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MBA Project Work Report

On

Service Proliferation and CustomerSatisfaction

Undertaken in HDFC Standard Life Insurance Company Limited, Jodhpur

For the partial fulfillment of M.B.A. Degree

Submitted by:

Harish Prajapat

Enrollment No. 062P08A16029, Session July 2008-10

Institute: Applied Management & Engineering Institute, JODHPUR

Guided by:

Mr. S.S. Ramdeo

Applied Management & Engineering Institute, Jodhpur

Submitted to:

Director CDE & Collaborative Programs


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PRIST University, Thanjavur (T.N.) INDIA

DECLARATION BY THE STUDENT

I hereby declare that the Summer Training Report on the topic of Product,

Market & Finance Research of Insurance comprehensive study on various

Plans confined to search the subjective insight Service Proliferation and

Customer Satisfaction at HDFC Standard Life Insurance, Jodhpur, submitted

by me to AMAR MANGAL EDUCATIONAL INSTITUTE, JODHPUR, is ofmy own and it is not submitted to any other college or published any time

before.

HARISH PRAJAPAT

Enrolment No.: 062P08A16029

MBA Program (Session 2008-2010)

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ACKNOWLEDGMENT

I would like to thank my project guide Mr. Deepak Vyas, Territory Manager

HDFC Standard Life Insurance, Jodhpur for guiding me through my summer

internship and research project. His encouragement, time and effort are greatly

appreciated.

I feel immense pleasure to express a deep sense of gratitude to my beloved Dr.

Sona Ram Bishnoi - Director of Applied Management & Engineering Institute,

who has given me an opportunity to do my Summer Training in HDFC

Standard Life Insurance. I would also thankful to my Faculty Guide Mr. S.S.

Ramdeo for his constant support and guidance, his valuable suggestions and

helping hands has helped me to complete my project successfully. I am also

very thankful to Mr. Rakesh Sharma and Mr. R. S. Soda to provide us such a

very exciting opportunity and for their good help to provide a better

coordination and control among all the activities related to completion of

internship.

I would also like to dedicate this project to my parents. Without their help and

constant support this project would not have been possible.

Lastly I would like to thank all the respondents who offered their opinions and

suggestions through the survey that was conducted by me in Jodhpur.

Harish Prajapat

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EXECUTIVE SUMMARY

HDFC Standard Life insurance is the oldest life insurance company in the

world. It is the largest insurer in the UK and is the 28 th largest company in the

world. In India, the company is marketing life insurance products and unit

linked investment plans. From my research at HDFC SLIC, I found that the

company has a lot of competition from other private insurers like ICICI, Aviva,

Birla Sun Life and Tata AIG. It also faces competition from LIC. To compete

effectively HDFC SLIC could launch cheaper and more reasonable products

with small premiums and short policy terms (the number of years premium is

to be paid). The ideal premium would be between Rs. 5000 Rs. 25000 and an

ideal policy term would be 10 20 years.

HDFC must advertise regularly and create brand value for its products and

services. Most of its competitors like Aviva, ICICI, Max, Reliance and LIC use

television advertisements to promote their products. The Indian consumer has a

false perception about insurance they feel that it would not benefit them if

they do not live through the policy term. Nowadays however, most policies are

unit linked plans where a customer is benefited even if their death does not

occur during the policy term. This message should be conveyed to potential

customers so that they readily invest in insurance.

Family responsibilities and high returns are the two main reasons people invest

in insurance. Optimum returns of 16 20 % must be provided to consumers to

keep them interested in purchasing insurance.

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On the whole HDFC standard life insurance is a good place to work at. Every

new recruit is provided with extensive training on unit linked funds, financial

instruments and the products of HDFC. This training enables an advisor/sales

manager to market the policies better. HDFC was ranked 13 in the Best Places

to Work survey. The company should try to create awareness about itself in

India. In the global market it is already very popular. With an improvement in

the sales techniques used, a fair bit of advertising and modifications to the

existing product portfolio, HDFC would be all set to capture the insurance

market in India as it has around the globe.

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TABLE OF CONTENTS

Investments 9

Introduction to Insurance 50

Company Profile 58

Competitive analysis 80

Marketing problems 86

SWOT Analysis 89

Research Methodology 94

Analysis and Interpretation 102

Future line of research 125

Conclusion 127

Bibliography 129

Appendix 131

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OVERVIEW OF CHAPTER SCHEME

CHAPTER 1:

Investment - An overview of the investment in India, history, investing

goal, investing formula, Basic investment tools.

CHAPTER 2:Introduction to insurance - An overview of the industry in India, history,

key milestones, reforms in the industry, present scenario in India.

CHAPTER 3:

Company profile of HDFC SLIC Introduction of HDFC SLIC, products

and services, vision and core values, human resource, organizational

structure, introduction to unit linked funds, national & international presence

of the organization.

CHAPTER 4:

Competitive analysis Information about the plans offered by LIC and

other private insurers in India. Comparisons between the plans to find the

most popular and beneficial plans which HDFC SLIC can incorporate into

their product portfolio.

CHAPTER 5:

Marketing problems - The techniques used to market insurance and their

advantages and disadvantages along with suggestions for improvement.

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CHAPTER 6:

SWOT Analysis - The Strength, Weakness, Opportunity and Threat of the

Firm over the Competitive environment

CHAPTER 7:

Research Design - Introduction, title of the study, statement of the problem,

objectives of the study, research methodology, sampling, plan of analysis

and study area.

CHAPTER 8:

Analysis and Interpretation A survey on factors that influence people to

purchase Life Insurance Policy.

CHAPTER 9:

Problems requiring more research Future line of work

CHAPTER 10:

Conclusion

CHAPTER 10:

Bibliography

Appendices

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CHAPTER-I

INVESTMENT

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INTRODUCTION ON INVESTMENT

What is Investment?

An outlay of a sum of money to be used in such a way that a profit or increase in

capital may be expected. Basically Investment is laying out money or capital in an

enterprise with the expectation of profit or money that is invested with an

expectation of profit. In other word accumulation of some kind of asset in hopes

of getting a future return from it.

The use of money to create more money through an appreciating or income-

producing asset.

Buying or sacrificing something today, with the intent of:

(a) Creating a stream of wealth in the future; or

(b) Preventing wealth destruction in the future.

Investment Goals

Investing for a specific goal

When investing money, many people have a specific goal in mind. If this is the

case for us, we need to decide what time frame is attached to that goal - short

term, medium term or long term? Examples of investment goals are:

Short Term(1 - 3 years): Overseas holiday, Car, Taking time off work to care

for a baby.

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Medium Term (3 - 5 years): Deposit on a house; Boat; A sabbatical or

extended break from work.

Long Term (5+ years): Childrens education; Holiday house; Retirement/Early

retirement.

Investing a specific amount

Rather than having a particular investment goal, some people may just be

wanting to invest a certain sum of money Example: An inheritance. If we are in

this situation, we need to decide what we want from that money.

Do we want to use the money in the next year or two? (In which case we are a

short term investor). Or do we want a regular income? (We will need medium

term income- producing investments). Or do we want it to achieve capital

growth over a long period of time, and are willing to take a long term view?

Time Frame

The time frame of our goals will determine how the money should be invested.

As we know that short term investment is more risky than a long term

investment. In a long term investment the stability & return on investment is

much higher than a short-term investment.

A short-term investor would be more likely to choose a more conservative

investment like cash, to ensure that their capital is available in the next 1 - 3

years when they need to access it.

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A long-term investor would be more willing to invest in 'growth assets' such as

Share, Insurance, Property as they do not need to access their capital for at least

5 years, so are less concerned about short term ups and downs. They recognize

that the potential returns are much higher in these investments, and if they are

held over the long term the risk is reduced.

The 5-Step Investing Formula:

Step 1: Searching for an Investment

Our alumni have access to over 65 prebuilt and back-tested online search tools

to consistently deliver the top 25 stocks according to parameters such as "Great

Earnings, Sales & Cash Flow Growth" or "Strong Long-Term Growth." With

these prebuilt searches, it's easy to screen stocks according to a wide variety of

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criteria. You can even build your own searches or refine prebuilt searches to

pinpoint the stock types that suit your strategy. This incredible depth of search

ability gives our alumni a significant advantage in all market conditions.

Step 2: Fundamental Analysis

It doesn't matter whether you find stocks in a search or in the newspaper, or if

you want to invest in a company you're familiar with. By doing a quick

fundamental analysis on a company through our Phase 1 and Phase 2 scoringsystem, you can confidently reduce or limit the amount of emotion that comes

with an investment decision: either a stock passes or it doesn't. Fundamentals

tell you the good and the bad, helping reduce risk. Good fundamentals provide a

great foundation for companies to build on. How long does the analysis take?

About 60 seconds per company once you've been trained.

Step 3: Technical Analysis

Once you've compiled a list of fundamentally solid stocks according to the

Phase 1 and Phase 2 scoring system, you monitor them for the opportune time

to buy and sell according to technical indicators. Technical analysis is useful in

forecasting potential directionto time your entry and exit points. With our red

and green arrow system, you can learn to accurately interpret several technical

charts (Moving Averages, MACD, Stochastic, Volume, Support & Resistance)

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in just 30 seconds per stock. And that's all the info you'll need to consider

whether it's time to buy or sell!

Step 4: Portfolio Management

Every day active investors are moving between steps 1, 2 and 3 looking for

great stocks and watching for buy and sell opportunities. Managing that

information effectively is critical to your success. Our online analysis and

strategic portfolio perspective tools make it easier than ever before to build,

manage and monitor portfolios.

Step 5: Industry Group Analysis

The final step in the systematic investing process is to be aware of how the

different industry groups are performing. An industry group's strength or

weakness can account for a huge portion of the potential move of a stock. If an

industry group is out of favor, it is unlikely that a stock within that group is

doing much better. Every stock belongs to one industry group or another.

Which group it belongs to depends on what the company does or produces.

For example, TARO manufactures over-the-counter and prescription

pharmaceuticals, so it belongs to the Drugs / Generic and OTC industry

group (DRU).

Most stocks in the same industrywhether it's the financial industry or the oil

industrygenerally move in the same direction. If the group is strong, it's an

indication that institutional money is flowing strongly into the group, causing

most stocks to rise. The best-performing stocks in the group generally make the

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strongest moves, but even lower-quality stocks in a strong group will typically

rise with the rest of the group.

Having a tool that helps you do industry group analysis allows you to better

focus your attention on the very best market sectors and to make sure that a

stock you are considering is in an uptrending industry.

Investment depends upon the Age of the Investor

If investors are between 25-40 years of age

If investors are between 25-40 years of age then they are in a position to take

average risk to achieve there financial goals. They can afford to have 70% of

their investments in equities by investing in assets like diversified equity funds,

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sector funds, tax-saving funds, balanced funds and stocks. The balance should

be in bonds, small saving schemes, debt funds and cash.

They must first look at investing in a steady, well-managed, diversified equity

fund that invests predominantly in large sized companies (typically from the

Sensex and Nifty). Such companies are well placed to drive there portfolio over

the next 10 years.

Investors with a moderate risk profile can consider investing in balanced funds

and give the mid cap and sector funds a miss instead. On the debt side, investors

must consider.

Investing a portion of their assets in small savings scheme like Public Provident

Fund (PPF), National Saving Certificate (NSC), GOI Bond etc.

Many individuals tend to be partial to investing in property. For an individual

planning to get married this is a necessity. Investing in property makes eminent

sense especially given that home loan.

For their insurance needs, consider a term plan first, given the lower premiums.They can take a ULIP (Unit-Linked Plan). For parents, it is important to take a

look at plans of insurance companies and/or mutual funds to plan for the child's

future. Consider pension to save for your retirement kitty.

If investors are between 40-55 years of age

If investors are between 40-55 years of age they are in a position to take some

risk. This means that they can invest in equity-oriented products, but not as much

as they could have when you were younger. They must look at building a 60:40

(equity: debt) portfolio.

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They must consider owning a steady, large cap, diversified equity fund as also a

well-managed mid cap fund.

They must consider tax-saving funds while chalking out a tax-planning strategy.

Balanced funds will fit nicely in their portfolio. The debt component can serve to

mitigate the risk of equities and provide stability. In fact as they approach 55

years of age, balanced funds and monthly income plans (MIPs) should be primary

windows to equities. They should have phased out their 100% equity funds.

Floating rate funds and long-term debt funds can form a chunk of your debt

portfolio. If they aren't sufficiently invested in equities (to the extent of 60% of

your portfolio), they can also consider MIPs.

Investment on property is the same across age groups, which means that if they

can afford to invest in (another) property they must go for it. There are 2 factors

working for them lower home loan rates and tax benefits, and they should make

the most of them.

In terms of retirement planning, it is important for them to get a pension plan. If

they don't have a term plan already, consider taking a term plan.

If investor are over 55 years of age

If investors are over 55 years of ageat this advanced age, it would be prudent to

shun risk and strive to achieve their financial goals by taking on minimal risk. If

at all, they can allow themselvesthe luxury of a small equity exposure(10-15%)

to supplement the existinginvestments in their portfolio. Since regular income

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post-retirement is their most pressing need, their investments must reflect this

important trait. The Senior Citizens Savings Scheme (SCS) is a must-have given

that it is targeted at retirees and gives a rate of return (9% per annum) that is far

superior to comparable avenues. The Post Office Monthly Income Scheme

(POMIS) should be the second most important investment in their portfolio,

although at 8% p.a., the return is lower than the SCS.

They can also go for fixed deposits with the monthly payout option. They also

have variable fixed deposits wherein the rate of interest is revised at regular

intervals; this should enable them to benefit from a rising interest rate scenario.

They can also invest in 8% GOI Bond. This investment also has an exclusive

tax benefit under Section 80L. If their risk appetite permits them, consider

investing a small portion of their surplus in low-risk MIPs.

The important thing is to start thinking on these lines and come up with a

strategy that works best for them, within the broad risk-return parameters that

we have tried to define in this note.

BASIC INVESTMENT TOOLS

Individuals with investable funds often have a desire to put those "extra"

dollars to work to meet a specific purpose. For some, there may be a

desire to accumulate funds for a future purchase, or a need to generate moreincome to pay current expenses. For others, it may be to put money aside for

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a "rainy day," or simply to "get rich." Whatever the investment goal, an

investor should clearly understand both the role and the potential risks and

rewards of each type of investment tool.

Stocks & Shares

Government Securities & Bonds

Fixed Deposits

Properties / Real Estate

Gold

Life Insurance

STOCKS & SHARES

The terms "stock" and "share" both refer to a fractional ownership interest in a

corporation. As "owners," stockholders vote for the company's Board of

Directors, and receive information of the firm's activities and business results.

Stockholders may share in current profits through "dividends" declared by the

firm's Board.

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When a corporate business is first organized, investors contribute money to fund

the enterprise, and in return receive shares of stock representing their ownership

in the company. If the business is successful, it will grow and have increasingprofits, and the shares generally become more valuable. If the business is not

successful, the value of the shares usually declines.

o Uses: Investors typically buy and hold stock for its long-term

growth potential. Stocks with a history of regular dividends are often heldfor both income and growth.

o Risks: As the long-term growth of a company cannot be predicted,

the short-term market value of the company's stock will fluctuate up and

down. If need or fear cause an investor to sell when the market is "down," a

capital loss will result. If the market is "up," the investor will realize a capital

gain.

There have been significant changes in India and in the Indian stock markets

over the past ten years that does, well, make us confess that this time it's

somewhat different.

There is little doubt that the Indian economy is a lot more efficient today than it

was in 1995. Capital allocation between the government and the private sector

is more "market-driven with most interest rates set by free market forces and

money increasingly free to move between various asset classes within the

Indian borders.

Companies are certainly more efficient today than they have ever been. Indian

managements have used text-book methods to cut the excessive fat in their

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working capital and wringing more revenues from their asset bases. But there

are still negatives swept away under the carpet when stock markets are rising.

These will emerge to haunt us when markets fall off a cliff - just as bad

accounting methods get exposed in recessions.

On the regulatory front, the Securities and Exchange Board of India (SEBI) has

taken many steps to protect investors. While the number of cases it has filed

against market inter intermediaries has increased, it has recently lost some very

high profile appeals that question the quality of its investigation.

GOVERNMENT SECURITUES & BONDS

While stocks represent ownership in a business, bonds are debt. Issued by

institutions such as the federal government, corporations, and state and local

governments, a bond is evidence of money borrowed by the bond issuer. In

return, bondholders receive interest and, at "maturity," the principal amount of

the bond.

When first issued, a bond will have a specified rate of return, or "yield." For

example, a 6.0% bond will pay $60.00 per year for each $1,000 invested. If a

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bond is traded to a public exchange, the market price will fluctuate, generally

with changes in interest rates. Later investors will receive a yield that may be

more, or less, than 6.0%, depending on the price paid for the bond in the open

market.

o Uses: Bonds are typically bought by investors seeking current

income. In some instances, bonds are also used for capital growth.

o Risks: Like stocks, the market price of bonds will fluctuate up and

down. If an investor sells a bond before it matures, a capital gain or loss may

result. Unless the issuer defaults, bonds held to maturity will recover the

principal amount. Since a bond pays a fixed return, inflation risk can be a

problem; over time, the dollars received will buy less and less. Also, the

interest income received may be subject to current income taxation.

FIXED DEPOSITS

Most investors are familiar with a savings account at a bank, savings and

loan, or credit union. For many, the generic term "savings account"

included both the traditional savings account (allowing for deposits and

withdrawals of small amounts), as well

as fixed-term certificates of deposit (CDs), for larger sums. Savings

accounts are usually prized by investors for two primary characteristics: safety

of principal, and liquidity. Such accounts are insured (against a failure of the

savings institution) by agencies of the Federal government, such as the

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Federal Deposit Insurance Corporation (FDIC) or the National Credit Union

Administration (NCUA), for up to $100,000 per account.

o Uses: Savings accounts are often used as a reservoir for emergency

funds, or as a "warehouse" for dollars ultimately earmarked for some other

purpose. Some investors also use such accounts to generate current income.

o Risks: Because there is little risk of principal loss, savings

accounts typically have a lower yield than other investments. One "risk" to

such accounts is the potential additional interest income foregone in

exchange for safety of principal. The relatively low yield can also be heavily

impacted by inflation and current income taxes.

Deposit Tips for Fixed Deposits:

SAFETY_FIRST:

Above all else, Safety is what makes bank deposits most appealing investments.

Banks are controlled by the Reserve Bank of India and so have to adhere to

several policies and operational parameters. Which means that you have the

security of knowing that your money is in safe hands? Yet another safety net,

should anything (which is unlikely) go wrong!

INTEREST_UP:

This is where you benefit most! Most banks offer their own interest rates on

Fixed Deposits, which are always higher than what you'd get from a Savings

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Account. Add to that the fact that interest is compounded once a quarter and

you've got a higher effective rate than you'd get elsewhere. Reason enough to

invest in them, don't you think?

LIQUIDITY_FLOW:

Having a Fixed Deposit doesn't mean your cash flow dries up! You can obtain

loans up to 75% of your deposit amount. You'll just be charged an interest that

is 2% more than the rate of interest earned on the deposit.

SHEER_CONVENIENCE:

Simply put, this one is the ease factor! Thanks to a wide network of branches

and a service-oriented working style, banks now offer extraordinary

convenience of transactions, whereby you can operate your accounts from any

of your bank's branches in the city and sometimes from any branch in the

country. You've got enough to cope with already - banks make sure your

investments, at least, can be handled with utmost expedience!

PROPERTIES / REAL ESTATE

Real estate has long been a favored investment for those seeking tax benefits

and a hedge against inflation. "Improved" real estate refers to land with

apartments, a home, office, store, or other rentable enhancement. Rental

income in excess of expenses may provide a "positive" cash flow.

Additionally, depreciation may shelter a portion of the cash flow from

current income tax. If all goes well, inflation will gradually increase rental

income, thus raising the market value of the property.

Real estate investors may also choose to invest in "unimproved or "raw" land.

Typically such land generated no current cash flow, unless rented for

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agricultural purposes such as animal grazing or farming. Investors in raw land

usually try to buy property in the path of expected, long-term growth, with

the hope of selling the property at a gain when future demand pushed

market prices up.o Uses: Investors in improved real estate typically seek tax-sheltered,

current income along with long-term capital growth. Investors in

unimproved real estate primarily seek long-term capital gains. Real estate

serves as a hedge against inflation.

o Risks: A real estate investor may find it difficult to keep a property

rented, and thus not receive the expected cash flow. Deflation may decrease

both rents and property values. Expected long-term growth in a geographical

area may not occur. Real estate can be very illiquid: a quick sale may require

a substantial reduction in price. Changes in tax law may reduce or eliminate

anticipated tax benefits.

GOLD

For centuries gold has served as an enduring store of value during periods of

political and social turmoil. It has also functioned to preserve purchasing power

during times of high inflation. Demand for gold, for jewelry and industrial

purposes, also impacts the price of gold.

There are a number of different ways for an individual to invest in gold. For

example, an investor can purchase bars of gold bullion (gold refined to a high

level of purity). Gold bullion coins, such as the South Africa Kruggerand or U.

S. Eagle offer a more portable way to own the metal. Risk-oriented speculators

can participate in gold markets indirectly via gold futures on commodities

exchanges.

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More conservative individuals may choose to invest in MutualFunds which

specialize in the stocks of companies mining gold.

o Uses: Gold serves as a permanent store of value during periods of

economic and political anxiety. It also acts as a hedge against inflation.

o Risks: The market value of gold can fluctuate widely. Selling gold

when the market is down can result in a capital loss. It can be difficult to

own and protect. Direct ownership provides no current income.

LIFE INSURANCE

In the last several decades, the life insurance industry has developed a

number of products that combine the protection of life insurance death benefits,

with a significant cash value element. Policies such as universal life, variable

life, and universal-variable life allow an individual to purchase a single

financial instrument providing for both life insurance and long-term

accumulation goals. Such policies may serve as a form of forced investment" for

those who find it difficult to put funds aside on a regular basis, but-who-

routinely-pay-their-bills.

Additionally, life insurance company annuities, with either a fixed or variable

return, offer a tax-deferred method of accumulating additional-retirement-funds.

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o Uses: Life insurance products are commonly used for long-term

accumulation goals. Available cash values may also serve as an "emergency

reserve," if needed, or a source of loans, since life policies frequently include

features permitting borrowing against these cash values.

o Risks: Fixed contracts rely on the financial strength of the issuing

life insurance company. Inflation may negatively impact a fixed return

contract. Variable contracts share the risks of the underlying investments.

Loans and withdrawals must be carefully structured to avoid negative

income tax results.

Wise Investors

Social

Status

Return Safety Liquidity Tax

Benefit

Life

Risk

Cover

Mutual Fund Yes Yes Yes Yes No No

Post Office No No Yes No No No

Fixed Deposit Yes / No No Yes No No No

Properties Yes Yes Yes / No No No No

Equity Yes Yes / No No Yes No NoPPF, EPF &

GPF

No No Yes No No No

Gold Yes Yes / No Yes No No No

ULIP Yes Yes Yes Yes Yes Yes

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LIFE INSURANCE AS AN INVESTMENT TOOL

Despite having the second largest population in the world, insurance-

penetration-in-India-remains-abysmally-low.

A recent study had indicated that only one-fourth of the insurable population

had taken up some form of life insurance. Further, even the insured persons

was heavily under-insured. In the non-life sector-too,-insurance-penetration-

levels-were-very-low.

Life insurance in India has primarily been driven by fiscal benefits. It is a fact

that new life insurance business picks up during November-February when

taxpayers like to avail of the benefits under Section 88 of the Income Tax Act.

But there is a need to educate people to look beyond the savings aspect and

appreciate the need for life insurance, which ensures economic security.

While the life insurance business grew manifold during 1956-2000 both in

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terms of premium collected and the number of policies, it was the endowment

and money back policies which contributed the-lions-share.

Pure risk coverage insurance policies, known as term insurance policies,-had-

an-extremely-insignificant-contribution.

Even the agents were not very keen on selling term insurance since their

remuneration by way of commission was in direct proportion to-the-premium-

collected.

With the opening up of the insurance sector in 2000 after the enactment

of the Insurance Regulatory and Development Act (IRDA) and the

subsequent advent of new players, people are

gradually-becoming-aware-of-pure-insurance.

Many companies now have term insurance plans for different age group and fordifferent periods. The public sector behemoth Life Insurance Corporation (LIC)

has also revived its term insurance plan-under-a-new-brand.

It is imperative to make term insurance more popular. Life insurance needs to

be bought for insurance, or financial security, and-not-for-savings.-The-latter-

may-be-incidental.

The government also needs to put in its bit. It may consider differentiated tax

benefits on the types of life insurance policies. In fact, the tax rebate on pure

insurance may be made higher than in other cases.

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History of Life Insurance

The business of life insurance in India in its existing form started in India in the

year 1818 with the establishment of the Oriental Life Insurance Company inCalcutta.

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

1912: The Indian Life Assurance Companies Act enacted as the first statute to

regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government

to collect statistical information about both life and non-life insurance

businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with

the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the

central government and nationalized. LIC formed

by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5

crore from the Government of India.

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Insurance sector reforms

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI

Governor R.N. Malhotra, was formed to evaluate the Indian insurance industry

and recommend its future direction. The Malhotra committee was set up with

the objective of complementing the reforms initiated in the financial sector. The

reforms were aimed at creating a more efficient and competitive financial

system suitable for the requirements of the economy keeping in mind the

structural changes currently underway and recognizing that insurance is an

important part of the overall financial system where it was necessary to address

the need for similar reforms In 1994, the committee submitted the report and

some of the key recommendations included:

i) Structure

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

Government should take over the holdings of GIC and its subsidiaries so that

these subsidiaries can act as independent corporations

All the insurance companies should be given greater freedom to operate

ii) Competition

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

allowed to enter the industry

No Company should deal in both Life and General Insurance through a single

entity

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

the domestic companies Postal Life Insurance should be allowed to operate in the rural market

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Only one State Level Life Insurance Company should be allowed to operate in

each state

iii) Regulatory Body

The Insurance Act should be changed.

An Insurance Regulatory body should be set up.

Controller of Insurance (Currently a part from the Finance Ministry) should be

made independent.

iv) Investments

Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%

GIC and its subsidiaries are not to hold more than 5% in any company (There

current holdings to be brought down to this level over a period of time)

v) Customer Service

LIC should pay interest on delays in payments beyond 30 days

Insurance companies must be encouraged to set up unit linked pension plans

Computerization of operations and updating of technology to be carried out in

the insurance industry.

The committee emphasized that in order to improve the customer services and

increase the coverage of the insurance industry should be opened up to

competition. But at the same time, the committee felt the need to exercise

caution as any failure on the part of new players could ruin the public

confidence in the industry.

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Hence, it was decided to allow competition in a limited way by stipulating the

minimum capital requirement of Rs.100 crores. The committee felt the need to

provide greater autonomy to insurance companies in order to improve their

performance and enable them to act as independent companies with economic

motives. For this purpose, it had proposed setting up an independent regulatory

body.

The Insurance Regulatory and Development Authority (IRDA)

Reforms in the Insurance sector were initiated with the passage of the IRDA

Bill in Parliament in December 1999. The IRDA since its incorporation as astatutory body in April 2000 has fastidiously stuck to its schedule of framing

regulations and registering the private sector insurance companies. The other

decisions taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies were the launch

of the IRDAs online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured

that the insurance companies would have a trained workforce of insurance

agents in place to sell their products, which are expected to be introduced by

early next year.

Since being set up as an independent statutory body the IRDA has put in a

framework of globally compatible regulations. In the private sector 12 life

insurance and 6 general insurance companies have been registered.

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Since 1956, with the nationalization of insurance industry, the state-run Life

Insurance Corporation of India (LIC) has held the monopoly in that country's

life insurance sector. General Insurance Corporation of India (GIC), with its

four subsidiaries, was its counterpart in the casualty sector. Over time, taking

advantage of its monopoly and virtual prerogative in establishing premiums,

LIC has evolved into a monolith. With around 600,000 agents in every nook

and corner of the vast country, it has created an enviable brand name,

particularly among the rural population of the country. It has around $40 billion

as its life fund and is a strong player in the financial sector. However, on the

qualitative side, it

has very little to take pride in. And there lies the potential for foreign players to

challenge this behemoth.

As is typical with monopolies, the premium rates charged by LIC are among thehighest in the world, and its track record in customer service can, at best, be

called shabby. With a huge unionized, rigid workforce mostly in the clerical

category, LIC runs the risk of high fixed cost, which will be the deciding factor

in productivity in the competitive scenario. While boasting full-scale

automation of its operation, the truth is that its technology is outdated. The new

players, with the state-of-the-art technology under their belt, will be in anadvantageous position. 80% of LIC's business is procured by 20% of its ill-

trained agent force. The foreign player, with the domestic partner's strong brand

value, can test the unconventional distribution channels like brokers, the

Internet, the banking distribution system, etc. Although foreign players may be

tempted to keep their operation in the big cities for the 'creamy layer' of the

society, the real market lies in rural India, which accounts for the lion's share of

LIC's present business. The foreign player must learn to adapt to Indian

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realities. The well-publicized failures of world famous consumer goods

companies like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian

psyche and sentiments demonstrate the concept. They failed in the areas of

realistic pricing, product promotion and reaching to the consumer. The foreign

companies need to know the "ground realities" to the details.

Political Scenario

The eagerly awaited Insurance Regulatory and Development Authority (IRDA)

Bill to open the insurance sector in India to private and foreign players, was

passed by the Lok Sabha on December 2, 1999 and by the Rajya Sabha on

December 7, 1999. The Bill seeks to grant statutory status to the interim

Insurance Regulatory Authority and amend the 1938 Insurance Act, the 1956

Life Insurance Corporation Act and the 1972 General Insurance Business

(Nationalization) Act to end the public sector monopoly. The IRDA Bill

incorporates the recommendations made by the parliamentary Standing

Committee on Finance.

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The Importance of Life Insurance

Losing someone close is one of the toughest things we will all have to deal with.

If that person has not properly planned ahead to cover the expenses they haveleft behind then they leave a tremendous burden on their loved ones. The

grieving process is difficult enough but when complicated with financial issues

can leave bitter feelings. The last thing someone wants to be remembered for is

not properly planning ahead.

Term life insurance is a cost effective way to protect the ones you care about

from having to clean up a financial mess after you have passed on. Several

unexpected costs arise after death such as funeral expenses and burial costs,

medical expenses, and other costs that normally rise into the tens of thousands

of dollars. In addition to these final expenses there are the normal costs of living

to pay for. The regular monthly bills such as mortgage payments, insurance,

loans, and other expenses must still be paid even though youre gone. All of

these expenses can quickly deplete your savings or retirement money and force

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loved ones to sell things investments below value. We need liquid assets that

can be available quickly after our death. Even high net worth individuals need

life insurance because houses, property, and other investments cant be sold fast

enough to provide the required assets. If our loved ones are forced to quickly

sell investments such as houses, property, stocks, or mutual funds, they possibly

will take a loss just to get the money.

Stay at home parents and non-working spouses are often over looked when it

comes to life insurance. The loss of a stay at home spouse means that the

working spouse will often have to quit their job or pay for someone to take care

of kids and tend to the things at the house.

5 Reason For Buying Insurance Products

Most of us buy a Life Insurance Policy to save tax. It is bought by almost

everyone right from the bigwigs of the business world to small retail investors.

And most buy it for one core reason- to save tax. But should this be the only

reason to buy a life insurance policy? I dont think so. Here I am presenting

some guiding principles for individuals who are contemplating taking life

insurance.

1. Passing away early:ever safe about life. We often come across people

claiming that nothing is going to happen to them that they are too young to pass

away. But do they really know the future holds for them? We only have to read

newspaper headlines about the recent Tsunami the earthquake that took place

not so long and such other natural calamities to understand how the future can

be unpredictable.

Individuals need to insure themselves to secure the future of those who are

dependent on them especially so if they happen to be the sole breadwinners.

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You wouldnt want them to go through hardships or rely on others/relatives etc.

This in fact is the prime reason why one should buy an insurance policy.

2. Living too long:Advances in the field of medicine have grown by leaps

& bonds over the past few decades. Due to this life expectancies have gone up.

This poses another problem for individuals. It is generally observed that

individuals who tend to live way beyond their earning years like say till the age

of 85 or 90

usually face a problem coming to terms with increasing costs of living. And that

is not taken into account the manifold increase in medical expenses of course.

This takes place largely due to imprudent financial planning by individuals

during their earning years. Insurance if bought at the right time for the right

amount acts as a saviour in such times. Individuals could opt for a pension plan

offered by insurance companies which suits their profile in terms of income

proposed retirement age and proposed expenses post-retirement. Such plans

provide an annuity which means that individuals keep getting a fixed sum every

month/year after they have retired.

3. Painful existence: May be an individual has planned well during his

earning years to secure himself financially. He has also designed his financial

portfolio in such a way that he is drawing a comfortable monthly income to

support his family expenditure. But what if an individual were to have a health

problem affecting him or his spouse? What if the remedy to this ailment were to

cost him a sum beyond his financial capacity? Here again life insurance can act

as the saving grace in two ways. One by way of a medical rider like the

accidental death benefit rider, permanent disability benefit rider, critical illness

benefit rider. These riders are taken along with the life insurance plan and helpcover the medical expenses.

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And secondly by allowing the individual to surrender the insurance policy. Of

course this should be done only in case of an urgent need like a serious health

problem and even then after all other sources that can be used for covering the

high cost of medical expenses.

4. Tax Benefits: Traditionally life insurance has always been bought more

for tax benefits than for what it is actually purposed to do. i.e. insure human life.

But the role of life insurance is an

individuals tax planning cannot in any way be undermined. Individuals can

invest in life insurance and can avail a deduction from taxable income. The tax

sops provided on insurance help increase the individuals disposable income

and make him consider taking a life insurance plan which he otherwise may not

have done.

5. Investment:Today life insurance has become an investment tool. After the

introduction of the Unit Link Insurance Plan (ULIPs) life insurance have

become something of a rage which their promise of market linked returns

combined with the duel benefit of insuring life from eventualities.

ULIPs attempt to fulfill investment needs of an investor with

protection/insurance needs of an insurance seeker. ULIPs work on the premise

that is class of investors who regularly invest their saving in products like fixed

deposits (FDS), coupon-beanng bond, debt funds, diversified equity fund and

stocks. There is another class of individuals who take insurance to provide for

their family in case of an eventually. So typically both these categories of

individuals have a portfolio of investments as well as life insurance. ULIP as a

product combines both these products (investment and life insurance) into a

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single product. This saves the investor/insurance-seeker the hassles of managing

and tracking a portfolio of products.

We cannot change yesterday: that is clear. Nor can we begin tomorrow until it is

here. But what we can and should do is to make today count to ensure ourselves

of a financially secure and stable tomorrow.

Top 10 Tips For Purchasing Life Insurance

1. We must not wait till us REALLY NEED the coverage! By that time well be

that much older, well be sick or we will have encountered a health issue that

will cause our premiums to be significantly more than we anticipated. That is of

course if we can even qualify for the coverage!

2. The highest financial rating doesnt necessarily mean better coverage. The

important thing is to at least be looking at an A rated company. There is little,

if any difference between one companys term policy and another, so basing a

decision solely on ratings wont always us to get our best deal. The highest

rated companies tend to be more conservative in their underwriting and

attaining the best available with them will be a bit more difficult.

3. First we must shop online before meeting individually with an agent! Many

online life insurance brokerage companies can be a useful source of information

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and can save our up to 75% on your premiums. The reason is of course because

they are impartial and are not driven to sell us only one companys product.

4. We should pay annually if we can afford it. Paying annually can save our, up

to 20% with some companies versus monthly, quarterly or semi-annually.

5. If we are trying to save money than being a smoker wont help our cause.

However, if we do smoke, most companies will let us re-apply for nonsmoker

rates if it has been at least 1 full year from our last usage.

6. If we have cholesterol or blood pressure issues get it controlled with

medication. Insurance companies dont like to see health

issues go unattended. If we are doing something to control it they will likely

look at that favorably and give us the benefit of the doubt when it comes to

approval time.

7. If we are considering buying $90,000 of coverage, buy $100,000 instead.

Many times it will cost less, the same or just a tad more for additional coverage.

Insurance companies give breakpoints at $100,000, $250,000, $500,000,

$750,000 and $1,000,000.

8. We must read the Prepare for the Medical Exam section before completing

our exam. Eating a few Twinkies or calling your stockbroker a half hour before

your exam will surely turn your lab results sour and cost you big time!

9. Obtaining coverage through the companys plan may be a good alternative

in the short-run. Many employers plans however are not portable and wont let

you continue our coverage if we leave. If you need coverage then, well have to

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apply for an individual policy anyway. We must not leave it to our employer to

take care of us!

10. If were 30 years old, were as old as 31 in the eyes of the insurance

company. Most insurance companies round up when determining your age and

because premiums increase with age that can make a big difference. So, if were

approaching 30 and we have thoughts of applying then we must not wait!

Innovation Will Be the Key

Ever since the insurance industry was opened to the private sector, things began

to move in leaps and bounds. Mostly for the better of course. The private

insurers took huge strides in terms of services, products, systems and have not

looked back since. Come 2004 and

life insurance looked totally different than what we have been used to seeing

over the past few decades. So what more can individuals expect in 2005? We

have tried to predict some trends that may unfold over the next few years in the

life insurance sector.

Increasing awareness of investing in term insurance

In the past, term plans have not got their due. A term plan can provide a larger

amount of death cover at a lower premium. But not many individuals appreciate

this or are even aware of it. What an individual has to understand is that

insurance is not a pure investment avenue that generates returns; rather it's a risk

cover. The returns part can also be taken care of by investing in alternate avenue

like equity-oriented mutual funds, monthly income plans (MIPs), stock markets

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and even PPF and NSC. A term plan should be bought as early as possible when

an individual is young and premiums are lower. We believe going forward the

rationale will get increasingly apparent for individuals and term plans are likely

to get their due place in individuals' insurance portfolios.

Investments in pension plans/annuities set to grow

With the setting up of an interim Pension Fund Regulatory and Development

Authority (PFRDA), we are likely to see positive shift towards better fund

management of pension products.

The PFRDA has envisaged setting up of distinct fund managers to manage pension

funds. There will be separate asset management companies to manage pension

assets. Individuals investing in pension plans will have the option to choose the

fund manager as well as move their investments across fund managers. Awareness

levels for investing in pension schemes and saving for retirement can only increase

in future. Individuals will consider setting aside a part of their investment surplus

in pension related schemes so as to accumulate a pool of savings with which they

can buy an annuity at a

later stage. Another pension-related issue where we can see some clarity is the

ongoing debate between 'defined benefit (DB)' and 'defined contribution (DC)'.

While DB gives an individual a fixed sum post-retirement, DC defines the amount

of contributions made towards the post-retirement corpus. We are likely to see a

marked shift from DB to DC, as the policy of defining contributions is more viable

for the government, which has been hard pressed to account for the huge outflow

of retirement benefits for pension- seekers. In this regard, Ms. Shikha Sharma,

CEO and MD, ICICI Prudential Life Insurance Company, commented, "It has been

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universally accepted that defined benefit systems place immense pressure on the

government and its money management. With most Indian companies now also

moving away from defined benefit schemes to defined contribution schemes, it is

clear that defined contribution is the most sustainable system". Initially, the defined

contribution scheme is likely to be made available only to government employees.

Over time, all private sector employees are expected to fall under the DC ambit.

The assured returns, currently at 8.5%, which is the rate on employee provident

fund (EPF), will slowly evaporate. This means that the government will be less

willing to take a liability on its books and let the individual earn a return by taking

on more risk. This is in line with what is happening in several countries already.

However, it is difficult to say with any certainty as to how the new pension

structure will evolve or vary from the existing one.

Increasing investments in Unit Linked Insurance Plans (ULIP)

There has been a marked shift in people's outlook towards variable returns.

They have now understood that 'assured returns' is a concept belonging to a

bygone era. This year saw an increase in business generated through sales of

ULIPs for insurance companies. A ULIP is comparable to a mutual fund

because both avenues of investment are market linked. ULIP works on 2 basic

principles: 1. Offering insurance cover to an individual (which is

generally lower than that offered on other insurance policies for the samepremium) and 2. Investing the savings element in the capital markets to give

market linked returns. The coming year is unlikely to be very different. Interest

in ULIPs is likely to sustain. Says Ms. Shikha Sharma: "Since their introduction

a few years ago, ULIPs have established themselves as flexible and transparent

life insurance products. Customer acceptance of these products they

contribute over 75% of ICICI Prudential's premium income has beentestament to this. Certainly, they will continue to be amongst the most popular

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type of products, given the many advantages they offer over their traditional

counterparts". With increasing competition amongst insurance companies, a few

of them have managed to reduce the marketing and fund management costs

associated with ULIPs thereby enhancing returns for investors. Given the drying

up of assured return options,

individuals may want to consider investing in ULIPs to earn above-average

returns. But a word of caution - ULIP costs needs to be evaluated vis-a-vis

comparable investment avenues.

Also ULIPs have a range of options for investors with varying risk levels. Take

a ULIP only if you have a longish investment time frame (at least 20 years) and

have the time and expertise to track equity and debt markets. Insurers allow

individuals to switch between ULIP options, so it's important for you to be

updated so as to make an informed decision on which option to choose at a

point in time.

Technology usage to go up

As insurers make increasing use of technology this is likely to add considerable

value to both insurers and individuals. Insurers will have better systems and

more sophisticated products. Individuals will benefit from convenience in terms

of more regular updates on their policies, ease of premium payments through

ATMs, and even

buying insurance online (at least one insurer is already doing this for its term

plan).

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Restructuring of mortality tables

Insurance premiums are calculated based on mortality tables, which in turn, are

structured based on the life expectancy of individuals in that country. The last

few decades have seen an enhancement in the life expectancy of Indians

through superior medical facilities and greater health awareness. Unfortunately,

the same is not reflected in mortality tables. The tables currently in use are still

the ones drawn up by Life Insurance Corporation (LIC) a few decades ago. The

coming years should see mortality tables being restructured. Restructuring of

mortality tables will translate into lowering of premiums across insurance,

plans.

Conclusion

If one has to understand what lies in store for the insurance sector, one just has

to take a look at how private sector banking evolved in the 1990s. Many were

pleasantly surprised at the positive changes that took place in the banking sector

in terms of customer service, personalized investment solutions, 24-hour cash

availability (ATMs) to cite just a few examples. The insurance industry, though

only recently privatised, looks set to grow at a scorching pace. A healthy sign of

things to come, one must say.

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The list of foreign players entering the Indian Life

Insurance sector and their Indian partners

Indian Partner

Foreign Insurer

Aditya Birla Group Sun Life, Canada

Kotak Mahindra Finance Old Mutual, South Africa

HDFC Standard Life, UK

Reliance No Foreign Alliance

ICICI Prudential, UK Max India New York Life, USA

Tata Group AIG, USA

Vysya Bank ING Insurance, Netherland

Hero Group Zurich, Switzerland

Cholamandalam Group Undecided

Hindustan-Times Undecided

Dabur CGNU Life, UK

Bajaj Auto AllianzUndecided Metlife, USA

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Sanmar Group AMP, Australia

SBI Cardiff, France

Corporation Bank Undisclosed

Undisclosed Aegon, Netherlands

Undisclosed Cigna, USA

Undisclosed Nationwide, USA

Undisclosed GE Capital Services International,

USA

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CHAPTER IIINDIAN INSURANCE

INDUSTRY

AN OVERVIEW

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THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

With the largest number of life insurance policies in force in the world,

Insurance happens to be a mega opportunity in India. Its a business growing at

the rate of 15-20 per cent annually and presently is of the order of Rs 1560.41

billion (for the financial year 2006 2007). Together with banking services, it

adds about 7% to the countrys Gross Domestic Product (GDP). The gross

premium collection is nearly 2% of GDP and funds available with LIC for

investments are 8% of the GDP.

Even so nearly 65% of the Indian population is without life insurance cover

while health insurance and non-life insurance continues to be below

international standards. A large part of our population is also subject to weak

social security and pension systems with hardly any old age income security.

This in itself is an indicator that growth potential for the insurance sector in

India is immense.

A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and

strengthens the risk taking ability of individuals. It is estimated that over the

next ten years India would require investments of the order of one trillion US

dollars. The Insurance sector, to some extent, can enable investments in

infrastructure development to sustain the economic growth of the country.

(Source: www.indiacore.com)

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HISTORICAL PERSPECTIVE

The history of life insurance in India dates back to 1818 when it was conceived

as a means to provide for English Widows. Interestingly in those days a higherpremium was charged for Indian lives than the non - Indian lives, as Indian lives

were considered more risky to cover. The Bombay Mutual Life Insurance

Society started its business in 1870. It was the first company to charge the same

premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to Triton

Insurance Company Limited, the first general insurance company established in

the year 1850 in Calcutta by the British. Till the end of the nineteenth century

insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Severalfrauds during the 1920's and 1930's sullied insurance business in India. By 1938

there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of

1938 that provided strict State Control over the insurance business. The

insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was

witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life

insurers and provident societies under one nationalized monopoly corporation

and Life Insurance Corporation (LIC) was born. Nationalization was justified

on the grounds that it would create the much needed funds for rapid

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industrialization. This was in conformity with the Government's chosen path of

State led planning and development.

The non-life insurance business continued to thrive with the private sector till1972. Their operations were restricted to organized trade and industry in large

cities. The general insurance industry was nationalized in 1972. With this,

nearly 107 insurers were amalgamated and grouped into four companies-

National Insurance Company, New India Assurance Company, Oriental

Insurance Company and United India Insurance Company. These were

subsidiaries of the General Insurance Company (GIC).

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KEY MILESTONES

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 by the Insurance Act with

the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were taken

over by the central government and nationalized. LIC was formed by an Act of

Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the

Government of India.

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INDUSTRY REFORMS

Reforms in the Insurance sector were initiated with the passage of the IRDA

Bill in Parliament in December 1999. The IRDA since its incorporation as astatutory body in April 2000 has fastidiously stuck to its schedule of framing

regulations and registering the private sector insurance companies. Since being

set up as an independent statutory body the IRDA has put in a framework of

globally compatible regulations.

The other decision taken simultaneously to provide the supporting systems to

the insurance sector and in particular the life insurance companies was the

launch of the IRDA online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured

that the insurance companies would have a trained workforce of insurance

agents in place to sell their products.

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PRESENT SCENARIO - LIFE INSURANCE INDUSTRY

IN INDIA

The life insurance industry in India grew by an impressive 47.38%, with

premium income at Rs. 1560.41 billion during the fiscal year 2006-2007.

Though the total volume of LIC's business increased in the last fiscal year

(2006-2007) compared to the previous one, its market share came down from

85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about

19% in a year's time. The figures for the first two months of the fiscal year

2007-08 also speak of the growing share of the private insurers. The share of

LIC for this period has further come down to 75 percent, while the private

players have grabbed over 24 percent.

With the opening up of the insurance industry in India many foreign players

have entered the market. The restriction on these companies is that they are not

allowed to have more than a 26% stake in a companys ownership.

Since the opening up of the insurance sector in 1999, foreign investments of Rs.

8.7 billion have poured into the Indian market and 19 private life insurance

companies have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled

fledgling private insurance companies to sign up Indian customers faster than

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anyone expected. Indians, who had always seen life insurance as a tax saving

device, are now suddenly turning to the private sector and snapping up the new

innovative products on offer. Some of these products include investment plans

with insurance and good returns (unit linked plans), multi purpose insurance

plans, pension plans, child plans and money back plans. (www.wikipedia.com)

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CHAPTER III

COMPANY PROFILE

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HDFC STANDARD LIFE INSURANCE COMPANY

LIMITED

INTRODUCTION

HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has

since emerged as the largest residential mortgage finance institution in the

country. The corporation has had a series of share issues raising its capital to Rs.

119 Crores. The gross premium income for the year ending March 31, 2007

stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624

Crores. The company has covered over 8,77,000 lives year ending March 31,

2007.

HDFC operates through almost 450 locations throughout the country with its

corporate head quarters in Mumbai, India. HDFC also has an International

Office in Dubai, UAE with service associates in Kuwait, Oman and Qatar.

HDFC is the largest housing company in India for the last 27 years.

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SNAPSHOT-I

Incorporated in 1977 as the first specialized Mortgage Company in India.

Almost 90% of initial shareholding in the hands of domestic institutes

and retail investors. Current 77% of shares held by foreign institutional

investors.

Besides the core business of mortgage HDFC has evolved into a financial

conglomerate with holdings In:

HDFC Standard Life insurance Company- HDFC holds 78.07 %.

HDFC Asset Management Company HDFC holds 50.1%

HDFC Bank- HDFC holds 22.25%.

Intelenet Global (Business Process Outsourcing) HDFC holds 50%.

HDFC Chubb General Insurance Company HDFC holds 74%.

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SNAPSHOT-II

Loan Approvals Rs. 805 billion.

(up to Dec 2007) (US $ 18.30 bn.)

Loan Disbursements Rs.669 billion

(up to Dec. 2007) (US $ 15.20 bn)

Housing Units Financed 2.5 million.

Distribution

Offices 181

Outreach Programs 90

KEY PLAYERS

Mr. Deepak S Parekh is the Chairman of the Company. He is also the

Executive Chairman of Housing Development Finance Corporation Limited

(HDFC Limited). He joined HDFC Limited in a senior management position in

1978. He was inducted as a whole-time director of HDFC Limited in 1985 and

was appointed as its Executive Chairman in 1993. He is the Chief Executive

Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered

Accountants (England & Wales).

Mr. Deepak M Satwalekar is the Managing Director and CEO of the

Company since November, 2000. Prior to this, he was the Managing Director of

HDFC Limited since 1993. Mr. Satwalekar obtained a Bachelors Degree in

Technology from the Indian Institute of Technology, Bombay and a Masters

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Degree in Business Administration from The American University, Washington

DC.

GROUP COMPANIES

HDFC Bank: World Class Indian Bank- among the top private banks in India.

HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.Intelenet Global: BPO services for international customers.

CIBIL: Credit Information Bureau India Limited.

HDFC Chubb: Upcoming Private companies in the field of General Insurance.

HDFC Mutual Fund

HDFC reality.com: Helps to search properties in all major cities in India

HDFC securities

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STANDARD LIFE

Standard Life is Europes largest mutual life assurance company. Standard Life,

which has been in the life insurance business for the past 175 years is a modern

company surviving quite a few changes since selling its first policy in 1825. The

company expanded in the 19th century from kits original Edinburgh premises,

opening offices in other towns and acquitting other similar businesses.

Standard Life Currently has assets exceeding over 70 billion under its

management and has the distinction of being accorded AAA rating

consequently for the six years by Standard and Poor.

SNAPSHOT

Founded in 1875, company supporting generation for last 179 years.

Currently over 5 million Policy holders benefiting from the services

offered.

Europes largest mutual life insurer.

JOINT VENTURE

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HDFC Standard Life Insurance Company Limited was one of the first

companies to be granted license by the IRDA to operate in life insurance sector.

Reach of the JV player is highly rated and been conferred with many awards.

HDFC is rated AAA by both CRISIL and ICRA. Similarly, Standard Life is

rated AAA both by Moodys and Standard and Poors. These reflect the

efficiency with which HDFC and Standard Life manage their asset base of Rs.

15,000 Cr and Rs. 600,000 Cr. respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August

2000. HDFC is the majority stakeholder in the insurance JV with 81.4% staple

and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO

of the venture.

HDFC Standard Life Insurance Company Ltd. Is one of Indias leading Private

Life Insurance Companies, which offers a range of individual and groupinsurance solutions. It is a joint venture between Housing Development Finance

Corporation Limited (HDFC Ltd.) Indias leading housing finance institution

and the Standard Life Assurance Company, a leading provider of financial

services from the United Kingdom. Both the promoters are will known for their

ethical dealings and financial strength and are thus committed to being a long-

term player in the life insurance industry- all important factors to consider whenchoosing your insurer.

BUSINESS GROWTH

Track Record so far

The gross premium income of HDFC, for the year ending March 31, 2007 stoodat Rs. 2,856 crores and new business premium income at Rs. 1,624 crores.

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The company has covered over 8,77,000 lives year ending March 31, 2007.

Company also declared our 5th consecutive bonus in as many years for our with

profit policyholders.

KEY STRENGTH

Financial Expertise

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As a joint venture of leading financial services groups. HDFC standard Life has

the financial expertise required to manage long-term investments safely and

efficiently.

Range of Solutions

HDFC SLIC has a range of individual and group solutions, which can be easily

customized to specific needs. These group solutions have been designed to offer

complete flexibility combined with a low charging structure.

Strong Ethical Values:

HDFC SLIC is an ethical and Cultural Organization. False selling or false

commitment with the customers is not allowed.

Most respected Private Insurance Company

HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the

World Class Magazine Business World for Integrity, Innovation and CustomerCare.

CORPORATE OBJECTIVE

Vision

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'The most successful and admired life insurance company, which means that we

are the most trusted company, the easiest to deal with, offer the best value for

money, and set the standards in the industry'.

'The most obvious choice for all'.

Values

Integrity

Innovation

Customer centric

People Care One for all

Teamwork

Joy and Simplicity

PRODUCTS & SERVICES

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The right investment strategies won't just help plan for a more comfortable

tomorrow -- they will help you get Sar Utha ke Jiyo. At HDFC SLIC, life

insurance plans are created keeping in mind the changing needs of family. Its

life insurance plans are designed to provide you with flexible options that meet

both protection and savings needs. It offers a full range of transparent, flexible

and value for money products. HDFC SLIC products are modern and

contemporary unitized products that offer unique customer benefits like

flexibility to choose cover levels, indexation and partial withdrawals. (Source:

www.hdfcslic.com)

PLANS THAT ARE OFFERED BY HDFC STANDARDS

LIFE INSURANCE

Individual Products

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Protection Plans

A person can protect his family against the loss of his income or the burden

of a loan in the event of his unfortunate demise, disability or sickness. These

plans offer valuable peace of mind at a small price. Protection range includes

ourTerm Assurance Plan & Loan Cover Term Assurance Plan.

Investment Plans

HDFC SLICs Single Premium Whole of Life plan is well suited to meet

long term investment needs. This provides attractive long term returns

through regular bonuses.

Pension Plans

Pension Plans help to secure financial independence even after retirement.

Pension range includes Personal Pension Plan, Unit Linked Pension,Unit

Linked Pension Plus.

Savings Plans

Savings Plans offer a flexible option to build savings for future needs such as

buying a dream home or fulfilling your childrens immediate and future

needs.

Savings range includes Endowment Assurance Plan, Unit Linked

Endowment, Unit Linked Endowment Plus,Unit Linked Endowment

Plus II,Money Back,

Unit Linked Enhanced Life Protection II,Children's Plan, Unit Linked

Young Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus

II.

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Group Products

One-stop shop for employee-benefit solutions

HDFC Standard Life has the most comprehensive list of products for

progressive employers who wish to provide the best and most innovative

employee benefit solutions to their employees. It offers different products for

different needs of employers ranging from term insurance plans for pure

protection to voluntary plans such as superannuation and leave encashment.

HDFC SLIC offers the following group products to esteemed corporate clients:

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Group Term Insurance

Group Variable Term Insurance

Group Unit-Linked Plan

An investment solution that provides funding vehicle to manage corpuses

with Gratuity, Defined Benefit or Defined Contribution Superannuation

orLeave Encashment schemes of your companyAlso suitable for other employee benefit schemes such as salary saving

schemes and wealth management schemes

Social Product

Development Insurance Plan

Development Insurance plan is an insurance plan which provides life cover to

members of a Development Agency for a term of one year. On the death of any

member of the group insured during the year of cover, a lump sum is paid to those

member beneficiaries to help meet some of the immediate financial needs

following their loss.

Eligibility

Members of the development agency and their spouses with:

- Minimum age at the start of the policy 18 years last birthday

- Maximum age at the start of policy 50 years last birthday

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Employees of the Development Agency are not eligible to join the group. The

group to be covered is only eligible if it contains more than 500 members.

Premium Payments The premium to be paid will be quoted per member in the group and will be the

same for all members of the group.

The premium can only be paid by the Development Agency as a single lump

sum that includes all premiums for the group to be covered. Cover will not start

until the premium and all the member information in our specified format has

been received.

Benefits

On the death of each member covered by the policy during the year of cover a

lump sum equal to the sum assured will be paid to their beneficiaries or legal

heirs. Where the death is as a result of an accident, an additional lump sum will

be paid equal to half the sum assured. There are no benefits paid at the end of the

year of cover and there is no surrender value available at any time.

The role of the Development Agency

Due to the nature of the groups covered, HDFC Standard Life will be passing

certain administrative tasks onto the Development Agency. By passing on thesetasks the premium charged can be lower. These tasks would include:

Submission of member data in a specified computer format

Collection of premiums from group members

Recording changes in the details of group members

Disbursement of claim payments and the mortality rebate (if any) to group

members

These tasks would be in addition to the usual duties of a policyholder such as:Payment of premiums

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Reporting of claims

Keeping policy holder information up to date

Training and support will be available to give guidance on how to complete the

tasks appropriately. Since these additional tasks will impose a burden on the

Development Agency, the Development Agency may charge a Rs. 10

administration fee to their members.

Prohibition of rebates

Section 41 of the Insurance Act, 1938 states

No person shall allow or offer to allow, either directly or indirectly, as an

inducement to any person to take out or renew or continue an insurance in

respect of any kind of risk relating to lives or property in India, any rebate of

the whole or part of the commission payable or any rebate of the premium

shown on the policy, nor shall any person taking out or renewing or continuing

a policy accept any rebate, except such rebate as may be allowed in accordance

with the published prospectus or tables of the insurerIf any person fails to comply with sub regulation (previous point) above, he

shall be liable to payment of a fine which may extend to rupees five hundred

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INTROUCTION TO UNIT LINKED FUNDS

Unit linked plans are based on the component of the premium or the

contribution of the customer towards the plan. This contribution can be in

different modes like yearly, half yearly, quarterly and monthly. Unit linked

plans have multiple benefits like life protection, rider protection, savings,

transparency, investment

harish report

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