ASummer Placement Report

on

HDFC Standard Life Insurance Company Limited

Submitted in partial fulfillment for Post Graduate Diploma in Management

from Aravali Institute of Management, Jodhpur.

Submitted to: Submitted by:Prof. M. M. Mehta Ravi Agarwal PGP – 2, PGDM Roll No. - 01

ARAVALI INSTITUTE OF MANAGEMENT

(An institution of Marwar Education Foundation)Marwar Bhawan, Polo No. 2, Paota,

Jodhpur (Raj.)

EXECUTIVE SUMMARY

HDFC Standard Life insurance is the oldest life insurance company in the world. It is the

largest insurer in the UK and is the 28th largest company in the world. In India, the

company is marketing life insurance products and unit linked investment plans. From

my research at HDFC SLIC, I found that the company has a lot of competition from

other private insurers like ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces

competition from LIC. To compete effectively HDFC SLIC could launch cheaper and

more reasonable products with small premiums and short policy terms (the number of

year’s premium is to be paid). The ideal premium would be between Rs. 5000 – Rs.

25000 and an ideal policy term would be 10 – 20 years.

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

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

advertisements to promote their products. The Indian consumer has a false perception

about insurance – they feel that it would not benefit them if they do not live through the

policy term. Nowadays however, most policies are unit linked plans where a customer is

benefited even if their death does not occur during the policy term. This message

should be conveyed to potential customers so that they readily invest in insurance.

2

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

insurance. Optimum returns of 16 – 20 % must be provided to consumers to keep them

interested in purchasing insurance.

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

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

the products of HDFC. This training enables an advisor/sales manager to market the

policies better. HDFC was ranked 13 in the Best Places to Work survey. The company

should try to create awareness about itself in India. In the global market it is already

very popular. With an improvement in the sales techniques used, a fair bit of advertising

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

insurance market in India as it has around the globe.

TABLE OF CONTENTS

Introduction to Insurance 5

Research Design 10

Company Profileof HDFC SLIC 16

Company Profile of Tata AIG LIC 29

POP’s and POD’s 33

3

Competitive analysis 38

Marketing problems 43

Analysis and Interpretation 46

Future line of research 63

Conclusion 65

References 67

Appendix 68

4

ACKNOWLEDGMENT

I would like to thank my project guide Mr. B. K. Panda, Sales Development Manager

HDFC Standard Life Insurance, New Delhi for guiding me through my summer

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

appreciated.

I would like to thank Prof. Varun Arya, Prof. M. M. Mehta and Mr. Sanjay Diddee for

supporting me during this project and providing me an opportunity to learn outside the

class room. It was a truly wonderful learning experience.

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

support this project would not have been possible.

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

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

5

CHAPTER I

INDIAN INSURANCE

6

INDUSTRY

“AN OVERVIEW”

7

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. It’s a business growing at the rate of 15-20

per cent annually and presently is of the order of Rs 1560.41 billion (for the financial

year 2006 – 2007). Together with banking services, it adds about 7% to the country’s

Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and

funds available with LIC for investments are 8% of the GDP.

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

insurance and non-life insurance continues to be below international standards. A large

part of our population is also subject to weak social security and pension systems with

hardly any old age income security. This in itself is an indicator that growth potential for

the insurance sector in India is immense.

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

it provides long term funds for infrastructure development and strengthens the risk

taking ability of individuals. It is estimated that over the next ten years India would

require investments of the order of one trillion US dollars. The Insurance sector, to

some extent, can enable investments in infrastructure development to sustain the

economic growth of the country. (Source: www.indiacore.com)

8

HISTORICAL PERSPECTIVE

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

means to provide for English Widows. Interestingly in those days a higher premium was

charged for Indian lives than the non - Indian lives, as Indian lives were considered

more risky to cover. The Bombay Mutual Life Insurance Society started its business in

1870. It was the first company to charge the same premium for both Indian and non-

Indian lives.

The Oriental Assurance Company was established in 1880. The General insurance

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

Limited, the first general insurance company established in the year 1850 in Calcutta by

the British. Till the end of the nineteenth century insurance business was almost entirely

in the hands of overseas companies.

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

Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the

1920's and 1930's sullied insurance business in India. By 1938 there were 176

insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of 1938 that

provided strict State Control over the insurance business. The insurance business grew

at a faster pace after independence. Indian companies strengthened their hold on this

9

business but despite the growth that was witnessed, insurance remained an urban

phenomenon.

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

provident societies under one nationalized monopoly corporation and Life Insurance

Corporation (LIC) was born. Nationalization was justified on the grounds that it would

create the much needed funds for rapid industrialization. This was in conformity with the

Government's chosen path of State led planning and development.

The non-life insurance business continued to thrive with the private sector till 1972.

Their operations were restricted to organized trade and industry in large cities. The

general insurance industry was nationalized in 1972. With this, nearly 107 insurers were

amalgamated and grouped into four companies- National Insurance Company, New

India Assurance Company, Oriental Insurance Company and United India Insurance

Company. These were subsidiaries of the General Insurance Company (GIC).

KEY MILESTONES

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

the life insurance business.

10

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.

INDUSTRY REFORMS

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

Parliament in December 1999. The IRDA since its incorporation as a statutory body in

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

the private sector insurance companies. Since being set up as an independent statutory

body the IRDA has put in a framework of globally compatible regulations.

The other decision taken simultaneously to provide the supporting systems to the

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

IRDA online service for issue and renewal of licenses to agents. The approval of

institutions for imparting training to agents has also ensured that the insurance

11

companies would have a trained workforce of insurance agents in place to sell their

products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

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

income at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total volume

of LIC's business increased in the last fiscal year (2006-2007) compared to the previous

one, its market share came down from 85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about 19% in a

year's time. The figures for the first two months of the fiscal year 2007-08 also speak of

the growing share of the private insurers. The share of LIC for this period has further

come down to 75 percent, while the private players have grabbed over 24 percent.

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

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

have more than a 26% stake in a company’s ownership.

12

Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7

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

been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled

fledgling private insurance companies to sign up Indian customers faster than anyone

expected. Indians, who had always seen life insurance as a tax saving device, are now

suddenly turning to the private sector and snapping up the new innovative products on

offer. Some of these products include investment plans with insurance and good returns

(unit linked plans), multi – purpose insurance plans, pension plans, child plans and

money back plans. (www.wikipedia.com)

13

CHAPTER II

RESEARCH DESIGN

14

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

“To Compare the products of HDFC Standard Life Insurance Company

Limited and Tata AIG Life Insurance Company Limited for HDFC Standard

Life Insurance Company Ltd.”

15

STATEMENT OF THE PROBLEM

This study was undertaken to identify which type of insurance plans HDFC SLIC should

market to beat Tata AIG LIC 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.

OBJECTIVES OF THE STUDY

To analysis the product details of HDFC Standard life Insurance Company

limited and Tata AIG life Insurance Company Limited.

To find ‘Points of Parity’ and ‘Points of Difference’ of HDFC Standard Life

Insurance Company Limited and Tata AIG Life Insurance Company Limited.

16

To find out factors that influence customers to purchase insurance policies

and give suggestions for further improvement.

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. (Source: Research

Methodology, By C. R. Kothari)

PRIMARY SOURCES

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, competitor’s websites etc, newspaper articles etc.

17

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.

SAMPLE SIZE

The sample size for the survey conducted was 270 respondents. This sample size

was taken on 95% confidence level and 6 significant level. Data universe for this

sample is 10,00,000 which is approx population of Jodhpur excluding people below age

of 18 years.

SAMPLING TECHNIQUE

Random sampling technique was used in the survey conducted.

PLAN OF ANALYSIS

Tables were used for the analysis of the collected data. The data is also neatly

presented with the help of statistical tools such as graphs and pie charts. Percentages

and averages have also been used to represent data clearly and effectively.

18

STUDY AREA

The samples referred to were residing in Jodhpur City. The areas covered were Shastri

Nagar, Sardarpura, Masuriya, Subhash Nagar, City Area and Kamla Nehru Nagar.

OVERVIEW OF CHAPTER SCHEME

CHAPTER 1:

Introduction to insurance - An overview of the industry in India, history, key

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

CHAPTER 2:

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

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

area.

19

CHAPTER 3 :

Company profile of HDFC SLIC – Introduction of HDFC SLIC, products and

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

introduction to unit linked funds, national & international presence of the

organization.

CHAPTER 4:

Company profile of Tata AIG – Introduction of Tata AIG, products and

services, vision and core values. The advantages of investing in HDFC SLIC

compared to other financial instruments.

CHAPTER 5:

Points of Parity and Points of Difference between HDFC SLIC and Tata

AIG LIC – Comparison between different plans, charges, fees, deductions and

riders available with HDFC SLIC and Tata AIG LIC

CHAPTER 6:

Competit ive analysis – Information about the plans offered by LIC and other

private insurers in India. Comparisons between the plans to find the most popular

and beneficial plans which HDFC SLIC can incorporate into their product portfolio.

20

CHAPTER 7 :

Marketing problems - The techniques used to market insurance and their

advantages and disadvantages along with suggestions for improvement.

CHAPTER 8:

Analysis and Interpretation – A survey on factors that influence people to

purchase Life Insurance Policy.

CHAPTER 9:

Problems requir ing more research – Future line of work

CHAPTER 10:

Conclusion

References

Appendices

21

CHAPTER III

22

COMPANY PROFILE

OF

HDFC STANDARD

LIFE INSURANCE

COMPANY LTD.

23

HDFC STANDARD LIFE INSURANCE COMPANY

LIMITED

INTRODUCTION

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

emerged as the largest residential mortgage finance institution in the country. The

corporation has had a series of share issues raising its capital to Rs. 119 Crores. The

gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores

and new business premium income at Rs. 1,624 Crores. The company has covered

over 8,77,000 lives year ending March 31, 2007.

HDFC operates through almost 450 locations throughout the country with its corporate

head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE

with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing

company in India for the last 27 years.

SNAPSHOT-I

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

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

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

24

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

conglomerate with holdings In:

HDFC Standard Life insurance Company- HDFC holds 78.07 %.

HDFC Asset Management Company – HDFC holds 50.1%

HDFC Bank- HDFC holds 22.25%.

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

HDFC Chubb General Insurance Company – HDFC holds 74%.

25

SNAPSHOT-II

• Loan Approvals Rs. 805 billion.

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

• Loan Disbursements Rs.669 billion

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

• Housing Units Financed 2.5 million.

• Distribution

Offices 181

Outreach Programs 90

KEY PLAYERS

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

Chairman of Housing Development Finance Corporation Limited (HDFC Limited). He

joined HDFC Limited in a senior management position in 1978. He was inducted as a

whole-time director of HDFC Limited in 1985 and was appointed as its Executive

Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is a

Fellow of the Institute of Chartered Accountants (England & Wales).

26

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.

GROUP COMPANIES

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

HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.

Intelenet Global: BPO services for international customers.

CIBIL: Credit Information Bureau India Limited.

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

HDFC Mutual Fund

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

HDFC securities

27

STANDARD LIFE

Standard Life is Europe’s largest mutual life assurance company. Standard Life, which

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

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

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

other towns and acquitting other similar businesses.

Standard Life Currently has assets exceeding over £ 70 billion under its management

and has the distinction of being accorded “AAA” rating consequently for the six years by

Standard and Poor.

SNAPSHOT

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

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

• Europe’s largest mutual life insurer.

JOINT VENTURE

28

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 Moody’s and Standard

and Poor’s. 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 India’s 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.) India’s leading housing finance institution and the Standard Life Assurance

Company, a leading provider of financial services from the United Kingdom. Both the

promoters are will known for their ethical dealings and financial strength and are thus

committed to being a long-term player in the life insurance industry- all important factors

to consider when choosing your insurer.

BUSINESS GROWTH

29

Track Record so far

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.

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

also declared our 5th consecutive bonus in as many years for our ‘with profit’

policyholders.

KEY STRENGTH

Financial Expertise

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

30

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

Magazine Business World for Integrity, Innovation and Customer Care.

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'.

Values

.Integrity

.Innovation

.Customer centric

.People Care One for all

.Teamwork

.Joy and Simplicity

PRODUCTS & SERVICES

31

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

they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life insurance plans are

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

designed to provide you with flexible options that meet both protection and savings

needs. It offers a full range of transparent, flexible and value for money products. HDFC

SLIC products are modern and contemporary unitized products that offer unique

customer benefits like flexibility to choose cover levels, indexation and partial

withdrawals. (Source: www.hdfcslic.com)

PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE

INSURANCE

Individual Products

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 SLIC’s Single Premium Whole of Life plan is well suited to meet long

32

term investment needs. This provides attractive long term returns through regular

bonuses.

Pension Plans

Pension Plans help to secure financial independence even after retirement. Pension

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

Pension Plus .

Savings Plans

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

a dream home or fulfilling your children’s 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

33

HDFC Standard Life has the most comprehensive list of products for progressive

employers who wish to provide the best and most innovative employee benefit solutions

to their employees. It offers different products for different needs of employers ranging

from term insurance plans for pure protection to voluntary plans such as superannuation

and leave encashment.

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

Group Term Insurance

Group Variable Term Insurance

Group Unit-Linked Plan

An investment solution that provides funding vehicle to manage corpuses with

Gratuity, Defined Benefit or Defined Contribution Superannuation or Leave

Encashment schemes of your company

Also suitable for other employee benefit schemes such as salary saving schemes

and wealth management schemes

Social Product

Development Insurance Plan

Development Insurance plan is an insurance plan which provides life cover to members of a

Development Agency for a term of one year. On the death of any member of the group insured

during the year of cover, a lump sum is paid to those member beneficiaries to help meet some

34

of the immediate financial needs following their loss.

Eligibi l ity

Members of the development agency and their spouses with:

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

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

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

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

Premium Payments

The premium to be paid will be quoted per member in the group and will be the same for all

members of the group.

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

includes all premiums for the group to be covered. Cover will not start until the premium and

all the member information in our specified format has been received.

Benefits

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

equal to the sum assured will be paid to their beneficiaries or legal heirs. Where the death is

as a result of an accident, an additional lump sum will be paid equal to half the sum assured.

There are no benefits paid at the end of the year of cover and there is no surrender value

available at any time.

The role of the Development Agency

35

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

administrative tasks onto the Development Agency. By passing on these tasks the premium

charged can be lower. These tasks would include: Submission of member data in a specified computer format

Collection of premiums from group members

Recording changes in the details of group members

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

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

Payment of premiums

Reporting of claims

Keeping policy holder information up to date

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

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

the Development Agency may charge a Rs. 10 administration fee to their members.

Prohibit ion of rebates Section 41 of the Insurance Act, 1938 states No person shall allow or offer to allow, either directly or indirectly, as an inducement to any

person to take out or renew or continue an insurance in respect of any kind of risk relating

to lives or property in India, any rebate of the whole or part of the commission payable or

any rebate of the premium shown on the policy, nor shall any person taking out or renewing

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

accordance with the published prospectus or tables of the insurer

36

If any person fails to comply with sub regulation (previous point) above, he shall be liable to

payment of a fine which may extend to rupees five hundred

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. Now the

money (Rs. 1000) is invested in the debt or equity market. Suppose the fund value

increased by 20%. As a result the Rs. 1000 invested became Rs. 1200. Hence the value of

every investor is now Rs. 12 and not Rs. 10.

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS

37

Parameters RBI Bonds Fixed Deposits Mutual Funds Unit l inked

Safety High High Medium High

Liquidity None High High High

Returns Low Low High High

Life Cover 1 time amount 1 time amount 1 time amount 10 times

Tax benefits Tax free Taxed Taxed Tax free

We find that life insurance unit linked plans is a good area to invest money in as it provides

liquidity, safety, high returns, life cover and tax benefits in a single plan. HDFC SLIC offers

the option of indexation to beat inflation. Risk is reduced to a large extent as the company

invests in a diversified portfolio of stocks.

Tax Benefits

INCOME TAX

SECTION

GROSS

ANNUAL

SALARY

HOW MUCH

TAX CAN YOU

SAVE?

HDFC STANDARD

LIFE PLANS

38

Sec. 80C Across All income

Slabs

Upto Rs. 33,990

saved on

investment of

Rs. 1,00,000.

All the life insurance

plans.

Sec. 80 CCC Across all income

slabs.

Upto Rs. 33,990

saved on

Investment of

Rs.1,00,000.

All the pension plans.

Sec. 80 D Across all income

slabs

Upto Rs. 3,399

saved on

Investment of

Rs. 10,000.

All the health insurance

riders available with the

conventional plans.

TOTAL SAVINGS

POSSIBLE

Rs37,389

Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399

under Sec. 80 D, calculated for a male with gross annual income

exceeding Rs. 10,00,000.

39

Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are completely tax-

free, subject to the conditions laid down therein.

CHAPTER IV

COMPANY PROFILE

OF

40

TATA AIG LIFE

INSURANCE

COMPANY LTD.

41

TATA AIG LIFE INSURANCE COMPANY LIMITED

Introduction

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company,

formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Life

combines the Tata Group’s pre-eminent leadership position in India and AIG’s global

presence as the world’s leading international insurance and financial services

organization. The Tata Group holds 74 per cent stake in the insurance venture with AIG

holding the balance 26 percent. Tata AIG Life provides insurance solutions to

individuals and corporate. Tata AIG Life Insurance Company was licensed to operate in

India on February 12, 2001 and started operations on April 1, 2001.

THE TATA GROUP

The Tata Group is one of India's largest and most respected business conglomerates,

with revenues in 2004-05 of $17.8 billion (Rs. 799,118 million), the equivalent of about

2.8 per cent of the country's GDP. Tata companies together employ some 215,000

people. The Group's 32 publicly listed enterprises - among them standout names such

as Tata Steel, Tata Consultancy Services, Tata Motors and Tata Tea - have a

combined market capitalization that is the highest among Indian business houses in the

private sector, and a shareholder base of over 2 million. The Tata Group has operations

in more than 40 countries across six continents, and its companies export products and

services to 140 nations.

42

AIG

American International Group, Inc. (AIG), world leaders in insurance and financial

services, is the leading international insurance organization with operations in more

than 130 countries and jurisdictions. AIG companies serve commercial, institutional and

individual customers through the most extensive worldwide property-casualty and life

insurance networks of any insurer. In addition, AIG companies are leading providers of

retirement services, financial services and asset management around the world. AIG's

common stock is listed on the New York Stock Exchange as well as the stock

exchanges in London, Paris, Switzerland and Tokyo.

Tata AIG has strong brand name and recall factor which most of its competitors lack in.

Other than the public behemoth Life Insurance Corporation (LIC) of India which has a

major hold in the market share (of approximately 79%), the private players too are

having more and more opportunities to tighten their hold of the market. Of the private

players, ICICI Prudential comes first with an almost 4.50% of the market share followed

by Tata AIG with about 2.10% of the pie. The private players have everything to work

for, especially with LIC not meeting the needs of its clientele with respect to the services

they need. This provides a prospect for the private sector players to increase their share

of the market. Companies with a familiarity such as Tata AIG can especially achieve

their targets due to the brand image that the Tata group has.

(Source: www.tata-aig-life.com)

43

A recent survey conducted by the Voluntary Organization in Interest of Consumer

Education (VOICE) revealed Tata AIG Life Insurance Company (Tata AIG Life) as the

clear winner in terms of customer satisfaction in the life insurance

category. This is India's first-ever customer satisfaction study for the insurance sector.

The survey also revealed that Tata AIG Life had a high recall as a reputed brand name.

The ability to provide innovative and customer-focused service such as allowing the

maximum grace period for premium payment has not only further distinguished Tata

AIG Life from other life insurance companies but also appealed to consumers.

PRODUCTS & SERVICES:

Corporate life insurance products:

44

• Employee Benefits

• Credit Life

• Group Pensions

• Workplace Solutions

Individual l ife insurance products:

• Health First

• Health Protector

• Mahalife

• InvestAssure II, InvestAssure Gold

• Shubh life, Nirbhay life

With respect to individual life insurance products, Tata AIG has an array of policies to

suit the needs and requirements of all age groups viz, children, students, adults,

retirees etc.

The ‘SUPPORT’ arm of Tata AIG Life is constituted of Operations, Human Resources,

Marketing, Corporate Training, Finance and Compliance.

Tata AIG Life possesses the philosophy and drive to customize retirement obligations

(for the company) which occur in the form of cash outflows, for the maximum benefit of

both the employer and the departing employee.

45

CHAPTER V

POINTS OF PARITY

AND46

POINTS OF

DIFFERENCE

BETWEEN

HDFC SLIC AND TATA

AIG

47

Points of Parity

Funds available with ULIP Plans

General Description Nature of Investments Risk Category

Equity Funds

Primarily invested in company

stocks with the general aim of capital

appreciation

High

Income, Fixed Interest

and Bond Funds

Invested in corporate bonds,

government securities and other fixed

income instruments

Medium

Cash Funds

Sometimes known as Money

Market Funds — invested in cash, bank

deposits and money market instruments

Low

Balanced FundsCombining equity investment

with fixed interest instrumentsMedium

Generally all life insurance companies have three types of fund which are Equity fund,

Debt fund and Balance fund. These fund have different risk profile. Equity fund has high

risk but it gives high return, Debt fund has low risk so it gives low return and Balanced

fund is combination of both Equity and Debt fund so risk is medium and return is also

low.

Both HDFC SLIC and Tata AIG LIC have 7 types of funds based on combination of

Debt–Equity fund. These are liquid fund, stable managed fund, secure

managed fund, defensive managed fund, balanced managed fund, equity

managed fund, growth fund.

48

Indexation

You have the option to increase your regular premiums by an indexation rate at any

policy anniversary to protect the real value of your investment against inflation. The rate

of indexation will be in line with the increase in the Whole Sale Price Index (or in the

event that this Index ceases to be published such other index as the Company may

select for this purpose). The base sum assured and sum assured of any attached rider

would also be increased by the corresponding indexation increase.

Charges, Fees and Deductions in ULIP

• Premium Allocation Charge

This is a premium-based charge. After deducting this charge from premiums, the

remainder is invested to buy units. The Allocation charges are guaranteed for the entire

duration of policy term.

• Mortality Charge

The Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the Fund

Value pertaining to regular premiums). It will be deducted by monthly cancellation of

units from the accumulation unit account. The Mortality Charge shall remain guaranteed

throughout the policy term.

• Fund Management Charge

49

1% p.a. on With Profits Fund, 1% p.a. on Debt Fund, 1.25% p.a. on Balanced Fund and

1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on a

daily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by the

IRDA.

• Policy Administration Charge

Rs. 60 per month, which will increase by 5% p.a. on the 1st of January each year. PAC

will be deducted monthly by cancellation of units from the accumulation unit account. If

premiums are discontinued, this charge would reduce to 60% of the charge applicable

for the premium paying policies

• Surrender Charge

This is the charge that applies when the policy is surrendered. It is equal to 50% of the

difference between regular premiums expected and those paid in the first year of the

contract.

• Service Tax Deduct ions

12.36% service tax is applicable on the first premium of life insurance policy.

50

T ax Benefits

Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961.

Insurance is tax free up to Rs. 100000 per annum and the returns on investment on

maturity of the policy are also tax free.

Riders and Bonuses

HDFC Standard Life

Insurance

Tata AIG Life

Insurance

Free Look Period 15 days 15 days

Reversionary BonusBased on company's

performance

Based on company's

performance

Terminal BonusBased on company's

performance

Based on company's

performance

TOP UP Minimum Rs. 5000 Minimum Rs. 5000

Riders

Crit ical I l lness (CI)

Benefit

Gives on diagnosis of

anyone

of 6 critical illness

Gives on diagnosis of

anyone

of 12 critical illness

Additional Term Benefit

(ATB)Provides Provides

Accidental Death Benefit

(ADB)Provides Provides

Double Benefit Provides Does not provide

Triple Benefit Provides Does not provide

Payer Benefit Rider

(PBR)Does not provide Provides

51

Waiver of Premium

(WOP) BenefitProvides Provides

Points of Difference

HDFC Standard Life

Insurance

Tata AIG Life

Insurance

Grace Period 15 days 31 days

Policy Administration

ChargeRs. 60 per month Rs. 55 per month

Guaranteed Bonus Does not give10% on sum-assured

after 10 year

Loyalty Bonus 0.1% every year0.25% after every 4th

year

Fund Switching Charge

Total 24 free switches in a

policy

after this Rs. 100 per

Switch

4 free switches per year

after this

Rs. 250 per switch

Guaranteed Surrender

value

50% of all premium

paid excluding 1st premium

30% of all premium

paid excluding 1st

premium

Fund Management

Charge

0.80% per annum

on the fund value

1.75% per annum

on the fund value

Premium Redirection

Charge

Total 12 free Premium

Redirection

in a policy after this Rs.

250 per Premium

Redirection

First 2 Premium

Redirection in a

year is free after this

Rs. 1000

per Premium

52

Redirection

Last Year Return 42.70% 72%

We see that both the life insurance companies’ products are almost same. They

have same charges, fees and deductions. There is slightly difference in charges

and maximum limits of all charges are fixed by IRDA. Before buying any life

insurance policy one should check charges and fees on policy and company’s

overall performance and return given to its consumer.

53

CHAPTER VI

COMPETITIVE

ANALYSIS

54

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 and 20 years and the balance 40% is payable at the 20 th year

along with accrued bonus. (www.lic.com)

55

For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and 20

years 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.

ICICI PRUDENTIAL

ICICI Prudential is a stiff competitor for HDFC SLIC. The company is a merger between

ICICI Bank which is the biggest private bank in India and Prudential Plc which is a

global life insurance company.

56

The company has an investment plan which is market related – Invest Shield Life. In

this plan even if the market falls, the premium will be returned to investors. It is a

guaranteed plan which ensures the company carefully invests your money. The stock

market performance of ICICI Prudential is much better than HDFC SLIC. The returns on

the growth fund were 46.28% compared to the 42.70% offered by HDFC SLIC.

Customers are attracted by higher returns and this is a plus point for Prudential.

The company is very well advertised. The advertisements are showcased in movies,

television, newspapers, magazines, bill boards, radio etc. The company has an

excellent brand ambassador – Mr. Amitabh Bacchan. His promotion of the company

builds trust and faith in the minds of our people.

However the charges are very high in the plans offered by ICICI Prudential. It is 35%

during the first year, 15% in the next year and 3% from the third year onwards. Also a

higher minimum premium of Rs. 8000 is charged. Hence the policies are not accessible

to the lower strata of the society. (Source: www.iciciprulife.com)

BIRLA SUN LIFE

57

Birla Sun Life Insurance Company Limited is a joint venture between The Aditya Birla

Group, one of the largest business houses in India and Sun Life Financial Inc., a

leading international financial services organization. The local knowledge of the Aditya

Birla Group combined with the expertise of Sun Life Financial Inc., offers a formidable

protection for your future. (Source: www.birlasunlife.com)

The Aditya Birla Group has a turnover close to Rs. 33000 crores with a market

capitalization of Rs. 53400 crores (as on 31st March 2007). It has over 72000

employees across all its units worldwide. It is led by its Chairman - Mr. Kumar

Mangalam Birla. Some of the key organizations within the group are Hindalco and

Grasim.

Sun Life Financial Inc. and its partners today have operations in key markets worldwide,

including Canada, the United States, the United Kingdom, Hong Kong, the Philippines,

Japan, Indonesia, India, China and Bermuda. It had assets under management of over

US$343 billion, as on 31st March 2007. The company is a leading player in the life

insurance market in Canada.

Being a customer centric company, BSLI has invested heavily in technology to build

world class processing capabilities. BSLI has covered more than a million lives since

inception and its customer base is spread across more than 1000 towns and cities in

India. All this has assisted the company in cementing its place amongst the leaders in

58

the industry in terms of new business premium income. The company has a capital

base of 520 crores as on 31st July, 2007.

Its Flexi Life Line Plan offers life long insurance cover till the policy holder is 100 years

of age. There are guaranteed returns of 3% p.a. net of policy charges after every 5

years from the eleventh policy year onwards. However the charges are very high. The

initial charges for the first year are 65%. Hence the fund value is greatly reduced.

BAJAJ ALLIANZ

Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in

over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years

in the Indian market. Together they are committed to offering you financial solutions that

provide all the security you need for your family and yourself. Bajaj Allianz is the

number one private life insurer for the year 2005 – 2006. It is leading by 78 crores. It

has experienced a whopping growth of 216% in the last financial year.

The company has sold 13, 00,000 policies and is backed by 550 offices across India. It

offers travel insurance, motor insurance, home insurance, health and corporate

insurance. The mortality charges are lower than HDFC SLIC. The entry age could be

zero years which allow even new born babies to be insured. (Source:

www.bajajallianz.com)

59

TATA AIG

Tata Aig is a joint venture between the Tata group and American International Group

Inc. In one of the plans the company offers hospital cash benefit wherein it will pay Rs.

2500 per day in case of hospitalization and Rs.12.5 lakhs in case the person suffers

from any critical illness. Annual premium is much less (about Rs. 6712) to avail such a

good benefit. Charges are relatively low compared to HDFC SLIC for some policies.

The company offers high coverage plans at low cost. There is a plan even for a policy

term of 1 year. Your family can continue to enjoy their current lifestyle even in the case

of something happening to you. These plans are very flexible and HDFC SLIC could

adopt this idea of insuring individuals for short periods of time. For example; there is a

family of four. The only earning member is the father.

He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is able to

repay the loan with his current salary in 15 years. The problem arises if something were

to happen to him within these fifteen years. Not only will the family face the emotional

and financial loss of their father but they will also have to repay the home loan or risk

being homeless. (Source: www.tataaig.com)

60

61

CHAPTER VII

MARKETING

PROBLEMS

62

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 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)

63

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

Some prospects have already invested and are not interested in further

investments

Consumers don’t want to undertake medical examinations

Large amount of documentation

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

64

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

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

Promote insurance in colleges and corporate houses

Promote HDFC SLIC as an Indian Company to build trust

HDFC SLIC could have a brand ambassador or a mascot to promote its services

Should have partial withdrawals from the first year onwards

65

Tap the rural market where there is large potential

Diversify product portfolio

Make products more straight forward – reduce complexities

CHAPTER VIII

ANALYSIS 66

&

INTERPRETATION

ANALYSIS & INTERPRETATION

“ A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA”

67

AGE GROUP OF SURVEYED RESPONDENTS

TABLE 1:

Age group No. of Respondents

18 - 25 years 127

26 - 35 years 67

36 - 49 years 46

50 - 60 years 24

More than 60 years 6

CHART 1:

Analysis:

68

From the chart above we find that 47% of the respondents fall in the age group of 18 –

25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36

– 49 years.

Therefore most of the respondents are relatively young (below 26 years of age). These

individuals could be induced to purchase insurance plans on the basis of its tax saving

nature and as an investment opportunity with high returns.

Individuals at this age are trying to buy a house or a car. Insurance could help them with

this and this fact has to be conveyed to the consumer. As of now many consumers have

a false perception that insurance is only meant for people above the age of 50. Contrary

to popular belief the younger you are the more insurance you need as your loss will

mean a great financial loss to your family, spouse and children (in case the individual is

married) who are financially dependent on you.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE 2:

Particulars No. of Respondents

Male 193

Female 77

CHART 2:

69

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 3:

Customer profile No. of respondents

Student 62

Housewife 5

Working Professional 116

Business 49

Self Employed 24

Government service employee 14

CHART 3:

70

Analysis:

From the chart above it can clearly be seen that 43% of the respondents are working

professionals, 23% are students and 18% are into business. Therefore the target

market would be working individuals in the age group of 18 – 25 years having surplus

income, interested in good returns on their investment and saving income tax.

NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE POLICY IN THEIR

NAME

TABLE 4:

Person who have life insurance policy

Yes 103

71

No 167

CHART 4:

ANALYSIS :

This graph shows that out of total 270 respondents only 103 or 38% respondents have

life insurance policy in their name. Rest all don’t have a single policy in their name. So

there is a very big scope for life insurance companies to cover these people. So in

future business of life insurace will gro further.

MARKET SHARE OF LIFE INSURANCE COMPANIES

TABLE 5:

LIFE INSURER NUMBER OF POLICIESHDFC STANDARD LIFE 4BIRLA SUN LIFE 3AVIVA LIFE INSURANCE 6BAJAJ ALLIANZ 7LIC 55TATA AIG 6ICICI PRUDENTIAL 12ING VYSYA 6BHARTI AXA 2

72

OTHERS 2

CHART 5:

Analysis:

In India, the largest life insurance company is Life Insurance Corporation of India. It has

been in existence in India since 1956 and is completely owned by the Government of

73

India. Today the organization has grown to 2048 offices serving 18 crore policies and

has a corpus of over 340000 crore INR.

74

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

TABLE 6:

Premium paid (p.a.) No. of respondents

Rs. 5000 - Rs. 10000 40

Rs. 10001 - Rs. 15000 26

Rs. 15001 - Rs. 24900 18

Rs. 25000 - Rs. 50000 10

Rs. 50001 - Rs. 60000 4

Rs.60001 - Rs. 80000 2

Rs. 80001 - Rs. 100000 3

CHART 6:

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

75

Analysis:

From the chart above we find that, 39% of the respondents surveyed pay an annual

premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an

annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs.

25000. Hence we can safely say that HDFC SLIC would be able to capture the market

better if it introduced products/plans where the minimum premium starts at Rs. 5000 per

annum.

Only 19% of the respondents pay more than Rs. 25000 as premium and most products

sold by HDFC SLIC have Rs.12000 as the minimum annual premium amount. They

should introduce more products like Easy Life Plus and Safe Guard where the minimum

premium is Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase

their market share as more individuals would be able to afford the policies/plans offered.

76

POPULAR LIFE INSURANCE PLANS

TABLE 7:

Type of Plan No. of Respondents

Term Insurance Plans 105

Endowment Plans 122

Pension Plans 16

Child Plans 8

Tax Saving Plans 19

77

CHART 7:

POPULAR LIFE INSURANCE PLANS

Analysis:

From the chart given above we can clearly see that 45% of the respondents hold

endowment plans and 39% of the respondents hold term insurance plans. Endowment

plans are very popular and serve two purposes – life cover and savings.

If the policy holder dies during the policy term the nominee gets the death benefit that

is, sum assured and accumulated bonus. On survival the policy holder receives the

survival benefit with a bonus.

A term plan is a pure risk cover plan wherein the insured pays a lower premium for a

higher sum assured. Term insurance is the cheapest form of insurance and helps the

policy holder insure himself for a relatively low premium. For the returns sensitive

78

investor term plans do not find favor as they do not offer a return in case the individual

does not die during the policy term.

AWARENESS OF UNIT LINKED INSURANCE PLANS

TABLE 8:

Awareness of Unit Linked Plans No. of Respondents

Yes 154

No 116

CHART 8:

AWARENESS OF UNIT LINKED INSURANCE PLANS

79

Analysis:

From the chart given above we find that 57% of the respondents are aware of unit

linked life insurance plans and 43% are not aware of such plans. These plans should be

promoted through advertising. The company can advertise through television, radio,

newspapers, bill boards and pamphlets. This would increase awareness and arouse

curiosity in the minds of the consumer which would enable the company to market its

products more effectively.

Unit – linked plans are those where the benefits are expressed in terms of number of

units and unit price. They can be viewed as a combination of insurance and mutual

funds. The number of units a customer would get would depend on the unit price when

they pay the premium.

When the policy matures the individual gets his fund value. The value of his fund is

calculated by multiplying the net asset value and number of units held by them on that

day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

TABLE 9:

80

Willingness to spend on premium No. of respondents Percentage

Less than Rs. 6,000 41 15%

Rs. 6,001 - Rs. 10,000 73 27%

Rs. 10,001 - Rs. 25,000 110 41%

Rs. 25,001 - Rs. 50,000 41 15%

Rs. 50,001 - Rs. 1,00,000 5 2%

CHART 9:

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

Analysis:

From the graph above, we can clearly see that 41% of the respondents would be willing

to spend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would be willing to

81

spend between Rs. 6001 – Rs. 10000 per annum. Only 15% would be willing to spend

more than Rs. 25000 per annum as life insurance premium.

We could say that the maximum premium payable by most consumers is less than Rs.

25000 p.a. This is further reduced as most customers have already invested with LIC,

ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.

HDFC SLIC is faced with a large amount of competition. There are 18 insurance

companies in India inclusive of LIC. Hence to capture a larger part of the market the

company could introduce more reasonable plans with lesser premium payable per

annum.

CHART SHOWING IDEAL POLICY TERM

TABLE 10:

Ideal policy term No. of respondents

3 - 5 years 51

6 - 9 years 41

10 - 15 years 95

16 - 20 years 38

21 - 25 years 24

26 - 30 years 5

More than 30 years 3

Whole life Policy 13

82

CHART 10:

CHART SHOWING IDEAL POLICY TERM

Analysis:

From the chart given above it can be seen that 35% of the respondents prefer a policy

term of 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a term of 6 – 9

years. This means that HDFC SLIC could introduce more plans wherein the premium

paying term is less than 15 years.

83

The outlook of insurance as a product should be changed from something which you

pay for your whole life (whole life policy) and do not receive any benefit (the nominee

only receives the benefit in case of your death) to an extremely useful investment

opportunity with the prospects of good returns on savings, tax saving opportunities as

well as providing for every milestone in your life like marriage, education, children and

retirement.

FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE

INSURANCE

TABLE 11:

Parameter No. of Respondents

Advertisements 35

High returns 84

Advice from friends 46

Family responsibilities 89

Others 16

CHART 11:

84

Analysis:

From the chart above it can be seen that 33% of the respondents purchase life

insurance to secure their families, 33% take life insurance to get high returns, 17%

purchase insurance on the advice of their friends and 13% purchase insurance because

of the influence of advertisements.

The main purpose of insurance is to cover the financial or economic loss that occurs to

the family in case of the uncertain death of the policy holder. But now a days this trend

is changing. Along with protection (life cover), a savings element is being added to

insurance.

With the introduction of the new unit linked plans in the market, policy holders get the

option to choose where their money will be invested. They can invest their money in the

equity market, debt market, money market or a combination of these. The debt and

85

money markets usually have low risk attached whereas the equity market is a high risk

investment option.

PREFERRED COMPANY TYPE OF THE RESPONDENTS

TABLE 12:

Type of Company No. of Respondents Percentage

Government Owned Company 127 47%

Public Limited Company 62 23%

Private Company 49 18%

Foreign Company 32 12%

CHART 12:

PREFERRED COMPANY TYPE OF THE RESPONDENTS

86

Analysis:

From the graph above we find that 60% of the respondents preferred to purchase

insurance from a government owned company, 29% of the respondents preferred to

purchase insurance from a public limited company and only 4% of the respondents

preferred a foreign based company. Heavy advertising through television, newspapers,

magazines and radio is required.

MINIMUM EXPECTED RETURN ON INVESTMENT

TABLE 13:

Expected Returns No. of respondents

Less than 5% 5

5% - 10% 39

11% - 15% 46

16% - 20% 49

21% - 25% 46

26% - 30% 27

31% - 40% 22

41% - 50% 14

More than 50% 22

CHART 13:

87

Analysis:

From the chart above it can clearly been seen that 18% of the respondents would like

16 – 20% returns, 17% would like returns between 21 – 25% and 17% would like

returns of 11 – 15% on their investments. Therefore the average return on investment

should be at least 16 – 20 %.

Most consumers are willing to adapt to some amount of risk but still want some

guaranteed returns. Therefore the bulk of investment should be made in the balanced

fund with 50% debt and 50% equity. The returns on the Secure Fund are guaranteed as

these involve investment is government securities and the debt market. But the returns

on these instruments are low (8 – 10%). If the company invests in shares, returns are

higher (39%) but correspondingly risk borne by the policy holder is also higher.

Therefore a good combination of the two instruments is often a wise choice.

88

89

CHAPTER IX

FUTURE LINE OF

RESEARCH

90

91

FUTURE LINE OF RESEARCH

The future topics for research in the organization could be setting up of an appropriate

ad campaign. It is very vital to the companies’ success that the people of India know

about HDFC SLIC, its products and their special features and how insurance in general

can help them in their future. The advertisements have to be emotionally appealing.

They might also include a celebrity. The brand name of HDFC could be used to give a

push to HDFC SLIC and its products. The general perception of insurance as

“inauspicious” should be done away with and individuals and corporations accept

insurance on power with other investment opportunities.

The other area of research could be in the management of funds HDFC SLIC

possesses and how it can maximize returns for its investors. A research project could

be undertaken on how to ensure that the money gets invested in the right companies

and earns a medium – high return on investment. Another area of research could be an

analysis of the sales and marketing techniques used by HDFC SLIC. A large number of

changes could be introduced and this would help in saving operating costs and

improving the efficiency of the firm.

92

93

CHAPTER X

CONCLUSION

94

CONCLUSION

HDFC standard life insurance is first life insurance company in India. It has businesses

spread out across the globe. It was registered on 23rd December 2000. It currently ranks

number 4 amongst the insurers in India (Source: annual premium provided by the

company)

The company faces a large amount of competition. To sustain itself it must promote its

products through advertising and improve its selling techniques. Consumers must be

aware of the new plans available at HDFC SLIC. The medium of advertising used could

be television since most of its competitors use this tool to promote their products. The

company must be promoted as an Indian company since consumers seem to have

more trust in investing in Indian firms.

The unit linked concept must be specifically promoted. The general perception of life

insurance has to change in India before progress is made in this field. People should

not be afraid to invest money in insurance and must use it as an effective tool for tax

planning and long term savings.

HDFC SLIC could tap the rural markets with cheaper products and smaller policy terms.

There are individuals who are willing to pay small amounts as premium but the plans do

not accept premiums below a certain amount. It was usually found that a large number

of males were insured compared to females. Individuals below the age of 30 (mostly

95

male) were interested in investment plans. This was a general conclusion drawn during

prospecting clients.

96

REFERENCES

www.hdfcslic.com

www.tata-aig-l i fe.com

www.irdaindia.com

www.lic.com

www.money control.com

www.bajajal l ianz.com

www.icici.pruli fe.com

Magazine –

Insurance World

The Outlook Money

Secrets of Successful Insurance Sales by Mr. Jack Kinder

97

98

A SURVEY ON ‘INSURANCE INDUSTRY’

Dear Sir/Madam,

I am a student of Aravali Institute of Management, Jodhpur. As part of the requirements

for my Post Graduation Diploma in Management I am required to do a research based

project. Kindly spend a few minutes of your valuable time and fill in this questionnaire.

Do you have a life insurance policy/investment

plan in your name?

o Yes o No

If yes which company’s insurance policies do you

hold?

o HDFC Standard

Life Insurance

o Birla Sun Life

Insurance

o Aviva Life

Insurance

o Bajaj Allianz Life

Insurance

o LIC

o Tata AIG Life

Insurance

o ICICI Prudential

Life Insurance

o ING Vysya Life

Insurance

o Bharti Axa Life

Insurance

o Others (specify name)

What is the approximate premium paid by you

annually ( in Rupees)?

o Rs. 5,000 – Rs.

10,000

o Rs. 10,001 – Rs.

15,000

99

o Rs. 15,001 – Rs.

25,000

o Rs. 25,001 – Rs.

50,000

o Rs. 50,001 – Rs.

60,000

o Rs. 60,001 – Rs.

80,000

o Rs. 80,001 – Rs.

1,00,000

o More than Rs. 1,00,000 (specify premium)

What kind of insurance policy would suit you best

in your current stage of l ife?

o Life Insurance

o Life Insurance and

Investment Plans

o Pension Plans

o Child Plans

o Tax saving plans

Are you aware of the new unit l inked insurance

plans in the market?

o Yes o No

How much would you be wil l ing to spend per

annum if you were to go for an

investment/ insurance plan?

o Less than Rs.

6,000

o Rs. 6,001 – Rs.

10,000

o Rs. 10,001 – Rs.

25,000

o Rs. 25,001 – Rs.

50,000

o Rs. 50,000 – Rs.

1,00,000

o More than Rs.

1,00,000

100

Which according to you is an ideal policy term?

(Number of years you would be wil l ing to pay

premium)

o 3 to 5 years

o 6 to 9 years

o 10 to 15 years

o 16 to 20 years

o 21 to 25 years

o 26 to 30 years

o More than 30

years

o Whole life policy

What motivates you to purchase

insurance/investment plans?

o Advertisements

o High Returns

o Advice from

friends

o Family

responsibilities

o Others (specify)

In which kind of company would you prefer to

make a purchase of insurance?

o Government

owned company

o Public Limited

Company

o Private Company

o Foreign based

company

101

Typically what kind of returns would you look at

from your investments? (Please note: Higher

returns involve greater r isk)

o Less than 5%

o 6% - 10 %

o 11% - 15 %

o 16% - 20 %

o 21% - 25%

o 26% - 30%

o 31% - 40%

o 41% - 50%

o More than 50%

Personal Details :

Name:

Address:

Age: Contact No. :

Profile of respondent:

• Student

• Housewife

• Working

Professional

• Business

• Self – Employed

• Government

Service Employee

Date:

102