a premium, either regularly or as one lump sum.
Other expenses, such as funeral expenses, can also be included in the benefits.

Life policies are legal contracts and the terms of the contract describe the limitations
of the insured events. Specific exclusions are often written into the contract to limit
the liability of the insurer; common examples are claims relating to suicide, fraud,
war, riot, and civil commotion.

Modern life insurance bears some similarity to the asset management industry and life
insurers have diversified their products into retirement products such as annuities.
Life-based contracts tend to fall into two major categories:

Protection policies – designed to provide a benefit, typically a lump sum payment, in

the event of a specified occurrence. A common form—more common in years past—
of a protection policy design is term insurance.
4
Investment policies – the main objective of these policies is to facilitate the growth of
capital by regular or single premiums. Common forms (in the U.S.) are whole
life, universal life, and variable life policies.

The main objective of the project is focused on awareness of “LIFE

INSURANCE’. And the analysis of the chrematistics that are helpful for a person to
become a good financial for any insurance company.

This project has done to promote the brand name of LIFE INSURANCE and to find
out the interested people for financial advisors. The main objective of the study is to
find out the existing market for the company and to cover all most all the people,
which will be helpful in increasing the companies’ operation activities and services
towards the customers. Most importantly it explains criteria for the recruitment of
financial advisors and the qualities that make good financial advisors.

Insurance works on the principle of transferring risk from an individual to a group.

Insurance is a risk transfer mechanism. The insurance company agrees to meet any
loss (as per the policy) for a certain amount of premium.
In 2012, Life insurance penetration in India which is the major indicator of growth of
insurance in the country was just 3.17 % compared to Japan 9.2%, Taiwan 15.0% S.
Korea 6.9%. (IRDA Annual Report 2012-13, p121-122) One of the important reasons for
low penetration was/is unawareness of the Indian people about need of insurance in their
life. It is true that with the establishment of IRDA and with the entry of private sector
insurance companies, life insurance market is witnessing introduction of innovative, need
based and customer friendly products. However, still majority of the Indian population is
either uninsured or under-insured. Yet, buying a life insurance policy is not a subject of
preference on the 'agenda' of most of the Indian people. Those who take out an
insurance policy give priority for tax exemption and saving rather than risk cover. This
paper is an attempt to study the awareness about need of life insurance among the
customers of LIC. This research revealed that the customers are aware about need of life
insurance in their life and the Individual Agents of LIC are the major source of information
for the policyholders.

5
Insurance Regulatory and Development Authority (IRDA) engaged the National
Council of Applied Economic Research (NCAER) to carry out a pan-India survey to
assess the levels of insurance awareness in the country. The survey was undertaken in
29 states/union territories.
The survey has brought out various findings from the information it gathered relating
to the socio-economic profiles of the insured and the uninsured in both rural and
urban areas and correlating it to various life and general insurance parameters. The
survey shows that most of the insured are salaried, regular wage earners or self-
employed. Insured households possess a high level of education as opposed to
uninsured households which are mostly illiterate.
However, still majority of the Indian population is either uninsured or under insured.
Those who take out an insurance policy give priority for tax exemption and saving
rather than risk cover. This paper is an attempt to study the awarenessabout need
of life insurance among the customers of LIC.

Insurance – As a Social Security Tool

1948, United Nations declaration “everyone has right to a standard of living adequate
for health and well being of family….”. The death of a person during productive years
is a great loss for the family and for the society/nations as well. Life assurance
reduces this cost and is complimentary to states’ efforts at social management.

THE HISTORY OF INSURANCE

The roots of insurance might be traced to Babylonia, where traders were encouraged
to assume the risks of the caravan trade through loans that were repaid (with interest)
only after the goods had arrived safely-a practice resembling bottomry and given legal
force in the Code of Hammurabi (c.2100 B.C.). The Phoenicians and the Greeks
applied a similar system to their seaborne commerce. The Romans used burial clubs
payments to the survivors.

6
With the growth of towns and trade in Europe, the medieval guilds undertook to
protect their members from loss by fire and shipwreck, to ransom them from captivity
by pirates, and to provide decent burial and support in sickness and poverty. By the
middle of the 14th cent, as evidenced by the earliest known insurance contract (Genoa,
1347), marine insurance was practically universal among the maritime nations of
Europe.

In London, Lloyd’s Coffee House (1688) was a place where merchants, ship
owners, and underwriters met to transact business. By the end of the 18 th century.
Lloyd’s had progressed into one of the first modern insurance companies.

In 1693 the astronomer Edmond Halley constructed the first mortality table,
based on the statistical laws of mortality and compound interest, The table, corrected
(1756) by Joseph Dodson, made it possible to scale the premium rate to age;
previously the rate had been the same for all ages.

Insurance developed rapidly with the growth of British commerce in the 17 th and
18th century. Prior to the formation of corporations devoted solely to the business of
writing insurance, policies were signed by a number of individuals, each of whom
wrote his name and the amount of risk he was assuming underneath the insurance
proposal, hence the term underwriter. The first stock companies to engage in
insurance were chartered in England in 1720, and in 1735, the first insurance
company in the American colonies was founded at Charleston, S.C. Fire insurance
corporations were formed in New York City (1787) and in Philadelphia (1794).

The Presbyterian Synod of Philadelphia sponsored (1759) the first life insurance
corporation in America, for the benefit of Presbyterian ministers and their dependents.
After 1840, with the decline of religious prejudice against the practice, life insurance
entered a boom period. In the 1830s the practice of classifying risks was begun.

The New York fire of 1835 called attention to the need for adequate reserves to
meet unexpectedly large losses; Massachusetts was the first state to require companies
by law (1837) to maintain such reserves. The great Chicago fire (1871) emphasized
the costly nature of fires in structurall+y dense modern cities.
7
Reinsurance, whereby losses are distributed among many companies, was devised to
meet such situations and is now common in other lines of insurance.

The Workmen’s Compensation Act of 1897 in Britain required employers to insure

their employees against industrial accidents. Public liability insurance, fostered by
legislation, made its appearance in the 1880s; it attained major importance with the
advent of the automobile.

In the 19th century, many friendly or benefit societies were founded to insure the life
and health of their members, and many fraternal orders were created to provide low-
cost, members-only insurance. Fraternal orders continue to provide insurance
coverage, as do most labor organizations. Many employers sponsor group insurance
policies for their employees; such policies generally include not only life insurance,
but sickness and accident benefits and old-age pensions, and the employees usually
contribute a certain percentage of the premium.

Since the late 19th century, there has been a growing tendency for the state to enter the
field of insurance, specially with respect to safeguarding workers against sickness and
disability, either temporary or permanent, destitute old age, and unemployment.

The U.S. government has also experimented with various types of crop insurance, a
landmark in this field being the Federal Crop Insurance Act of 1938. In World War II
the government provided life insurance for members of the armed forces; since then it
has provided other forms of insurance such as pensions for veterans and for
government employees.

The main objective of the project is focused on awareness of “LIC’. And the analysis
of the chrematistics that are helpful for a person to become a good financial for any
insurance company.

8
This project has done to promote the brand name of LIC and to find out the interested
people for financial advisors. The main objective of the study is to find out the
existing market for the company and to cover all most all the people, which will be
helpful in increasing the companies’ operation activities and services towards the
customers. Most importantly it explains criteria for the recruitment of financial
advisors and the qualities that make good financial advisors.

NEED OF THE STUDY

 An enquiry into the nature and factors responsible for performance of the LIC of
India and also the private sector insurance players during the period 2000-01 to
2009-10 will be helpful in formulating the future course of action in the area of
product innovation and development, asset-liability management and customer
relationship management of the life insurance players in India.
 This will enable the Government, IRDA, LIC of India, private sector players,
employees, insurance marketers and the policyholders to know the causes
underlying the existing position, to understand and appreciate the other
stakeholders’ attitude and to promote compromising and conciliatory 75 behaviour
which is the essential pre-requisite for the healthy growth of life insurance
industry in our country.
 It is hoped that this study will be useful in the context of the imperative need for
toning up the efficiency of the working of both the public and private sector units,
which are expected to play a crucial role in the years to come and give a new
outlook to the life insurance policy laid down by the Government and the IRDA.
 Its aim is also to find out why certain deficiencies have occurred and how they

9
 It will also be useful to bring to light many aspects, with broader perspective, of
the performance evaluation of the life insurance industry that contribute for higher
insurance penetration and better customer service are brought to light. It is also
hoped that the data presented, the observations made and conclusions arrived at in
this study will be useful for inter-sectoral comparison, not only in the case of other
players who newly entered and those who are proposed to enter in the years to
come in the insurance sector. Therefore, a study of this sort is undertaken in a
more judicious manner.
 A human being is an income generating asset. One’s income generating ability
depends on one’s skills, (manual, professional, problem solving, entrepreneurial,
etc.) These are the assets the value of which can be measured by considering the
income that is generated by the person concerned. The concept of human life
values provided by insurance enables the determination of the asset value of the
human life and therefore, the amount of life insurance required. Life insurance
emphasizes the preservation of the economic value of the human asset in the event
that these assets may be lost through unexpectedly early death or through sickness
and disabilities caused by accidents.
 Insurance as a social security tool – The United Nations Declaration of Human
Rights 1948 provides that “Everyone has a right to a standard of living adequate
for the health and wellbeing of himself and his family, including food, clothing,
housing and medical care and necessary social services and the right to security in
the event of unemployment, sickness, disability, widowhood or other lack of
livelihood in circumstances beyond his control”. When the bread winner dies, to
that extent, the family’s income dies. The economic condition of the family is
affected, unless other

10
The objectives of the project are as follows:

 To find out the awareness of LIC

 To find out the interested candidates to become financial advisor for the LIC

SCOPE OF THE STUDY

Because of the time constraint the study is limited to Hyderabad and

secunderabad. The study is mainly concentrated on finding out the financial advisors

for LIC; the sample size of the study is two hundred.

This thesis aims at making an in depth study of Life Insurance Companies only,

both in the Public Sector and Private Sector. It deals with products offered by Life

Insurance Companies consisting of Endowment Assurance (Participating), and Money

Back (Participating) and Unit Linked Insurance Policies. An elaborate study is

undertaken covering a period of ten years since the inception of the IRDA and the

resultant entry of private players in the Insurance segment.

11
Research Methodology

Primary Data

Primary data may be obtained from individuals, from families’ representatives, or

form originations.

Questioning

This is done mainly by interviewing, but also data may be obtained through self
administered questionnaires distributed by mail and other ways. There are several
means by which questioning can be carried out, which will categorize as personal,
telephone, and E-mail.

Personal Questioning:

To conduct depth interviewing of the selected people at the appointed times

Population

A Population is an aggregation of the elements.

An element is that unit about which information is collected and which provides
the basis for analysis. Generally, in marketing research sampling, elements are
people.

Sources of Data

There are numerous possible sources of data and again we cannot list them in
detail. General clarification of sources, which we now offer in several dimensions.

Secondary Data

Secondary sources should be first considered, which refer to those for already
gathered and available data (in contrast with primary data). These sources may
include books or periodicals, published reports, data services, and computer data
bank.

12
LIMITATIONS

While doing the project work we made good effort, but still we may suffer from
certain limitations like

 This survey was undertaken to find out the interested candidates, who wants
to become financial advisors for the LIC company.

 The sample size of this survey is restricted to 200 respondents only.

 The information, views & options given by the respondents may be biased or
half-truth.

 This study might have become outdated by the time it is presented to the
company for their kind considerations.

 This survey is limited to twin cities. i.e. Hyderabad and Secundrabad only

13
CHAPTER – II
REVIEW OF
LITERATURE

14
Life Insurance

Life insurance is a branch of insurance in which compensation is made

available to designated survivors of a deceased person, or to a person on their own
survival after a fixed term of years, in return for payments, or premiums. Life
assurance is based on the mathematics of probability, which determines the level of
premium to be paid, and on compound interest, which determines the growth over
time, through investment, of the fund constituted by the intake of premiums. The two
together ensure an adequate fund to provide the compensation required.

Life insurance is insurance for the customers and their family’s peace of
mind. Life insurance is a policy that people buy from a lifer insurance company,
which can be the protection and financial stability after one’s death. It’s primary life
insurance company function is to help beneficiaries financially after the owner of the
policy dies.

It can also be a form of savings in the long run if you purchase a plan ,
which offers option of contributing regularly. Also, a little known function of life
insurance can be tied in with a person’s pension plan. A person can make contribution
to a pension that is founded a by a life insurance company. These are considered
private pension arrangements.

Life insurance provides unique benefits. It is designed to help the family in

case of premature demise of the life assured and even in case the life assured lives for
too long.

A list of the benefits that life insurance provides are:

 Protection: against the risk for the family of the insured.
 Painless savings: complete focus of life insurance schemes is on long term
investment. The amount that the person pays every month as premium is very less.
 Liquidity: normally life insurance schemes are accepted as collaterals for
providing loans

15
Tax Relief:
 u/s 88 all premium paid is exempted from taxation(subject to limits)
 u/s 10(10D) all income received from life insurance is exempted from tax
 u/s 80CCC(I)—contribution to the extent of Rs.10,000 /- to a pension fund like
LIC’s jeevan suraksha is exempted from taxes.

Some of the life insurance plans which are designed to meet the life cycle needs of
individuals are:

Security to family at a very low cost, in Whole life insurance plan

the event of untimely death
Have a large sum assured at old age on Endowment plan
maturity of the plan.
Children’s education and marriage Specific plan are designed
High quality with survival benefits Money back policy

Legislative and Regulatory Matters

Several Acts have been constituted for the smooth operation of the Insurance
Industry in India. Some of them date back to 1872, as in the case of the Indian
Contract Act (of course with amendments), whereas others are as recent as 1999, as in
case of the IRDA Act.
A large body of literature on insurance provides the basis for this study. The
literature reviewed mainly consists of journals published by the Insurance Institute of
India, Federation of Insurance Institute, IRDA and insurance magazines. The
researcher has also gone through the websites of various insurance companies and
IRDA. An attempt has been made to briefly review previous studies in the area of
privatisation, liberalisation, rural insurance, bancassurance, IRDA, customer
satisfaction, insurance coverage, insurance marketing and insurance growth. Harold
D. Skipper (2000) in his paper explains the terms liberalisation and deregulation.
Liberalisation means the process by which the government take actions to move
towards liberal markets. It denotes a reduction of government barriers to market
access, especially as relates to foreign insurers Thitivadee Boonyasai, Grace and

16
Skipper (1999) in their study examined the effects of liberalisation and deregulation
on the efficiency of life insurers in selected Asian life insurance markets. The life
insurance industries selected for examination are those of Korea, Philippines, Taiwan
and Thailand. Korea and Philippines undertook 16 modest liberalisation and
deregulation efforts during the decade of 1990’s, but Taiwan and Thailand undertook
no deregulation. The liberalisation and deregulation of the Korean and Philippine life
insurance industries stimulated improvements in productivity and total efficiency. The
evidence suggests that liberalisation and deregulation generated impressive
productivity growth for Philippine life insurers. Liberalisation had little effect on the
productivity and efficiency of Taiwanese and Thai life insurance industries. The life
insurance industries in these countries regressed in terms of efficiency after
liberalisation. Liberalisation alone failed to stimulate productivity growth in Korea in
1989. But after partial deregulation in 1993, Korean life insurance industry witnessed
significant increase in productivity growth. They conclude that liberalisation alone
with a restrictive regulatory regime is unlikely to yield the improvements. In a
restrictive regulatory environment, welfare gains will be minimal if deregulation does
not closely follow liberalisation. Harold D. Skipper (2005) addresses the major issues
and concerns relating to the liberalisation of the insurance markets from several
perspectives. He sets out the role and importance of government policy in insurance
and points out that the government intervention in the insurance market is essential
but should be carefully targeted to minimise undue interference. He also discusses the
role of foreign insurers with particular emphasis on the concerns that have historically
been expressed about their roles in national insurance markets of emerging economies
and points out that such insurers 17 should be expected to play an important role in
market evolution and development. He also presents a set of principles around which
governments should craft their regulation of insurance and suggests that for having a
competitive and solvent insurance market, insurance regulation The lesson for the
government is to craft laws and enforce regulations that promote more transparent
markets supported by fair competition. Competitive insurance market serves each
country’s interest. Governments that deny their citizens and business such markets
lessen consumer choice and hinder national economic development. Mathur (2003)
has the opinion that joint efforts need to be made by all insurance operators to extend
coverage to millions of insurable people who need insurance and points out the need
for promoting different distribution channels for expanding rural insurance market.
17
LIC has contributed immensely to the process of economic development through its
multi dimensional activities and services over twelve crore policies which is a record
for any life insurance company in the world. Gupta and Chuganee (2001) in their
article specify the major steps to be taken by the LIC in order to compete with the
new players. 18 The opening up of the insurance sector has challenged the monopoly
of the LIC and in order to withstand competition LIC has to take steps in the areas of
products, services and information technology. The excess workforce in the LIC
should be utilised in raising business volumes through skill upgradation. S.B Mathur
(2002) mentions the challenges that LIC faces from new entrants having sound
background and high brand equity. He also expresses doubts about the ethics of new
players who may focus on those areas not covered by LIC. The development officers
of LIC must work carefully to ensure that the people are not weaned away from LIC.
Kundu (2003) in his article discusses the various issues in the insurance industry after
the entry of new players. India has a low insurance penetration of 1.95 percent. The
saving rate in India is 25 percent but only less than five percent is spent on insurance.
The market is witnessing a wide array of products from new players. The profile of
the consumer is also changing. People are looking for integrated financial solutions
that can offer stability of return along with total protection. Geetanjali Mehlwal
(2006) in her article describes the insurance market as it exists today, its growth
potential and the incentive to private insurers from world over. The study suggests
that after liberalisation of the insurance industry in March 2000, there has been
consistent growth and the current potential premium income of the country is
estimated at $80 billion. India is seen as the sixth largest market in the world. In India
80 percent of the population remains without life insurance and only 2.5 percent of
the country’s insurable population is currently insured. Though LIC has been in the
country for a long time, it did not tap much of the rural market. It mainly concentrated
on endowment and money back policies. The private insurance has made good
progress despite the existence of public sector players. As a result there is a decline in
the new premium business of LIC. Between April 2004 and February 2005, LIC’s first
year premium dropped by 9.3 percent i.e. 77.87 percent from a market share of 87.22
percent in the preceeding year. The study points out that the insurance business is
growing at the rate of 15-20 21 percent annually. Insurance penetration has increased
from 2.32 percent in 2000 to 2.88 percent in 2003. Likewise insurance density has
increased from Rs. 435.897 in 2000 to Rs.722.092 in 2003. There has been an
18
increase of 83 percent in the premium collection during the three years following the
enactment of the IRDA Act. The premium collected by insurers, both life and non-life
is estimated to be about Rs.25,343 billion in the year 2004-2005. The average size of
life insurance cover before privatisation which was around Rs.50,000/- has now been
risen to Rs.80,000/-. Geetanjali Mehlwal also mentions about insurance distribution
and intermediaries. Insurance companies are making new investments in information
technology. Today there are alternate channels like bancassurance, brokers, corporate
agents and direct marketing through internet. Prakash Rao B.K.S. and
Bh.Venkateswara Rao (2005) have made an attempt to examine the opportunities for
insurers in the rural market. They point out that the new companies entered into
insurance business after liberalisation focused their attention mainly in urban areas.
Table 2.1 shows that majority of the rural population is uninsured. They also listed the
challenges in increasing the insurance coverage in rural areas. It was pointed out that
the cost of building exclusive delivery systems for selling insurance in rural areas is
very high. The second barrier is the paucity of channels to communicate the benefits
of products to the entire rural population. They suggest that by establishing network
with rural development agencies, banks, cooperative institutions and youth clubs,
insurance policies can be sold in rural areas. Forte (2005) conducted a study on rural
insurance market. Majority of the respondents were able to name the types of policy
but could not recall the actual name of the policy. Majority purchased money back
policies and the penetration of whole life policies was very low. A sum assured of less
than Rs.50,000/- accounted for most of the policies taken. A significant number also
adopted for a higher value policy of upto Rs. 1,00,000/-. There was a great deal of
similarity between the policy actually purchased by respondents and the policy
recommended by the agents, suggesting that a great influence is exercised by the
agents in the selection of insurance products. It is found that insurance companies
have to create awareness about security and savings involved in insurance and
develop the felt-need among these potential customers. Aggarwal (2005) in his article
deals with the insurance status of the poor in India. Insurance is more concentrated in
relatively financially stable urban areas but the requirement for a cushion to absorb
risk is greater among rural and urban poor. Compared to developed countries 23 the
penetration of insurance is very poor in India. Even after liberalisation the poor and
the needy find insurance a risky proposition with their uncertain and irregular income.
The male literacy rate in India in the year 2000 was 68.4 percent and the female
19
literacy rate was only 45.4 percent. Thus, access is not sufficient in rural areas. Health
insurance is extremely limited in India. There is no significant change in the
availability of new health insurance products or in the volume of business although a
number of private insurance companies have entered the field. Agriculture is the
mainstay of the rural people and therefore products and reforms must be designed
after considering this segment of the population. 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. The study also revealed that in urban areas the
efficient customer service helped the 24 market penetration by private players. The
major reasons cited for the failure in the rural sector can be summarised as follows. 1.
Lack of popular appeal in marketing strategy 2. High variation between services
provided and consumers’ expectations 3. High premiums 4. Product differentiation
and innovation are not in conformity with the rural population 5. Professional style of
working has failed to generate confidence and goodwill as rural population prefers
personalised approach and that too in accordance with the regional culture The above
findings reveal that there should be a change in the products, marketing and service
strategy of private players of insurance sector.

Life Insurance Industry in India

Life insurance in its existing form came in India from United Kingdom (UK)
with the establishment of a British firm, Oriental Life Insurance Company in 1818
followed by Bombay Life Assurance Company in 1823, the Madras Equitable Life
Insurance Society in 1829 and Oriental Life Assurance Company in 1874, Prior to
1871, Indian lives were treated as sub-standard and charged an extra premium of 15%
20
to 20%. Bombay Mutual Life Assurance Society, and Indian insurer that came into
existence in 1871, was the first to cover Indian lives at normal rates.

The Indian Life Assurance Companies Act, 1912 was the first statutory
measure to regulate life insurance business. Layer, in 1928 the Indian Insurance
companies Act was enacted, inter alia, to enable the government to collect statistical
information about life and non-life insurance business transacted in India by India and
foreign insurers, including the provident insurance societies.

In 1938, with a view to protecting the interest of the insuring public, earlier
legislation was consolidated and amended by Insurance Act, 1938 with
comprehensive provisions for detailed and effective control over the activities of
insurers. In order to administer the aforesaid legislation, an insurance wing was
established and attached first with the Ministry of commerce and then Ministry of
Finance. This ministry was administratively responsible fro policy matters pertaining
to insurance. The actuarial and operational matters relating to the insurance industry
were looked after by an attached office in Shimla, headed first by Actuary to 0the
Government of India, then by Superintendent of Insurance and finally by the
Controller of Insurance. The act was emended in 1950, making far-reaching changes
such as requirement of equity capital for companies, carrying on life insurance
business, ceilings on shareholdings in such companies, stricter control on investment
of life insurance companies, submission of periodical returns relating to investments
and such other information to the controller as he may call for, appointment of
administrators for mismanaged companies, ceilings on expenses of management and
agency commission, incorporation of the Insurance Association of India and
formation of councils and committees thereof.

By 1956, 154 Indian insurers, 16 non-Indian insurers and 75 provident

societies were carrying on life insurance business in India. Life insurance business
was confined mainly to cities and the better-of segments of the society.

On 19th January 1956, the management of life insurance business of 245

Indian and foreign insurance and provident societies, then operating in India, was
taken over by the Central government and then nationalized on 1 st September 1956.
21
LIC was formed in September, 1956 by an Act Parliament, viz. LIC Act, 1956, with
capital contribution of Rs.5crores from the Government of India.

Some of the Salient Acts which needs to be understood are:

 Insurance act, 1938
 Life Insurance Corporation Act, 1956
 Insurance Regulatory and Development Authority Act, 1999
 Consumer Protection Act, 1986
 Ombudsman
 Income Tax Act
 Married Women’s Property Act
 Contact Act

Insurance Regulatory and Development Authority Act, 1999

An Act to provide for the establishment of an Authority to protect the interest

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

 The Authority replaces the Controller under Insurance Act, 1938. It states that, if
“Authority” is superceded by the Central Government, the “controller of
Insurance” may be appointed till such time as “Authority” is reconstituted
 Section 2(f) defines an intermediary to include insurance brokers, re-insurance
brokers, insurance consultants, surveyors and loss assessors
 The authority has the power and function to specify qualifications, code of
conduct and practical training for intermediaries and agents

22
Income Tax Act
An Act to consolidate and amend the law relating to income tax and super tax.

 Sub section 10D of section 10 of Income Tax Act 1961, any sum received under a
life insurance is exempted from Income Tax
 Exception: Not applicable if the amount is to be refunded under the Jeevan Adhaar
Plan in case the handicapped dependent predeceases the individual or under a key-
man insurance

Fundamentals of Agency Law

Who is an insurance agent? Can an agent be an employee of an insurance
company? Who is the responsible authority for issuing licenses to insurance agents?
What role is the agent supposed to perform? For answering these questions let us get a
deeper understanding of the rules and regulations enacted by the Insurance Regulatory
and Development Authority (IRDA).

Insurance Agent

An insurance agent is an agent licensed under Section 42 of the Insurance Act, 1938.

He receives payment by way of commission or other remuneration for procuring

insurance business. He is also responsible for business relating to the continuance,
renewal or revival of policies of insurance.

The agent cannot be an employee of an insurance company and the Insurance Act,
IRDA Act and the Indian Contract Act govern his role as an agent.

23
Types of Agents

 Individual
 Absorbed Agent is an insurance agent licensed on or before the date of
notification of the Insurance agents Regulations, 2000, under the provisions of
section 42 of the Insurance Act, 1938.
 Composite Insurance Agent means an insurance agent who holds both life
insurance agency license and general insurance agency license
 Corporate Agent could be a company or a firm.

Every director or person holding charge of the office of the Corporate Agent
shall possess a valid license to act as an insurance agent or a composite insurance
agent. Employees of the office of the Corporate Agent shall possess valid licenses to
act as insurance agents or composite insurance agents provided such employees are
involved in soliciting or procuring insurance business.

As such, a corporate agent can solicit or procure insurance business thorough

its employees who hold valid licenses. The insurer shall pay the commission due to
the corporate agents.

Procedure for becoming an agent

Step – I
An application to be made to “designated person”. The “designated person” is
appointed by the insurer sponsoring the application.
- Form IRDA – Agents – VA, if the applicant is an individual;
- Form IRDA – Agents – VC, if the applicant is a firm or a company;
Two separate applications to be made, if a person desires to work as composite agent

24
Step – II
Deposit Fee
First Time – The fees payable by the applicant to the Authority for becoming an
insurance agent or composite agent would be Rs. 250.00
Renewal Fees – The fees payable by the applicant to the Authority for Renewal of
license would be Rs. 250.00. This is applicable only if the application for renewal is
made at least thirty days before the expiry of license. If the application is submitted
in less than 30 days before the expiry of license, a penalty of Rs. 100.00 is levied.

Step – III
The designated person may, on receipt of the application along with the evidence of
payment of fees to the Authority, an on being satisfied that the applicant,
 Possesses the minimum qualifications
 Possesses practical training
 Has passed the examination
 Has furnished the application complete in all respects
 Has the requisite knowledge to solicit and procure insurance business; and
 Is capable of providing the necessary service to the policyholders; grant or renew,
as the case may be, a license.

Step – IV
 Identity card from one life insurer and such identity card from one general insurer
shall be provided to the applicant seeking license to act as a composite insurance
agent.
 In the case of a firm or a company, all of its partners or directors, as the case may
be, shall fulfill the requirements of educational qualifications, practical training
and pre-recruitment examination.
 License issued in accordance with this regulation shall entitle the applicant to act
as insurance agent fro one life insurer or one general insurer or both, as the case
may be
 If the designated person refuses to grant or renew a license under this regulation,
he shall give the reasons therefore to the applicant.

25
Code of conduct for insurance agents :

Every person licensed to act as an insurance agent shall be subject to a code of

conduct specified below.

(1) Every agent shall:

a. Identify himself and the Insurance company of which he is an insurance agent,
disclosing his certificates of license to the prospect on demand for the purpose of
soliciting or procuring insurance business;
b. Disseminate the requisite information in respect of insurance product offered for
sale by his insurer, and also by other insurer in the market, taking into account the
needs of the prospect for insurance before offering any insurance product;
c. Disclose the commission offered to him in respect of the insurance product
offered for sale;
d. Determine the premium to be charged by the insurer for the insurance product
offered for sale;
e. Explain to the prospect in regard to information required in the proposal form by
the insurer, and also the importance of disclosure of material information to the
insurer;
f. Inform the prospect regarding the acceptance of the proposal by the insurer
promptly;
g. Handover a copy of the proposal form or any other form to the proponent before
submitting such form to the insurer for purchase of insurance contract;
h. Abide by any matter that has been notified by the authority in its notification;

(2) Every agent shall not:

a. Solicit or procure insurance business without holding a certificate of valid

license.
b. Advice or induce the prospect to omit to disclose the material information in
the proposal form;

26
c. Submit wrong information in the proposal form or in the documents submitted
to the insurer for acceptance of the proposal;
d. Utilize his handwriting in respect of answers to the questions in the proposal
form which contains the signature of eh prospect: provided that if the prospect is
an illiterate, the handwriting in the proposal form shall be from another person
who is not an insurance agent, and such proposal shall be countersigned by him
(the insurance agent) as a witness.
e. Utilize his handwriting in respect of answers to the questions in the medical
reports;
f. Behave in discourteous manner with the prospect;
g. Interfere with any proposal introduced by any other insurance agent;
h. Offer better terms and conditions than offered by his insurer;
i. Part to or share his agency commission with any prospect or with any other
person;
j. Receive an share of the benefit payment payable to the policyholder or the
claimant or the beneficiary;
k. Give advice to any policy holder for termination of the insurance contract with
any insurer in order to effect a new proposal within one hundred eighty days from
date of such termination;

Functions of the Agent

The primary function of the agent is to procure business for the insurance company.
Prior to offering the policy, the agent has to check out on the insurability of the
proposer based on the principles of insurable interest and utmost good faith. The
relevant information can be:
a) Paying capacity
b) Health and habits
c) Age
Once the insurance contract has been put into force, the agent is supposed to ensure
continuance of policy through regular payment of renewal premiums.

In case of a claim the agent should help the insured or his family in proper settlement
of claims.

Agents Qualifications

27
a) In order to discharge the above duties, to the satisfaction of the consumer, it is
required that a person making an application for a license to act as an insurance
agent or as a composite insurance agent,
b) Is at least 18 years of age as on the date of application;
c) Has not been found to be a person of unsound mind by a Court of competent
jurisdiction;

d) Has not been found guilty of any kind of criminal conduct. In case of an offence at
least five years should have elapsed since the completion of sentence imposed.
e) Possesses the minimum educational qualification of a pass in 12 th Standard or
equivalent examination conducted by any recognized Board/Institute of
Education.
f) Possesses a Certificate in Insurance Salesmanship issued by an Examination Body
or any other Institution by the Authority (IRDA) in this behalf;

Agents Regulations

Agent’s regulations deal primarily with the following features:

Appointment of Agents
An insurer or the designated person acting on behalf of the insurer may appoint a
person as an insurance agent. Provided that such agent holds a valid license at the
time of appointment.

Qualification of Insurance Agents (dealt with in previous

page)

Training of Insurance Agents

Every person appointed as a insurance agent after the appointed day by an

insurer shall undergo training organized by an independent institute or by an insurer’s
institution to be accredited by the Authority for a minimum period of four weeks
before appearing for the Certificate in Insurance Salesmanship Examination pass in
the pre-recruitment examination conducted by the Insurance Institute of India,
Mumbai or any other approved examination body.

Every person, before renewal of his license to act as an insurance agent, shall
undergo training organized by an independent institute or by an insurer’s institutions,
accredited by the authority, for a minimum period of four weeks once in every three
years. Where a person is a composite insurance agent, such training will be for a
period of six weeks.

28
Code of conduct for insurance agents

Every person licensed to act as an insurance agent shall be subject to a code of

conduct specified below.

(1) Every agent shall:

a) Identify himself and the Insurance company of which he is an insurance agent,
disclosing his certificates of license to the prospect on demand for the purpose of
soliciting or procuring insurance business;
b) Disseminate the requisite information in respect of insurance product offered for
sale by his insurer, and also by other insurer in the market, taking into account the
needs of the prospect for insurance before offering any insurance product;
c) Disclose the commission offered to him in respect of the insurance product
offered for sale;
d) Determine the premium to be charged by the insurer for the insurance product
offered for sale;
e) Explain to the prospect in regard to information required in the proposal form by
the insurer, and also the importance of disclosure of material information to the
insurer;
f) Inform the prospect regarding the acceptance of the proposal by the insurer
promptly;
g) Handover a copy of the proposal form or any other form to the proponent before
submitting such form to the insurer for purchase of insurance contract;
h) Abide by any matter that has been notified by the authority in its notification;

(2) Every agent shall not:

a) Solicit or procure insurance business without holding a certificate of valid license.

b) Advice or induce the prospect to omit to disclose the material information in the
proposal form;
c) Submit wrong information in the proposal form or in the documents submitted to
the insurer for acceptance of the proposal;

29
d) Utilize his handwriting in respect of answers to the questions in the proposal form
which contains the signature of eh prospect: provided that if the prospect is an
illiterate, the handwriting in the proposal form shall be from another person who is
not an insurance agent, and such proposal shall be countersigned by him (the
insurance agent) as a witness.
e) Utilize his handwriting in respect of answers to the questions in the medical
reports;

l. Behave in discourteous manner with the prospect;

m. Interfere with any proposal introduced by any other insurance agent;
n. Offer better terms and conditions than offered by his insurer;
o. Part to or share his agency commission with any prospect or with any other
person;
p. Receive an share of the benefit payment payable to the policyholder or the
claimant or the beneficiary;
q. Give advice to any policy holder for termination of the insurance contract with
any insurer in order to effect a new proposal within one hundred eighty days from
date of such termination;

Limitation on Commission to Insurance agents

Every insurance agent and every insurer shall be subject to the provisions of the
Act, in regard to payment of commission or remuneration to the insurance agent.

Prohibition on cessation of payments of commission

Every insurance agent and every insurer shall be subject to the provisions of
the section 44 of the Act, in regard to cessation of payments of commission to the
insurance agent.

Termination of Agency
The license of any insurance agent including an absorbed agent may be
terminated by the Authority, if such agent suffers, at any time during the currency
of the license, from any of the said disqualification mentioned in sub-section (4)
of section 42 of the Act, as the case may be

30
 Issue of duplicate license
An insurance agent shall make an application to the issuing authority through
the designated person for issue of a duplicate license with a fee of rupees fifty.

Returns to be submitted to the Authority

Every insurer shall, annually or at such shorter periods as may be prescribed
by the Authority, submit a statement to the Authority, showing the particulars
mentioned in section 43 of the Act.
Remuneration to Agents

The only way in which the company remunerates the agent is though commissions
received on sales made. Commission to agents is specified as a percentage of the
premium paid. Agents are entitled to term insurance and gratuity benefits. An agent
will be eligible for gratuity if he has worked continuously for fifteen years or more
without agency termination. IRDA has given the upper limit of remuneration to agents
as 40% of premium.

Some companies offer reimbursement of telephone charges and other office

administration expenses to the agents.

31
 CHAPTER – III
COMPANY PROFILE

32
 LIFE INSURANCE

The story of insurance is probably as old as the story of mankind. The same instinct
that prompts modern businessmen today to secure themselves against loss and disaster
existed in primitive men also. They too sought to avert the evil consequences of fire
and flood and loss of life and were willing to make some sort of sacrifice in order to
achieve security. Though the concept of insurance is largely a development of the
recent past, particularly after the industrial era – past few centuries – yet its
beginnings date back almost 6000 years.

Life Insurance in its modern form came to India from England in the year 1818.
Oriental Life Insurance Company started by Europeans in Calcutta was the first life
insurance company on Indian Soil. All the insurance companies established during
that period were brought up with the purpose of looking after the needs of European
community and Indian natives were not being insured by these companies. However,
later with the efforts of eminent people like Babu Muttylal Seal, the foreign life
insurance companies started insuring Indian lives. But Indian lives were being treated
as sub-standard lives and heavy extra premiums were being charged on them. Bombay
Mutual Life Assurance Society heralded the birth of first Indian life insurance
company in the year 1870, and covered Indian lives at normal rates. Starting as Indian
enterprise with highly patriotic motives, insurance companies came into existence to
carry the message of insurance and social security through insurance to various
sectors of society. Bharat Insurance Company (1896) was also one of such companies

33
inspired by nationalism. The Swadeshi movement of 1905-1907 gave rise to more
insurance companies. The United India in Madras, National Indian and National
Insurance in Calcutta and the Co-operative Assurance at Lahore were established in
1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the
rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The
Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were
some of the companies established during the same period. Prior to 1912 India had no
legislation to regulate insurance business. In the year 1912, the Life Insurance
Companies Act, and the Provident Fund Act were passed. The Life Insurance
Companies Act, 1912 made it necessary that the premium rate tables and periodical
valuations of companies should be certified by an actuary. But the Act discriminated
between foreign and Indian companies on many accounts, putting the Indian
companies at a disadvantage.

The first two decades of the twentieth century saw lot of growth in insurance
business. From 44 companies with total business-in-force as Rs.22.44 crore, it rose to
176 companies with total business-in-force as Rs.298 crore in 1938. During the
mushrooming of insurance companies many financially unsound concerns were also
floated which failed miserably. The Insurance Act 1938 was the first legislation
governing not only life insurance but also non-life insurance to provide strict state
control over insurance business. The demand for nationalization of life insurance
industry was made repeatedly in the past but it gathered momentum in 1944 when a
bill to amend the Life Insurance Act 1938 was introduced in the Legislative Assembly.
However, it was much later on the 19th of January, 1956, that life insurance in India
was nationalized. About 154 Indian insurance companies, 16 non-Indian companies
and 75 provident were operating in India at the time of nationalization.
Nationalization was accomplished in two stages; initially the management of the
companies was taken over by means of an Ordinance, and later, the ownership too by
means of a comprehensive bill. The Parliament of India passed the Life Insurance
Corporation Act on the 19th of June 1956, and the Life Insurance Corporation of India
was created on 1st September, 1956, with the objective of spreading life insurance
much more widely and in particular to the rural areas with a view to reach all
insurable persons in the country, providing them adequate financial cover at a
reasonable cost.
34
LIC had 5 zonal offices, 33 divisional offices and 212 branch offices, apart from its
corporate office in the year 1956. Since life insurance contracts are long term
contracts and during the currency of the policy it requires a variety of services need
was felt in the later years to expand the operations and place a branch office at each
district headquarter. Re-organization of LIC took place and large numbers of new
branch offices were opened. As a result of re-organisation servicing functions were
transferred to the branches, and branches were made accounting units. It worked
wonders with the performance of the corporation. It may be seen that from about
200.00 crores of New Business in 1957 the corporation crossed 1000.00 crores only in
the year 1969-70, and it took another 10 years for LIC to cross 2000.00 crore mark of
new business. But with re-organisation happening in the early eighties, by 1985-86
LIC had already crossed 7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 109 divisional
offices, 8 zonal offices, 992 satallite offices and the Corporate office. LIC’s Wide
Area Network covers 109 divisional offices and connects all the branches through a
Metro Area Network. LIC has tied up with some Banks and Service providers to offer
on-line premium collection facility in selected cities. LIC’s ECS and ATM premium
payment facility is an addition to customer convenience. Apart from on-line Kiosks
and IVRS, Info Centres have been commissioned at Mumbai, Ahmedabad, Bangalore,
Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With a vision
of providing easy access to its policyholders, LIC has launched its SATELLITE
SAMPARK offices. The satellite offices are smaller, leaner and closer to the customer.
The digitalized records of the satellite offices will facilitate anywhere servicing and
many other conveniences in the future.
LIC continues to be the dominant life insurer even in the liberalized scenario of Indian
insurance and is moving fast on a new growth trajectory surpassing its own past
records. LIC has issued over one crore policies during the current year. It has crossed
the milestone of issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy
growth rate of 16.67% over the corresponding period of the previous year. From then
to now, LIC has crossed many milestones and has set unprecedented performance
records in various aspects of life insurance business. The same motives which inspired
our forefathers to bring insurance into existence in this country inspire us at LIC to
35
take this message of protection to light the lamps of security in as many homes as
possible and to help the people in providing security to their families.

SOME OF THE IMPORTANT MILESTONES IN THE LIFE INSURANCE

BUSINESS IN INDIA
1818: Oriental Life Insurance Company, the first life insurance company on Indian
soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company
started its business.
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate
the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are taken over by the
central government and nationalised. 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 (Nationalisation) Act, 1972 nationalised the
general 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

36
Oriental Insurance Company Ltd. and the United India Insurance Company
Ltd. GIC incorporated as a company.

OBJECTIVE 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.
 Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.
 Bear in mind, in the investment of funds, the primary obligation to its
policyholders, whose money it holds in trust, without losing sight of the interest of
the community as a whole; the funds to be deployed to the best advantage of the
investors as well as the community as a whole, keeping in view national priorities
and obligations of attractive return.
 Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
 Act as 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 capability 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 Objective.

37
Mission

"Explore and enhance the quality of life of people through financial security by
providing products and services of aspired attributes with competitive returns, and by
rendering resources for economic development."

Vision
"A trans-nationally competitive financial conglomerate of significance to societies and
Pride of India."

Determine or define the

Step 1 problem or opportunity
that is faced

Specify what
Step 2 information is needed

Identify the sources of

Step 3 the information

Decide on the
Step 4 technique for acquiring
the information

Gather and process the

Step 5 information

Step 6 Analyze and interpret

the meaning

Step 7 Present the finding to

the decision maker

Figure: the Seven Major Steps in a Research Project

38
 Sequence of steps in solving a problem

Setting objectives

Discover problem and

Step 2 define

Analyze problem
Step 3 environment

Search and select

Step 4 alternatives

Decide on action to
Step 5 take

Step 6 Implement

The methodology used for this study is questionnaire. There are two ways for
collecting the data.

39
 ANALYSIS AND
INTERPRETATION

40
From the primary data so far which we have collected from questionnaires, we came
to know that the awareness of LIC life insurance is of 78% and rest of the people i.e.
22% are to be covered. Till now the LIC life insurance company has covered only
78% of the total population in the metropolitan cities. As a program to cover the rest
22% of population, this survey has been conducted.

The objective of this survey is to find out the awareness for LIC Company and
to find out the interested candidates, who wanted to become as financial advisors of
the company and the analysis of the characteristics of them. For conducting this
survey, a sample of 200 members is selected randomly from twin-cities and it is
completely unbiased.

This survey has been completed with the help of questionnaire, which will
provide information the awareness. . Here we found out of two hundred, 156 people
know about “LIC COMPANY”, And rest of the 44 people don’t know. And it will also
provide the information about the characteristics of the interested candidates, who
wants to become as financial holder of the company. It will also provide the
information such as gender, age, occupation, financial status and his/her employment
status.

Awareness of
Yes No
insurance
Percentage of
78% 22%
the respondents

41
 Awareness of LIC life
insurance

78%
Yes
No
22%

From the above graph, we may interpret the data as follows. The total number
of persons surveyed is 200. From the graph we can come to know about the people
who were surveyed and about the area in which they fall under. In terms of the
awareness, 156 candidates fall under the category of ‘aware’, that is 78% of the total
surveyed people come under this category. This the major part of the pie graph, by
that we can come to know that most of the people are aware of the insurance.

Channel:- For any company advertising is an important thing, that means we have
to promote any brand name or any company through advertising only, so only we can

42
penetrate into the market through media whatever it may be for example they are
friends, relatives, agents, telemarketers, T.V.Ads, Paper Ads, Hoardings, Internet , and
Others.

Channels No.of
respondents
Friends 36
Relatives 14
Agents 21
Telemarketers 06
T v ads 81
Paper ads 56
Hoardings 31
Internet 16

Others 11

From The above graph we can say that the awareness of LIC through different
channels. That is the awareness through T.V.Ads is 81is the highest. And the second
highest is through PAPER Ads that is 56. Here the lowest awareness is 6 which are
from telemarketing. And the other channels are as follows in the descending order.
That is from FRIENDS it is 36, from HOARDINGS it is31, from AGENTS it is 21,
from INTERNET it is 16, from RELATIVES it is 14, and from OTHERS it is 11. So
from the above table we can find that the maximum number of people has aware of
ICICILIC through T.V Ads.

43
Rating:-
Rating the awareness of LIC life insurance company is one more important
issue while evaluating the awareness that identifies how far we achieved the
penetration of the market . We scaled it on the scale having the options like
“Unaware”, “Low”, “Medium”, and “High”. Here out of two hundred respondents
we found that 44 people are not aware of ICICI-PRU LIFE INSURANCE, 24 people
have rated low, 49 people have rated as medium and finally 73 people have rated
high.

Unaware low medium High

n.o of
respondents 22% 12% 24.5% 36.5%

From the above table and graph, we may interpret the data as follows. The total
number of persons surveyed is 200. From the table and graph we can come to know
about the candidates who were surveyed and about the area in which they fell under.
Here we can find the rating of ICICI LIC is very high. Here 36.5% or 77 candidates
fall under the category ‘high”.

44
 And the next major part belongs to “medium’. It indicates that 55 or24.5% of
the total candidates are aware of the company. But in terms of awareness, it is very
low. That means they may be aware of the company name, the products by the
company and about life insurance.

22% of the total candidates are not aware of the company. That is 44
members belong to “unawareness “group. It indicates that these people do not know
any thing about ICICI-PRU LIFE INSURANCE.

The last one is low that is 12% or 24 candidates who knows about
ICICILIC COMPANY is very low.

Marketing Experience:-

45
 To work as a financial advisor one requires a vast knowledge of marketing and
handling the situations. So, in the section we enquired the person whether is he having
any previous marketing experience. In our survey we found that out of two hundred
74 respondents are having a good marketing experience and remaining 136
respondents are not well at marketing experience.

Marketing Yes No
experience
Percentage of 37% 63%
the responds

From the above graph, we may interpret the data as follows. The total number of
persons surveyed is 200. From the table we can come to know about the candidates
who were surveyed and about the area in which they fell under. In terms of the
marketing experience, 37% of the candidates are having the experience. And 63% of
the candidates are not having the experience.

Preferred to work as:-

Generally life insurance employees are in two types ,they are full timers those
who works on the basis of regular monthly salary and another type is commission
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based employees ,those who gets money according to their work. Here I found that
the candidates who were interested to work as a full-time worker is 26 and the
remaining 36 of the people are part-timers in life insurance companies.

Preferred to work as Full time Part time

Percentage of the responds 42% 58%

From the above graph we can find that the preference of the candidates to work as a
full time employee, or part time in life insurance companies. Here we found that most
of the people are interested to work as part time. That is 58% of the candidates are
interested to work as part time. And rest of the 42% of the candidates is interested to
work as full time employees.

FINDING OUT THE FINANCIAL ADVISORS:

Finding out the interested candidates to become financial advisors is the main
objective of this project, so, here we analyzed the data according to the personal

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details like age, gender, marital status, occupation wise and income status wise. With
this personal details we concluded the objective with respective to the interested
candidates or not, and this is also a useful result and it will make easier the work of
the unit managers that who have to find out the financial advisors to make their
business fruitful.

From the primary data that which we were collected is analyzed based on those details
they are as follows.

Total interested candidates:- The main objective of this project is to finding out
the financial advisors and here we analyzed them based on the question “ whether
they are interested or not” and the out put is as follows, that is out of two hundred
candidates 62 candidates are interested and rest of the 138 candidates aren’t
interested.

Response of the candidates Yes No

Percentage of respondents 31% 69%

Above graph suggests that the interested persons those who wants to work as financial
advisors are 31% and remaining 69% are not interested.
Finding based on gender wise:-
The interested candidates who becomes to financial advisors is analyzed based
on their gender, and those details are as follows that is interested male candidates are
44, and female are 18.

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Gender Male Female
Percentage of the 71% 29%
respondents

From the above graph we found that 71% were male candidates and remaining 29%
female candidates were interested to work as financial advisors in LIC Life insurance
Ltd.

Analysis based on age-wise:-

Age:-
Age which acts very important characteristic factor for anyone who wants to
contribute his/her services. The present analysis based upon the ages of the surveyed
candidates. it will facilitates the organization to know about the age group of
interested persons and focus on that particular age group which is contributing more
and good service oriented financial advisors.

The below table provides the information about the age groups of the total interested
candidates.

Age <25 years 26-35 years 36-45 years 46-55 years >55
years
N.o. of interested 17 21 14 08 02
candidates

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 The above graph shows the ratio among the candidates of different age
group who are interested to become as financial advisors for the ICICILIC
COMPANY. The total candidates who were surveyed are 200, out of that 62 persons
are interested to become as financial advisors. In that if we take as age wise 17
candidates are below 25 years age, 21 candidates are between 26-35 years, 14
candidates are between 36-45years, 8 candidates are between 46-55years and 2
candidates are more than 55years. Here we found that maximum people are interested
to work as financial advisors is between 26-35 years of age group.

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Analysis based on marital status:-
The interested candidates who becomes to financial advisors is analyzed based
on their marital status , and those details are as follows. Here the interested candidates
who were married 48, and who were not married 14.

Marital status Single Married

Percentage of the 23% 77%
respondents

I found that the candidates who were interested to work as a financial advisor is based
on their marital status are 77% who were married and 23% were single.

Occupational-wise:-

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 The interested candidates who wants to become as a financial advisors is
analyzed based on their occupation, and those details are as follows.

Occupation Business Service House Professional Student Others

wife
N.o. of 18 10 04 08 18 04
respondents

From the above graph we can find that 62 persons are interested to become as
financial advisors. The interested candidates who want to become as a financial
advisors is analyzed based on their occupation, and those details are as follows. Here
maximum people are interested to work as financial advisors are business people and
students that are 18. And next one is service people who are10. And next one is
professionals that are 8. And the last one is a house wives and others both are
interested the same that is 4.

Income status-wise:-

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 The interested candidates who become to financial advisors is analyzed based
on their income status and those details are as follows.

Income status <60 thousands 61-1.5 lakhs 1.5 lakhs- >3 lakhs
3lakhs
N.o. of persons 12 16 24 10

We have divided the interested candidates based on their income status-wise.

and those details are as follows. That is less than 60,000 thosands, 61-1.5 lakhs, 1.5-3
lakhs, and finally more than 3 lakhs.

Here we found that the interested candidates are12, whose annual income is
RS .60, 000 thousands, and the next interested candidates are16, whose annual income
is 61,000-1.5 lakhs, and the next interested candidates are 24,whose annual income is
1.5-3 lakhs, and finally the that the interested candidates are 10,whose annual income
is more than 3 lakhs.

Here we can find that, from the above graph that the interested candidates
whose annual income is 1.5-3 lakhs is maximum

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 FINDINGS
SUGGESTIONS AND
CONCLUSIONS

FINDINGS:
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 In the field work we came to know that there are very less people who do not
know about the LIC.
 This survey reveals that 31% of the respondents are interested to become financial
advisors for the company, and 69% of the respondents are not interested to
become as financial advisors for the company.
 58% of the people were interested to work as part time, and 42% people were
interested to work as full time workers.
 Here we found that 71% of the interested candidates were males, and 29% of the
candidates were females.
 The percentage of the candidates that are interested from single group is 23% and
77% percentage from married group.
 There are some reasons for which the candidates are not interested join as
financial advisors, they are:
1) Lack of awareness.
2) Less interest.
3) Lack of knowledge.
4) Lack of experience.
5) Less commission.
 Most of the candidates are looking for a minimum salary.
 Most of the candidates don’t know about the benefits, what they get will if they
join in “LIC COMPANY”. So impart them clearly.
 The awareness level of “LIC COMPANY”. Should be increased by conducting
various promotional activities.
 “LIC COMPANY” branches has not established in all district head quarters. So
please make it, and then only “LIC COMPANY” will reach every one.
 Promotional activities have to be conducted to increase the awareness level in
rural areas.
 One of the best ways to attract financial advisors is by providing high commission
for achieving certain sales figures. And by providing them good work
environment and facilities.

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 ANNEXURE - QUESTIONNAIRE

Personal details:-

Name:_________________________________ Gender: Male □ Female □

Address: ____________________________
City:_________________________________ Phone No.:__________________

1. Age:

<25 yrs □ 26-35yrs □ 36-45yrs □ 46-55yrs □ >55yrs □

2. Marital Status:

Married □ Single □

3. Occupation:

Business □ Service □ Housewife □ Professional □ Student □ Others

□

4. Income:

<60,000 □ Rs.60, 000-1.5lakhs □ Rs.1.5 lakhs-3 lakhs □ >Rs.3 lakhs□

5. Do you know about ICICI-Pru life insurance

Yes □ No □

6. How do you know about ICICI-Pru life insurance?

Friend’s □ Relatives□ Agents□ Telemarketers □

T.V Ads□ Paper Ads □ Hoardings □ Internet □ Others□

7. How would rate your awareness of ICICI-Pru life insurance?

Unaware □ Low □ Medium □ High □

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8. Do you have any marketing experience
Yes□ No □

9. Would you be interested to become financial advisor for the ICICILIC company?

Yes □ No □

10. Would you like to work as?

□ Part timer □ Full timer

11. Term insurance has many options available. Check as many items below that you
would want in your policy:

□ Ability to renew the term without having to undergo new medical exams.
□ Ability to convert to a cash value policy later on.
□ I/we need to discuss these with GCD before making these decisions.

12. If you feel there is a maximum annual premium you could afford, without GCD
first mathematically computing the actual number, please state .

□ yes No □

BIBILIOGRAPHY

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 BIBILIOGRAPHY

Books:

 “LIFE INSURANCE PROGRAMME” based on IRDA syllabus.

 Product book of ICICI-Pru Life Insurance

 Insurance material from bema online training centre

Sites:-

 www.iciciprulife.com

 www.licindia.com

 www.bimaindia.com

 www.bimaguru.com

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 www.irdaindia.org

 www.assureindia.com

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