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CHAPTER- 1
INDIAN INSURANCE INDUSTRIES

THE INSURANCE INDUSTRY IN INDIA AN OVERVIEW

With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20per cent annually and presently is of the order of Rs 1760.41 billion (for the financial year 2009 2010). Together with banking services, it adds about 7% to the countrys Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and funds available with LIC for investments are 8% of the GDP. Even so nearly 65% of the Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. A large part of our population is also subject to weak social security and pension systems with hardly any old age income security. This in itself is an indicator that growth potential for the insurance sector in India is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain the economic growth of the country. HISTORICAL PERSPECTIVE In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (Manusmrithi),Yagnavalkya (Dharmasastra ) and Kautilya (Arthasastra ). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular. In 1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834.

In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and non-life business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers. The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. 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 LIC absorbed 154 Indian, 16 non-Indian insurers as also 75 provident societies245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector. The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all

classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate investments and set minimum Solvency margins. The Tariff Advisory Committee was also set up then. In 1972 with the passing of the General Insurance Business (Nationalization) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973. This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies are allowed to enter by floating Indian companies, preferably a joint venture with Indian partners. Following the recommendations of the Malhotra Committee report, in1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market. The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the

power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders interests. In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002. Today there are 14 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 14 life insurance companies operating in the country. The insurance sector is a huge one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the countrys GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

KEY MILESTONES

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life Insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect Statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956: with a capital contribution of Rs. 5 crore from the Government of India.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 47.38%, with premium income at Rs. 1560.41 billion during the fiscal year 2009-20010. Though the total volume of LIC's business increased in the last fiscal year (2009-2010) compared to the previous one, its market share came down from 85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about 19% in a year's time. The figures for the first two months of the fiscal year 2008-09 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24%.With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a companys ownership. Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 19 private life insurance companies have been granted licenses.

PROFILE OF HDFC LIFE INSURANCE COMPANY LIMITED

INTRODUCTION:
HDFC Life Insurance Company Limited. is one of India's leading private insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Limited), India's leading housing finance institution and a Group Company of the Standard Life Plc, UK. As on February 28, 2009

HDFC Ltd. holds72.43% and Standard Life (Mauritius Holding) 2006, Ltd. holds 26.00% of equity in the joint venture, while the rest is held by others. as a joint venture of leading financial services groups, HDFC Standard Life has the financial expertise required to manage your longterm investments safely and efficiently.

HDFC LIC has a range of individual and group solutions, which can be easily Customized to specific needs. Group solutions have been designed to offer complete Flexibility combined with a low charging structure. The gross premium income, for the year ending March 31, 2009 stood at Rs. 5,564.69 crores. The company has covered over 8,33,070 lives as on March 31, 2009.

HDFC Standard Life believes that establishing a strong and ethical foundation is an essential prerequisite for long-term sustainable growth. To ensure this, we have concentrated our focus on expansion of branch network, organising an efficient and well trained sales force, and setting up appropriate systems and processes with optimum use of technology. As all these areas form the basic infrastructure for establishing the highest possible customer service standards. Our core values are drilled down to all levels of employees, as these are inviolable. We continue to promote high integrity in business practices and shun short cuts and unethical practices, as we wish to be perceived as an institution with high moral standing. Since our inception in 2000, when the Indian insurance space was opened for private participation, we have consistently focused on setting benchmarks in all aspect on insurance business. Being the first private player to be registered with the IRDA and the first to issue a policy on December 12, 2000, our differentiators are:

Strong promoter

HDFC Standard Life is a strong, financially secure business supported by two strong and secure promoters HDFC Ltd and Standard Life. HDFC Ltds excellent brand strength emerges from its unrelenting focus on corporate governance, high standards of ethics and clarity of vision. Standard Life is a strong, financially secure business and a market leader in the UK Life & Pensions sector. Preferred and Trusted Brand

Our brand has managed to set a new standard in the Indian life insurance communication space. We were the first private life insurer to break the ice using the idea of self-respect instead of death to convey our brand proposition (Sar Utha KeJiyo). Today, we are one of the few brands that customers recognize, like and prefer to do business. Moreover, our brand thought, Sar Utha Ke Jiyo, is the most recalled campaign in its category. Investment Philosophy

We follow a conservative investment management philosophy to ensure that our customers money is looked after well. The investment policies and actions are regularly monitored by a formal Investment Committee comprising non-executive directors and the Principal Officer & Executive Director. As a life insurance company, we understand that customers have invested their savings with us for the long term, with specific objectives in mind. Thus, our investment focus is based on the primary objective of protecting and generating good, consistent, and stable investment returns to match the investors long-term objective and return expectations, irrespective of the market condition. Need-Based Selling Approach Despite the criticality of life insurance, sales in the industry have been characterized by over reliance on tax benefits and limited advice-based selling. Our eight-step structured sales

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process Disha however, helps customers understand their latent needs at the first instance itself without focusing on product features or tax benefits. Need-based selling process, 'Disha', the first of its kinds in the industry, looks at the whole financial picture. Customers see a plan not piecemeal product selling. Risk Control Framework

HDFC Standard Life has fully implemented a risk control framework to ensure that all types of risks (not just financial) are identified and measured. These are regularly reported to the board and this ensures that the company management and board members are fully aware of any risks and the actions taken to ensure they are mitigated. Focus on Training

Training is an integral part of our business strategy. Almost all employees have undergone training to enhance their technical skills or the softer behavioral skills to be able to deliver the service standards that our company has set for itself. Besides the mandatory training that Financial Consultants have to undergo prior to being licensed we have developed and implemented various training modules covering various aspects including product knowledge, selling skills, objection handling skills and so on. Focus on Long-Term Value

HDFC Standard Life do not focus in the business of ramping up the top line only, but to create maximization of stakeholder's value. Today, we are extremely satisfied with the base that we have created for the long-term success of this company. Transparent Dealing

We are one of the few companies whose product details, pricing, clauses are clearly communicated to help customers take the right decision. Strict Compliance with Regulations

We have initiated and implemented many new processes, some of which were found useful by the IRDA and later made mandatory for the entire industry. The agents who

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successfully completed this training only were authorized by the company to sell ULIPs. This has now been made compulsory by IRDA for all insurance companies under the new Unit Linked Guidelines. Diversified Product Portfolio

HDFC Standard Lifes wide and diversified product portfolio help individuals meet their various need, be it: y y Protection: Need for a sound income protection in case of your unfortunate demise. Investment: Need to ensure long-term real growth of your money.

Savings: Save for the milestones and protect your savings too.

Pension: Need to save for a comfortable life post retirement.

Health: Cover for health related exigencies.

Brief Profile of The Management Team

Mr. Amitabh Chaudhry Managing Director and Chief Executive Officer

Before joining HDFC Standard Life in January 2010, he was the Managing Director and CEO of Infosys BPO and was also heading an Independent Validation Services unit in Infosys Technologies.

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Mr. Paresh Parasnis Executive Director and Chief Operating Officer

A fellow of the Institute of Chartered Accountants of India, he has been associated with the HDFC Group since 1984. During his 16-year tenure at HDFC Limited, he was responsible, for driving and spearheading several key initiatives performance management system etc.

Ms. Vibha Padalkar Chief Financial Officer Ms. Padalkar joined HDFC Standard Life in August 2008 after a seven year stint as Executive Vice President-Finance at WNS Global Services, a NYSE listed leading global business process outsourcing company.

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Mr. Ashley Rebello Chief Actuary and Appointed Actuary He completed his degree in Mathematics at Imperial College, London, before joining Prudential UK in 1996. During his six years at Prudential he worked in Product Development and Pricing, Valuation and in the Appointed Actuary's team.

Mr. Vikram Mehta General Manager, Sales and Marketing Mr. Mehta joined HDFC Standard Life in February 2009. Before joining HDFC Standard Life, he was associated with Citibank for 16 years serving various responsibilities including the Head for Direct Sales - Citibank Credit Cards division in Germany, Regional Director East - Citibank NA, India, and Acquisitions Head - Credit Cards, Central and Eastern Europe cluster.

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Mr. Prasun Gajri Chief Investment Officer

Mr. Gajri joined HDFC Standard Life in April 2009 with a rich experience of 14 years in investments and banking industry. He started his career in 1995 with Citibank and was associated with it for over 6 years delivering various roles. He joined Tata AIG Life Insurance Company in October 2001 to start the investment function and stayed there until April 2009, the last role being that of the Chief Investment Officer. HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since emerged as the largest residential mortgage finance institution in the country. The corporation has had a series of share issues raising its capital to Rs. 119 Crores. The gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624 Crores. The company has covered over 8,77,000 lives year ending March 31, 2007. HDFC operates through almost 450 locations throughout the country with its corporate head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing company in India for the last 27 years. SNAPSHOT - I y Incorporated in 1977 as the first specialized Mortgage Company in India.

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

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

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

Conglomerate with holdings in: y HDFC Standard Life insurance Company- HDFC holds 78.07 %.

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HDFC Asset Management Company HDFC holds 50.1%

HDFC Bank- HDFC holds 22.25%.

Intel net Global (Business Process Outsourcing) HDFC holds 50%.

HDFC Chubb General Insurance Company HDFC holds 74%.

SNAPSHOT-II GROUP COMPANIES

HDFC Bank: World Class Indian Bank- among the top private banks in India. HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager. Intel net Global: BPO services for international customers. CIBIL: Credit Information Bureau India Limited. HDFC Chubb: Upcoming Private companies in the field of General Insurance. HDFC Mutual Fund. HDFC reality.com: Helps to search properties in all major cities in India HDFC securities.

STANDARD LIFE

Standard Life is Europes largest mutual life assurance company. Standard Life, which has been in the life insurance business for the past 175 years is a modern company surviving quite a few changes since selling its first policy in 1825. The company expanded in the 19th century from kits original Edinburgh premises, opening offices in other towns and acquitting other similar businesses. Standard Life Currently has assets exceeding over 70 billion under its management and has the distinction of being accorded AAA rating consequently for the six years by Standard and Poor.

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SNAPSHOT

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

Currently over 5 million Policy holders benefiting from the services offered.

Europes largest mutual life insurer

JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first companies to be granted license by the IRDA to operate in life insurance sector. Reach of the JV player is highly rated and been conferred with many awards. HDFC is rated AAA by both CRISIL and ICRA. Similarly, Standard Life is rated AAA both by Moodys and Standard and Poors. These reflect the efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively. HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000.HDFC is the majority stakeholder in the insurance JV with 81.4% staple and Standard of as a staple 18.6%Mr. Deepak Satwalekar is the MD and CEO of the venture. HDFC Standard Life Insurance Company Ltd. Is one of Indias leading Private Life Insurance Companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.) Indias leading housing finance institution and the Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. Both the promoters are well known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life insurance industry- all important factors to consider when choosing your insurer.

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BUSINESS GROWTH Track Record so far y The gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs.2,856 crores and new business premium income at Rs. 1,624 crores. y The company has covered over 8,77,000 lives year ending March 31, 2007. Company also declared our 5th consecutive bonus in as many years for our with profit policy holders. KEY STRENGTH Financial Expertise

As a joint venture of leading financial services groups. HDFC standard Life has the financial expertise required to manage long-term investments safely and efficiently. Range of Solutions

HDFC SLIC has a range of individual and group solutions, which can be easily customized to specific needs. These group solutions have been designed to offer complete flexibility combined with a low charging structure. Strong Ethical Values:

HDFC SLIC is an ethical and Cultural Organization. False selling or false commitment with the customers is not allowed.

Most respected Private Insurance Company

HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World Class Magazine Business World for Integrity, Innovation and Customer Care.

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CORPORATE OBJECTIVE Vision 'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'. 'The most obvious choice for all'. y y y y y y y Values Integrity Innovation Customer centric People Care One for all Teamwork Joy and Simplicity

PRODUCTS & SERVICES

The right investment strategies won't just help plan for a more comfortable tomorrow-they will help you get Sar Utha ke Jiyo. At HDFC SLIC, life insurance plans are created keeping in mind the changing needs of family. Its life insurance plans are designed to provide you with flexible options that meet both protection and savings needs. It offers a full range of transparent, flexible and value for money products. HDFC SLIC products are modern and contemporary unitized products that offer unique customer benefits like flexibility to choose cover levels, indexation and partial withdrawals.

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PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE INSURANCE

Individual Products

Protection Plans A person can protect his family against the loss of his income or the burden of a loan in the event of his unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Protection range includes our Term Assurance Plan & Loan Cover Term Assurance Plan.

Investment Plans HDFC SLICs Single Premium Whole of Life plan is well suited to meet long term investment needs. This provides attractive long term returns through regular bonuses.

Pension Plans Pension Plans help to secure financial independence even after retirement. Pensionrange includes Personal Pension Plan, Unit Linked Pension, Unit Linked PensionPlus.

Savings Plans Savings Plans offer a flexible option to build savings for future needs such as buying a dream home or fulfilling your childrens immediate and future needs. Savings range includes Endowment Assurance Plan, Unit Linked Endowment, Unit Linked Endowment Plus, Unit Linked Endowment Plus II, Money Back, Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked Young Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus II

Group Products One-stop shop for employee-benefit solutions HDFC Standard Life has the most comprehensive list of products for progressive employers who wish to provide the best and most innovative employee benefit

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solutions to their employees. It offers different products for different needs of employers ranging from term insurance plans for pure protection to voluntary plans such as superannuation and leave encashment. HDFC SLIC offers the following group products to esteemed corporate clients:

A) Group Term Insurance B) Group Variable Term Insurance C) Group Unit-Linked Plan An investment solution that provides funding vehicle to manage corpuses with Gratuity, Defined Benefit or Defined Contribution Superannuation or Leave Encashment schemes of your company Also suitable for other employee benefit schemes such as salary saving schemes and wealth management schemes.

INTROUCTION TO UNIT LINKED FUNDS

Unit linked plans are based on the component of the premium or the contribution of the customer towards the plan. This contribution can be in different modes like yearly, half yearly, quarterly and monthly. Unit linked plans have multiple benefits like life protection, rider protection, savings, transparency, investment choices, liquidity and planning for taxes. These plans work like mutual funds. The premium is collected from the policy holder. He is allotted a certain number of units based of his contribution. The Net Asset Value is the value of each unit of the fund. It is found by subtracting the charges and current liabilities from the current assets and investments and dividing this number by the total number of outstanding units.

Let us take an example. There are 100 investors and each invests Rs. 10 in a fund. The total value of the fund is Rs. 1000 and each person is allotted 1 unit of Rs 10.

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Unit linked with other financial products Parameters Safety Liquidity Return Life cover RBI bonds High None Low 1 time amount Tax benefit Tax free Fixed deposit High High Low 1 time amount Taxed Mutual funds Medium High High 1 time amount Taxed Unit linked High High High 10 time amount Tax free

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COMPANY PROFILE OF LIC

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Life Insurance Corporation of India (LIC)

Life Insurance Corporation (LIC) is the largest life insurance company in India fully owned by the government. Established in 1956 by the Life Insurance of India Act, LIC is headquartered in Mumbai and is the countrys largest investor. Its subsidiaries include Life Insurance Corporation of India International, LIC Nepal, LIC Lanka, LIC Housing Finance and LICHFL Care Homes.

Product Portfolio:

LIC has enormous range of products. Retirement Plan: With rising inflation, its absolutely necessary to make provisions for the future which makes retirement plan an important financial decision. Better known as Pension plan, this plan takes care of financial needs after retirement by investing a part of your savings for limited period. Pension plan provides steady income after retirement and takes care of daily needs. The pension plans offered by LIC are Pension Plus, Jeevan Nidhi, Jeevan Akshay- VI, New Jeevan Dhara- I and New Jeevan Suraksha- I.

Child Plan: Parenthood brings responsibilities and no one is better judge of that than you. Child Plan is a plan specifically designed to take care of financial needs of your child. Child plan provides with necessary funds that will take care of childs education, marriage etc. By investing small portion of your savings you secure the financial end of your child. Child plans of LIC are called Jeevan Anurag, CDA Endowment Vesting at 21, CDA Endowment Vesting at 18, Jeevan Kishore, Child Career Plan, Child Fortune Plus, Komal Jeevan, Jeevan Chaya, Child Future Plan and Marriage Endowment Or Educational Annuity Plan.

Term Plan: A risk plan which provides comprehensive cover for your family in the unfortunate event of untimely demise. A term life insurance plan provides good cover at relatively nominal cost and has no survival benefits. LIC term plans are Amulya Jeevan- I, Two Year Temporary Assurance Plan, The Convertible Term Assurance Plan, Anmol Jeeval- I and Mortgage Redemption.

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Investment Plan: Popularly known as ULIP, an investment plan invests part of your savings in equity or debt market as per your preference. The objective of investment plan is to give you returns which easily beat the rising costs since the usual returns in a bank are extremely low. ULIPs offered by LIC are The Money Back Policy- 20 years, The Money Back Policy- 25 years, Jeevan Surabhi- 15 Years, Jeevan Surabhi-20 Years, Jeevan Surabhi- 25 Year, Bima Bachat, Jeevan Shree- I, Jeevan Pramukh, The Endowment Assurance Policy, The Endowment Assurance Policy- Limited Payment, Jeevan Mitra (Double Cover Endowment Plan), Jeevan Mitra (Triple Cover Endowment Plan), Jeevan Anand, New Janaraksha Plan, Jeevan Amrit, Endowment Plus, The Whole Life Policy, The Whole Life Policy- Limited Payment, The Whole Life Policy- Single Premium, Jeevan Tarang, Jeevan Bharati-I, Jeevan Aadhar, Jeevan Vishwas, New Bima Gold, Bima Nivesh 2005, Jeevan Saral, Jeevan Madhur and Jeevan Mangal.

Health Plan: Slightly different from health insurance, health plan provides cover for surgery costs, critical illness. A lump sum is paid irrespective of actual hospital bill. Health Protection Plus is LIC health plan.

Distribution Network: LIC has the most formidable distribution network among all insurance companies. Today LIC functions with 2048 fully computerized branch offices, 109 divisional offices, 8 zonal offices, 992 satellite offices and the corporate office. LICs Wide Area Network covers 109 divisional offices and connects all the branches through a Metro Area Network. LIC has tied up with some Banks and Service providers to offer on-line premium collection facility in selected cities.

Financial Information:

The total premium earned for the half year ended September 30, 2010 was Rs 896,466 million. The profit after tax for the same period is Rs 112 million.

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Marketing Campaigns:

LIC has long history of campaign and has been more active after the government legislation of privatization of insurance industry. LIC has always engaged on social themes like prevention of pollution, water is precious, preserve the wild through its advertisements. LIC recent ad campaign Jeevan Bima- Zindagi ke saath bhi, Zindagi ke baad bhi was quite a success. LIC usually goes with 360 degree campaign to create awareness and promote products.

Distinctions:
y y y

CNBC Awaaz Consumer awards 2010 Reader Digest Trusted Brand Insurance category 2010 OUTLOOK MONEY -- NDTV PROFIT AWARD 2009 in "BEST LIFE INSURER CATEGORY"

y y y y

World Brand Congress Award Golden Peacock Innovative Product / Service Award - 2009 ASIA PACIFIC HRM Congress, 2009 Award for INNOVATIVE HR PRACTICES NDTV Profit Business Leadership Award 2008

Management: DK Mehrotra is the MD of LIC. Thomas Mathew is the MD of LIC. AK Das Gupta is the MD of LIC. T Bhargava is the Appointed Actuary of LIC.

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LIC Product Table Retirement/Pension Plan Retirement/Pension Plan Retirement/Pension Plan Retirement/Pension Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Term Plan Pension Plus Jeevan Nidhi Jeevan Akshay- VI New Jeevan Dhara- I New Jeevan Suraksha- I Jeevan Anurag CDA Endowment Vesting at 21 CDA Endowment Vesting at 18 Jeevan Kishore Child Career Plan Child Fortune Plus Komal Jeevan Jeevan Chaya Child Future Plan Marriage Endowment Or Educational

Annuity Plan Term plan Term Plan Term Plan Two Year Temporary Assurance Plan The Convertible Term Assurance Plan Anmol Jeeval- I

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Term Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan

Amulya Jeevan- I Mortgage Redemption The Money Back Policy- 20 years The Money Back Policy- 25 years Jeevan Surabhi- 15 Years Jeevan Surabhi-20 Years Jeevan Surabhi- 25 Year Bima Bachat Jeevan Shree- I Jeevan Pramukh The Endowment Assurance Policy The Endowment Assurance Policy- Limited Payment

Savings & Investment Plan

Jeevan Mitra (Double Cover Endowment Plan)

Savings & Investment Plan

Jeevan Mitra (Triple Cover Endowment Plan)

Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan

Jeevan Anand New Janaraksha Plan Jeevan Amrit

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Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Health Plan

Endowment Plus The Whole Life Policy The Whole Life Policy- Limited Payment The Whole Life Policy- Single Premium Jeevan Anand Jeevan Tarang Jeevan Bharati-I Jeevan Aadhar Jeevan Vishwas New Bima Gold Bima Nivesh 2005 Jeevan Saral Jeevan Madhur Jeevan Mangal Health Protection Plus

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CHAPTER -2
RESEARCH DESIGN

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RESEARCH DESIGN INTRODUCTION A Research Design is the framework or plan for a study which is used as a guide in collecting and analyzing the data collected. It is the blue print that is followed in completing the study. The basic objective of research cannot be attained without a proper research design. It specifies the methods and procedures for acquiring the information needed to conduct the research effectively. It is the overall operational pattern of the project that stipulates what information needs to be collected, from which sources and by what methods.

TITLE OF THE STUDY

A Comparative study of HDFC Life Insurance Company limited with LIC.

STATEMENT OF THE PROBLEM This study was undertaken to identify which type of insurance plans HDFC life should market to beat other insurance company in India. A survey was undertaken to understand the preferences of Indian consumers with respect to insurance. While marketing policies the sole duty of an advisor/ agent is to provide insurance plans as per customer requirements. In effect plans (insurance products) should be flexible to suit individual requirements. This research tries to analyze some key factors which influence the purchase of insurance like the term of the policy, the type of company, the amount of annual premium payable (capacity and willingness to spend), risk taking ability and the influence of advertising. Solutions and recommendations are made based on qualitative and quantitative analysis of the data.

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OBJECTIVE: PRIMARY OBJECTIVE:

y y y

To know where HDFC life insurance Company limited stands in the market. To find out the strengths and the weaknesses of HDFC when compared to LIC. To make comparative analysis between the HDFC life insurance Company limited with Life insurance Corporation of India.

RESEARCH METHODOLOGY

TYPE OF DATA COLLECTED

There are two types of data used. They are primary and secondary data. Primary data is defined as data that is collected from original sources for a specific purpose. Secondary data is data collected from indirect sources.

PRIMARY SOURSCE These include the survey or questionnaire method, telephonic interview as well as the Personal interview methods of data collection.

SECONDARY SOURCES These include books, the internet, company brochures, product brochures, the Company website, competitors websites etc, newspaper articles etc

SAMPLING Sampling refers to the method of selecting a sample from a given universe with a view to draw conclusions about that universe. A sample is a representative of the universe selected for study.

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SAMPLE SIZE The sample size for the survey conducted was 100 respondents. This sample size was taken on 100% confidence level. Data universe for this sample is 3,00,000 which is approx population of Madurai excluding people below age of 18 years. Research design: Descriptive Sampling method: - non- probability Convenience sampling Sample area = Madurai Sample size = 100

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CHAPTER- 3
Competitive analysis

LIFE INSURANCE CORPORATION OF INDIA (LIC) LIC has an excellent money back policy which provides for periodic payments of partial survival benefits as long as the policy holder is alive. 20% of the sum assured is payable after 5, 10, 15

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and 20 years and the balance 40% is payable at the 20th year along with accrued bonus. (www.lic.com) For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and 20years and the balance 40% plus the accrued bonus becomes payable at the 25th year. An important feature of these types of policies is that in the event of the death of the policy holder at any time within the policy term the death claim comprises of full sum assured without deducting any of the survival benefit amounts which have already been paid. The bonus is also calculated on the full sum assured. HDFC SLIC does not have a money back policy. It could offer a money back plan and capture some portion of this market. While marketing insurance products I found that many customers wanted to purchase these plans. LIC offers 66 different plans; plans are formulated for specific occasions whole life plans, term assurance plans, money back plan for women, child plans, plans for the handicapped individuals, endowment assurance plans, plans for high worth individuals, pension plans, unit linked plans, special plans, social security schemes diversified portfolio of products. HDFC SLIC could diversify its product portfolio. It could add more plans for high worth individuals and women

MARKETING PROBLEMS The old and out dated technique of tele marketing is used to prospect customers. More modern techniques must be adopted. The company must sponsor shows and give presentations in

37

corporate houses. The financial health check must be performed for every prospect to assess his/her true financial position and needs. Some of the advisors skip this vital step and the prospect ends up with a plan they do not appreciate and soon surrender or discontinue. Some of the main problems in marketing the policies are: Large amount of competition (18 players in the market) Other brands are well advertised and have higher recall value LIC is considered a safer option Face competition from banks and mutual funds High premium policies are difficult to market Incorrect perception about insurance Interested prospects might have a lack of time and postpone investments Customers get defensive if you cold call Short term plans are available only at large premium Customers do not have risk appetite to invest in shares y y y Some prospects have already invested and are not interested in further investments. Consumers dont want to undertake medical examinations Large amount of documentation

y y y y y y y y y

38

y y y

Customers do not like their money locked up for many years Lack of awareness about the unit linked funds in the market No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT

Advertise about the company and its products it motivates individuals to purchase insurance

Create a positive perception about insurance Speak about the good features a plan offers like high returns, life cover, tax benefits, indexation, accident cover while prospecting customers

Try to sell the product/plan which the consumer requires and not the plan where the advisors benefit is higher

y y

Improve the efficiency in operations Bring out policies with small premiums payable for short periods of time Rs. 5000 Rs. 10000 per annum for 10 years

Attract the youth of India with higher returns on investment as returns are the motivating factor which influence purchase of insurance

FINDINGS y Customers are less aware about the private insurance company in market.

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y y

Some customer likes to join HDFC as FCs because it is a Part-time job. Many professions like CA, tax planner wants corporate agency rather than to be a financial consultant.

HDFC is too selective in making a FC rather than to appoint any one like LIC.

Customer dont want to join as financial consultant because its on commission basis and they want the job on salary basis.

Educated customers are now vending towards private insurance Companies, due to the attractive packages and services provided by various new insurance companies.

LIC has created a branded image in 3-4 decades, due to which new insurance companies are facing trouble in capturing market share

If the customers are joining HDFC the segment is more of tax consultant, investment for consultant and other people who are engaged in investment business that is because they want to diversify their portfolio.

HDFC SLIC is having good retention strategies for their financial consultant

SUGGESTIONS y Customers should be made aware of the brand name of Insurance company through advertisement.

40

y y

The fear in the customer mind should be removed by company. The insurance companies should try to nurture their brand name timely and attractive facility provide to customer

TABLE 2.1 GENDER WISE RESPONDENTS

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S.NO 1 2

PARTICULARS Male Female TOTAL

LIC 35 15 50

HDFC life 40 10 50

TOTAL 75 25 100

Inference The above table says that, 75% of the respondents are male, 25% of the respondents are female. CHART 2.1
60

50

40

30

female male

20

10

0 LIC HDFC life

TABLE 2.2 AGE OF THE RESPONDENTS

42

PARTICULARS 20-30 31-50 51-70 71 and above TOTAL

LIC 10 25 10 5 50

HDFC life 5 30 15 0 50

TOTAL 15 55 25 5 100

PERCENTAGE 15 55 25 5 100

Inference The above table inferred that, 15% of the employees age is between 20-30 years, 55% of the respondents age is between 31-50 years, and 25% of the respondents age is between 51-70 years, and 5% of the respondents age is between 71 and above. CHART 2.2

35 30 25 20 LIC 15 10 5 0 20-30 31-50 51-70 71 & above HDFC life

TABLE 2.3

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ANNUAL INCOME OF THE RESPONDENTS PARTICULARS Below 50,000 50,000 to 1 lakhs 1 lakhs to 2 lakhs More than 2 lakh TOTAL LIC 14 7 10 19 50 HDFC life 7 4 18 21 50 TOTAL 21 11 28 40 100 PERCENTAGE 21 11 28 40 100

Inference

The above table expressed that, 21% of the respondents Annual income is below 50,000, and 11% of the respondents annual income is between 50,000 to 1 lakh, 28% of the respondents annual income is between 1 lakhs to 2 lakhs, 40% of the respondents income is more than 2 lakh. CHART 2.3

25

20

15 LIC 10 HDFC life

0 Below 50,000 50,000 to 1 lakh 1 lakh to 2 lakhs more than 2 lakh

TABLE 2.4

OCCUPATION OF THE RESPONDENTS

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PARTICULARS Business man Professional Students House wife Total

LIC 25 10 0 15 50

HDFC life 10 33 2 5 50

TOTAL 35 43 2 20 100

PERCENTAGE 35 43 2 20 100

Inference The above table shows that, 35% of the respondents are business man, and 43% of the respondents are professional, 2% of the respondents are students, 20% of the respondents are house wifes. CHART 2.4

35 30 25 20 LIC 15 10 5 0 business man professional students house wife HDFC life

TABLE 2.5

AWARNESS OF VARIOUS PLAN OFFERED BY THE INSURANCE COMPANY

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PARTICULARS Yes No TOTAL

LIC 18 32 50

HDFC life 33 17 50

TOTAL 51 49 100

PERCENTAGE 51 49 100

Inference The above table shows that, 51% of the respondents have said yes, 49% of the respondents said No. CHART 2.5
35

30

25

20 LIC 15 HDFC life

10

0 Yes No

TABLE 2.6

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PERFORMANCE OF THE INSURANCE COMPANY PARTICULARS Excellent Good Fair Poor Total LIC 36 8 6 0 50 HDFC life 38 4 8 0 50 TOTAL 74 12 14 0 100 PERCENTAGE 74 12 14 0 100

Inference In the above table shows that 74% of the respondents said Excellent, 12% of the respondents said good, 14% of the respondents said Fair. CHART 2.6

40 35 30 25 20 15 10 5 0 excellent Good Fair Poor LIC HDFC life

TABLE 2.7

PERSON WHO SUGGESTED TO TAKE INSURANCE POLICY

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PARTICULARS Friends Family Agents Others TOTAL

LIC 2 13 26 9 50

HDFC life 4 7 37 2 50

TOTAL 6 20 63 11 100

PERCENTAGE 6 20 63 11 100

Inference In the above table 6% is suggested by friends, 20% of suggestion given by family members, 63% is given by agents, 11% is given by others. CHART 2.7

40 35 30 25 20 15 10 5 0 Friends Family Agents others LIC HDFC life

TABLE 2.8 FOR WHOM INSURANCE POLICIES

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PARTICULARS Child Adults Couple Old people TOTAL

LIC 5 29 3 13 50

HDFC life 20 14 8 8 50

TOTAL 25 43 11 21 100

PERCENTAGE 25 43 11 21 100

Inference In the above table 25% of the respondents said child, 43% of the respondents said for adults, 11% of the respondents said for couple, 21% of the respondents said for old people. CHART 2.8

35 30 25 20 LIC 15 10 5 0 Child Adults Couple Old peoples HDFC life

TABLE 2.9

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RATING OF INSURANCE COMPANY RATING 1 2 3 4 5 TOTAL LIC 18 25 7 50 HDFC 15 32 3 50 TOTAL 33 57 10 100 PERCENTAGE 33 57 10 100

Inference In the above table 33% of respondents have rated 1, 57% of respondents rated 2, 10% of the respondents rated 3.

CHART 2.9

35 30 25 20 LIC 15 10 5 0 1 2 3 4 5 HDFC life

TABLE 2.10

COMPANIES AWARE THROUGH ADVERTISEMENT

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PARTICULARS Television News paper Internet Radio Other media TOTAL

LIC 27 12 8 3 0 50

HDFC life 16 6 21 0 7 50

TOTAL 43 18 29 3 7 100

PERCENTAGE 43 18 29 3 7 100

Inference In the above table 43% of the respondents aware television,18% of the respondents aware through news paper, 29% of the respondents aware through internet, 3% of the respondents aware through radio and 7% of the respondents aware through other media. CHART 2.10

30

25

20

15

LIC HDFC life

10

0 Television News paper Internet Radio other media

TABLE 2.11

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BENEFIT ATTAIN BY THE RESPONDENTS PARTICULARS NO.OF.RESPONDENTS Yes No 33 67 TOTAL 33 67 PERCENTAGE 33 67

Inference In the above table 33% of the respondents said Yes and 67% of the respondents said No.

CHART 2.11

Benefit

Yes No

TABLE 2.12

SATISFACTION OF RESPONDENTS ON THE BENEFIT

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PARTICULARS Highly satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Highly dissatisfied TOTAL

LIC 36 9 15

HDFC life 39 7 6

TOTAL 75 16 21

PERCENTAGE 75 16 21

0 0

0 0

0 0

0 0

50

50

100

100

Inference In the above table 75% of respondents are highly satisfied, 16% respondents are satisfied, 21% of respondents are neither satisfied nor dissatisfied.

CHART 2.12

40 35 30 25 20 LIC 15 10 5 0 Highly satisfied Satisfied Neither satisfied nor dissatisfied Dissatisfied Highly dissatisfied HDFC life

TABLE 2.13

SCHEMES THE RESPONDENTS INVEST

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PLANS Term plan Endowment Money back Children Pension ULIP Health TOTAL

NO.OF.RESPONDENTS TOTAL 36 41 3 7 2 6 5 100 36 41 3 7 2 6 5 100

PERCENTAGE 36 41 3 7 2 6 5 100

Term plan Endowment plan Money back plan Children plan Pension plan ULIP Health plan

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TABLE 2.14 REPONDENTS PREFERENCE ON LIFE POLICY PARTICULARS High return Security Wide acceptance Less risk Flexible Tax benefit TOTAL NO.OF.RESPONDENTS 43 27 2 18 7 3 100 RANK 1 2 6 3 4 5 PRECENTAGE 43 27 3 18 7 2 100

Inference In the above table 43% of the respondents gave 1st rank to high return, 27% of the respondents gave 2nd rank to security, 18% of the respondents gave 3rd rank to less risk,7% of the respondents gave 4th rank to flexibility, 3% of the respondents gave 5th rank to tax benefit .2% of the respondents gave 6th rank to the wide acceptance.

CHART 2.14
45 40 35 30 25 20 15 10 5 0 High return Security Wide acceptance Less risk Flexible Tax benefit

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TABLE 2.15 RESPONDENTS GAVE POINTS ON THE COMPANY SERVICES PARTICULARS LIC points High return Security Wide acceptance Less risk flexible Tax benefit 6.5 8 7.5 9 6.5 6 / 10 HDFC / 10 TOTAL / 20 PERCENTAGE points 7 8.5 7 6.5 8 7.5 13.5 16.5 14.5 15.5 14.5 13.5 13.5 16.5 14.5 15.5 14.5 13.5

Inference In the above table 13.5% of points is given to high return out of 20, 16.5% for security, 14.5% for wide acceptance, 15.5% for less risk, 14.5% for flexibility, 16% for tax benefit.

9 8 7 6 5 4 3 2 1 0 LIC HDFC life

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TABLE 2.16 HOW LONG RESPONDENTS INVEST IN LIFE POLICY PARTICULARS LIC Less than 1 year 1-2 years 2-3 years 3 years and more TOTAL 6 16 4 24 50 HDFC life 4 9 18 19 50 TOTAL 10 25 22 43 100 PERCENTAGE 10 25 22 43 100

Inference In the above table the 10% of the respondents invest less than 1 year, 25% of the respondents invest 1-2 years, 22% of the respondents invest 2-3 years, 43% of the respondents invest in life policy more than 3 years.
25

20

15 LIC 10 HDFC life

0 less than 1 year 1-2 year 2-3 year 3 year and above

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TABLE 2.17 QUALITY OF SERVICE PROVIDED BY INSURANCE COMPANY PARTICULARS Very good Good Average Poor TOTAL LIC 28 13 11 0 50 HDFC life 31 11 8 0 50 TOTAL 59 24 19 0 100 PERCENTAGE 59 24 19 0 100

Inference In the above table 59% of the respondents said very good, 24% of the respondents said good, 19% of the respondents said average CHART 2.17
35 30 25 20 LIC 15 10 5 0 Very good Good Average Poor HDFC life

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TABLE 2.18 RESPONDENTS RATING HDFC LIFE WHEN COMPARE TO LIC PARTICULARS 1 HDFC life LIC 2 3 4 5 4 3 2 1

1 = HIGHLY PREFERABLE 2=

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