Project ReportOn

LIFE INSURANCE INDUSTRY

Semester- VI

PROJECT GUIDEProf. Smt. Smita Kuntay

(M.Com, M,Phil, B.Ed)

T.Y.B.Com (Banking & Insurance)2012-2013

Submitted to University of Mumbai in part fulfillment of requirements for the Award of the Degree of B.com (Banking &

Insurance)

Submitted By SIDDESH AJAGAONKAR

Roll No. 01

SYDENHAM COLLEGE OF COMMERCE & ECONOMICS CHURCHGATE, MUMBAI-400 020

1

DECLARATION

I, SIDDESH MOHAN AJAGAONKAR Student of B.Com – Banking and

Insurance – Semester VI (2011-2012) hereby declare that I have

completed the project On Life Insurance Industry(business strategies &

market perspective ) Whenever the data/information have been taken

from any book or other sources the same have been mentioned in the

Bibliography.

The information submitted is true and original to the best of my

knowledge.

Signature OF Student

SIDDESH.M.AJAGAONKAR

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ACKNOWLEDGEMENT

First of all I would like to extend my gratitude towards the MUMBAI

UNIVERSITY for giving me an opportunity to make this project, project

has broadened my horizon.

I would like to thank SYDENHAM COLLEGE for providing me opportunity

to do so.

I would also like to thank our head of department Prof. Ms. SMITA

KUNTAY and all lecturers for their continuous support and guidance.

My grateful thanks to my project guide Prof. Ms. SMITA KUNTAY for her

admirable support and guidance. I would also like to thank my

colleagues and other concerned people for their on going support.

I would be grateful to Prof. SYED MUBASHAR HASAN for guiding me

throughout the project and furnish me with valuable information in

accomplishing this project.

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PERFACE

I have great pleasure in presenting this project of Life Insurance

Industry(business strategies & market perspective ) .I Have

made a sincere effort to make this project informative and I am

sure it would help in understanding the concept of Life

Insurance Industry(business strategies & market perspective )

in a better way.

I am very thankful to professor Ms SMITA KUNTAY and

Prof .SYED MUBASHAR HASAN sir for their response and

suggestions which have necessitated for successful project.

MUMBAI

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INDEX

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Sr. N.o Topic Pg. No.1 Introduction 62 Uniqueness Of Insurance Industr 8

3 History 94 Life Insurance Business In India 125 Marketing— Mix 196 Icici 327 Weakness Of Insurance Industry 358 Indian Insurance Business: From

State Monopoly To Competition

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9 Conclusion 38

10 Biblography 39

Chapter 1- INTRODUCTION

With the introduction of specialization in all branches of commerce,

insurance also passed into the hands of experts and now it has become

a highly specialized business. Many insurance companies have sprung

up which under-take to provide for the loss of human life and property

caused by a particular risk in exchange for a price fixed in advance. The

party who seeks protection against a particular risk is called the insured

while the party undertaking to protect the former is called the insurer.

Mostly the insurers are insurance companies these days.

An Ordinance was issued on 19th January, 1956 nationalizing the Life

Insurance sector and Life Insurance Corporation came into existence in

the same year. The amount for which the risk is insured is called the

insured amount of policy moneyor is also known as the fact value of the

policy. The amount which is paid by the insured to the insurer as a

consideration of the insurance contract is called the premium, this is

price of the insurance. The document which contains the terms and

conditions of the insurance contract is termed the insurance policy.

When a person takes insurance on the same subject matter with more

than one insurer it is called double insurance. In case of life, one can

take insurance with as many insurers as one likes for any amount and on 6

the maturity of policies and assured can realize the total amount for

these various insurers. But it indemnity contracts, nothing more can be

realized than the actual loss though the insurance might have been

effected with more than one insurance company.

When an insurer transfers a part of his risk on a particular policy by

insuring it with some other insure, it is called re-insurance. It is a

contract between two insurance companies and the original insured is

not affected by it. Some insurance companies conduct only the business

of reinsurance.

DEFINED

In its modern form, the insurance may be defined as a“contract

between two parties whereby one party undertakes, in exchange for a

fixed sum, to pay the other party a fixed amount of money on the

happening of a certain even (death or attaining a certain age in case of

human life), or to pay the amount of actual loss when it takes place

through the risk insured (in case of property)”

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Chapter 2 - Uniqueness of Insurance industry

The nature of insurance industry is different compared to

manufacturing and service industries

The fundamental difference between insurance products and

other products is that while in the insurance products consumer’s

interests are actively involved even after the sale of the products since

their liabilities have to be met by the insurer, no such consumer’s

interests are involved in other products. The activities carried out by

insurance companies even after sale of products are of crucial

importance from consumer’s point of view as these companies are

contractually bound to compensate for the potential losses to the

consumers that may arise in future. The funds at the disposal of insurers

are essentially policyholders’ (consumer) funds. The misuse and

mismanagement of these funds may result into failure on the part of

insurers to fulfill their liabilities and consequent loss to the consumers.

In other products, once the products have been sold the only

commitment on the part of seller may be to ensure efficient and

expeditious after-sales services. From this platform. It warrants some

control in one or other form on the activities of the insurers so that

consumer’s interests are properly protected and are not sacrificed

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Chapter 3- HISTORY

Life Insurance in its modern form came to India from England in the year

1818. Oriental Life Insurance Company stated by Europeans in Calcutta

was the first life insurance company on Indian Soil. All the insurance

companies established during that period were brought up with the

purpose of looking after the needs of European community and Indian

natives were not being insured by these companies. However, later with

the efforts of eminent people like BabuMuttylal Seal, the foreign life

insurance companies started insuring Indian lives. But Indian lives were

being treated as sub-standard lives and heavy extra premiums were

being changed on them. Bombay Mutual Life Assurance Society

heralded the BIRTH of first Indian life insurance company in the year

1870, and covered Indian lives at normal rates. Bharat Insurance

Company (1896) was also one of such companies inspired by natioalism.

theSwadeshi movement of 1905-1907 gave rise to more insurance

companies. The United India in Madras, National Indian and National

Insurance in Calcutta and the Hindustan Co-operative Insurance

Company took its birth in one of the rooms of the Jorasanko, house of

the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile,

General Assurance and Swadeshi Life (later Bombay Life) were some of

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the companies established during the same period. Prior to 1912. India

had no legislation to regulate insurance business. In the year 1912, the

Life Insurance Companies Act, and the Provident Fund Act were passed.

The Life Insurance Companies Act, 1912 made it necessary that the

premium rate tables and periodical valuations of companies should be

certified by an actuary. But the act discriminated between foreign and

Indian companies on many accounts, putting the Indian companies at a

disadvantage.

The first two decades of the twentieth century saw lot of growth in

insurance business. From 44 companies with total business-in force as

Rs. 22.44 cr, it rose to 176 companies with total business-in-force as Rs.

298 cr in 1938.The Insurance Act 1938 was the first legislation governing

not only life insurance but also non-life insurance to provide strict state

control over insurance business. The demand for nationalization of life

insurance industry was made repeatedly in the past but it gathered

momentum in 1944 when a bill to amend the Life Insurance Act 1938

was introduced in the Legislative Assembly. However, it was much later

on the 19th of January, 1956, that life insurance in India was

nationalized. About 154 Indian insurance companies, 16 non-Indian

companies and 75 provident were operating in India at the time of

nationalization, nationalization was accomplished in two stages; initially

the management of the companies was taken over by means of an

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Ordinance, and later, the ownership too by means of a comprehensive

bill. The Parliament of India passed the Life Insurance Corporation Act

on the 19th of June 1956, and the Life Insurance Corporation of India was

created on 1st September, 1956, with the objective of spreading life

insurance much more widely and in particular to the rural areas with a

view to reach all insurable persons in the country, providing them

adequate financial cover at a reasonable cost.

Life insurance in its present form is a heritage from England. In India, the

joint family system of Hindus had worked as an insurance institution for

the past so many centuries and the dangers of old age, early death,

livelihood of widows and children etc. were very easily provided for in

its fold. With the advent of large-scale industrialization, the replacement

of barter economy by money economy and the spread of individualism

in social life, the joint family has slowly disintegrated and all its

attendant advantages are on the way to their gradual disappearance. On

Indiaof today, though owing to the fatalistic attitude ofhe masses, their

poverty and ignorance, the development of the insurance business has

been slow.

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Chapter 4- Life Insurance Business in India; An

overview

The insurance market in India is currently in the throes of radical

change. Close to 80 present of Indians do not hold an insurance policy,

according to a resent survey. Agricultural and rural areas remain largely

untouched. But changing government policies and an influx of private

and foreign players mean the industry is on the bring of a boom. Strong

competition and innovative product is what defines India to be small but

rapidly growing in insurance sector today. In 1999, when insurance in

India was first opened up to private participation and foreign direct

investment there were just 5 players. Today there are 28 , with more

looking to make inroads. Forecasts say the sector is poised to grow 500

present over the next three years to become a 60 billion USS industry by

2010. For the global insurance majors, the strategy is educating the

consumer on insurance and investment needs and opening up new

markets.

INSURANCE MARKET IN INDIA

By any yardstick, India, with about 200 million middle class

households, presents a huge untapped potential for players in the

insurance industry. Saturation of markets in many developed

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economies has made the Indian market even more attractive for

global insurance majors. Table 1 reflects the low percentage and

per capita penetration of insurance in India compared to other

developed and developing countries2.

With the per capita income in India expected to grow at over 6%

for the next 10 years and with improvement in awareness levels,

the demand for insurance is expected to grow at an attractive rate

in India. An independent consulting company, The Monitor Group

has estimated that the life insurance market will grow from Rs.218

billion in 1998 to Rs.1003 billion by 2008 (a compounded annual

growth of 16.5%)3.

WINDS OF CHANGE

Reforms have marked the entry of many of the global insurance

majors into the Indian market in the form of joint ventures with

Indian companies. Some of the key names are AIG, New York Life,

Allianz, Prudential, Standard Life, Sun Life Canada and Old Mutual.

The entry of new players has rejuvenated the erstwhile monopoly

player LIC, which has responded to the competition in an

admirable fashion by launching new products and improving

service standards.

The following are the key winds of change brought about by

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privatisation.

Market Expansion: There has been an overall expansion in the

market. This has been possible due to improved awareness levels

thanks to the large number of advertising campaigns launched by

all the players. The scope for expansion is still unlimited as virtually

all the players are concentrating on large cities and towns - except

by LIC to an extent there was no significant attempt to tap the

rural markets.

New Product Offerings: There has been a plethora of new and

innovative products offered by the new players, mainly from the

stable of their international partners. Customers have tremendous

choice from a large variety of products from pure term (risk)

insurance to unit-linked investment products. Customers are

offered unbundled products with a variety of benefits as riders

from which they can choose. More customers are buying products

and services based on their true needs and not just traditional

money-back policies, which is not considered very appropriate for

long-term protection and savings. However, there are still some

key new products yet to be introduced - e.g. health products.

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Customer Service : Not unexpectedly, this was one area that

witnessed the most significant change with the entry of new

players. There is an attempt to bring in international best practices

in service and operational efficiency through use of latest

technologies. Advice and need based selling is emerging through

much better trained sales force and advisors. There is

improvement in response and turnaround times in specific areas

such as delivery of first policy receipt, policy document, premium

notice, final maturity payment, settlement of claims etc. However,

there is a long way to go and various customer surveys indicate

that the standards are still below customer expectation levels.

Channels of Distribution: Till two years back, the only mode of

distribution of life insurance products was through Agents. While

agents continue to be the predominant distribution channel, today

a number of innovative alternative channels are being offered to

consumers. Some of them are bancassurance, brokers, the

internet and direct marketing. Though it is too early to predict, the

wide spread of bank branch network in India could lead to

bancassurance emerging as a significant distribution mechanism.

Table 2 below gives a snapshot of the performance for 2003-04 (up

to October) of the 13 life insurance payers in India based on the

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first year premium figures4.

STRATEGIC ALTERNATIVES

If one analyses the history of growth of the insurance industry

since reforms, it is marked by all-round growth of all players. More

or less all players (including the market leader LIC) have

aggressively recruited and trained advisors, appointed agents,

launched new products, improved customer service standards and

revamped/expanded their distribution networks. If at all there was

any major difference between players it was only in time lag in

launching of services. Every player would like the customers to

believe that its service standards are the best or that its agents are

the most informed and ethical, but is debatable whether there are

any significant differences. In other words, each company is trying

to be ‘everything to everybody’.

Our argument is that the strategy of being everything to 16

everybody is risky. Some players justify the above strategy on the

basis that the Indian market is huge and it can accommodate

everybody. Still, in a market where it is difficult to distinguish

oneself sufficiently on service or any other parameter to be able to

charge a premium, it will lead to unmitigated price competition to

the detriment of all players. One may achieve sales turnover, but

margins and profitability will suffer severely. In the insurance

industry where large amounts of capital are required, this is risky.

While there is room for a few scale players with a finger in every

pie, it is profitable for other players to focus on different segments

to survive and thrive in a multi-firm open environment. While each

company has to choose its own unique positioning based on its

unique strengths, the below-mentioned generic positioning

alternatives5 appear worth considering. Needless to say the

positioning choices discussed here are not mutually exclusive and

can be overlapping.

Variety-based Positioning

This type of positioning is based on varieties in products and

services rather than customer segments. It is a sensible strategy

for those companies who have distinctive advantages or strengths

in offering certain products and services.

In the insurance industry too, it is possible to achieve a unique

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position by focusing on certain category of products. One such

example is Birla Sunlife Insurance, which has been placing

particular focus on investment-related products since its launch in

India6. Through its superior fund management capabilities, the

insurance company can deliver better returns on its investment-

linked products and thereby carve for itself a leadership position in

this segment.

Then there is the entire category of pension products which is

widely touted to have immense growth potential in India due to

imminent pension reforms. It is possible to achieve profitable

positioning by focusing and excelling in only pension products.

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Chapter 5- MARKETING— MIX FOR

LIFEINSURANCE COMPANIES:

The marketing mix is the combination of marketing activities that an

organisation engages in so asto best meet the needs of its targeted

market. The Insurance business deals in selling services and therefore

due weight-age in the formation of marketing mix for the Insurance

business is needed.The marketing mix includes sub-mixes of the 7 P's of

marketing i.e. the product, its price, place,promotion,people, process &

physical distribution .One more physical attraction or evidence is help in

growth of insurance business and maintain a signage touch to every

insurance company.so frist ,abovementioned 7P's and also 8th P can be

used for marketing of life Insurance products, in the following

manner:1-

1.PRODUCT :

A product means what we produce.A product is both what a seller has

to sell and a buyer has to buy. Thus, an Insurance company sells services

and therefore services are their product. A service is a bundle

of features and benefits. However these benefits have relevance to a

specific target market. Hence while developing a service package it is

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important that the package of benefits in the service offer must have a

customer perspective. The first level is that of basic service package

which includes core service, facilitating services and supporting services.

The 2nd level is that of an augmented service offering where

accessibility interaction and customer participation is given equal

importance in delivering the service product.the third level is that of the

market communication of the service offering as in its absence the

augmentation service package doesn't have any relevance to the

customer.In India, the Life Insurance Corporation of India (LIC) and 22

the Private players( icicipru life insurance,bajajAllianz,met life, birla,etc.

are offering life insurance services to the users. Apart from offering life

insurance policies, they also offer underwriting and consulting

services.When a person or an organisation buys an life Insurance policy

from the insurance company, he not only buys a policy, but along with it

the assistance and advice of the agent, the prestige of the insurance

company and the facilities of claims and compensation.It is natural that

the users expect a reasonable return for their investment and the

Life insurance companies want to maximize their profitability. Hence,

while deciding the product portfolio or the product-mix, the services or

the schemes should be motivational. The Group Insurance scheme is

required to be promoted, the Crop Insurance is required to be expanded

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and the new schemes andpolicies for the villagers or the rural

population are to be included.

2. PRICING:

A particular product or service is acceptable to the customer at a

particular price and if the price ids increased it is likely that the same

product or service might become less acceptable to the customer.

Service pricing follows the principles and practices of pricing of goods

and therefore they are either cost

based or market based.Following aspects should be taken into

consideration while pricing services:

1.Demand fluctuations should be successfully handled

2. Service prices should be based on costs so as to take into account the

tangible clues

3. Service pricing should be such as to provide value addition and quality

indication

4. The pricing strategy should cope up with the degree of

competition.But the life insurance business

the pricing decisions are concerned with:

i) The premium charged against the policies,ii) Interest charged for

defaulting the payment of premium and credit facility, andiii)

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Commission charged for underwriting and consultancy activities.With a

view of influencing the target market or prospects the formulation of

pricing strategy becomes significant. In a developing country like India

where the disposable income in the hands of prospects is low, the

pricing decision also governs the transformation of potential

policyholders into actual policyholders.The strategies may be high or

low pricing keeping in view the level or standard of customers or the

policyholders.1-The pricing in life insurance is in the form of premium

rates. The three main factors used fordetermining the premium rates

under a life insurance plan aremortality,,expense ,interest.The

premium rates are revised if there are any significant changes in any of

these factors.o Mortality (deaths in a particular area):When deciding

upon the pricing strategy the average rate of mortality is one of the

main. In a country like South Africa the threat to life is very important as

it is played byhost of diseases but in india it is less then South

Africa.oExpenses:The cost of processing, commission to agents,

reinsurance companies as well as registration are all incorporated into

the cost of instalments and premium sum and forms the integral part of

the pricing strategy.oInterest:The rate of interest is one of the major

factors which determines people's willingness to invest in Life Insurance.

People would not be willing to put their funds to invest in Life Insurance

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business if the interest rates provided by the banks or other financial

instruments are much greater than the perceived returns from the

insurance premiums.

Pricing objectives:

The pricing of services is greatly influenced by the basic service

characteristics. However in setting price objectives several factors in

relation to the overall marketing strategy of the corporation should be

considered Planned market position for the service product: Gitlow

suggested that price not only influences the market position but also

affect the customers perceptual positioning. It is therefore important to

keep market or customer position …. Product life cycle: the stage of life

cycle of the life insurance product is of utmost importance. Also you

have to consider the elasticity of demand i.e. whether the demand is

sensitive to the change in price or not……Competition: competition

should be studied both from the point of interbrand and also from the

viewpoint of the brand that provides the same need satisfaction. For

e.g. LIC is facing competition from other private players but also from

the railways faster trains on the same routes during convenient timings

….Strategic role of pricing: Lastly it is important to understand the

strategic role of pricing in your overall marketing strategy.

3. PLACE:

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This component of the marketing mix is related to two important facets

- (a)Managing the Life Insurance personnel, and (b) Locating a branch

office.The management of agents and insurance personnel is found

significant with the viewpoint of maintaining the norms for offering the

services. This is also to process the services to the end userin such a way

that a gap between the services- promised and services -- offered is

bridged over. In amajority of the service generating organizations, such

a gap is found existent which has beeninstrumental in making worse the

image problem.The transformation of potential policyholders to the

actual policyholders is a difficult task that depends upon the

professional excellence of the personnel. The agents and the rural

career agents acting as a link, lack professionalism. The front-line staff

and the branch managers also are found not assigning due weight-age

to the degeneration process. The insurance personnel if not managed

properly would make all efforts insensitive. Even if the policy makers

make provision for the quality upgrading the promised services hardly

reach to the end users. It is also essential that they have rural

orientation and are well aware of the lifestyles of the prospects or users.

They are required to be given adequate incentives to show their

excellenceWhile recruiting agents, the branch managers need to prefer

local persons and provide them training and conduct seminars. In

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addition to the agents, the front-line staff also needs an intensive

training

programme to focus mainly on behavioural management. given proper

attention. Therefore place is important but other than place what is

more important is wide distribution of policies through banks directly. It

is known as Bancassurance. It is a term used to describe the partnership

or relationship between a bank and an insurance company whereby the

insurance company uses the bank sales channel in order to sell

insurance products. By selling insurance policies bank earns a revenue

stream apart from interest. It is called as feebased income. This income

is purely risk free for the bank since the bank simply plays the role of an

intermediary for sourcing business to the insurance company.So, ICICI

Bank uses bancassurance to distribute policies to its customers. ICICI

Prudential Life has one of the largest distribution networks amongst

private life insurers in India. It has a strong presence across India with

1,960 branches (including 1,096 micro-offices) and an advisor base of

over 230,000 (as on December 31, 2009).ICICI Prudential has 6

bancassurance partners having tie-ups with ICICI Bank, Jalgaon Peoples

Coop Bank, Ratanagiri District Central Co-op Bank, BalliaKshetriya Co-

operative Bank ,RenukaNagrikSahakari Bank, Bhandara Urban Co-

operative Bank.Mostly all private life insurance companies are using

bancassurance model. Other than this all ICICI Prudential Life Insurance

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offices are at significant locations. Now LIC also use banccassurance

through their bank agent and Fses -central Bank, Uco ,Indian Overseas

Bank,LucknowKhetriyaGrameenBank,Dena Bank Etc.

4. Promotion:

The Life Insurance services depend on effective promotional measures.

In a country like India,the rate of illiteracy is very high and the rural

economy has dominance in the national economy. It is essential to have

both personal and impersonal promotion strategies. In promoting

insurance business, the agents and the rural career agents and banks

play an important role. Due attention should be given in selecting the

promotional tools for banks,agents and rural career agents and even for

the branch managers and front line staff. They also have to be given

proper training in order to create impulse buying.

IMPERSONAL COMMUNICATION

Advertising and aPublicity, organisation of conferences and

seminars,incentive to policyholders are. Arranging Kirtans, exhibitions,

participation in fairs and festivals, rural wall paintings and publicity drive

through the mobile publicity van units would be effective in creating the

impulse buying and the rural prospects would be easily transformed into

actual policyholders.Here is a life insurance promotion through ICICI

PRU husband to help him fulfil all these promises. The TV campaign has

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also been extended to outdoor."The company has also undertaken press

and internet campaigns to inform customers about benefits of some of

its products, particularly retirement solutions, through the Chintamani

campaign. "After the hugely successful Chintamani (retirement) and

SaatPhere (corporate) campaigns, ICICI Prudential Life Insurance also

introduced some innovations in the category, such as: having a tax

planner by the name of Chintamani on radio, who would answer

consumer's queries about the role of insurance in financial planning.In

addition to advertising, the company has also nitiated several activities

to raise consumer awareness about life insurance and ICICI Prudential.

"It includes seminars - ICICI Prudential regularly holds consumer

awareness meets on 'the need for retirement planning' in different cities

such as Pune, Aurangabad, Coimbatore, Nagpur, Bangalore and

Mangalore. These are very well attended and have contributed

significantly towards increasing awareness about the category and the

company. Apart from this, it also entered into alliances with telecom

companies.Now above these 4 P's when inter related with 3 P's of

marketing mix.then it help to service marketing- life insurance

marketing let's see these5.

5.PEOPLE:

Understanding the customer better allows to design appropriate

products. Being a service industry which involves a high level of people 27

interaction, it is very important to use this resource efficientlyin order to

satisfy customers. An essential ingredient to any service provision is the

use of appropriate staff and people. appropriately in the delivery of

their service is essential if the organisation wants to obtain a form of

competitive advantage. Consumers make judgments and deliver

perceptions of the service based on the employees they interact with.

Staff should have the appropriate interpersonal skills, aptitude, and

service knowledge to provide the service that consumers are paying for..

To look on this we see ICICI Prudential has good number of talented

people in their organization . The people strategy of ICICI Prudential is

"To build a committed team with a culture of innovation, learning and

growth. The Human Resource Function at ICICI Prudential

drives the people strategy of the business. With its initial focus on

operational excellence to deliver benefits and services to staff members,

HR is now committed to building capability through state of the art

processes. A robust performance management system, compensation

system and a segmented training architecture enable it to deliver value

to the organization. The company provides an enabling environment to

foster growth and learning for their employees.Every member of the

ICICI Prudential team is committed to 5 core values:* Integrity*

Customer First *

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Boundaryless* Ownership * PassionThese values shine forth in all we

do, and have become the keystones of our success.

6. PROCESS:

The process should be customer friendly in Life insurance industry. The

speed and accuracy of payment is of great importance. The processing

method should be easy and convenient to the customers. Instalment

schemes should be streamlined to cater to the ever growing demands of

the customers. IT & Data Warehousing will smoothen the process flow.

IT will help in servicing large no. of customers efficiently and bring down

overheads. ( the product describes the features provided by the insurer

like maturity bonus, claims allowed etc. These features vary from

product to product), sum assured (the amount for which the client is

covered), term (number of years for which the client is to be covered)

and premium amount (instalment amount to be paid by the client to the

insurer). The agent who brings this proposal is termed as a base/

servicing agent for the proposal.The proposal will go through various

stages of approval &risk evaluation by the "Central Processing Centre"

of the ICICI Prudential. Upon final approval, a legal agreement, termed

as policy, between the insurer and the client is prepared whereby the

insurer covers the client for the sum assured. The client is also entitled

for some additional benefits, if any, depending on the features of the

product taken in the policy. The base agent gets a commission for the 29

policy…The client pays a premium at regular intervals. These subsequent

premiums aretermed as renewal premiums. The base agent gets

acommission on the renewal premium also….The client may come back

with some alterations to the policy viz. increase/decrease in sum

assured, increase/decrease of the term of policy etc. The insurer will

make the relevant changes to the policy and will issue endorsements

stating the alterations made and their effect on the policy… During the

term of the policy, the client can submit claims. The insurer makes

payment against the claim after verification. Depending on the type of

claim the policy is either terminated or is kept in force.At the end of the

term of the policy, the client gets the sum assured as part of the

maturity benefit under life insurance policies. In addition to this the

client will get the maturity bonus and any other benefits depending on

the product feature.

7. PHYSICAL DISTRIBUTION:

Distribution is a key determinant of success for all insurance companies.

Today, the nationalized insurers have a large reach and presence in

India. Building a distribution network is very expensive and time

consuming. If the insurers are willing to take advantage of India's large

population and reach a profitable mass of customers, then new

30

distribution avenues and alliances will be necessary.Initially life

insurance was looked upon as a complex product with a high advice and

service component. Buyers prefer a face-to-face interaction and they

place a high premium on brand names and reliability. As the awareness

increases, the product becomes simpler and they become off-the-shelf

commodity products. Today, various intermediaries, not necessarily life

insurance companies, are selling insurance. For example.The financial

services industries have successfully used remote distribution channels

such as telephone or internet so as . Finance companies and banks can

emerge as an attractive distribution channel forinsurance in India. In

India also, banks hope to maximize expensive existing networks by

selling a range of products

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Chapter 6

THE ICICI PRUDENTIAL EDGE

The ICICI Prudential edge comes from our commitment to our

customers, in all that we do - be it product development, distribution,

the sales process or servicing. Here's a peek into what makes us leaders.

Our products have been developed after a clear and thorough

understanding of customers' needs. It is this research that helps us

develop Education plans that offer the ideal way to truly guarantee your

child's education, Retirement solutions that are a hedge against inflation

and yet promise a fixed income after you retire, or Health insurance that

arms you with the funds you might need to recover from a dreaded

disease.

Having the right products is the first step, but it's equally important to

ensure that our customers can access them easily and quickly. To this

end, ICICI Prudential has an advisor base across the length and breadth

of the country, and also partners with leading banks, corporate agents

and brokers to distribute our products .

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Robust risk management and underwriting practices form the core of

our business. With clear guidelines in place, we ensure equitable costing

of risks, and thereby ensure a smooth and hassle-free claims process.

Entrusted with helping our customers meet their long-term goals, we

adopt an investment philosophy that aims to achieve risk adjusted

returns over the long-term.

Last but definitely not the least, our team is given the opportunity to

learn and grow, every day in a multitude of ways. We believe this keeps

them engaged and enthusiastic, so that they can deliver on our promise

to cover you, at every step in life

AWARDS & RECOGNITIONS

Awards 2012

ICICI Prudential Life Insurance has been pronounced winner in the 2nd

Excellence Awards and Recongnition for Shared Services, 2012. We won

the award in the category - Shared Services in India - Insurance Domain.

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These awards have been instituted by All India Management Association

(AIMA) & Delhi Management Association (DMA), in collaboration with

Rvalue Consulting as knowledge partners, to honour,recognize &

promote trasformative strategies for shared services.

Bronze Effie in the Financial services category for the campaign "Life

Insurance in just 10 Minutes"

ICICI Pru iCare has been voted the Product of the Year 2012*

*A survey by Nielsen for Insurance Category that included 30,000 peopl

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Chapter7- Weakness of Insurance Industry

prior to Reforms of Late 1990s

People in general have all along been grumbling against LIC’s

monopolistic exploitation, poor service and high premium rates. Same

was the case with general insurance business which was also

monopolistic by the Government. Articulating the inefficiency of the

government – controlled insurance sector and the need to allow private

participation in it, the ninth five year plan (1997-2002) observed , ‘’ …

the average premium charge d by insurance companies in India tends to

be relatively high due to obsolete and rigid actuarial practices and

inefficient operations. There is a pressing need to reorient the insurance

sector in India in a manner that it fulfils its principal mandate of

providing risk cover. It is unlikely that this sector would attain the

requisite degree of efficiency and professionalism unless it is exposed to

a certain degree of competition.”

Low productivity:

Being a monopoly of the Government, the insurance industry in India

could not develop on modern and competitive lines after Independence.

It suffered from various infirmities. There can be several parameters to

measure the productivity in the insurance sector. These can be in terms

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of collection of premium per development officer, issuance of

documents per employee, claim settlement per employee, underwriting

results, yield on investment income etc. productivity of the Indian

insurance industry in terms of these indicators was quite prior to the

reforms of late 1990s.

Lack of Information Technology:

The adoption of information technology in the industry was not to the

desired extent. There was lack of computerization and hence database

for being utilized by the insurance companies agents and consumers.

Technology infrastructure, such as electronic fund transfer, internet,

automatic teller machines, interactive voice response electronic data

inter change was almost not-existent. The use of internet and e-

commerce for selling the insurance products had not yet commenced in

the industry.

Limited Availability of Insurance Products: Insurance Policies in the

segment of health and household risks were not properly marketed and

publicised. The entire thrust on health insurance was on products after

the occurrence of illness servicesprovided was low. The quality of

insurance services is evaluated, inter alia, in terms of expeditious

settlement of l, delivery of policy documents and after sales services.

The delivery of insurance documents took long times.

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Chapter 8- Indian Insurance Business: From

State Monopoly to Competition

The public sector monopoly of insurance business was ended with

enactment of the insurance regulatory and Development Act, 1999.The

insurance business thrown open for private participation [including

foreignequity participation up to 26 percent of the paid-up

capital].Insurance Regulatory And Development Authority was enacted

in 1999 and a separate Insurance Regulatory and Development

Authority was set up. In order to ensure solvency of insurers and

protection of policyholders’ interests, the IRDA Act stipulates prudential

norms for investments and service obligations in the less-lucrative rural

sector. Following this, the Insurance Regulatory and Development

Authority (IRDA) was set up April 19 , 2000. Its major functions

include(a) regulation of investment funds by insurers and companies.(b)

adjudication of disputes between insurers and intermediaries and (c)

supervision of Tariff Advisory Committee The IRDA has been notifying

regulations from time to time, which inter alia, pertain to registration of

Indian insurance companies insurance advertisements and disclosures,

licensing agents and intermediaries, reinsurance, and obligation of

insurers to rural and social sector

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Chapter 9- Conclusion

Life insurance industry is a way to meet the contingencies of physical

and economical death of any individual. Today, the marker is flooded

with many private life insurance companies with a wide range of

products because the awareness of respondents about insurance has

increased though not significantly. Life insurance companies have to

adopt some means to delight and allure thecustomers through their

products and services with a better knowledge of the behavior of the

customers. It is not only important to introduce innovative products

catering to the needs of the customer but also to understand the

channels of communication between then. The Information Technology

can be used to the fullest extent possible so that the customers can get

their information about the product and services quickly in a lesser

time. The insurers can conduct customers meet at regular intervals

including rural areas not only to improve the level of awareness of the

public but also to get the opinion about the problems they face. It is also

necessary that the Life Insurance industry be modernized, upgraded and

geared to go to the unreached potential customers. If all the suggestions

given in the study are carried out by the life insurers there is no doubt

about the life insurers industry reaching new heights in the near future.

Let ,Aim for the Skies be the motto of Life Insurance Industry.

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Chapter 10- WEBLIOGRAPHY

(i) www.timesofindia.indiatimes.com

(ii) www. thehindubusinessline.com

(iii) www.economictimes.indiatimes.com

(iv) www.irdaindia.org

(v) www.dnaindia.com

(vi) www.google.com

(vii) www.icici.com

(viii)

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