a comparative analysis of selected insurance plans

A

SUMMER TRAINING REPORT

ON

A COMPARATIVE ANALYSIS OF SELECTED INSURANCE

PLANS

UNDERTAKEN AT

AVIVA LIFE INSURANCE CO LTD

SUBMITTED IN PARTIAL FULFILMENT FOR THE

REQUIREMENT OF THE AWARD OF DEGREE OF

MASTER OF BUSINESS ADMINISTRATION (MBA)

TO

MAHARSHI DAYANAND UNIVERSITY, ROHTAK

BY

ARYA MITRAROLL NO. 2809 MBA (3rd Sem)

AMITY BUSINESS SCHOOL, MANESAR

(2008-2010)

DECLARATION

I, Arya Mitra, Roll No. 2809, MBA (3rdsemester) of Amity Business School, Manesar,

hereby declare that the Summer Training Report entitled, “A Comparative Analysis of

http://amity.edu/absmanes/default.asp

Selected Insurance Plans”, is an original work and the same has not been submitted to any

other institute for the award of any other degree.

A seminar presentation of the Training Report was made on August 28, 2009 and the

suggestion as approved by the faculty was duly incorporated.

Presentation-In-Charge Signature of the Candidate

Signature: ___________________

Name of the Faculty: _________________

Countersigned:-

Director of the Institute

2 |


ACKNOWLEDGEMENT

Making a project is a result of meticulous efforts put in by many minds that contribute to the

final report formation. This is an honest effort towards putting forward whatever I have

gained as a valuable experience that will surely help me move up the learning curve towards

the path I have chosen.

“If the words are symbol of undiluted feelings and token of gratitude then let the words

play the heralding role of expressing my feelings.”

I am indeed thankful to honorable Prof (Dr) R C Sharma, Director, Amity Business

School, Manesar, who has provided the wonderful opportunity of getting exposed to

industrial and business working know-how. I extend my deepest thank to my mentor and

guide, Dr Vikas Madhukar, Professor, Amity Business School for giving me the

opportunity to understand the project and for providing me the necessary information

whenever required.

I owe a special gratitude to Mr. Prem Singh, Deputy Branch Manager, Aviva Life

Insurance Co Ltd and Mr. Ashish Bhardwaj, Assistant Sales Manager, Aviva Life

Insurance Co Ltd, for providing me valuable directions and guidance.

I would like to render my sincere thanks to Mr. Abhishek Verma, Branch Trainer, Aviva

Life Insurance Co Ltd for his immense encouragement, guidance and invaluable lecture

sessions throughout my training. He has been an inspirational mentor guiding me through

every step of my project, thus making the entire Project a complete learning process.

Never the last, I would take the opportunity to thank to all the staff members of “Aviva Life

Insurance Co Ltd” who gave their precious time in providing me with valuable information

whenever needed.

ARYA MITRA

MBA(3rd Sem)

3 |


TABLE OF CONTENTS

Certificate

Declaration

Acknowledgement

CHAPTER-I

PAGE NO.

1. Significance of the study 1

2. Conceptualization 2

3. Focus of the study 37

4. Objectives of the study 38

5. Limitations of the study 39

CHAPTER-II

1. Industry Profile 41

2. Company Profile 46

CHAPTER-III

1. Review of Existing Literature 57

2. Research Methodology 62

CHAPTER-IV

Analysis and Interpretation 65

CHAPTER-V

1. Findings 75

2. Recommendations 76

3. Conclusion 77

Bibliography

4 |


CHAPTER-I

5 |


S IGNIFICANCE OF THE STUDY

It is generally unpredictable what would going to happen next, thus, everybody require life

insurance due to the uncertainties of life. Life Insurance protects the dependents of deceased

person against certain economic losses that results from unexpected death of the bread

winner. It basically ensures that the family of deceased person does not suffer from much

loss.

Besides this protection, Life insurance is also a good investment option. One can do financial

planning for the various key stages (like career, marriage, childs’ education, retirement, etc.)

of life cycle.

Understanding the importance of Life Insurance, government of Inda established “Life

Insurance Corporation of India” in 1956 and opened the market for private players in 1999.

At present, there are 22 private life insurance companies in India offering a large range of

insurance products keeping in view the needs of the people. Even then, a huge population of

India is not insured. Unawareness among the people is one of the important reasons of this

fact. Hence, this study has become more significant to people as well as to organizations.

This study will help in creating awareness among people about the importance and benefits of

Life Insurance that will help in creating interest of people in life insurance products and

ultimately in the growth of insurance industry that will contribute to the growth of Indian

economy and last in the growth of World economy.

In this highly competitive scenario, this study will also help people to know about the various

plans and in selecting the best insurance plan among the available plans according to their

needs.

In this study, an attempt has been made to compare the Child Plan, Pension Plan & Term

Plan of Top 2 companies viz. ICICI Prudential Life Insurance & SBI Life Insurance with

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AVIVA Life Insurance which helps the company know about the plans of other companies

and their competitive advantage over Aviva life’s plan. That will help company to make more

competitive plans and to gain the competitive advantages over its competitor and ultimately

by increasing the sale of the company, increase its market share.

CONCEPTUALIZATION

What Is Insurance ?

Basically insurance is assurance. Insurance is transfer and sharing of risk by equitable

loss sharing. Insurance does not get back or replace the assets, it only compensates for the

loss suffered. In other words, we can say that insurance is a mechanism that provides

compensation for the financial value of the assets in case of loss or damage. At last insurance

an important social security tool that offers the counter balance to risk, that is, security.

Insurance is transfer and sharing of risk by equitable loss sharing.

Insurance is assurance and protect the human life.

Or

In other words “insurance is a form of cooperation through which all those who are

subject to certain risks and losses pool their resources to compensate those who really

suffer a loss”

Essential Features to Insurance-

There must be large numbers of similar risks.

The loss caused by the risk must be definite.

The occurrence of the loss must be accidental.

The potential loss must be large enough to cause hardships.

The cost of insuring must be economically feasible.

Need for Life Insurance:

Possibility of damage caused by any event the risk.

Uncertainty and unpredictability about future losses or damages which may or may

not happen, which may happen suddenly and unexpectedly.

Insurance is relevant about the risk.

Insurance is done against the contingency of the happening of such events.

7 |


If there is no risk then no need of insurance7.

Special need like medical expenses.

Today insurance has become even more important due to the disintegration of the

prevalent joint family system, a system in which a number of generations co-existed

in harmony, a system in which a sense of financial security was always there as there

were more earning members.

Times have changed and the nuclear family has emerged. Apart from other pitfalls of

a nuclear family, a high sense of insecurity is observed in it today besides, the family

has shrunk. Needs are increasing with time and fulfillment of these needs is a big

question mark.

How will you be able to satisfy all those needs? Better lifestyle, good education, your

long desired house. But again - you just cannot fritter away all your earnings. You

need to save a part of it for the future too - a wise decision

Types of Insurance

There are two type of insurance.

Non- life insurance

Life insurance

1. Non life insurance:

In this we include health and general insurance. GIC was set up by nationalizing

the non-life business of insurance sector in 1972. The GIC operates as the holding

co. of its four subsidiaries, namely

• National Insurance Company Ltd.

• The New India Assurance Company Ltd.

• The Oriental Insurance Company Ltd.

• United India Insurance Company Ltd.

All the 68 Indian insurers and 45 non-Indian insurers who did business before

nationalization got merged and taken over by the four subsidiaries of GIC. These four

subsidiaries have branches all over the country and concentrate on non-life insurance

8 |


business like marine, fire, accident, medical expenses, Car and vehicle insurance etc. GIC can

invest up to 50% in private corporate and non-government sector.

2. Life insurance:

A family is dependent for its food, clothing and shelter on the income brought by the family's

breadwinner. The family is secure so long as this breadwinner is alive and is capable of

earning. A sudden death (or disability) may leave the family in a financially difficult

situation. Uncertainty of death is inherent in human life and this uncertainty makes it

necessary to have some protection against the financial loss arising from untimely death. Life

insurance offers this protection.

Life Insurance was there in India since 1818 carried by private and foreign insurers. In 1956,

LIC Act was passed under which life insurance was nationalized and LIC was set up by

taking over the business of about 245 large and medium companies doing business of life

insurance. LIC had a monopoly of life business. It has set up the LIC mutual fund for

mobilizing savings of the public, particularly from rural and some urban areas and provides a

good return to investors.

Endowment Insurance P lan:

Endowment plans provide life insurance cover for a specified period. The important aspect is

that on maturity i.e. if the insured survives the term of the insurance, he/she receives the sum

assured at the end of the term.

Term Insurance Plan:

9 |

Life insurance or life assurance is a contract between the policy owner and the

insurer, where the insurer agrees to pay a sum of money upon the occurrence of the

policy owner's death. In return, the policy owner (or policy payer) agrees to pay a

stipulated amount called a premium at regular intervals.


Term life insurance plans provide insurance cover for a specified period. The defining

characteristic of this type of life insurance plan is the complete absence of survival benefit i.e.

on maturity (surviving the term of the policy), you receive no money from the insurance

company.

Uni t L inked Insurance P lan:

Unit-linked Insurance Plans (ULIPs) combine the benefits of life insurance policies with

mutual funds. A certain part of the premium is invested in listed equities/debt funds/bonds,

and the balance is used to provide for life insurance and fund management expenses. Yields

earned on investments i.e. the value of the investment or the sum assured, whichever is

higher, is paid to the insured or nominee. This varies from company to company i.e. some

insurance companies pay the value of the investment in addition to the sum assured.

ULIPs have gained high acceptance due to attractive features they offer. These include:

Flexibility

Flexibility to choose Sum Assured.

Flexibility to choose premium amount.

Option to change level of Premium /Sum Assured even after the plan has started.

Flexibility to change asset allocation by switching between funds

Transparency

Charges in the plan & net amount invested are known to the customer

Convenience of tracking one’s investment performance on a daily basis.

Liquidity

Option to withdraw money after few years (comfort required in case of exigency)

Low minimum tenure.

Partial / Systematic withdrawal allowed

Fund Options

A choice of funds (ranging from equity, debt, cash or a combination)

Option to choose your fund mix based on desired asset allocation

10 |


SOME INSURANCE TERMINOLOGIES

Sum Assured:

It is the minimum guaranteed amount the nominee get in case of an unfortunate demise of the

life covered.

Premium:

The consideration paid by the insured to the insurer for making an insurance. If it is paid

regularly during the term of policy, it is called Regular premium and if it is paid as lump

sum, for the whole policy term, it is called Single premium.

Premium Payment Term (PPT):

It is the time period for which one have to pay the Regular Premium. It can be less than or

equal to policy term.

Additional Regular Premium (ARP):

It is the extra amount paid above the Regular Premium. Once you opt for this feature, you are

bound to pay it for the whole premium payment term. The minimum and maximum amount is

different in different insurance companies.

Top-Up Premium:

It is also the extra amount paid over and above the Regular Premium. The only difference

between ARP and Top-up premium is that one does not obliged to pay it for the whole policy

term. The minimum and maximum top-up amount is different for different companies.

Partial Withdrawal (PW):

11 |


One, if needed, can withdraw some amount from the fund value pertaining to regular

premium and top-up premium after completion of the 3or 5 policy anniversary or as per the

rules of the companies.

Fund Option:

Premium you paid, after deducting all the charges, rest amount is invested in the Debt,

Money and Equity market. Every Life insurance company has some options according to the

percentage of money allocated in these markets. These are called Fund Options.

Switch:

By opting this feature you can switch from one fund option to another fund option available

in the plan depending on your financial priorities and investment decision. Switching policy

of different companies are different. Like minimum and maximum amount switched between

fund options are different in different companies and switching charges are also different.

Systematic Transfer Plan (STP):

This option allows you to enter and exit the equity market not abruptly, at once, but slowly at

different times and at different levels. This has the effect of averaging out the risks associated

with the equity market, thus reducing the overall risk you face.

In this option some proportion of the fund value is automatically switched from debt

dominated fund to equity dominated fund on regular basis.

Automatic Asset Allocation (AAA):

This option helps you to automatically decrease your exposure to equity and increase your

exposure to dept, as you grow older. This option relies on the fact that an individual’s risk

appetite reduces with age and he tends to be more conservative with his investment. This

option provides you the flexibility of leveraging the returns from equitys market and secure/

book the profits by the way of auto asset allocation as he advances in his age.

Premium Re-direction:

This option helps you to modify the allocation proportion of your future premium into

various funds in accordance with your changing needs / preferences.

Settlement Option:

12 |


This option allows you to keep your money invested in the fund even after maturity and

enables you to receive the same systematically over a period of up to 5 years.

Cover Continuance Option:

This option ensures that your life insurance cover continues in case you are unable to pay

premiums, anytime after payment of first three years premium. All applicable charges will be

automatically deducted from the units available in your fund.

Free Look Period:

You can review the terms and conditions of the policy, 15 days from the date of the receipt of

the policy document and where you disagree to any of those terms and conditions, you have

the option to return the policy stating the reason of your objection.

Waiver of Premium Rider:

According to this rider, In case of an unfortunate event of death of the policy holder, the sum

assured is paid to nominee at that point of time and all the future premium will be paid by the

company.

Income Benefit (IB) Rider:

If this rider is opted for, then upon your death, 10% of the income benefit rider sum assured

will be payable to the appointee for every year.

Accidental Death Benefit (ADB) Rider:

If this rider is opted for, then in case of accidental death, the nominee will receive an

additional sum assured along with the death benefit.

Comprehensive Health Benefits (CHB) Rider:

If this rider is opted for, then upon permanent total disability due to illness or accident or

contracting any of listed 18 critical illnesses, then we shall pay the benefits payable in case of

your death.

13 |


INTRODUCTION ABOUT THE PLANS

1. CHILD PLANS

Aviva Young Scholar Plan

Features:

Entry Age(Last Birthday) Parent: 18 – 50 years

Child: 0 – 17 years

Policy Term (PT) 10-25 years, subject to maximum maturity

age of 70 years

Premium Payment Term(PPT) 3 years/5 years/equal to policy term

Annual Premium Minimum Rs. 15000 if PPT = PT

Minimum Rs. 50,000 if PPT = 3years/5years

Maximum = No Limit

Top-up Premium Minimum: Rs. 1,000;

Maximum: 25% of total regular premium

paid

Sum Assured (SA) Minimum: 5* Annual Premium

Maximum: 1.5*Policy Term*Annual

Premium

Riders Available In Built: Waiver of Premium

Optional:

Accidental Death Benefit(ADB) Rider

Income Benefit(IB) Rider

Comprehensive Health Benefit(CHB) Rider

14 |


Premium Frequency Yearly, Half yearly, Quarterly, Monthly

Fund Options Enhancer, Growth, Balanced, Protector &

Bond

Partial Withdrawal Regular Premium: After 5 Policy Years

Top-up Premium: After 3 Years

Minimum: Rs. 5000,

Maximum: 25% of Fund value

Switches 1st 4 switches free of charge in a Policy year

Subsequent switches are charged at 0.5% of

amount switched, subject to a maximum of

500 per switch

Minimum switch amount: Rs. 5000

Benefits

Death Benefit

Sum Assured will be paid immediately.

All the future premium will be waived and paid into your fund.

Loyalty Benefit

At the end of every 5th policy year, some amount as a percentage of fund value is added in

your fund as loyalty benefit. The rate of amount is as:

End of Policy Year Loyalty Addition as a % of Fund Value

pertaining to Regular Premium

Policy Year 5 0.50%

Policy Year 10 1.00%

Policy Year15 1.50%



Maturity Benefit

15 |


Fund value pertaining to Regular Premium and Top-up Premium will be paid

at the time of maturity.

Tax Benefit

The premium paid will be eligible for tax benefit as per Section 80C, 80D and

Section 10(10D) of the Income Tax Act, 1961.

Charges:

Policy Administration Charges:

Policy administration charge will be Rs. 55 per month. This charge will

increase from 1st Jan every year by 5%.

Fund Management Charges:

Bond Fund: 1.00% per annum

Protector Fund 1.00% per annum

Balanced Fund 1.25% per annum

Growth Fund 1.50% per annum

Enhancer Fund 1.75% per annum

Allocation Charges:

Regular premium:

Allocation charges for PPT =PT

Annual

Premium

Year 1 Year 2 Year 3 & 4 Year5 Year 6 &

thereafter

<50,000 20% 10% 5% 2% 1%

>=50,000 to

<1,00,000

18% 10% 5% 2% 1%

>=1,00,000 16% 10% 5% 2% 1%

16 |


Allocation charges for PPT = 3 Years/5 Years

Policy Year Allocation Charge

Year 1 10%

Year 2 4%

Year 3 & thereafter 2%

Top-up Premium:

The allocation charge shall be 98% of top-up premium.

Mortality Charges:

It is levied on the Sum at Risk (SAR).

Sum at Risk = Sum Assured + Sum of future premiums payable till the date of

maturity.

Sample annual charges per thousand SAR for a healthy male are given below:

Age 25 30 35 40

Rs. 1.31100 1.34665 1.65025 2.47250

Surrender Charge:

Completed Policy years for which

premium is paid

Surrender charges on Fund Value

pertaining to regular premium

For PPT = PT

Less than 1 year 100%

1 year 90%

2 years 60%

3 years 30%

4 years 20%

5 years 5%

8 years 1%

More than 8 years Nil

17 |


For PPT = 3 years

less than 1 year 100%

1 year 90%

2 years 20%

More than 2 but less than 3 years 10%

3 years Nil

For PPT = 5 years

Less than 1 year 100%

1 year 90%

2 years 20%

3 years 10%

More than 3 but less than 5years 5%

5 years Nil

• ICICI PRU SMART KID UNIT-LINKED REGULAR PREMIUM

Features:



Maturity Age Parent: 75 Years

Child: 19 - 25 years

Policy Term (PT) 10-25 years, subject to maximum maturity

age of 75 years

Annual Premium Minimum Rs. 10,000

Maximum = No Limit



paid

Sum Assured (SA) Minimum: 1,00,000

Maximum: 5*Annual premium

Riders Available Waiver of Premium

Accidental Death & Disability

Benefit(ADDB) Rider

18 |


Income Benefit(IB) Rider

Premium Frequency Yearly, Half yearly, Monthly

Fund Options R.I.C.H II, Multiplier II, Flexi Growth II,

Flexi Balanced II, Balancer II, Protector II,

Preserver,Return Guarantee Fund

Partial Withdrawal Regular Premium: After 5 Policy Years

Top-up Premium: Any time during PT

Minimum: Rs. 2000,


1 PW in a Policy Year

Maximum 5 PW during entire PT


Subsequent switches are charged at Rs. 100

per switch


Benefits

Death Benefit


All the future premium will be waived and paid by the company till maturity

of the policy.

Maturity Benefit



Tax Benefit



Charges:

19 |



Policy administration charge will be Rs. 60 per month.


Protector II 0.75% per annum

Preserver 0.75% per annum

Balancer II 1.00% per annum

Flexi Balanced II 1.00% per annum

R.I.C.H. II 1.50% per annum

Flexi Growth II 1.50% per annum

Multiplier II 1.50% per annum

Return Guarantee 1.50% per annum

Allocation Charges:

Regular premium:

Annual

Premium

Year 1 Year 2 - 5 Year 6 – 10 Year 11

onwards

<20,000 20% 5% 2% 1%

>=20,000 to

<50,000

19% 5% 2% 1%

>=50,000 18% 5% 2% 1%

Top-up Premium:


Mortality Charges:

Mortality charges are deducted on the basis of Sum Assured. Indicative charges per

20 |


thousand Sum Assured for a healthy male and female life per annum are shown in

table:

Age(yrs) <7 20 30 40 50

Male 0 1.33 1.46 2.48 5.91

Female 0 1.26 1.46 2.12 4.85

Surrender Charges:

Completed policy years

for which premiums are

paid

Surrender value as a %

of Fund Value

Surrender Charges

Less than 1 year 0% 100%

1 year 25% 75%

2 years 40% 60%

However, this surrender value would be payable only after completion of three

policy years or whenever the policy is surrendered thereafter.

Following are the surrender values and charges applicable after payment of 3 full

years’ premium.

No. of completed policy

years

Surrender Value Surrender Charge

3 policy years 96% 4%


5 policy years & above 100% 0%

• SBI LIFE- UNIT PLUS CHILD PLAN

Features:



Maturity Age Parent: 65 Years

Child: 18 - 25 years

Policy Term (PT) Min.: 8yrs or (18 – child’s age at entry)

21 |


whichever is higher

Max. : 25 yrs

Premium Payment Term(PPT) 3yrs/ 5yrs/ 7yrs/ Till the child attains 18yrs

Annual Premium Minimum Rs. 84,000; for PPT = 3yrs

Minimum Rs. 60,000; for PPT = 5yrs

Minimum Rs. 48,000; for PPT = 7yrs

Minimum Rs. 12,000; for PPT = PT

Maximum = No Limit



paid

Sum Assured (SA) Minimum: 5*Annual Premium

Maximum: For age 18 – 40 yrs = 25*AP

For age 41 – 50 yrs = 20*AP

For age 51 – 57 yrs = 15*AP

Riders Available Waiver of Premium

Accidental Death & Disability(ADD) Rider

Dhanvantri Supreme (CI) Rider

Premium Frequency Yearly, Half yearly, Quarterly, Monthly

Fund Options Equity Optimiser Fund, Equity Fund, Bond

Fund, Growth Fund, Balanced Fund

Partial Withdrawal (PW) Regular Premium: After 3 Policy Years

Top-up Premium: Any time during PT

Minimum: Rs. 2000,


4 PW are free in a Policy Year

Maximum 5 PW during entire PT



per switch

Minimum switch amount: Rs. 10,000

Benefits

Death Benefit

22 |



All the future premium will be waived and paid by the company till maturity

of the policy.

Fund Value will be paid at maturity.

Maturity Benefit



Loyalty Benefit

To celebrate the 18th birthday of your child, SBI Life offer loyalty units by

way of free allocation of units based on the average of last 24 months Fund

value.

0.15*average last 24 months fund value*No. of policy till age 18

Tax Benefit



CHARGES:



increased by 2% per annum for each subsequent year on the 1st business day of

the policy month following 1st April each year, subject to maximum of Rs.300

per month.


Equity Fund 1.50% per annum

23 |


Equity Optimiser Fund 1.50% per annum

Bond Fund 1.00% per annum

Balanced Fund 1.25% per annum

Growth Fund 1.35% per annum

Allocation Charges:

Regular premium:

Annual

Premium

Year 1 Year 2 – 3 Year 4 – 7 Year 8

onwards

Upto 500,000 18% 5% 2% 1%

500,100 to

10,00,000

17% 5% 2% 1%

10,00,000 &

above

15% 5% 2% 1%

Top-up Premium:


Surrender Charges:

Year 2 3 4 5 6 & onwards

Surrender

charges

25% 15% 4% 2% Nil

2 PENSION PLANS

• AVIVA PENSION PLUS

Features:

24 |


Entry Age Min: 18 Years

Max: 65 Years

Vesting/Maturity Age Min: 40 years

Max: 70 years

Policy Term Min: 5 years

Max: Vesting age chosen

Annual Premium Min: 10,000

15,000 For PT < 10 Years

100,000 for Single Premium

Max: No Limit

Additional Regular Premium Minimum: 1000

Maximum: No Limit

Top-up Premium Minimum: 1000

Maximum: No Limit

Fund Options Pension Index, Pension growth, Pension

Balanced, Pension Protector


Subsequent switches are charged at 0.5% of

amount switched, subject to a maximum of

500 per switch


Benefits

Death Benefit

100% of the value of units pertaining to regular/single premium.

The value of units pertaining to top-up premium(s) and additional regular

premium, if any, are paid in addition to the above.

Loyalty Addition

For all regular premium policies with term of 20 years and above, Aviva provides a loyalty

addition as a percentage of units pertaining to regular premiums only.

Policy Term (years) Loyalty Addition as a % of Fund Value

25 |


pertaining to Regular Premium

20 1.0%

21 1.1%

22 1.2%

23 1.3%

24 1.4%

25 1.5%

26 1.6%

27 1.7%

28 1.8%

29 1.9%

30 & above 2.0%

Maturity Benefit

Take up to 1/3rd of the fund value as lump sum and use the balance to purchase

an annuity from Aviva.

Buy an annuity from any other life insurance company.

Tax Benefit

Tax benefit will be as per Section 80C/80CCC(1) & Section 10(10A)(3) of the

Income Tax Act, 1961.

CHARGES:


Policy administration charge will be Rs. 51 per month (Rs. 30 in case of

Single Premium policies). This charge will increase from 1st Jan every year by

5%.


Pension Index Fund: 0.75% per annum

26 |


Pension Protector Fund 1.00% per annum

Pension Balanced Fund 1.25% per annum

Pension Growth Fund 1.50% per annum

Allocation Charges:

Regular premium:

Annual Premium Year 1 Year 2 onwards

< 10,000 25% 2%

10,000 to 29,999 20% 2%

30,000 to 99,999 12.5% 2%

100,000 to 499,999 10% 2%

500,000 & above 7.5% 2%

Single Premium Allocation Charge

<500,000 2%

500,000 & above 1%

Top-up Premium:


Surrender Charge:

Completed Policy years for which

premium is paid

Surrender charges on Fund Value

pertaining to regular premium

Upto 1 year 100%

More than 1 but upto 2 year 25%

More than 2 but upto 3 policy years 5%

More than 3 but upto 4 policy years 2%

More than4 policy years Nil

27 |


ICICI PRU LIFE TIME SUPER PENSION

Features:


Max: 65 Years


Max: 75 years

Policy Term (PT) Min: 10 years

Max: 57 years

Annual Premium(APE) Min: 10,000

Max: No Limit

Sum Assured(SA) Minimum: 100,000

Maximum: PT*Annual Premium


Maximum: No Limit

Fund Options Pension R.I.C.H. II, Pension Flexi Growth II,

Pension Multiplier II, Pension Flexi

Balanced II, Pension Balancer II, Pension

Protector II, Pension Preserver, Pension

Return Guarantee Fund



per switch


Riders Available Accidental Death & Disability Rider, Waiver

of Premium Rider

28 |


BENEFITS

Death Benefit

The Nominee will get the higher of sum assured or fund value as lump sum

where spouse is not the nominee.

Where spouse is nominee, this amount can be given as lump sum or can be

used to purchase an annuity from the company. Alternately, 1/3rd of this value

can be taken as lump sum and balance can be used to purchase an annuity.

Maturity Benefit


an annuity from ICICI Prudential.


Tax Benefit

Tax benefit will be as per Section 80CCC & Section 10(10A) of the Income

Tax Act, 1961.

CHARGES:


Policy administration charge will be Rs. 40 per month.


Pension R.I.C.H. II: 1.50% per annum

Pension Flexi Growth II 1.50% per annum

Pension Multiplier II 1.50% per annum

Pension Return Guarantee Fund 1.50% per annum

Pension Balancer II 1.00% per annum

29 |


Pension Flexi Balanced 1.00% per annum

Pension Protector II 0.75% per annum

Pension Preserver 0.75% per annum

Allocation Charges:

Regular premium:

Annual

Premium

Year 1 Year 2 Year 3 – 10 Year 11

Onward

10,000-19,999 20% 9% 1% Nil

20,000-49,999 17% 9% 1% Nil

50,000 & above 14% 9% 1% Nil

Top-up Premium:


Surrender Charge:

Completed policy years

for which premiums are

paid

Surrender value as a %

of Fund Value

Surrender Charges

Less than 1 year 0% 100%

1 year 25% 75%

2 years 40% 60%

However, this surrender value would be payable only after completion of three policy years

or whenever the policy is surrendered thereafter.

Following are the surrender values and charges applicable after payment of 3 full years’

premium.

No. of completed policy

years

Surrender Value Surrender Charge



30 |


5 policy years & above 100% 0%

SBI LIFE UNIT PLUS II PENSION

Features:


Max: 65 Years


Max: 70 years

Policy Term (PT) Min: 5 years

Max: as per the vesting age chosen

Annual Premium(APE) Min: 24,000

Min: 25,000 for single premium

Max: No Limit

Sum Assured(SA) Single Premium Mode

Age 18-35 125% of SP, Max:

10 lac

36-45 Same, Max: 5 lac

46-60 Same, Max: 1.2 lac

Regular Premium Mode

Age 18- 35 5/10*APE, Max: 10

lac

36-45 Same, max: 5 lac

46-60 1.2 lac


Maximum: No Limit

Fund Options Equity Optimiser, Equity Pension, Bond

Pension, Growth Pension, Balanced Pension



per switch

Minimum switch amount: Rs. 10,000

Riders Available Accidental Death & Permanent Disability

31 |


Rider, Dhanvantri Supreme (Critical illness)

Rider

BENEFITS

Death Benefit

The Nominee will get the higher of sum assured or fund value.

Maturity Benefit


an annuity from SBI Life.


Tax Benefit

Tax benefit will be as per Section 80CCC (1) of the Income Tax Act, 1961.

CHARGES:



increased by 2% per annum for each subsequent year on the 1st business day of

the policy month following 1st April each year, subject to maximum of Rs.300

per month.


Equity Optimiser Fund 1.50% per annum

Equity Pension Fund 1.50% per annum

Bond Pension Fund 1.00% per annum

Growth Pension Fund 1.35% per annum

32 |


Balanced Pension Fund 1.25% per annum

Allocation Charges:

Regular premium:

Annual

Premium

Year 1 Year 2 & 3 Year 4 & 5 Year 6-10 Year 11

Onward

24,000-

99,999

15% 7.5% 5% 2% Nil

100,000-

49,999

12% 5% 5% 2% Nil

500,000&

above

9% 3% 3% 2% Nil

Single Premium:

Annual Premium Allocation Charges

25,000-100,000 4%

100,000-500,000 3%

500,000 & above 2%

Top-up Premium:

The allocation charge shall be 1% of top-up premium received during 1st 10

policy years. 11th onward allocation charges will be nil.

Surrender Charge:

Policy Year For Regular Premium

Mode

For single Premium

Mode

Year 4 & 5 2% of F.V. Nil

Year 6-10 1% of F.V. Nil

11 onwards Nil Nil

33 |


3 PROTECTION PLANS

AVIVA LIFE SHIELD PLUS

Features:

Entry Age Minimum: 18 years

Maximum: 55 years

Maturity Age Minimum: 28 years

Maximum: 65 years

Policy Term (PT) 10 – 30 years

Sum Assured (SA) Minimum: 10 lacs

Maximum: No Limit

Premium Frequency Single

Regular: Yearly, Half-yearly, Quarterly &

Monthly

Riders Available In-Built: No

Additional: Accidental Death Benefit

Aviva Dread Disease

BENEFITS:

Death Beneit:

In case of your unfortunate death during the policy term, nominee will receive the full

Sum Assured.

Maturity Benefit:

As this is a purely protection plan (Term Plan), there is no maturity benefit.

Tax Benefit:

34 |


Tax Benefits will be as per the Section 80C, 80D & 10(10D) of the Income Tax Act,

1961.

ICICI PRU PURE PROTECT

FEATURES:


Maximum: 55 years

Maximum Coverage Age 75 years


Premium Minimum: 2400 per annum

Sum Assured (SA) Maximum: 24,99,999 for Classic

Minimum: 25 lacs for Elite

Maximum: No Limit


Additional: Accidental Death & Disability

Benefit Rider, Waiver of Premium Rider

BENEFITS:

Death Benefit:


Sum Assured.

Maturity Benefit:


Tax Benefit:

Tax Benefit as per section 80C.

35 |


SBI LIFE- SHIELD

Features:


Maximum: 60 years

Maximum Coverage Age 65 years


Sum Assured (SA) Minimum: 3 lacs

Maximum: No Limit


Additional: Accidental Death & Permanent

Disability Benefit Rider, Premium Waiver

Benefit Rider

Benefits:

Death Benefit:


Sum Assured.

Maturity Benefit:


Tax Benefit:

Tax Benefit as per Section 80C & 10(10D).

36 |


FOCUS OF THE PROBLEM

In India, one public sector life insurer that is Life Insurance Corporation and 22 private sector

companies are providing a wide range of insurance products. Even then a huge part of the

population does not have life insurance and the people those have life insurance, are not

sufficiently covered.

As the work was to sell the insurance plans of Aviva life insurance company mainly “Aviva

Young Scholar Plan, Aviva Pension Plus, Aviva Life Shield Plus”. During the field work,

people having income more than 3 lac per annum had been approached. The most of them

were focusing on the various charges levied in the plans. The responses were, “Charges are

very high”.

Hence the focus of the study is the charges levied in various plans in various companies. An

attempt is made to compare the charges levied in the plans by Aviva Life Insurance co. with

the same levied by the current top two private companies viz. ICICI Prudential Life Insurance

Co. and SBI Life Insurance Co. in their respective plans.

37 |


OBJECTIVES OF THE STUDY

The main objectives of this study are:-

To compare the plans of Aviva with its competitors.

To compare the features offered in various plans.

To compare the various charges levied in the plans.

To find out a plan that best secures the child’s future.

To find out one best retirement solution and protection plan that protects your life in

cheapest cost.

38 |


LIMITATIONS OF THE STUDY

The study is limited to few companies and few plans only.

All the charges are not disclosed by the companies.

The study is restricted to limited geographical area.

The study is limited to a time period of July-August 2009.

39 |


CHAPTER-II

GENESIS

Insurance in India can be traced back to the Vedas. For instance, Yogakshema, the name of

Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda.

40 |


The term suggests that a form of "community insurance" was prevalent around 1000 BC and

practiced by the Arya.

Insurance, in its modern form, first arrived in India through a British company called the

Oriental Life Insurance Company in 1818, followed by the Madras Equitable Life

Insurance Society in 1829 and the Bombay Assurance Company in 1870. They insured the

lives of Europeans living in India. The first company that sold policies to Indians was the

Bombay Mutual Life Assurance Society starting in 1871. The first general insurance

company, Triton Insurance Company Limited, was established in 1850. For the next

hundred years, both life and non-life insurance were confined mostly to the wealthy living in

large metropolitan areas.

Regulation of insurance companies began with the Indian Life Assurance Companies Act,

1912. In 1938, all insurance companies were brought under regulation when a new Insurance

Act was passed. It covered both life and non-life insurance companies. It clearly defined what

would come under life and non-life insurance business. The Act also covered, among other

deposits, supervision of insurance companies, investments, commissions of agents and

directors appointed by the policyholders. This piece of legislation lost significance after the

insurance business was nationalized in 1956 (life) and 1972 (non-life) respectively. When the

market was opened to private participation in 1999, the earlier Insurance Act of 1938 was

reinstated as the backbone of the current legislation of insurance companies, as the IRDA

Act of 1999 was superimposed on the 1938 Insurance Act.

Insurance business was nationalized in 1956 with the Life Insurance Corporation of India

(LIC) designated the sole provider – its monopolistic status was revoked in 1999.

There were several reasons behind the nationalization decision:

Firstly, the government wanted to channel more resources to national development

programs.

Secondly, it sought to increase insurance market penetration through nationalization.

Thirdly, the government found the number of failures of insurance companies to be

unacceptable. The government argued that the failures were the result of

mismanagement and nationalization would help to better protect policyholders.

In 2006, the Indian insurance market ranked 19th globally and was the 5th largest in Asia.

41 |


The insurance industry in India has come a long way since the time when businesses were

tightly regulated and concentrated in the hands of a few public sector insurers. Following the

passage of the Insurance Regulatory and Development Authority Act in 1999, India

abandoned public sector exclusivity in the insurance industry in favour of market-driven

competition. This shift has brought about major changes to the industry. The inauguration of

a new era of insurance development has seen the entry of international insurers, the

proliferation of innovative products and distribution channels, and the raising of supervisory

standards. By mid-2004, the number of insurers in India had been augmented by the entry of

new private sector players to a total of 28, up from five before liberalization. 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 bank branches. 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 2006.

There are good reasons to expect that the growth momentum can be sustained. In particular,

there is huge untapped potential in various segments of the market. While the nation is

heavily exposed to natural catastrophes, insurance to mitigate the negative financial

consequences of these adverse events is underdeveloped. The same is true for both pension

and health insurance, where insurers can play a critical role in bridging demand and supply

gaps. Major changes in both national economic policies and insurance regulations will

highlight the prospects of these segments going forward.

Last one decade of reforms in India have started yielding the results in the Indian economy.

The Government's resolve to push the reforms measures further, less bureaucratic hurdles,

investors' friendly business environment all put together have given tremendous boost to the

industries in terms of FDI and investments from FIIs.

The service industry in India has achieved a phenomenal growth in the recent past and among

them, Insurance is one sector, which has witnessed high decibel growth thanks to the investor

friendly regulator in the name of Insurance Regulatory Development Authority (IRDA). The

growth the market has achieved in terms of 18-20% in life insurance and 15-17% in non-life

insurance stands testimony to that.

Looking back at the history, the ride had not been so smooth to the public sector players like

LIC, GIC and its subsidiaries. For a long time, the insurance policies are not bought but sold

in the country because of so many odd reasons like low awareness level, aversion towards the

42 |


products as such, superstitious beliefs and less diverse product portfolio. The monolith in the

life insurance sector, Life Insurance Corporation of India had been basking in its past glory

and enjoying the monopolistic situation in the market.

Even the General Insurers like GIC and its subsidiaries were able to reach the people with

very few products out of many products in their kitty offering little or no options to the

customers. In 1956, when the Government of India nationalized the business of life

insurance, there were 245 private insurance companies operating in the country. And sixteen

years later, when the same happened to General insurance, there were 106. But the seeds

were sown as far back as 1993, when the Malhotra Committee headed by former Finance

Secretary and Ex-RBI Governor R.N.Malhotra was created to recommend the directions the

Indian industry should take. By 1994, the Committee was ready with its report.

In April 2000, Insurance Regulatory Development Authority (IRDA) came into being as a

statutory body to regulate the industry and to keep an eye on the private players. The mission

of IRDA is to protect the interests of the policyholders, regulate, promote and ensure orderly

growth of the insurance industry and for matters connected with the matter. After April 2000

a number of private players have entered the market and with this the insurance sector has

reached new heights. The number of people insured, penetration and the general awareness

has increased manifolds.

Some Major players With Their Registration Nos.

S.No. RegistrationNumber

Date of Reg. Name of the Company

1 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.

2 104 15.11.2000 Max New York Life Insurance Co. Ltd.

3 105 24.11.2000 ICICI Prudential Life Insurance Company Ltd.

4 107 10.01.2001 Kotak Mahindra Old Mutual Life Insurance Limited

5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.

6 110 12.02.2001 Tata AIG Life

43 |

http://www.hdfcinsurance.com/



http://www.tata-aig-life.com/

http://www.birlasunlife.com/



http://www.omkotakmahindra.com/



http://www.iciciprulife.com/



http://www.maxnewyorklife.com/

http://www.maxnewyorklife.com/


Insurance Company Ltd.

7 111 30.03.2001 SBI Life Insurance Company Limited .

8 114 02.08.2001 ING Vysya Life Insurance Company Private Limited

9 116 03.08.2001 Bajaj Allianz Life Insurance Company Limited

10 117 06.08.2001 Metlife India Insurance Company Ltd.

11 133 04.09.2007 Future Generali India Life Insurance Company Limited

12 135 19.12.2007 IDBI Fortis Life Insurance Company Ltd.

13 121 03.01.2002 Reliance Life Insurance Company Limited.

14 122 14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.

15 127 06.02.2004 Sahara India Insurance co. ltd.

16 128 17.11.2005 Shriram Life Insurance Company Ltd.

17 130 14.07.2006 Bharti AXA Life Insurance Company Ltd.

18 133 04.09.2007 Future Generali India Life Insurance Company Limited

19 135 19.12.2007 IDBI Fortis Life Insurance Company Ltd.

20 136 08.05.2008 Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.

21 138 27.06.2008 Aegon Religare Life Insurance Company Ltd.

22 140 27.06.2008 DLF Pramerica Life Insurance Company Ltd.

44 |

http://www.dlfpramericalife.com/



http://www.aegonreligare.com/



http://www.canarahsbclife.com/



http://www.idbifortis.com/



http://www.irdaindia.org/www.fg-life.in



http://www.reliancelife.com/






http://www.fg-life.in/



http://www.metlife.co.in/



http://www.allianzbajaj.co.in/



http://www.ingvysyalife.com/



http://www.sbilife.co.in/

http://www.sbilife.co.in/




COMPANY PROFILE

Aviva Life Insurance India is a private insurance company formed from collaboration

between the Aviva insurance group of UK and the Dabur group, one of India's oldest and

top producer of traditional Health Care Products. Aviva's products are meant to provide

customers flexibility, transparency and value for money.

45 |


Aviva insurance group in UK with a history dating back to 1696, today stands as one of the

leading provider of life and pension products to Europe and other parts of the world. The

history of Aviva Life Insurance India starts at 1834 during nationalization when Aviva was

the largest foreign insurance group in terms of the compensation paid by the Indian

Government. In 1995 Aviva was the first foreign insurance company to start its

representative office in India. At present in Aviva Life Insurance India, the Aviva group is

a 26% share holder and the Dabur group holds 74% shares in the joint venture

Serving Partners:

46 |

Joint venture, 2002

26% stake

74% stake


Founded in 1884, Dabur is one of India's oldest and largest group of

companies. A professionally managed company, it is the country's leading producer of

traditional healthcare products.

Aviva is UKs largest and the worlds fifth largest insurance Group. It is

one of the leading providers of life and pensions products to Europe and has substantial

businesses elsewhere around the world.

AVIVA INSURANCE GROUP

47 |


Aviva Plc is the world’s fifth largest

insurance Group, the largest insurance

group in the UK and the second-largest

insurance group in Canada operating as

Aviva Canada. It is one of the leading

providers of life and pensions products in

Europe and has substantial businesses

elsewhere around the world.

Founded in 1696, Aviva has 57,000

employees serving over 50 million

customers in 28 countries around the

world.

It has more than £381 billion of assets under management.

Aviva plc is listed on the London Stock Exchange.

DABUR INDIA LIMITED

48 |

Type Public Founded 1696 Headquarters London,

England, United Kingdom

Key People Lord Sharman, Chairman

Andrew Moss, CEO

Industry Insurance Products Life Insurance

Pensions Revenue £36,206 (2008) Asset Under mgt. £381 billon Market capitalization $ 25 billon Employees 54,000(2009) Website www.aviva.com

The main activities of Aviva are:

Long-term Savings

Asset Management co.

General insurance

Core Values

Performance Progressiveness

Team Work

Integrity

Type Public (NSE, BSE ) Founded 1884 Headquarter Ghaziabad, India Key people V.C. Burman Industry Health Care, Food Products Dabur Amla, Dabur

Chyawanprash, Vatika, Hajmola & Real

Market capitalization $ 2 billon Turn over 2286 crore Website www.dabur.com


Dabur India Limited is a leading Indian consumer goods Company with interests in Health

Care, Personal Care and Food Products. It is most famous for Dabur Chyawanprash,

Hajmola, Glucose-D, Vatika Life.

Over more than a 100 years Dabur India Ltd. has been dedicated to providing nature-based

solutions for a healthy and holistic lifestyle.

Through the comprehensive range of products Dabur touches the lives of all consumers, in all

age groups, across all social boundaries.

VISION

Dedicated to the Health & Well Being of every household

MISSION

• To Popularize a natural life style

CORE VALUES

Ownership

Passion for Winning

People Development

Consumer Focus

Team Work

Innovation

Integrity

AVIVA LIFE INSURANCE CO. LTD.

Life InsuranceKAL PAR CONTROL

49 |


History:

Aviva insurance group in UK with a history dating back to 1696, today stands as one of

the leading provider of life and pension products to Europe and other parts of the world.

The history of Aviva Life Insurance India starts at 1834 during nationalization when

Aviva was the largest foreign insurance group in terms of the compensation paid by the

Indian Government. In 1995 Aviva was the first foreign insurance company to start its

representative office in India. At present in Aviva Life Insurance India, the Aviva

group is a 26% share holder and the Dabur group holds 74% shares in the joint venture.

Mission:

• To be amongst India’s leading life insurers with quality business modal focus on sustainable growth

Vision:

AVIVA – where exceeding expectations through innovative solutions is “our” way of life

Values: Customer centricity

Passion for winning

Integrity

Innovation

Empowered team

PARTNERS:

ABN AMRO Bank

Aviva's relationship with ABN India commenced in June 2002 under which the

bank introduces its customers to Aviva for insurance and provides access to its

affluent customer base across the country through its operations in 21 branches at

14 locations.

The Lakshmi Vilas Bank Ltd

The Lakshmi Vilas Bank Ltd, based out of Karur, is among the top private banks

50 |


in India. It has 221 branches with a customer base of 1.2 million, across 10 states.

Currently Aviva products are sold across 204 branches of LVB.

Punjab & Sind Bank

The Punjab & Sind Bank was established in the year 1908. Based on the

principles of social commitment to the people, to help the farmers, and the

weaker sections of the society to raise their standard of living and play a

significant role in the development of the country. Even after 96 years of its

inception, the Punjab & Sind Bank stands committed to honor the high ideals of

its founding fathers. Punjab and Sindh Bank has a network of 759 branches and

132 extension counters all over the country with close to 9,765 employees. Forty-

two per cent of its branches are in the rural and semi-urban areas.

IndusInd Bank

IndusInd Bank Ltd., is one of the leading new-generation private-sector banks in

India. It commenced operations in 1994 and had a net worth of Rs.866 crore as of

March 31, 2006. At present, the Bank has a network of 148 branches and 87

offsite ATMs spread over 118 geographical locations in 24 states and Union

Territories.

Bank of Rajasthan

A private sector bank, with 467 branches and a major presence in North

(Rajasthan), has its Head Office in Mumbai. Having a customer base of nearly 14

lakh and a Rs 13,000 crore deposit base, the bank spreads across 12 regions of

Jaipur, Jodhpur, Bikaner, Kota, Bhilwara, Udaipur, Chandigarh, Delhi, Kolkata,

Indore, Mumbai and Bangalore.

MANAGEMENT TEAM:

TR Ramachandran

Chief Executive Officer & Managing Director

Abhay Johorey

Chief Operating Officer

Rajeev Arora

51 |


Director, Finance & Actuarial

Shoumitro Roye

Sales Director

Anil Sahgal

Director, Strategy & Chief Investment Officer

Monica Agrawal

Director, Corporate Initiatives

Chandan Khasnobis

Appointed Actuary

Mohammad Shahber

Associate Director, Human Resources

Vishal Gupta

Director, Marketing

Sumit Behl

Director, Business Risk & Internal Audit

Ravi Bhadani

Company Secretary and Associate Director – Compliance & Legal

Munish Sharda

Director, Direct Sales Force

Rishi Piparaiya

Director, Bancassurance

AVIVA LIFE INSURANCE

FACT SHEET

Founded 2002

Started Operations 2nd June, 2002

Headquarter Gurgon, India

52 |


World Wide Web Address www.avivaindia.com

Managing Director & CEOT.R Ramachandran

Paid-Up CapitalRs. 1498.8 crores

Employees7713

Number of Products21

Number of Branches224

AWARDS AND RECOGNITION:

Aviva has been felicitated with the "Bronze Award for Excellence in People

Management" by Grow Talent Company Limited and Business world.

Aviva has been ranked amongst the top 25 companies as per the Grate Place to Work

survey in the last four years.

Aviva got the 4th rank among “India’s Best Companies to work for 2009” as per the

study done by “The Economic times & Great Place to work”.

Aviva India won the coveted Award for Talent Management during the national

round of Asia Pacific HRM Congress.

Aviva India was also felicitated by the HR Excellence Award by Amity Business

School.

Market Share:

53 |


Market Share of Aviva is 2.3% in Private players.

ORGANISATIONAL STRUCTURE

54 |


SWOT ANALYSIS

Strength:

• Joint venture between125 years old company i.e. Dabur India Ltd. And 313 years old

world’s 5th largest insurance group Aviva plc.

• Financial health checkup tool (LLKK) is used as a need generation tool.

• Special training to Agents & Advisors.

Solvency Margin Of Aviva is 350%.

Weakness:

• Less awareness About Aviva Life Insurance among people.

• Do not use the name of Dabur.

• Less distribution channel.

Opportunities:

Huge amount of Indian Population is not under Insurance cover.

People having Insurance cover are not adequately covered. 94% Insured people are

under insured.

Threats:

Huge Competition in the market having 23 Life insurance companies.

LIC, which has a big distribution network, is very well known in rural areas and also

has got the advantage of being the only public sector company.

55 |


CHAPTER-III

56 |


REVIEW OF EXISTING LITERATURE

For long, policyholders in India shunned term insurance plans in favour of endowment

policies — i.e. policies with a savings component. This is despite term insurance being a

crucial component of financial planning in all developed countries.

Term insurance is the most basic life insurance policy where the only benefit is compensation

to the nominee if the insured person dies. But in India the thought of not getting the money

‘invested’ back on maturity has been pushing buyers towards money back schemes and, in

the past few years, unit-linked insurance plans (Ulips), which boast of a seemingly irresistible

combination of investment, insurance and tax saving. Insurance agents too have actively been

pushing Ulips as these have helped pump up premium volumes. While the level of premium

has gone up, the purchase of protection has not been commensurate with the growth in the

income.

All this is set to change with insurers effecting cuts in premium rates on term insurance,

particularly for high-value policies entailing a sum assured of over Rs 25 lakh. For instance,

Birla Sun Life’s term insurance cover is available for an annual premium as low as Rs 13,400

(excluding 10.3% service tax) for a sum assured of Rs 1 crore and a 20-year term, if the

proposer is a healthy 30-year-old female.

This is in sharp contrast to a decade ago, when a 30-year-old would have to spend at least Rs

50,000 for a Rs 1-crore cover. Because of such high premiums, policyholders were reluctant

to ‘spend’ without any scope for returns. Today, LIC offers a Rs 1-crore cover for an annual

premium of Rs 25,700. The new low-premium regime marks a significant leap forward in

terms of affordability, and is capable of sparking considerable interest amongst insurance-

seekers for pure protection-oriented plans.

Touching new ‘lows’

Term insurance rates have come down primarily because of two reasons — competition and

increased life expectancy.

57 |


Following the advent of Ulips, insurance policies have become so complex that it is near

impossible to compare products of two companies. The only product that can really be

compared is the term insurance policy. Moreover, the comparison has been made easier with

quite a few internet-based aggregators giving term insurance quotes across companies. With

over 17 life companies in the fray, competition has pushed term insurance rates further down.

Decrease in mortality rates too has played its part. Most individuals buy term insurance to

cover any loss of revenue for their families if they die during their earning years. With the

mortality rates for those below 60 years coming down, insurance companies have been able

to sharply reduce term insurance premium.

In the past couple of years, the term insurance premium rates have declined by almost 30%,

with major private players like ICICI Prudential Life Insurance, Birla Sun Life and HDFC

Standard Life Insurance slashing their rates.

There are other factors for rate reduction as well. These include deepening insurance

penetration and the reduction in solvency margins prescribed by IRDA and availability of

better mortality data — which helps companies ascertain the risks better. Insurers have been

able to reduce cost of high-value policies further because well-heeled urban Indians, enjoying

the fruits of a blossoming economy, are seeing marked improvement in mortality rates. Their

life expectancy is enhanced by the quality of their lifestyle and access to best-in-class

healthcare facilities, leading to low probability of death due to natural causes.

Consequently, insurance companies do not view offering them inexpensive term cover as a

risky proposition. This, coupled with the increasing demand from this segment, has swollen

the volumes, which in turn, have contributed to shrinking rates. Therefore, life insurers’

margins for the term insurance portfolio haven’t come under pressure.

Sustaining the premiums at these levels doesn’t seem likely to hit a roadblock in the future

and, in fact, there are signs that the market could see low-cost insurance scaling new highs in

the coming days. “Offering pure term insurance at cheaper rates for HNI consumers is an

idea, which we might see more of in the near future,” says Manik Nangia, corporate vice-

president and head, product management, Max New York Life Insurance.

58 |


A win-win situation?

If indeed most people are living well beyond their earning years, does a term life insurance

pass the utility test from the policy holders’ perspective? While every individual needs to

carry out his/her own cost-benefit analysis before zeroing in on a suitable policy, overall,

these protection covers are worth buying, feel financial planners, particularly for those falling

in the high-income category. After all, their family is used to a superior lifestyle, and should

anything happen to the provider, the term cover’s sum assured should act as an appropriate

replacement for the income lost.

Also, given the high level of indebtedness of today’s working class, either in the form of

home loans or auto loans, there is a risk that the family is left with a liability rather than an

inheritance if the breadwinner dies. For such individuals, variants of term insurance cover —

mortgage protection plans and credit shield — would ensure that life insurance takes care of

their outstanding loans.

The thumb rule for buying a protection cover dictates that the sum assured should be equal to

100 times the insured’s monthly income. Though this estimate is generally considered to be

accurate, there is a view that to ensure complete peace of mind, the basic term cover could be

enhanced with riders like critical illness and disability benefit. The rationale behind this

argument is that in the event of an accident resulting in severe physical impairment or a

serious ailment, the term cover will be rendered ineffective as it comes into play only after

the insured’s death.

More complaints against insurance cos.

A seminar was held on Wednesday to help deal with consumer complaints related to

insurance service providers at the respective companies’ level itself. Rita Bhattacharya,

secretary of General Body Insurance Council, Mumbai, addressed those present. An

insurance ombudsman’s office has been set up in Chandigarh, which deals with complaints

from the city, Punjab, Jammu & Kashmir, Haryana and Himachal Pradesh.

Assistant secretary with the office, AC Keshav, stated that it was a facility, which people

could approach easily to raise insurance-related issues. He said complaints against life

insurance firms in the city had risen to 74 this year as compared to 68 for 2008. Public sector

59 |

http://timesofindia.indiatimes.com/NEWS/City/Chandigarh/More-complaints-against-insurance-cos/articleshow/4809429.cms


insurance providers are higher on the grievance list as compared to private firms, he added.

“The northern region had 619 life insurance-related complaints this year, which numbered

517 last year,” said Keshav.

Officials from LIC of India, New India Assurance, Oriental Insurance, ICICI Lombard,

HDFC Standard life and SBI Life attended the seminar.

Lifeless premium collections upset coverage

29 Jul 2009, 0616 hrs IST, Paramita Chatterjee, ET Bureau

A 12 % jump in the number of life insurance policies sold in April-June this year has resulted

in only 0.95% rise in new premium collections as consumers preferred smaller investments in

an economic downturn.

“Sale of life insurance products remained flat during the first quarter of the current fiscal

year. Consumers are preferring to invest smaller amounts in insurance products,” said Sanjay

Kumar Jha, zonal manager for north and head of pension business at Bajaj Allianz.

Life insurers collected Rs 14,456 crore as new premium in the first quarter of this fiscal

compared to Rs 14,320 crore during the corresponding period last year, according to data

released by the Insurance Regulatory and Development Authority (Irda). The companies sold

84.5 lakh policies in this fiscal year’s first quarter.

At a time when large salary hikes are on hold in corporate India and there is a check on

recruitment in several sectors, consumers are preferring to hold on to their money.

“This year, we have seen a month on-month improvement in performance. By the end of the

year, the industry will surely register a good growth rate,” said Reliance Life Insurance

president Malay Ghosh.

State-run Life Insurance Corporation, meanwhile, collected Rs 9,028 crore from 59 lakh

policies in the first quarter, up 20% over the corresponding period of last fiscal. The public

sector insurer sold 48 lakh policies in the year-ago period.

60 |

http://timesofindia.indiatimes.com/NEWS/City/Chandigarh/More-complaints-against-insurance-cos/articleshow/4809429.cms


The 22 private life insurers sold 25.4 lakh policies in this period, collecting Rs 5,427 crore in

premium from new products — a decline of 20% on Rs 6,795 crore premium collections

during the corresponding period last fiscal year.

“Insurance is not a priority when it comes to consumer spending. The maximum sale of

insurance products happens only during the last quarter of every financial year when

consumers look at ways to save tax,” said an executive at a private insurer.

Insurance: A sunrise sector

29 Jul 2009, 0303 hrs IST, Pallavee Dhaundiyal Panthry, ET Bureau

The insurance sector in India offers immense growth opportunities. The potential can be

judged by the fact that today life insurance premiums account only 2.5% of the country's

GDP, while general insurance premiums are at only 0.65%. The sector has been thrown open

for private participation, but the largest life insurance company in India is still owned by the

government, known as Life Insurance Corporation.

While the rest of the world is in grip of an economic downturn and the year 2009 is

witnessing a downtrend in the life insurance industry, with almost flat growth, India for the

very first time has been ranked amongst the top10 life insurance markets worldwide.

The facts, data and reports for the year 2008-09 state that insurance sector penetration, both

in life and non-life segments, has improved since the time the sector has been opened for

private participation.

61 |


RESEARCH METHODOLOGY

RESEARCH APPROACHES

Two types of approaches are used during this study:

1. Analytical

2. Descriptive

DATA COLLECTION METHODS

To conduct the Business research the data is collected by:

Secondary Data: Secondary data is one which already exist and is collected from the

published sources.

The sources from which secondary data was collected are:

Newspapers like Economic Times

Internet

BOOKS ON THE SUBJECT

PUBLISHED REPORTS

RECORDS OF ORGANIZATION

UNIVERSE:

Insurance Companies operating in India is the universe of this study.

POPULATION:

The following three Insurance companies made the population of this study:

Aviva Life Insurance Co Ltd

ICICI Prudential Life Insurance Co Ltd

SBI Life Insurance Co Ltd

SAMPLE:

Child Plan, Pension Plan and Term Plan were taken for comparison as sample.

COMPARISON TECHNIQUE

62 |


The plans of selected companies were compared based on three important factors:

• Plan features

• Allocation charge

• Policy Administration charges.

Each feature fetch 1 point.

Points Regarding Allocation charges & Policy Administration charges were as follows:

• Least Allocation Charges & Policy Admin. Charges fetch 15 points each.

• Next least Allocation Charges & Policy Admin. Charges fetch 10 points each.

• Highest Allocation Charges & Policy Admin. Charges fetch 5 points each.

Then all the points regarding features, allocation charges and policy administration charges

were added to find out the total points collected by the plans of each company.

The plan having highest points is rated 1 and so on.

The Term plan is compared on other basis because there is no allocation charges and no

policy administration charges.

The annual premium is calculated for different age people opting for the same policy term

and same sum assured.

The company offering least annual premium in an age group for the same policy term and

same sum assured is rated 1 and so on.

63 |


CHAPTER-IV

64 |


COMPARISON OF CHILD PLANS:

Product Features Aviva Young

Scholar

ICICI PRU

SmartKid New

ULRP

SBI Life- Unit Plus

Child Plan

Cover on parent Yes Yes Yes

Cover On Child No No No

WOP Yes Yes Yes

IB Rider Yes Yes No

ADB Rider Yes Yes Yes

CHB Rider Yes Yes Yes

Increase/Decrease

Premium

Yes No Yes

Increase/Decrease

S.A

Yes Yes Yes

Top-up premium Yes Yes Yes

Partial Withdrawal Yes Yes Yes

Cover continuance

option

Yes Yes Yes

Premium Re-direction Yes No Yes

Switches Yes Yes Yes

Systematic Transfer

plan

Yes Yes No

Automatic Asset

Allocation

Yes No No

Settlement option Yes Yes Yes

Loyalty Addition Yes No Yes

Free Look Period Yes Yes Yes

Total Points 17 13 14

65 |


Comparison of Charges

The charges are compared with the help of examples.

Consider

Policy Term: 15 Years

Premium Payment Term: 15 Years

Annual Premium: 15,000/20,000/50,000

Allocation Charges:

Year APE: 15,000 APE: 20,000 APE: 50,000

Aviva

Young

Schola

r

ICICI

PRU

SmartKi

d ULRP

SBI

Life-

Unit

Plus

Chil

d

Plan

Aviva

Young

Schola

r

ICICI

PRU

SmartKi

d ULRP

SBI

Life-

Unit

Plus

Chil

d

Plan

Aviva

Young

Schola

r

ICICI

PRU

SmartKi

d ULRP

SBI

Life-

Unit

Plus

Child

Plan

1 3000 3000 2700 4000 3800 3600 9000 9000 9000

2 1500 750 750 2000 1000 1000 5000 2500 2500

3 750 750 750 1000 1000 1000 2500 2500 2500

4 750 750 300 1000 1000 400 2500 2500 1000

5 300 750 300 400 1000 400 1000 2500 1000

6 150 300 300 200 400 400 500 1000 1000

7 150 300 300 200 400 400 500 1000 1000

8 150 300 150 200 400 200 500 1000 500

9 150 300 150 200 400 200 500 1000 500

10 150 300 150 200 400 200 500 1000 500

11 150 150 150 200 200 200 500 500 500

12 150 150 150 200 200 200 500 500 500

13 150 150 150 200 200 200 500 500 500

14 150 150 150 200 200 200 500 500 500

15 150 150 150 200 200 200 500 500 500

66 |


Total

charge

s

7800 8250 6600 10,400 10,800 8800 25,000 26,500 22,00

0

From the above table, It can infer that in every case the allocation charges are least in SBI

Life Unit Plus Child Plan and highest in ICICI PRU SmartKid Unit Linked Regular

Premium.

Hence rating According to Allocation charges are:

1. SBI Life Unit Plus Child Plan : 15

2. AVIVA Young Scholar : 10

3. ICICI PRU SmartKid Unit Linked Regular Premium: 05


Year Aviva Young

Scholar

ICICI PRU

SmartKid ULRP

SBI Life- Unit Plus

Child Plan

1 660 720 750

2 693 720 765

3 728 720 780

4 765 720 795

5 803 720 811

6 843 720 828

7 885 720 844

8 929 720 861

9 976 720 878

10 1024 720 896

11 1075 720 914

12 1129 720 932

13 1186 720 951

14 1245 720 970

15 1307 720 990

Total 14,248 10,800 12,965

67 |


From the above table, It can infer that Policy Administration charges are least in ICICI PRU

Life SmartKid Unit Linked Regular Premium and highest in AVIVA Young Scholar.

Hence rating according to the Policy administration charges are:

1. ICICI PRU Life SmartKid Unit Linked Regular Premium: 15

2. SBI Life Unit Plus Child Plan 10

3. AVIVA Young Scholar 05

Total Points Collected Are:

Company Features Allocation Charges

Policy Admin. Charges

Total Points

AVIVA LIFE 17 10 05 32ICICI PRU LIFE 13 05 15 33SBI LIFE 14 15 10 39

Interpretation:

From the above Column chart, it is clear that AVIVA Young Scholar has got the least points,

ICICI PRU Life SmartKid Unit Linked Reguiar Premium got the second highest points. Hence

SBI Life Unit Plus Child Plan is the best plan among these three life Insurer.

68 |


COMPARISON OF PENSION PLANS

Product Features Aviva Pension Plus ICICI PRU Life

Time Super Pension

SBI Life- Unit Plus

II Pension

Option of Life Cover No Yes Yes

WOP No Yes No

ADDB Rider No Yes Yes

Critical Illness Rider No No Yes

Increase RP No No Yes

Additional RP Yes No No

Indexation Yes No No

Top-up premium Yes Yes Yes

Partial Withdrawal No No NO

Cover continuance

option

No Yes Yes

Premium Re-

direction

Yes No Yes

Switches Yes Yes Yes

Systematic Transfer

plan

No No No

Automatic Transfer

Strategy

No Yes No

Change of Maturity

Date

Yes Yes No

Loyalty Addition Yes No Yes

Free Look Period Yes Yes Yes

Open Market Option Yes Yes Yes

Single Premium Yes No Yes

69 |


Total Points 10 10 12

Comparison of Charges

The charges are compared with the help of examples.

Consider

Policy Term: 15 Years

Annual Premium: 25,000/50,000/100,000/500,000

Allocation Charges:

Year APE: 25,000 APE: 50,000 APE: 100,000

Aviva

Pensio

n Plus

ICICI

PRU

Life

time

Super

Pensio

n

SBI

Life-

Unit

Plus II

Pensio

n

Aviva

Pensio

n Plus

ICICI

PRU

Life

time

Super

Pensio

n

SBI

Life-

Unit

Plus II

Pensio

n

Aviva

Pensio

n Plus

ICICI

PRU

Life

time

Super

Pensio

n

SBI

Life-

Unit

Plus II

Pensio

n

1 5000 4250 3750 6250 7000 7500 10,000 14000 12000

2 500 2250 1875 1000 4500 3750 2000 9000 5000

3 500 250 1875 1000 500 3750 2000 1000 5000

4 500 250 1250 1000 500 2500 2000 1000 5000

5 500 250 1250 1000 500 2500 2000 1000 5000

6 500 250 500 1000 500 1000 2000 1000 2000

7 500 250 500 1000 500 1000 2000 1000 2000

8 500 250 500 1000 500 1000 2000 1000 2000

9 500 250 500 1000 500 1000 2000 1000 2000

10 500 250 500 1000 500 1000 2000 1000 2000

11 500 0 0 1000 0 0 2000 0 0

12 500 0 0 1000 0 0 2000 0 0

13 500 0 0 1000 0 0 2000 0 0

14 500 0 0 1000 0 0 2000 0 0

70 |


15 500 0 0 1000 0 0 2000 0 0

Total

charge

s

12000 8500 12,500 20,250 15,500 25,000 38,000 31,000 42,000

From the above table, It can infer that in every case the allocation charges are least in ICICI

Prudential Life Time Super pension and highest in SBI Life Unit Plus II Pension.

Hence rating According to Allocation charges are:

1 ICICI Prudential Life Time Super pension 15

2 Aviva Pension Plus 10

3 SBI Life Unit Plus II Pension 05


Year Aviva Pension Plus ICICI PRU Life

time Super Pension

SBI Life- Unit Plus

II Pension

1 612 480 765

2 643 480 781

3 675 480 796

4 709 480 812

5 744 480 829

6 782 480 845

7 821 480 862

8 862 480 879

9 905 480 897

10 950 480 915

11 998 480 933

12 1047 480 952

13 1100 480 971

14 1155 480 990

15 1213 480 1010

Total 13216 7200 13237

71 |


From the above table, It can infer that Policy Administration charges are least in ICICI PRU

Life Time Super Pension and highest in SBI Life- Unit Plus II Pension.

Hence rating according to the Policy administration charges are:

1. ICICI PRU Life Time Super Pension 15

2. AVIVA Pension Plus 10

3. SBI Life- Unit Plus II Pension 05

Total Points Collected are

Company Allocation Charges

Policy Admin. Charges

Features Total Points

AVIVA LIFE 10 10 10 30ICICI PRU LIFE 15 15 10 40SBI LIFE 05 05 12 22

Interpretation:

From the above column chart, it is clear that ICICI PRU LIFE has got the maximum points &

SBI LIFE has got the minimum points. Hence ICICI PRU Life Time Super Pension is the best

retirement solution among the 3 Insurer.

72 |


COMPARISON OF TERM PLAN

Term plan can be compared on the basis of premium payable for level covered. Table below

shows the sample of premium payable for Policy Term of 10 & Sum Assure of 15 lacs for

different companies:

Premium payable for PT=10 & SA=1500000

Age Aviva Life Shield Plus

ICICI Pru Pure Protection

SBI Life- Shield

30 2465 2920 298835 3177 3771 375340 4583 5373 5237

From the above data it is clear that Aviva Life Shield provide you the basic cover level for

your life charging the minimum cost amoung the 3 life Insurer.

73 |


CHAPTER-V

74 |


FINDINGS

The findings from the above study are as follows:

Allocation charges in Aviva Young Scholar Plan are higher than SBI Life- Unit Plus

Child Plan.

Policy Administration Charges in Aviva Young Scholar Plan are very much high than

other 2 Insurer.

There is no option of life cover in Aviva pension Plus plan, whereas ICICI Pru life & SBI

Life provide you the option of life cover in their respective retirement plans.

Aviva Pension Plus does not have any Rider, whereas ICICI Pru Life & SBI Life provide

you two Riders in their respective plans.

Aviva Pension Plus have the option of Additional RP & Indexation, which the other 2

Insurer do not provide.

Allocation charges & Policy Administration charges in Aviva Pension Plus Plan are

higher than ICICI Pru Life time Super Pension but lower than SBI Life- Unit Plus II

Pension.

Annual premium in Aviva Life Shield Plus is lower than Other 2 Insurer.

LIC is more popular among people than any other private insurance company.

Aviva Life Insurance Company is not very much recognized among people.

75 |


RECOMMENDATIONS

Based upon the above findings, the following recommendations were made:

Company should reduce the charges in order to make the products more competitive.

Company must reduce the policy administration charges levied in Aviva Pension Plus

Plan. PAC is approximately 2 times than levied by ICICI Pru.

Company should provide the option of life cover & Rider in Pension Plan as done by the

other 2 Life Insurers.

The company should spend more on the promotional activities like advertisement in

television, newspapers to create more awareness of the product as they have more recall

value.

Company needs greater awareness of its product among target audience.

Company should use the name of Dabur to create more awareness among the people.

Company should open more of its branches so as to promote its product.

.

76 |


CONCLUSION

After comparison of the plans of these three company, it is concluded that charges are varying

significantly between companies. Policy Administration Charges levied by Aviva Life

Insurance and SBI Life Insurance Companies are approximately two times levied by ICICI

Prudential Life Insurance Company.

Hence among Pension plans, ICICI Prudential Life Time Super Pension Plan is the best plan

among these 3 life insurers.

Whereas for Child Plan, SBI Life- Unit Plus Child Plan is the best plan among these 3

companies.

Aviva provides the cheapest Term among these 3 life insurance companies.

77 |


ANNEXURE

78 |


BIBLIOGRAPHY

Website:

www.avivaindia.com

www.aviva.com

www.irdaindia.com

www.dabur.com

www.iciciprulife.com

www.sbilife.com

Book:

Kothari CR (2005), ‘Research Methodology’, 2nd Edition, New Age International (p) Ltd. Publisher, New Delhi

Journal:

Annual Report of IRDA (2007-2008)

IRDA Journal, Volume VII, No. 7, July 2009

IRDA Journal, Volume VI, No. 6, June 2009

79 |


a comparative analysis of selected insurance plans

Documents