EXECUTIVE SUMMARY

Overall, the life insurance and pension sector is set for rapid changes and growth in

the years ahead. Delivering service, building trust and being innovative are key

areas in which any company will have to excel in order to do well in the long road

ahead. Different companies will take different approaches and it would be myriad of

solutions that will be found to delight the Indian customer.

During the first part, I was given complete classroom training about the various unit

linked as well as the traditional plans and solutions which the company offers.

Later, Market Research was done through various activities and tele-calling which

are discussed further in the report. Activities led to practical exposure and taught me

the aspects of customer dealing.

Finally, interesting conclusions were drawn out of the data collected regarding the

Awareness of Financial Planning among the people in today’s environment.

It was great experience because selling an insurance product demands a great deal

of confidence and product knowledge.

1

INDUSTRY PROFILE

Overview

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

happens to be a mega opportunity in India. It’s a business growing at the rate

of 15-20 per cent annually.

Together with banking services, it adds about 7 percent to the country’s

GDP .In spite of all this growth the statistics of the penetration of the

insurance in the country is very poor. Nearly 80 per cent of Indian population

is without life insurance cover while health insurance and non-life insurance

continues to be below international standards. And this part of the population

is also subject to weak social security and pension systems with hardly any

old age income security. This it-self is an indicator that growth potential for the

insurance sector is immense.

Historical Perspective

The insurance came to India from UK; with the establishment of the Oriental Life

insurance Corporation in 1818.The Indian life insurance company act 1912 was the

first statutory body that started to regulate the life insurance business in India. By

1956 about 154 Indian, 16 foreign and 75 provident firms were been established in

India. Then the central government took over these companies and as a result the

LIC was formed. Since then LIC has worked towards spreading life insurance and

building a wide network across the length and the breath of the country.

2

Important milestones in the life insurance business in India:

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

regulate the life insurance business.

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

central government and nationalized. LIC formed by an Act of Parliament- LIC Act

1956- with a capital contribution of Rs.5 cr. from the Government of India.

Important milestones in the general insurance business in India

are:

1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact all

classes of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India,

frames a code of conduct for ensuring fair conduct and sound business practices.

1972: The general insurance business in India nationalized through The General

Insurance Business (Nationalization) Act, 1972 with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies- the National Insurance

Company Limited, the New India Assurance Company Limited, the Oriental

Insurance Company Ltd. and the United India Insurance Company Ltd. GIC

incorporated as a company.

Insurance Sector Reforms

3

Prior to liberalization of Insurance industry, Life insurance was

monopoly of LIC.

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:

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.

Competition

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

to enter the sector. 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.

Regulatory Body

4

The Insurance Act should be changed. An Insurance Regulatory body should be set

up. Controller of Insurance- a part of the Finance Ministry- should be made

independent

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)

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 is to be carried out in the insurance

industry.

STATISTICS (INDIAN & GLOBAL)

This section gives the users important and detailed statistics of the Indian as well as

the Global insurance industry. These statistics would give important insights of

where the respective markets are headed for.

The global life insurance market stands at $1,521.2 billion while the non-life

insurance market is placed at $922.4 billion.

The United States itself accounts for about one-third of the $2443.6 billion

global insurance market and Japan stands next with a 20.62% share.

India takes the 23rd position with US $9.933 billion annual premium

collections and a meager 0.41% share.

5

Out of one billion people in India, only 35 million people are covered by

insurance.

India's life insurance premium as a percentage of GDP is just 1.77 per cent.

The income derived by GIC and its subsidiary companies through investment

was Rs.2491.76 crore and the investable fund generated was Rs.2843 crore

in 1999-2000.

Indian insurance market is set to touch $25 billion by 2010, on the assumption

of a 7 per cent real annual growth in GDP.

NATURE OF INDUSTRY

The insurance industry provides protection against financial losses resulting from a

variety of perils. By purchasing insurance policies, individuals and businesses can

6

receive reimbursement for losses due to car accidents, theft of property, and fire and

storm damage; medical expenses; and loss of income due to disability or death.

The insurance industry consists mainly of insurance carriers (or insurers) and

insurance agencies and brokerages. In general, insurance carriers are large

companies that provide insurance and assume the risks covered by the policy.

Insurance agencies and brokerages sell insurance policies for the carriers.

Insurance companies assume the risk associated with annuities and insurance

policies and assign premiums to be paid for the policies. In the policy, the companies

states the length and conditions of the agreement, exactly which losses it will provide

compensation for, and how much will be awarded.

The premium charged for the policy is based primarily on the amount to be awarded

in case of loss, as well as the likelihood that the insurance carrier will actually have

to pay. In order to be able to compensate policyholders for their losses, insurance

companies invest the money they receive in premiums, building up a portfolio of

financial assets and income-producing real estate which can then be used to pay off

any future claims that may be brought.

There are two basic types of insurance carriers: Direct and Reinsurance.

Direct carriers are responsible for the initial underwriting of insurance policies and

annuities, while Reinsurance carriers assume all or part of the risk associated with

the existing insurance policies originally underwritten by other insurance carriers.

7

Direct insurance carriers offer a variety of insurance policies.

Life insurance provides financial protection to beneficiaries—usually spouses and

dependent children—upon the death of the insured.

Disability insurance supplies a preset income to an insured person who is unable

to work due to injury or illness

Health insurance pays the expenses resulting from accidents and illness.

An Annuity (a contract or a group of contracts that furnishes a periodic income at

regular intervals for a specified period) provides a steady income during retirement

for the remainder of one’s life.

Property-casualty insurance protects against loss or damage to property resulting

from hazards such as fire, theft, and natural disasters.

Liability insurance shields policyholders from financial responsibility for injuries to

others or for damage to other people’s property. Most policies, such as automobile

and homeowner’s insurance, combine both property-casualty and liability coverage.

Companies that underwrite this kind of insurance are called property-casualty

carriers.

What is Life Insurance?

Human life is subject to risks of death and disability due to natural and accidental

causes. When human life is lost or a person is disabled permanently or temporarily,

8

there is a loss of income to the household. The family is put to hardship. Risks are

unpredictable. Death/disability may occur when one least expects it. There are a

number of life insurance products which offer protection and also coupled with

savings.

A Term insurance product provides a fixed amount of money on death during the

period of contract.

A Whole Life insurance product provides a fixed amount of money on death.

An Endowment Assurance product provided a fixed amount of money either on

death during the period of contract or at the expiry of contract if life assured is alive.

A Money Back Assurance product provides not only fixed amounts which are

payable on specified dates during the period of contract, but also the full amount of

money assured on death during the period of contract.

An Annuity product provides a series of monthly payments on stipulated dates

provided that the life assured is alive on the stipulated dates.

A Linked product provides not only a fixed amount of money on death but also

sums of money which are linked with the underlying value of assets on the desired

dates.

There are a variety of life insurance products to suit to the needs of various

categories of people—children, youth, women, middle-aged persons, old people; and

also rural people, film actors and unorganized laborers.

9

Life insurance products could be purchased from registered life insurers notified by

the IRDA. Insurers appoint insurance agents to sell their products.

As per regulations, insurers have to give the various features of the products at the

point of sale. The insured should also go through the various terms and conditions of

the products and understand what they have bought and met their insurance needs.

They ought to understand the claim procedures so that they know what to do in the

event of a loss.

INDIAN INSURANCE SECTOR

REGULATORY BODY

Insurance is a federal subject in India. The primary legislation that deals with

insurance business in India is: Insurance Act, 1938, and Insurance Regulatory &

Development Authority Act, 1999.

The Insurance Regulatory and Development

Authority (IRDA)10

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 a statutory body

in April 2000 has fastidiously stuck to its schedule of framing regulations and

registering the private sector insurance companies.

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’s online service for issue and renewal of licenses to agents. Since being set up

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

compatible regulations.

MISSION-IRDA

“To protect the interests of the policyholders, to regulate, promote and ensure

orderly growth of the insurance industry and for matters connected therewith

or incidental thereto.”

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IMPACT OF LIBERALISATION

The introduction of private players in the industry has added to the colors in the dull

industry. The initiatives taken by the private players are very competitive and have

given immense competition to the on time monopoly of the market LIC. Since the

advent of the private players in the market the industry has seen new and innovative

steps taken by the players in this sector.

The new players have improved the service quality of the insurance. As a result LIC

down the years have seen the declining phase in its career. The market share was

distributed among the private players. Though LIC still holds the 79% of the

insurance sector but the upcoming natures of these private players are enough to

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give more competition to LIC in the near future. LIC market share has decreased

from 95% (2002-03) to 81 %( 2004-05).

LIC has the current market share of 79%.

Among the private players ICICI Prudential has the maximum of approx. 5.60%

Followed by Bajaj Allianz (3.27 %) and HDFC Standard Life of about 3.11%.

Below is the table that shows the market share of various players of the industry.

The following companies have the rest of the market share of the insurance industry.

COMPANY NAME MARKET SHARE

LIC 79.30

ICICI PRUDENTIAL 5.63

BAJAJ ALLIANZ 3.27

HDFC STANDARD LIFE 3.11

BIRLA SUNLIFE 2.32

TATA AIG 1.45

SBI LIFE 1.24

MAX NEWYORK 0.90

AVIVA LIFE 0.82

ING VYSYA 0.66

OM KOTAK LIFE 0.54

13

AMP SANMAR 0.38

METLIFE 0.33

RELIANCE LIFE 0.05

The liberalization of the Indian insurance sector has opened new doors to private

competition and the new and improved insurance sector today promises several new

job opportunities. With private players now in the field, there will be innovative

products, better packaging, improved customer service, and, most importantly,

greater employment opportunities.

There are a number of options to choose from for a career in Insurance. Ideally

an insurance company will have openings in the following fields:

Actuaries

Underwriter

Surveyor

Investment

Marketing & Distribution

Actuaries

Evaluates the risk for companies to be used for strategic management

decisions.

14

Actuaries use their analytical skills to predict the risk of writing insurance

policies through the use of mathematical, statistical and economic models.

An actuary not only fixes the premium rates for new products, but also revises

both products and prices. They calculate costs to assume ris

Underwriters

Insurance underwriters review insurance applications and decide whether

they should be accepted or rejected based on the degree of risks involved in

insuring the people or objects of concern.

In the life insurance business, an underwriter is expected to filter the "bad or

substandard lives". Whereas, in the general insurance segment, he takes care

of risk management.

Agents/Brokers:

Insurance agents may work for one insurance company or as independent

agents selling for several companies.

Insurance agents and brokers can find openings in the health insurance

sector, financial planning services, retirement planning counseling or even

provide other services, for e.g. sell mutual funds, annuities etc.

Surveyor/Loss Assessor:

Surveyors are professionals who assess the loss or damage and serve as a

link between the insurer and the insured.

They usually function only in non life business.

Their job is to assess the actual loss and avoid false claims.

15

Sales/Marketing:

And who can forget the guys who make and break a brand. They would be

required in a large number in order to promote the number of products that will be

launched by numerous companies in the insurance sector.

CURRENT SCENARIO OF THE INDUSTRY

INSURANCE MARKET IN INDIA

India with about 200 million middle class household shows a huge untapped

potential for players in the insurance industry. Saturation of markets in many

developed economies has made the Indian market even more attractive for global

insurance majors. The insurance sector in India has come to a position of very high

potential and competitiveness in the market.

Innovative products and aggressive distribution have become the say of the day.

Indians, have always seen life insurance as a tax saving device, are now suddenly

turning to the private sector that are providing them new products and variety for

16

their choice. Life insurance industry is waiting for a big growth as many Indian and

foreign companies are waiting in the line for the green signal to start their operations.

The Indian consumer should be ready now because the market is going to give them

an array of products, different in price, features and benefits. How the customer is

going to make his choice will determine the future of the industry.

CUSTOMER SERVICE

Consumers remain the most important centre of the insurance sector. After the entry

of the foreign players the industry is seeing a lot of competition and thus

improvement of the customer service in the industry. Computerization of operations

and updating of technology has become imperative in the current scenario. Foreign

players are bringing in international best practices in service through use of latest

technologies. The one time monopoly of the LIC and its agents are now

Going through a through revision and training programs to catch up with the other

private players. Though lot is being done for the increased customer service and

adding technology to it but there is a long way to go and various customer surveys

indicate that the standards are still below customer expectation levels.

DISTRIBUTION CHANNELS

Till date insurance agents still remain the main source through which insurance

products are sold. The concept is very well established in the country like India but

still the increasing use of other sources is imperative. It therefore makes sense to

look at well- balanced, alternative channels of distribution.

17

LIC has already well established and have an extensive distribution channel and

presence. New players may find it expensive and time consuming to bring up a

distribution network to such standards. Therefore they are looking to the diverse

areas of distribution channel to have an advantage. At present the distribution

channels that are available in the market are:

• Direct selling/Retail

• Corporate agents

• Group selling

• Brokers and cooperative societies

• Banc assurance

DIRECT SELLING/RETAIL

Direct selling or retail business is carried out by Agents of the company. This is the

main distribution channel due to the complexity of most Insurance products

(Endowment, Whole of Life, Unit Linked). This tends to be the focus of most

companies due to its past success as well as its ability to deliver the right advice.

However, this channel can be expensive and it is a time consuming sales process.

An agent is the public face of an Insurance company. Hence it is important that this

face is always smiling and presentable and the facts and figures at his/ her

command are updated and correct.

An agent should be a pleasing personality with complete knowledge about the

various plans and solutions which the company has to offer and must also

understand the customer’s psychology well to deal in an efficient manner.

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BANCASSURANCE

Banc assurance is the distribution of insurance products through the bank's

distribution channel. It is a phenomenon wherein insurance products are offered

through the distribution channels of the banking services along with a complete

range of banking and investment products and services. To put it simply, Banc

assurance, tries to exploit synergies between both the insurance companies and

banks.

Advantages to banks

Productivity of the employees increases.

By providing customers with both the services under one roof, they

can improve overall customer satisfaction resulting in higher customer retention

levels.

Increase in return on assets by building fee income through the sale of

insurance products.

Can leverage on face-to-face contacts and awareness about the

financial Conditions of customers to sell insurance products.

Banks can cross sell insurance products e.g.: Term insurance products with loans.

Advantages to insurers 19

Insurers can exploit the banks' wide network of branches for distribution of

products. The penetration of banks' branches into the rural areas can be

utilized to sell products in those areas.

Customer database like customers' financial standing, spending habits,

investment and purchase capability can be used to customize products and

sell accordingly.

Since banks have already established relationship with customers, conversion

ratio of leads to sales is likely to be high. Further service aspect can also be

tackled easily.

Advantages to consumers

Comprehensive financial advisory services under one roof. i.e., insurance

services along with other financial services such as banking, mutual funds,

personal loans etc.

Enhanced convenience on the part of the insured

Easy accesses for claims, as banks are a regular go.

Innovative and better product ranges

WHAT DOES LIFE INSURANCE HAVE TO OFFER?

Life insurance is many different things to many different people. For some, it is a

premium to be paid on time. For others it offers liquidity since cash can be borrowed

when needed. For the investment-minded, it denotes a constantly growing capital

account and numerous other benefits. 

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The contractual guarantee is the promise to pay, backed by one of the oldest and

most stably regulated financial industry operating in the Indian sub-continent today.

1) Insurance Buys Time and Money

People like to refer to life insurance as time insurance, the reason being that life

insurance proceeds are paid to the insured's beneficiaries in case of death. The

money proffered by life insurance helps buy time to adjust to the change of

circumstances. Insurance provides large amounts of cash that will keep the lifestyle

for the survivors the way it was before the insured's death.

2) Insurance Offers Peace of Mind

For the person who buys an insurance policy, it offers absolute and complete peace

of mind. He or she knows that the decision made by him will provide sound benefits

in the future, whether or not the individual may live to see it.

3) Multiple Applications

The future is uncertain for each and every one. No one knows how long He or she

will live. The investment benefit is paid to the insured's beneficiaries after his death

or it can be used during the life as well. Life insurance policy owners can turn to the

cash value of the policy in case of a financial emergency when all avenues are either

blocked or denied.

4) Enduring Elasticity

21

Since life insurance is flexible enough to serve several needs, the insured can keep

several long-term goals in mind once he or she invests in the insurance plan. The

cash value of the policy can be allocated towards augmenting the monthly income

during the retirement years. Leisure years should be turned into pleasure years.

Permanent life insurance is designed on the concepts of long-term flexibility.

5) Financial Security

The insurance policy offers contractual guarantees to people looking for peace of

mind when they buy life insurance. Life insurance offers complete financial security.

The purchase of life insurance demonstrates concern for a family's future financial

well being.

6) Regard for Family

The purchase of life insurance clearly displays care and concern for the people the

policy owner loves.

7) Insurance is Safer

No financial institution can do what life insurance does. No industry can back its

products with reserves and surplus as sound as those of the insurance industry. The

proof of strength and safety that insurance companies have ensured even under the

most adverse of conditions is a matter of pride for the entire insurance industry. For

generation after generation, life insurance has been acclaimed as the very

benchmark of security against which the other industries are measured.

OPPORTUNITIES FOR INSURANCE COMPANIES

22

In the now open sector on insurance, the following is what I feel will determine the

success of the company in particular and the industry in general:

A change in the attitude of the population

Indians have always been wary of employing their hard-earned money in a venture

that will pay them on their death. Insurance has always been used as a Tax saving

tool. No more, no less. It is upon the insurers to educate the people to secure/insure

their future against any unknown calamity and make a shield around their families

and businesses.  

An open and transparent environment created under the IRDA.

The reason for this being on the top of our understanding is that when ever we have

seen any sector open up in India there are always grey areas and unsure policies.

These are not exactly what any player, be it Indian or foreign, looks for. It creates an

air of uncertainty in all the decision making process. Insurance as a sector requires

players who are strong financially and are willing to wait for returns. Their confidence

can be bolstered only if there is an open and a transparent policy guidelines. This will

also help the consumers feel safe that the regulatory is an active one and cares to

do everything possible to keep things under control and help the insurance

environment grow maturely.   A well-established distribution network.

To cater to the largest democracy in the world is by no means a cakewalk. Insurance

profits are directly related to number of insured and this is in turn related to the

reach.

23

Trained professionals to build and sell the product.

It is said that the insurance agent is the best salesman in the world. He makes you

pay, regularly, an amount promising to pay back only on your death. Thus the

players will require an excellent sales team to sell their products in the now

competitive environment. 

Encouragement of new and better products and letting the hackneyed ones

die out.

This will itself ensure the market grows. And that every class/society gets a product

that best suits them.

SPECIAL PROVISIONS

The Income Tax Act and Life Insurance policies

Under Section 10(10D), any sum received under a Life Insurance policy (not

being a Key Man policy) is also exempt from taxation. But it is wise to remember

that Pensions received from Annuity plans are not exempted from Income Tax.

Section 80C provides a deduction up to Rs.1, 00,000/- to an individual assesses

for any amount paid as a premium. 

POLICYHOLDERS GRIEVANCES

24

Policyholders may have complaints against insurers either in respect of their policies

or their claims. As per Regulations for Protection of policyholders’ interests, 2002,

every insurer should have in place, a grievance reprisal system to address the

complaints of policyholders. The IRDA has a Grievance Reprisal Cell which plays a

facilitative role by taking up complaints against insurers with the respective

companies for speedy resolution. The IRDA however does not adjudicate on

complaints.

SWOT ANALYSIS OF INSURANCE INDUSTRY

STRENGTH

1. Best returns with the added advantage of 100% life insurance coverage.

2. Good option for new investors into the market as all the money is invested by best

fund managers so with less knowledge also they can earn good Returns.

3. Best commission charges paid to the agents which vary from 12% to 35% which is

much higher as compared to mutual funds i.e. , only 2-2.5%.

WEAKNESS

1. HDFC SLIC could not able to match LIC in remote areas services.

2. Misleading facts given by life advisors about the returns of ULIPs.

25

3. Hidden charges taken by the companies.

4. Less Promotional Campaigns.

OPPORTUNITY

1. 80 percent of Indian population is still under insured. So there is

a big opportunity for insurance companies.

2. As the stock market can be under the mark any time so it can

bring loss to the investors but as in ULIPs there is proper mixture of debt

securities and equity so the loss is incurred during dark trading days also.

3. Unit-linked products are exempted from tax and they provide life insurance.

4. Increasing consumer awareness about Insurance and its use.

THREAT

1. Cannibalism within the industry by providing misleading figures to the investors.

2. Govt.’s instability has a long term repercussions affecting company’s policies

and its growth.

26

COMPANY’S PROFILE

INTRODUCTION

Helping Indians experience the joy of home ownership.

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. HDFC operates

through 75 locations throughout the country with its Corporate Headquarters in

Mumbai, India.

OBJECTIVES AND BACKGROUND

27

Background

HDFC was incorporated in 1977 with the primary objective of meeting a social need

– that of promoting home ownership by providing long-term finance to households for

their housing needs. HDFC was promoted with an initial share capital of Rs. 100

million.

Business Objectives

The primary objective of HDFC is to enhance residential housing stock in the country

through the provision of housing finance in a systematic and professional manner,

and to promote home ownership. Another objective

Is to increase the flow of resources to the housing sector by integrating the housing

finance sector with the overall domestic financial markets..

ORGANIZATION AND MANAGEMENT

HDFC is a professionally

managed organization with

28

a board of directors

consisting of eminent

persons who represent

various fields including

finance, taxation,

construction and urban

policy & development. The

board primarily focuses on

strategy formulation, policy

and control, designed to

29

deliver increasing value to

shareholders.

FOUNDER – Mr. Hasmukhbhai Parekh

Brief profile of the Board of Directors

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. Keki M Mistry joined the Board of Directors of the Company in December,

2000. He is currently the Managing Director of HDFC Limited. He joined HDFC

Limited in 1981 and became an Executive Director in 1993. He was appointed as

its Managing Director in November, 2000. Mr. Mistry is a Fellow of the Institute of

Chartered

30

Accountants of India and a member of the Michigan Association of Certified Public

Accountants.

Mr. Alexander M Crombie joined the Board of Directors of the Company in April,

2002. He has been with the Standard Life Group for 34 years holding various

senior management positions. He was appointed as the Group Chief Executive of

the Standard Life Group in March 2004. Mr. Crombie is a fellow of the Faculty of

Actuaries in Scotland.

   

Ms. Marcia D Campbell is currently the Group Operations Director in the Standard

Life group and is responsible for Group Operations, Asia Pacific Development,

Strategy & Planning, Corporate Responsibility and Shared Services Centre. Ms.

Campbell joined the Board of Directors in November 2005.

   

Mr. Keith N Skeoch is currently the Chief Executive in Standard Life Investments

Limited and is responsible for overseeing Investment Process & Chief Executive

Officer Function. Prior to this, Mr. Skeoch was working with M/s. James Capel &

Co. holding the positions of UK Economist, Chief Economist, Executive Director,

Director of Controls and Strategy HSBS Securities and Managing Director

International Equities. He was also responsible for Economic and Investment

Strategy research produced on a worldwide basis. Mr. Skeoch joined the Board of

Directors in November 2005.

31

Mr.

Mr. Gautam R Divan is a practicing Chartered Accountant and is a Fellow he

Institute of Chartered Accountants of India. Mr. Divan was the Former Chairman

and Managing Committee Member of Midsnell Group International, an

International Association of Independent Accounting Firms and has authored

several papers of professional interest. Mr. Divan has wide experience in auditing

accounts of large public limited companies and nationalized banks, financial and

taxation planning of individuals and limited companies and also has substantial

experience in structuring overseas investments to and from India.

   

Mr. Ranjan Pant is a global Management Consultant advising

CEO/Boards on Strategy and Change Management. Mr. Pant, until 2002 was a

Partner & Vice-President at Bain & Company, Inc., Boston, where he led the

worldwide Utility Practice. He was also Director, Corporate Business Development

at General Electric headquarters in Fairfield, USA. Mr. Pant has an MBA from The

Wharton School and BE (Honors) from Birla Institute of Technology and Sciences.

   

Mr. Ravi Narain is the Managing Director & CEO of National Stock Exchange of

India Limited. Mr. Ravi Narain was a member of the core team to set-up the

32

Securities & Exchange Board of India (SEBI) and is also associated with various

committees of SEBI and the Reserve Bank of India (RBI).

   

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 Degree in

Business Administration from The American University, Washington DC.

   

Ms. Renu S. Karnad is the Executive director of HDFC Limited, is a graduate in

law and holds a Master’s degree in economics from Delhi University. She has

been employed with HDFC Limited since 1978 and was appointed as the

Executive Director in 2000. She is responsible for overseeing all aspects of

lending operations of HDFC Limited.

HDFC has a staff strength of 1029, which includes professionals from the fields of

finance, law, accountancy, engineering and marketing.

SUBSIDIARY & ASSOCIATE COMPANIES

33

HDFC Bank

HDFC Mutual Fund

HDFC Standard Life ++

Intel net Global Services Ltd.

HDFC Chubb General Insurance Company Ltd.

HDFC Reality

Other Companies Co-Promoted by HDFC

HDFC Trustee Company Ltd.

34

HDFC Developers Ltd.

HDFC Venture Capital Ltd.

HDFC Ventures Trustee Company Ltd.

HDFC Investments Ltd.

HDFC Holdings Ltd.

Home Loan Services India Pvt. Ltd.

Credit Information Bureau (India) Ltd

HDFC STANDARD LIFE INSURANCE

35

INTRODUCTION:

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. Each 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 Moody's 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 14th August 2000.

HDFC is the majority stakeholder in the insurance JV with 81.4 % stake and

Standard Life has a stake of 18.6%. Mr. Deepak Satwalekar is the MD and CEO of

the venture.

THE PARTNERSHIP:

36

HDFC and Standard Life first came together for a possible joint venture, to enter the

Life Insurance market, in January 1995. It was clear from the outset that both

companies shared similar values and beliefs and a strong relationship quickly

formed. In October 1995 the companies signed a 3 year joint venture agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further strengthening

the relationship.

In October 1998, the joint venture agreement was renewed and additional resource

made available. Around this time Standard Life purchased 2% of Infrastructure

Development Finance Company Ltd. (IDFC). Standard Life also started to use the

services of the HDFC Treasury department to advise them upon their investments in

India.

Towards the end of 1999, the opening of the market looked very promising and both

companies agreed the time was right to move the operation to the next level.

Therefore, in January 2000 an expert team from the UK joined a hand picked team

from HDFC to form the core project team, based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and a 5%

stake in HDFC Bank.

COMPANY’S MISSION:

To be the top life insurance company in the market.

37

This not only means being the largest or the most productive company in the market,

but a combination of several things like-

Customer service of the highest order

Value for money for customers

Professionalism in carrying out business

Innovative products to cater to different needs of different customers

Use of technology to improve service standards

Increasing market share

COMPANY’S VALUES:

SECURITY: Providing long term financial security to our policy holders will be

our constant endeavor. This is done by offering life insurance and pension

products.

TRUST: Company appreciates the trust placed by our policy holders in us.

Hence, company will aim to manage their investments very carefully and live

up to this trust.

INNOVATION: Recognizing the different needs of our customers, company

will be offering a range of innovative products to meet these needs.

Company’s mission is to be the best new life insurance company in India and these

are the values that will guide us in this.

KEY MANAGEMENT PERSONNEL

Chairman

38

Mr. Deepak S. Parekh

Board of Directors

Mr. K. M. Mistry

Ms. Renu S. Karnad

Mr. A. M. Crombie

Ms. Marcia D. Campbell

Mr. Norman Keith Skeoch

Mr. G. R. Divan

Mr. G. N. Bajpai

Mr. Ranjan Pant

Mr. Ravi Narain

Managing Director & CEO

Mr. D. M. Satwalekar

AUDIT COMMITTEE

Haribhakti & Company

Chartered Accountants

B.K. Khare & Co.

Chartered Accountants

Bankers

HDFC Bank Ltd.

39

Union Bank of India

Indian Bank

The Saraswat Co-operative Bank Ltd.

Federal Bank

KNOWLEDGE MANAGEMENT

When Should One Go For Insurance?

Your insurance need will change as your life does, from starting to work to enjoying

your golden years and all the stages in between. Each one of these stages may

pose a different insurance need/cover for you. In this section, we have drawn up the

basic life stages and help you analyze various insurance needs accordingly.

Stage 1: Young and Single

40

This is an important stage where one lays down the foundation of a successful life

ahead. Take advantage of the time and power of compounding to ensure that you

build up your dreams, so start saving early.

Your needs:

oSave for a home and wedding

oTax Planning

oSave for Golden years

Stage 2 - Just Married

Marriage brings about a significant change. New dreams and new opportunities also

bring in additional responsibilities. While both of you look forward to a happy and

secure life, it is equally important to ensure that eventualities don’t come in the way

of shaping your dreams.

Your needs:

o Planning for home / securing your home loan

Liability

o Save for vacation

o Save for your first child

Stage 3 - Proud Parents

41

Once you have children, your need for life insurance is even more. You need to

protect your family from an untoward incident. Ensure your protection umbrella takes

into account the future cost of securing your child’s dream. You will want life to go on

for your loved ones, and having enough life insurance is a way to help ensure that.

Your needs:

o Provide for children’s education

o Safeguarding family against loan liabilities

o Savings for post-retirement

Stage 4 - Planning for Retirement

While you are busy climbing the ladder of success today, it is important for you to

take time and plan for your life after retirement. Having an early start for retirement

planning can make a significant difference to your savings. Think about your golden

years even before you have reached them. The key is to think ahead and plan well

using your time and money.

Your needs:

o Provide for regular income post retirement

o Immediate Tax benefits

o Lead a secure, independent and comfortable

Life style after retirement

PRODUCT MIX42

At HDFC Standard Life, there is a bouquet of insurance solutions to meet every

need. They cater to both, individuals as well as to companies looking to provide

benefits to their employees.

For individuals, they have a range of protection, investment, pension and savings

plans that assist and nurture dreams apart from providing protection. One can

choose from a range of products to suit one’s life-stage and needs.

For organizations they have customized solutions that range from Group Term

Insurance, Gratuity, Leave Encashment and Superannuation Products.

PRODUCTS FOR INDIVIDUALS

PROTECTION - You can protect your family against the loss of your income or the

burden of a loan in the event of your unfortunate demise, disability or sickness.

These plans offer valuable peace of mind at a small price.

Plans: Term Assurance Plan

Loan Cover Term Assurance Plan.

INVESTMENT - This includes a plan that is well suited to meet your long term

investment needs. We provide you with attractive long term returns through regular

bonuses.

Plan: Single Premium Whole of Life

43

PENSION - Our Pension Plans help you secure your financial independence even

after retirement and live a relaxed retired life.

Plans: Personal Pension Plan

Unit Linked Pension

Unit Linked Pension Plus

SAVING - Our Savings Plans offer you flexible options to build savings for your

future needs such as buying a dream home or fulfilling your children’s immediate and

future needs.

Plans: Endowment Assurance Plan,

Unit Linked Endowment,

Unit Linked Endowment Plus,

Money Back Plan,

Children’s Plan,

Unit Linked Young star,

Unit Linked Young star Plus.

GROUP PLANS

44

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. They offer different products for different needs of

employers ranging from term insurance plans for pure protection to voluntary plans

such as superannuation and leave encashment.

Plans: Group Term Insurance with Riders

Group Term Insurance with Profit-Share

Group Unit-Linked Plan

For Gratuity

For Defined Benefit Superannuation

For Defined Contribution Superannuation

Group Leave Encashment Plan

RURAL CUSTOMER - According to research findings, there is keenness among

rural customers to invest in savings cum protection plan with a term of five years,

especially, if the premium amount is low and affordable. Keeping this in view, HDFC

STD> LIFE has plans like:

Plans: Bima Bachat Yojana.

Super Bachat Yojana

DISTRIBUTION OFFICES

45

In addition to the corporate office at Mumbai, your Company had 169 offices in over

135 cities/towns in the country. It has a widespread network of Financial

Consultants, Corporate Agents and Brokers servicing customers in these cities and

towns.

FINANCIAL CONSULTANTS

The number of licensed Financial Consultants appointed by your Company

increased from over 23,000 in the previous year to over 33,000 in the current year.

During the year, the Company continued its

CURRENT SALES- HDFC Standard Life

“HDFC STANDARD LIFE PACING AHEAD”

The Financial Express 15th May 2007

“HDFC Standard Life has recorded a strong year-on-year growth of 112% for

the period April-March 2006-07, in comparison to the same period 2005-06,

with a new business first year premium of Rs. 1,029 crore.

In terms of effective premium income (EPI), which gives a 10% value to a

Single Premium policy and is an internationally-accepted indicator of an

insurance company's performance, the EPI grew by 103% to Rs. 887 crore

from Rs. 436 crore.

46

HDFC Standard Life's growth in new business is a manifestation of the number

of lives insured as well as an increase in the average premium. For the

individual business, volume measured by the number of lives insured

witnessed a 32% growth.

The average premium also grew by 62% to Rs 27,500 in 2006-07 from Rs 17,000

in 2005-06.

During the year the company issued over 3, 97,000 policies and has covered more

than 5, 80,000 lives”

Table Showcasing Financial Results:

Parameters

April-March

2005-06

(Rs. Cr)

April-March

2006-07

(Rs. Cr)

Growth

(%)

Total received premium 668.40 1532.21 129.23

    I.  New Business 486.15 1028.94 111.65

    ii. Renewal 182.25 503.27 176.14

Effective Premium

Income (Total) 436.08 887.30 103.47

Group Business

Premium (EPI) 49.40 135.15 173.58

47

48

Fund Name Offer Prices (Rs) Bid Price (Rs)

Liquid Fund 24.5113 23.2857

Secure Managed Fund 24.7568 23.5190

Defensive Managed Fund 29.6157 28.1349

Balanced Managed Fund 34.1340 32.4273

Fund Name Offer Prices (Rs) Bid Price (Rs)

Liquid Fund 24.5661 24.5661

Secure Managed Fund 22.6666 22.6666

Defensive Managed Fund 27.3346 27.3346

Balanced Managed Fund 36.2603 36.2603

Equity Managed Fund 46.2655 46.2655

Growth Fund 59.0512 59.0512

Unit Prices as on 29/08/2007

FUTURE PLANS

HDFC has always been market-oriented and dynamic with respect to resource

mobilization as well as its lending program. This renders it more than capable to meet

the new challenges that have emerged. Over the years, HDFC has developed a vast

client base of borrowers, depositors, shareholders and agents, and it hopes to capitalize

on this loyal and satisfied client base for future growth. Internal systems have been

developed to be robust and agile, to take into account changes in the volatile external

environment.

HDFC has developed a network of institutions through partnerships with some of the

best institutions in the world, for providing specialized financial services. Each institution

is being fine-tuned for a specific market, while offering the entire HDFC customer base

the highest standards of quality in product design, facilities and service.

INTRODUCTION OF TOPIC49

India is at a relatively nascent stage in the wealth management life cycle,

albeit attractively poised for rapid growth as economic expansion has been

driving wealth creation in India. Observing the way our country has

transformed itself from a slow growing agrarian economy into one of the

world’s most dynamic economies in less than two decades, the recent

Barclay’s Wealth Report forecasts that India will be the world’s top wealth

centre in 2017. Capgemini and Merrill Lynch released the latest World

Wealth Report stating that in 2007, India led the world in HNI’s population

growth, almost 22 per cent up.

To continue, a US based Celent report predicts that by 2012, wealth

management in India would be a $1 trillion market, with approximately 42

million households as compared to 13 million households today. An

important factor which contributes to India’s shining story is the Indian

middle class. According to Celent, the middle class is expected to grow to

600 million by 2012 as consumerism across sectors, including demand for

financial products and services is on the rise.

50

RESEARCH MEHODOLOGY

The study of awareness about Financial Planning among the people and particularly

the insurance sector covers data collection through observation, questionnaire and

interview of consumers.

Type of research :

Exploratory:

Type of research carried out was EXPLORATORY in nature; the objective of such

research is to determine the approximate area where the drawback of the company

lies and also to identify the course of action to solve it. For this purpose the

information proved useful for giving right suggestion to the company.

Data Collection:

Primary data

Secondary data

Data used for the research work was primary in nature.

Sample unit: -

The research process was done by interacting with number of customers during the

activities performed, which included, markets, cold calling, canopies, etc. Sample

Design consists of Random Sampling.

Sample size: - 100 people

51

Method of collection: -

Field procedure for gathering primary data included observation and interview

schedule in which the questionnaires were filed by the interviewer.

Personal interviews through self administered survey was done to collect the data,

market research was undertaken, that was accomplished by performing various

activities designed.

Research Instrument:

Questionnaire

The questionnaire was formulated by keep in mind the following Points: -

Giving the respondents clear comprehension of the question.

Inducing the respondents to co-operate.

Giving instructions as to what is wanted.

Identifying the needs to be known.

Limititations:

The following were the limitations that were there during the course of the study: 3

1. Limited time period.

2. Less number of respondents.

3. Biasness of the respondents.

PROJECT OBJECTIVES52

To study the awareness of Financial Planning among the people.

To study the importance of Insurance in today’s scenario.

Brand awareness of various private insurance companies.

Preference among different investment tools.

Purpose of buying insurance.

To generate leads for Unit Linked Insurance and the Unit Linked Pension

Plans, by interacting with walking and existing customers of the company.

DATA ANALYSIS & INTERPRETATION

53

AGE DISTRIBUTION

AGE DISTRIBUTION(yrs.)

35%

41%

24%Below 30

31 - 45

Above 45

Highest number of Respondents (41%) from Age group 31 to 45 yrs.

35% respondents are of age below 30 yrs, small percentage of which is

unemployed.

MARITAL STATUS

54

MARITAL STATUS

19

4

16

37 24

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Below 30 31 - 45 Above 45AGE(yrs)

SINGLE MARRIED

Total number of single respondents – 23

Total number of married respondents – 77

INCOME DISTRIBUTION

55

INCOME DISTRIBUTION(Annual in Rs.appx.)

16

13

5

1

7

12

12

10

0

6

12

6

<1.5 lacs

1.5 - 3 lacs

3 - 5 lacs

> 5 lacs

INC

OM

E

Below 30 31 - 45 Above 45

Highest, 16 respondents in income bracket below 1.5 lacs, which mainly

comprises of age group below 30 years.

Respondents of the age group 31-45 yrs, lie in all the income slabs.

Minimum, 6 respondents in income bracket of above 5 lacs, which are in age

group of above 45 years.

ARE YOU AWARE ABOUT FINANCIAL PLANNING ?

56

98%

2%

0

10

20

30

40

50

60

70

80

90

100

NO

OF

PEO

PLE

DO YOU KNOW WHAT IS FINANCIAL PLANNING ?

YES

NO

98% of the respondents were aware about Financial Planning.

BRAND RECALL

57

100 % respondents mentioned first name to be LIC

Among private players, ICICI Prudential has the highest

Brand Recall i.e. 96%

HDFC Standard life has Brand Recall of 92%

INVESTMENT PREFERENCE58

BRAND RECALL

100%

96%

92%

82%86%

72%

64%

75%

71%

60%51%

LIC

ICICI Prudential

HDFC Std Life

TATA AIG

BIRLA SUN LIFE

KOTAK MAHINDRA

SBI LIFE

AVIVA

MAX NEW YORK

METLIFE

INGVYSYA

INVESTMENT PREFERENCE

11%18%

21%

9%

20%

21%

Banks & PostofficeShare Market

Insurance

Bonds

Mutual Funds

Real Estate

21% respondents prefer banks and post office schemes as an investment tool

preference.

Respondents of age group below 30 years prefer Mutual Funds, as they provide

higher returns than banking investment tools.

Insurance ranks 2nd as an investment tool choice, which itself includes various

protection, saving and pension plans.

Govt. Bonds & securities are mostly preferred by people of higher age group rather

than young generation.

Property as an investment option is most lucrative choice. However it is important

to mention that majority of respondents are in age group of above 30 years and

people with high income bracket prefers to invest in Real Estate.

INSURED PERCENTAGE

59

67 % of respondents were insured on own life and on life of their family members.

So we had 33 % of potential customers to approach.

COMPANY PREFERENCE

60

ARE YOU INSURED?

67%

33%

YES

NO

COMPANY PREFERENCE(in %)

55% 30% 15%

0 20 40 60 80 100 120

1

ONLY LIC BOTH ONLY PVT. COs

55% of respondents have insurance cover provided by LIC only

15% of respondents have insurance cover provided by Private Cos. only

Whereas 30% have got insurance from both LIC and Private Companies.

Total number of LIC policies sums up to 85% and total number of Pvt. Companies

policies sold sums up to 45%.

Data provides that though LIC is still got a maximum market share but Private

Companies are making a fast move in the market.

61

TYPE OF PLAN BOUGHT

TYPE OF PLAN

26, 29%

20, 23%

24, 28%

17, 20% MONEY BACK

ENDOWMENT

PENSION PLAN

ULIPs

Money back Policies have been most popular and also the endowment plans.

As people today are more aware about financial planning, so people of the age 30

years have planned for their Retirement now.

ULIPs are fast gaining popularity as they provide investment

Benefit with Insurance.

62

PURPOSE OF BUYING INSURANCE

PURPOSE OF BUYING INSURANCE

52%

11%

23%

14%

0 10 20 30 40 50 60

Risk Cover

Investment

Tax Benefit

RetirementPlanning

Risk cover remains the most important purpose for buying insurance followed by

option as Tax saving tools.

Retirement planning in an early period is also gaining the market share.

ULIPs are responsible for increasing popularity of insurance as an investment tool

DISTRIBUTION CHANNEL PREFERENCE

63

CHANNEL PREFERENCE

56 17 14 9 4

0 20 40 60 80 100 120

1

Known/Current Advisor Friends & RelativesGroup Insurance BanccassuranceTelesales/unknown Advisor

According to the data, known/current Advisors remains the 1st choice for buying

Insurance.

In retail also known Advisors are preferred over referrals.

Banc assurance is emerging as a popular option for buying life Insurance.

Group insurance is a channel which customers expect but it is not so popular

because only few employers have taken the initiative.

Buying insurance from a unknown person or getting a phone call is still not

preferred by most of the people

FINDINGS

THE BARRIERS FACED DURING THE PROCESS: 64

The Attitudinal Barriers to Purchasing …..

• Death - a taboo topic for discussion

“It’s quite ashubh talking about death”

• The belief in karma … destiny

“Jo kismet me likha hai wohi hoga, hum kya kar sakte hai”

The Product/ Service Barriers ……

• Liquidity

“What if I need my money urgently for some medical illness?”

• Service quality of the Agent

“He disappears after he takes the first premium”

• Sanctity of the contract

“What if my dependents do not get the money once I die?”

Charges

“Its better to invest in Mutual Funds, the charges there are very less”

The Other Barriers….

Unsure about Pvt. Companies

Low rate of return

“Better to put my money in PPF, at least I get fixed returns”

Money gets tied up

High premium

CONCLUSION

The various conclusions drawn from the project are:

65

There has been a tremendous change in the insurance industry. And with it

there has been continuous growth in this sector both in Indian as well as world

context.

The opening up of the insurance sector has changed the whole look of the

industry. While the LIC, in order to face the competition is coming up with new

strategies. New private players are leading the sector due to their strategic

management and tailored made projects.

From the research, we also conclude that though the awareness and people

opting for LIC plans are more as compared to other private players’ but the

latter are gaining momentum in the market day by day.

The demand for insurance is likely to increase with rising per-capita income,

rising literacy rates, and growth of service sector. In-fact opening up of the

insurance sector is an integral part of the liberalization process being persued

by many developing countries.

Life insurance as a form of protection is the single-most important financial

product any earning member of a family must have. Having said this, a well-

diversified portfolio is one of the first rules of financial planning, and as such

one should consider different instruments as the ability to save increases.

Possible investment options range from bank deposits and government small saving

schemes to mutual funds, stocks and property.

66

Certainly ULIPs successfully combine the first and most important need of protection,

with savings, and hence are an excellent addition to your portfolio.

All financial products have a certain amount of risk and charges, be it a mutual fund,

property, or even a bank deposit. It would be unrealistic to assume that the features

and benefits of a ULIP come at no cost, though the charges are considerably lower

than that of a traditional product.

In fact, the very reason the product is transparent is because the customer knows the

charges and risks.

There is no right or wrong in this. The success of marketing insurance depends on

understanding the social and cultural needs of the target population, and matching the

market segment with the suitable intermediary segment. All intermediaries can’t sell all

lines of business profitably in all markets. There should be clear demarcation in the

marketing strategies of the company from this perspective. Clients should also receive

price differentials for using different channels.

The intermediaries need to be empowered with the right learning, training and sales

tools and technology enablers. Coupled with the right product mix, this will help the

insurers to survive and flourish in this competitive market scenario. So lets conduct

this business with utmost economy with the spirit of trusteeship; thereby making

insurance widely popular.

LIMITATIONS

Limitations:67

The following were the limitations that were there during the course of the study: 4

1. Limited time period.

2. Less number of respondents.

3. Biasness of the respondents.

RECOMMENDATIONS

Lack of Knowledge: Ease of Process, simplifying the product and the

procedure

Need to promote the quality of awareness

68

The benefits: Leverage on Risk Protection or Returns oriented or both

The product: catering to life stages

Need for Branding in Insurance: Branding is more relevant in the Insurance

market which not only faces the problem of securing and retaining customers in

an increasingly competitive marketplace but also experiences the need for

heightened relevance of the brand proposition in a world where brand has been

termed the new religion.

In rural India, the LIC is especially synonymous with insurance. But in the wake

of competition insurance companies have to do a considerable brand building

exercise at least in urban India.

Adequate time, investment and longer-term management of the brand are

essential, not only for success but also survival. All brands need to be built

around well-differentiated and credible positioning that springs from the

organization’s history. The brand must not only be believed but lived by

management and employees.

Focus on different segments to survive and thrive in a competitive

environment. Each company has to choose its own unique positioning based

on its unique strengths. Below-mentioned positioning alternatives can be worth

considering.

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

69

insurance industry too, it is possible to achieve a unique position by focusing on

certain category of products.

NEEDS-BASED POSITIONING

This is the most commonly understood positioning and is based on the differing

needs of different groups of consumers. This can be done successfully if a

company has unique strengths to service a group of customer needs better than

others.

The insurance needs of customers vary significantly for different groups of

customers. The insurance needs of young family with small children will be quite

different from that of a family in which the income-earner is close

To retirement. However, in India most of the life insurance companies have a wide

variety of products tailored for different customer needs and there is no company

focusing on a particular customer need.

ACCESS-BASED POSITIONING

Positioning of customers can also be done by the way they are accessible. That is

different groups of customers may be accessible in different ways even though

they may have similar needs. Access is typically a function of customer geography

or customer scale. There is excellent opportunity in the insurance industry to

employ access-based positioning by targeting the rural insurance sector.

The rural market for life insurance is very different from the urban market in terms

of needs, income levels and distribution (seasonality, for example), penetration of

media and so on. Rural market can be a highly profitable position if one is able to

70

carefully plan and tailor an entire set of low-cost activities of advertising,

distribution, and product design etc. to successfully exploit the potential.

GLOSSARY

Accident Benefit

An add-on with a life policy. It compensates a policyholder in the event of death or

injury by accident

Annuity71

An investment option that makes a series of regular payments to an individual in

exchange for a premium or a series of premium.

 

Asset allocation

How your investments are spread across various asset classes

 

Bonus

The amount paid as return in a ‘with-profit’ policy. The bonus, expressed as a

percentage of the sum assured, is generally declared every year. The amount is

linked to the profits earned by the insurer. Depending on the time of withdrawal, there

are two kinds of bonuses – reversionary and cash. A reversionary bonus can be

encashed only on maturity of the policy; a cash bonus can be withdrawn when

declared

 

Capital gains

Profit earned from the sale of stocks, mutual fund units and real estate. Long-term

capital gains arise from assets owned for more than a year while short-term capital

gains are made from assets owned for less than a year.

 

Corpus

The amount of money available with a scheme for investing. If already invested, the

corpus is the current value of the scheme’s portfolio.

 

Cover

Another word for insurance; it also refers to the amount of insurance.

72

 

Critical illness rider

A rider that provides a policyholder financial protection in the event of a critical illness

Death benefit

The amount payable to the nominee on death of the policyholder. The amount paid is

the sum assured plus benefits applicable (if any) less outstanding loans.

 

Endowment plans

An insurance plan that provides a policyholder risk cover and some return on

investment. Usually suitable for the risk-averse

 

ELSS (equity-linked savings schemes)

Diversified equity funds that additionally offer a tax deduction under Section 80C on

investments up to Rs.1 lakh.

Financial planning

It covers the essential elements of a person’s financial affairs and is aimed at

achieving a person’s financial goals.

 

Group Insurance

An insurance policy taken out by employers to provide life cover to their employees.

Usually the cheapest form of insurance.

 

Insured

73

The policyholder: The person who buys an insurance policy

 

Insurer

The insurance company

 

Investments

Assets like fixed deposits, post office savings, bonds and stocks that are acquired for

the purpose of earning a return

 

Liquidity

The quality of assets that can be easily and quickly converted into cash without any,

or significant, loss in value.

 

Lock-in period

The period of time for which investments made in an investment option cannot be

withdrawn.

 

Maturity date

The date on which a policy term or fixed-income investment like fixed deposit or bond

comes to an end.

 

Money-back plans

74

A variant of endowment plans in which survival benefits are disbursed through the

policy term, rather than in a lump sum at the end.

Net asset value (NAV)

The simplest measure of how a scheme is performing, it tells how much each unit of it

is worth at any point in time. A scheme’s NAV is its net assets (the market value of the

financial securities it owns minus whatever it owes) divided by the number of units it

has issued.

Nominee

The person(s) nominated by the policyholder to receive the policy benefits in the event

of his death.

Pension Plan

Investment products offered by insurance companies and mutual funds that required

the investor to make defined contributions over regular periods, mostly every year.

The contributions are invested according to a pre-decided investment plan. At

retirement, the accumulation is paid out through regular pay-out options.

 

Policy

The legal document issued by an insurance company to a policyholder that states the

terms and conditions of an insurance contract.

 

Policy term

The period for which an insurance policy provides cover

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Post office schemes

Also known as Small Savings schemes, they are offered at post offices and carry the

highest returns among fixed income instruments. Government backing makes these

instruments like Public Provident Fund (PPF), National Savings Certificate (NSC),

Kisan Vikas Patra (KVP) and Post Office Monthly Income Scheme (POMIS) risk-free

Premium

The amount paid by the insured to the insurer to buy cover

 

Riders

Additional covers that can be added to a life policy, for a cost

Sum assured

The amount of cover taken under a life insurance policy, it is the minimum amount that

will be paid on death of the policyholder during the policy term.

 

Surrender value

The amount payable by the insurer to the owner of an investment-based plan in case

he opts to terminate the policy after three years (the mandatory lock-in period) but

before its maturity date. The surrender value will be the premium paid till date minus

surrender charges and any outstanding loans due.

 

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Term plans

A plan that provides life cover for a specified period of time, but no return on the

premium paid

 Vesting date

In pension plans, it is the date from which the policyholder starts receiving pension. In

children’s plans, it is the date from which a child becomes the owner of a policy taken

out in his name (generally, around his 18th birthday).

  

Waiver of premium rider

A rider that waives the premium payable on the base policy and other riders in certain

circumstances mostly related to death, disability or injury. An important feature

especially for investment products such as children’s policies.

  

Will

A document that designates the assets of a person-both financial and physical- to

various family members and other heirs.

 

Whole-life plans

Class of life insurance policies that provide cover through your lifetime.

List of Preference

BIBLIOGRAPHY

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BOOKS

Marketing Management, By Philip kotaler

Marketing of Service By Dr. S.L Gupta and V.V. Ratna

Financial Management By I.M.Panday

Economics Times

Websites

www.rbi.org.in

www.irdaindia.org

www.banknetindia.com

www.hdfcinsurance.com

www.businessworldonline.com

www.google.com (search engine)

Other References:

Brochures of various plans

Questionnaire

Name: ________________________

Age: ______

Gender: M F

Marital Status: Married Single

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Occupation: ___________________

Contact No: __________________

Annual Income (approx. in Rs.)

Up to 1.50 lacs 1.50 lacs-3 lacs

3 lacs-5 lacs above 5 lacs

Q1) Are you aware about ‘what is financial planning’?

YES NO

Q2) Mention the names of Life insurance companies you have heard of:

1) ________________ 4) ________________

2) ________________ 5) ________________

3) ________________ 6) ________________

Q3) How much do you save approximately of your annual income?

____________________________________________________

Q4) where do you invest/would like to invest your savings?

(Rank in order of preference, 1 being most preferable)

Banks Share Market

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Insurance Bonds & Securities

Mutual Funds Real Estate/Property

Q5) Have you taken any life insurance policy on your own life or on life of any of your

family member?

YES NO

(If no, switch to Q 9)

Q6) which company(s) policy(s) you have?

LIC ICICI PRUDENTIAL

BIRLA SUNLIFE ING VYSYA

BAJAJ ALLIANZ SBI LIFE

HDFC STD. LIFE TATA AIG

MAX NEW YORK LIFE AVIVA

RELIANCE KOTAK MAHINDRA

MET LIFE OTHER ____________ (specify)

Q7) which type of plan did you buy?

Money Back Plan

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Endowment Plan

Pension Plan

ULIP

Q8) What was your purpose/will be your likely purpose of taking insurance?

RANK THEM (1 being most ideal)

a) PROTECTION

OF FAMILY

b) TAX BENEFIT

c) INVESTMENT

d) RETIREMENT

PLANNING

Q9) Have you ever been approached for Life insurance by any of the following (please

√); also Rank according to your preference from whom you are most likely to buy

insurance?

1) Known/Current Advisor

2) Advisors referred by friends/family

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3) Telesales and subsequent visit by unknown Advisor

4) Schemes offered by your bank (Banc assurance)

5) Group Insurance Policies offered by your employer

Q10) Do you feel opening up of the sector has created more insurance awareness

among the public?

YES NO

Q11) How many dependents do you have?

<2 2-4 4-6 >6

Q12) Do you really think insurance cover in today’s scenario is not

Essential?

_____________________________________________________

_____________________________________________________

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THANKS YOU FOR YOUR CONTRIBUTION

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