manu shukla reporticici prudential life insurance ltd[1]
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TABLE OF CONTENTS
AcknowledgementsList of TablesSummary
INDUSTRY PROFILEInsurance industry – An Overview……………………………….. 2
Insurance Industry in India……………………………………….. 3
New Look of Insurance Industry………………………………….. 4
COMPANY PROFILE
Introduction………………………………………………………. 6
Vision……………………………………………………………... 6Core Values………………………………………………………. 7
Distribution……………………………………………………….. 8
Sub division of ICICI Group……………………………………… 8Organization Structure……………………………………………. 11
Board of Directors………………………………………………… 12
Organizational Chart………………………………………………. 13
PRODUCTS & SERVICES
Group Solutions…………………………………………………….. 16Group Term Assurance……………………………………………... 18
Gratuity and Superannuation……………………………………….. 23EDLI………………………………………………………………… 35
FINANCIAL ANALYSIS……………………………………………………………37
COMPETITIVE ANALYSIS……………………………………………………….. 41
INTRODUCTION……………………………………………………………………45
Need of the study………………………………………………... 45Objectives……………………………………………………….. 45
Methodology…………………………………………………….. 46
Problems Encountered……………………………………………47Limitations ……………………………………………………….48
FINDINGS……………………………………………………………………………50
SWOT…………………………………………………………………………………52
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CONCLUSION………………………………………………………………………55
INDUSTRY PROFILE
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INSURANCE INDUSTRY AN OVERVIEW
Insurance may be described as a social device to reduce or eliminate risk of
life and property. Under the plan of insurance, a large number of people
associate themselves by sharing risk, attached to individual. The risk, which
can be insured against include fire, the peril of sea, death, incident, &
burglary. Any risk contingent upon these may be insured against at a
premium commensurate with the risk involved.Insurance is actually a contract between 2 parties whereby one party called
insurer undertakes in exchange for a fixed sum called premium to pay the
other party happening of a certain event.
Insurance is a contract whereby, in return for the payment of premium by the
insured, the insurers pay the financial losses suffered by the insured as a
result of the occurrence of unforeseen events. With the help of insurance,
large number of people exposed to a similar risk makes contributions to a
common fund out of which the losses suffered by the unfortunate few, due toaccidental events, are made good.
This is the current scenario of the global Insurance Industry and now, let us
looks at the basic functions of insurance. While conceding that insurance is a
risk-transfer tool, corporate should be made to understand that it does not
suffice merely to transfer the risk but they have to participate in the effort of
loss prevention. New but they have to participate in the effort of loss
prevention. New techniques and technology have to be adopted from time to
time in order to improve performance and this has special significance to theorder to improve performance and this has special significance to the Indian
Insurance Industry. The Indian insurance industry has always suffered from
drawbacks like lack of proper understanding of the purpose of insurance,
lopsided growth etc. With the opening up of the industry, it is hoped that the
new entrants with their better channels would spread the real message of
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insurance, leading to a dynamic growth. Emphasis should be on finding new
technological avenues, although it has been observed world over that for
selling insurance, an eye-to-eye contact is essential. Internet can be used for
better servicing which would eventually, lead to business development. With
the entry of foreign companies into the insurance arena, a fresh life has been
inducted and there is a great deal of optimism in the air that the market
would automatically create a vibrant competition leading to the customer
being the ultimate winner.
INSURANCE INDUSTRY IN INDIA
The insurance sector in India has come a full circle from being an open
competitive. Market to nationalization and back to a liberalized market again.
Tracing the Developments in the Indian insurance sector reveals the 360
degree turn witnessed over period of almost two centuries.
Insurance was nationalized. First, the life insurance companies were
nationalized in 1956, and then the general insurance business was
nationalized in 1972. Only in 1999 private insurance companies have been
allowed back into the business of insurance with a maximum of 26% of
foreign holding. In what follows, we describe how and why of regulation and
deregulation. The entry of the State Bank of India with its proposal of banc
assurance brings a new dynamics in the game. We study the collective
experience of the other countries in Asia already deregulated their markets
and have allowed foreign companies to participate. If the experience of the
other countries is any guide, the dominance of the Life Insurance Corporation
is not going to disappear any time soon.
The Indian insurance market, with a population of over one billion, offers
tremendous opportunities and can easily sustain 100 insurers. The
development of the insurance sector will result in higher domestic savings
and investments, significant expansion of the capital market, enhanced
infrastructure financing and increased foreign capital inflow and employment.
The opening up of the Indian insurance sector has been hailed as a
groundbreaking move towards further liberalization of the Indian economy.
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The size of the existing insurance market is growing at a rate of ten per cent
per year. The estimated potential of the Indian insurance market in terms of
premium was around Rs3, 44,000 crores (US$86 billion) in 1999. The Indian
players have tapped only ten per cent of the market share and the remaining
90 per cent of the market remains untapped.
The Indian Government has recently enacted the Insurance Regulatory
Development Authority Act 1999, which amends existing insurance laws
dating from 1938. The Act establishes an authority called the Insurance
Regulatory Development Authority, designed to regulate the insurance
sector.
THE INSURANCE INDUSTRY - WITH A NEW LOOK
Competition has well and truly set in the fast-growing insurance sector,
barely a year after the doors were opened for the re-entry of private players.
The new face of the Indian insurance industry is craving for attention.
Hoardings and billboards of the new joint venture private companies gaze at
you from everywhere. Advertisements in newspapers and on television,
insurance agents and direct mailers form part of the campaign vehicle. The
dozen-odd life and non-life companies in the private sector are fighting a
quiet but intense battle to make their presence felt to the Indian consumer.
Not to be undone, the public sector companies are trying to match the moves
of the private companies. They are shedding their old ways and donning a
sprightlier and market-friendly exterior to make sure that they do not lose the
advantage of a head start.
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COMPANY PROFILE
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Introduction
ICICI Prudential Life Insurance Company is a joint venture between ICICI
Bank, a premier financial powerhouse and prudential plc, a leading
international financial services group headquartered in the United Kingdom.
ICICI Prudential was amongst the first private sector insurance companies to
begin operations in December 2000 after receiving approval from Insurance
Regulatory Development Authority (IRDA).
ICICI Prudential's equity base stands at Rs. 9.25 billion with ICICI Bank and
Prudential plc holding 74% and 26% stake respectively. In the period April-
December 2004, the company garnered Rs 8.6 billion of new business
premium for a total sum assured of over Rs 73.6 billion and wrote nearly
345,000 policies. The company has a network of over 50,000 advisors; as
well as 7 bank assurance tie-ups. Today, ICICI Prudential has emerged as the
No. 1 private life insurer in the country, with a wide range of flexible products
that meet the needs of the Indian customer at every step in life.
Vision
To make ICICI Prudential the dominant Life and Pensions player built on trust
by world-class people and service. This we hope to achieve by:
Understanding the needs of customers and offering them superior products
and service
Leveraging technology to service customers quickly, efficiently and
conveniently
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Developing and implementing superior risk management and investment
strategies to offer sustainable and stable returns to our policyholders
Providing an enabling environment to foster growth and learning for our
employees
And above all, building transparency in all our dealings.
The success of the company will be founded in its unflinching commitment to
5 core values -- Integrity, Customer First, Boundary less, Ownership and
Passion. Each of the values describes what the company stands for, the
qualities of our people and the way we work. They do believe that they are on
the threshold of an exciting new opportunity, where we can play a significant
role in redefining and reshaping the sector.
CORE VALUES
The success of the company will be founded in its unflinching commitment to
5 core values –
Integrity
Customer First
Boundary less
Ownership
Passion.
Each of the values describe what the company stands for, the qualities of our
people and the way we work. We do believe that we are on the threshold of
an exciting new opportunity, where we can play a significant role in
redefining and reshaping the sector. Given the quality of our parentage and
the commitment of our team, there are no limits to our growth.
DISTRIBUTION
ICICI Prudential has one of the largest distribution networks amongst private
life insurers in India, having commenced operations in 74 cities and towns in
India. The company has seven banc assurance tie-ups, having agreements
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with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna
Bank and some co-operative banks, as well as over 150 corporate agents and
brokers. It has also tied up with NGOs, MFIs and corporate for the distribution
of rural policies and organizations like Dhan for distribution of Salaam
Zindagi, a policy for the socially and economically underprivileged sections of
society.
ICICI Prudential has recruited and trained over 60,000 insurance advisors to
interface with and advice customers. Further, it leverages its state-of-the-art
IT infrastructure to provide superior quality of service to customers.
SUBDIVISION of ICICI GROUP
BASIS OF SUBDIVISION
ICICI LOMBARD
9
ICICI BANK ICICI
PRUDENTIAL
MUTAL FUND
ICICI
PRUDENTIAL LIFE
INSURANCE
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The subdivisions are made on the basis of services provided to the customers
on basis of there financial and securities needs. The details of the
subdivisions are given below
ICICI BANK
History
ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian
financial institution, and was its wholly-owned subsidiary. ICICI was formed in
1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a
development financial institution for providing medium-term and long-term
project financing to Indian businesses. In the 1990s, ICICI transformed its
business from a development financial institution offering only project finance
to a diversified financial services group offering a wide variety of products
and services, both directly and through a number of subsidiaries and affiliates
like ICICI Bank. 1999, ICICI become the first Indian company and the first
bank or financial institution from non-Japan Asia to be listed on the NYSE.
ICICI BANK in India
ICICI Bank is India's second-largest bank with total assets of about Rs.
2,513.89 bn (US$ 56.3 bn) at March 31, 2006 and profit after tax of Rs. 25.40
bn (US$ 569 mn) for the year ended March 31, 2006 (Rs. 20.05 bn (US$ 449
mn) for the year ended March 31, 2005). ICICI Bank has a network of 741
branches (including 48 extension counters) and over 3300 ATMs in India and
presence in 30 International locations. ICICI Bank offers a wide range of
banking products and financial services to corporate and retail customers
through a variety of delivery channels and through its specialized subsidiaries
and affiliates in the areas of investment banking, life and non-life insurance,
venture capital and asset management. ICICI Bank set up its international
banking group in fiscal 2002 to cater to the cross border needs of clients and
leverage on its domestic banking strengths to offer products internationally.
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ICICI Bank currently has subsidiaries in the United Kingdom, Russia and
Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai
International Finance Centre and representative offices in the United States,
United Arab Emirates, China, South Africa and Bangladesh. Our UK subsidiary
has established a branch in Belgium. ICICI Bank is the most valuable bank in
India in terms of market capitalization.
ICICI PRUDENTIAL Life Insurance
ICICI and Prudential came together in 1993 to form Prudential ICICI Asset
Management Company, which has today emerged as one of the leading
mutual funds in India. The two companies bring together two of the strongest
financial service brands in Asia, known for their professionalism, excellent
quality of service and long term commitment. Riding on the success of this
relationship, the two companies joined hands once more in 2000, to form
ICICI Prudential Life Insurance, with a commitment to provide leading edge
life insurance solutions.
ICICI Bank has 74% stake in the company, and prudential plc has 26%.
ICICI Lombard
ICICI Lombard General Insurance Company Limited is a 74:26 joint venture
between ICICI Bank Limited and the Canada based $ 26 billion Fairfax
Financial Holdings Limited. ICICI Bank is India's second largest bank, while
Fairfax Financial Holdings is a diversified financial corporate engaged in
general insurance, reinsurance, insurance claims management and
investment management. ICICI Lombard is India’s largest non private firm
which provide general insurance.
ICICI PRUDETIAL MUTAL FUND
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ICICI PRUDENTIAL asset management company enjoys the strong parentage
of Prudential plc, one of the UK’s largest players in the insurance and fund
management
Sectors and ICICI bank, a well known and trusted name in financial services
in India.
ICICI prudential asset Management Company, in a span of just over eight
years. has forged a position of pre-eminence in Indian mutual fund industry
as one of the largest asset management companies in country with asset
under management of Rs. 37,906.24 crores (as of march 31st , 2007). The
company manages a comprehensive range of schemes to meet the varying
investment needs of its investors spreads across
68 cities in the country.
Organization Design and Structure
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Chairman
Board of Directors
Managing Director
CFO
CMOSales Channel
Heads
Acturial Head
Underwriting
Head
HR Head
Service &
Operations
Bank Assurance
Tide Agencies
Group & RuralHeads
RGSM
GSM
Key AccountManager
Account
Manager
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BOARD OF DIRECTORS
The ICICI Prudential Life Insurance Company Limited Board comprises
reputed people from the finance industry both from India and abroad.
Mr. K.V. Kamath, Chairman
Mr. Barry Stowe
Mrs. Kalpana Morparia
Mrs. Chanda Kochhar
Mr. HT Phong
Mr. M.P. Modi
Mr. R Narayanan
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Mr. Keki Dadiseth
Ms. Shikha Sharma, Managing Director
Mr. N. S. Kannan, Executive Director
Mr. Bhargav Dasgupta, Executive Director
MANAGEMENT TEAM
Ms. Shikha Sharma, Managing Director
Mr. Sandeep Batra, Chief Financial Officer & Company Secretary
Mr. Shubhro J. Mitra, Chief - Human Resources
Mr. Puneet Nanda, Head - Investments
Ms. Anita Pai, Chief - Customer Service and Operations
Mr. V. Rajagopalan, Appointed Actuary
Mr. Dipan Bhattacharya - Chief Information Technology
ORGANIZATIONAL CHART
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The ICICI group is divided in four parts on the basis of the services provided. The first arm is ICICI Bank which includes Personal Banking, NRI Banking andCorporate Banking.
ICICI GROUP
ICICI BANK ICICI LOMBARD GENERAL
INSURANCE
ICICI PRUDENTIAL LIFEINSURANCE
ICICI PRUDENTIAL MUTALFUND
PERSONAL BANKING HEALTH INSURANCE
NRI BANKING
CORPORATEBANKING
HOME INSURANCE
MOTOR INSURANCE
OVERSEAS TRAVEL INSURANCE
STUDENT MEDICAL INSURANCE
LIFE
RETIREMENT
HEALTH
PORTFOLIO MANAGEMENT SERVICE
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The second branch is the ICICI Lombard general Insurance under whichcomes Health Insurance, Home Insurance, Motor Insurance, Overseas travelInsurance, Student medical Insurance.
The next branch is ICICI Prudential Life Insurance which includes Life,Retirement and Health.
The last branch is ICICI Prudential mutual fund which includes PortfolioManagement Service.
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PRODUCT AND SERVICES
GROUP SOLUTION
In an era of competitive parity, the only asset that makes a decisive
difference between corporate success and failure is the quality of human
capital. Employee benefits have proven to be an excellent tool to optimize
the retention of talent and improve an organization’s bottom line. The quality
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of an organization’s employee benefits establishes and maintains a
company’s image as a caring employer. Optimum care of employees is a
long-term investment that results in a sustained competitive advantage for
an organization in the times to come.
ICICI Prudential Group Solutions Advantage
• An integrated basket of employee benefit solutions that offer
incomparable flexible benefits.
• Sound investment management that focuses on safety, stability and
profitability of the portfolio.
• Personalized financial planning for your employee that takes care of
his/her changing financial needs at every stage of life.
• Quality service initiatives and transparency across all operations,
promising superlative operational efficiency.
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GROUP TERM ASSURANCE
The cover could be uniform or based on designation/rank or a multiple of
salary, and can be extended to all employees between the ages of 18 and 65
years. The benefit under the policy is paid on the event of the member’s
death to the beneficiary nominated by the member. It is a one-year
renewable policy where one master policy covers all proposed employees
comprising the group, with a minimum group size of 25 persons. New
members can join the group and outgoing members can leave the group at
any point during the policy term.
FEATURES
• Greater convenience for the employees with relaxed underwriting
and medical requirements.
• “Free Cover Limits” with simplified underwriting depending upon
the number of employees in the group and the level of cover chosen.
• Guaranteed benefit: On death during the term of the contract (while
in service), the sum assured will be paid to the beneficiary of the
employee.
• Choice of additional coverage in form an Accident and Disability
Benefit Rider and Critical Illness Cover
• Premium is viewed as a business expense in the year of payment.
ICICI PRUDENTIAL offer a flexible Group Term solution that provides benefits
to your employees by covering their lives against unfortunate incidents like
death, disability or disease. You can also provide cover to the extent of their
liabilities such as housing loans.
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ELIGIBILITY
Group term plan covers:
• Group size of minimum 25
• from the minimum age of 18 till the maximum age of 65 or normal
retirement age of the employee, whichever is earlier excluding employees
who have taken leave on medical grounds for more than 7 days in the last
one year.
EMPLOYER BENEFITS
Attract and retain employees
Provide welfare benefits to the employees and their families
Have simple administration procedures
Take optional riders at nominal cost
Enjoy tax benefits
EMPLOYEE BENEFITS
Have insurance protection at a relatively low cost
Require no medical test (as per Free Cover Limit)
Get covered 24 hours a day, 7 days a week, any where in the world.
Enjoy conversation option to an individual policy
Enjoy tax benefits.
BENEFITS PAYABLE
The benefit (life cover) under the policy is payable on the death of the
employee to the beneficiary nominated by him.
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LIFE COVER DETAILS
The basic term cover can be chosen
As a multiple of salary
As a flat cover
As a grade wise cover
As a cover against outstanding loan amount
The minimum cover to be taken is Rs 100000 per employee.
ADDITIONAL COVERS
As riders to the basic plan for a nominal additional premium 3 additional
covers are offered against accident, disabilities and critical illnesses.
ACCIDENT AND DISABILITY BENEFIT RIDER (ADBR)
On death due to accident caused by violent, external and visible
means, the sum assured under the rider will be paid. The maximum
benefit that can be availed of is equal to the basic sum assured to a
maximum limit of Rs 10 lakhs.
In case of a death in a mass surface public transport, double the
benefit will be payable.
ACCIDENTAL BENEFIT RIDER
On total and permanent disability due to accident, the sum assured
under the rider will be payable in ten annual installments, each equal
to one tenth of the amount of accidental cover. On death of such a
member before the last such installment, then the installments
remaining unpaid shall become payable immediately.
CRITICAL ILLNESS RIDER
In the event of the life assured contracting a critical illness, an
additional payment equivalent of the sum assured under the rider
would be made. The 9 major illness covered are:
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Cancer, Coronary Artery By- Pass Graft Surgery (CABGS), Heart Attack,
Major Organ Transplant, Stroke, Paralysis, Aorta- Surgery, Heart Valve
Replacement/Surgery, Kidney Failure.
when employees join or leave the scheme?
• All new employees become a part of the group, if they meet the eligibility
criteria. The cover starts from the date of joining the company.
• The particulars of the new joinees are to be submitted by the Employer on a
monthly basis along with the proportionate premium.
• In case of an individual leaving service or the group, life cover will cease
immediately.
• The proportionate premium will be refunded for the employees leaving the
scheme.
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ICICI PRUDENTIAL GROUP RETIREMENT BENEFITSOLUTIONS
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GRATUITY - THE LOYALTY REWARD
Gratuity is a statutory benefit paid to the employees under the Payment Of
Gratuity Act, 1972 who have rendered continuous service for at least five
years. The employee is eligible for 15 days pay for each completed year of
service. The employer can also structure a gratuity that is higher than
statutory requirements. It is payable on cessation of employment
(resignation/death/retirement/termination) by taking the last drawn basic
salary as the basis for calculation.
Gratuity payment liability tends to increase as the salaries and tenure of
employment increase annually. If the employer pays the gratuity from its
current revenue, it becomes difficult to meet the liability. It is therefore
beneficial that a gratuity fund is set up for prudent financial planning.
ICICI GROUP GRATUITY PLAN
ICICI Pru Life Insurance offers a market linked group gratuity plan that helps
the insured company to fund the statutory gratuity obligation in a scientific
manner and also avail of the tax benefits as applicable to approved gratuity
funds.
FEATURES:
• Wider choice of investments with Market Linked Plans - to meet
the diverse financial goals. We offer 4 investment options (short-term
debt, debt and balanced and capital guarantee plan) where
investments will be made in accordance with the fund objectives.
• Transparency through Daily disclosure of Unit Value and regular
disclosure of the portfolio of each of the investment option
• Flexibility through switching and contribution redirection option to
enable reshuffling of portfolio.
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• Bundled Life Cover greater value to the employee by packaging life
insurance cover with the gratuity, with minimal amount of
underwriting.
• Actuarial services to provide a scientific estimation of the gratuity
liability.
• Low explicit charge structure with the conditions for exit specified
upfront.
• Enhanced service levels through faster claim settlement, easier
access to information and regular statements.
• Complete end to end solution in the legal and regulatory
approval process for scheme set up or transfer.
ELIGIBILITY
Group Gratuity Plan covers
• employer- employee groups.
• group size of 25 and above
• employees (members) between the age of 18 and retirement age of the
company
Employer Benefits:
• Annual contribution up to 8.33% of salary bill in a financial year is
allowed a deduction for the purpose of computation of profits and
gains of business.
• Contribution towards past service liability is allowed as deduction as
per the Income Tax rules.
Employee Benefits:
• The contribution made by the employer is not included in the value of
taxable perquisites in the hands of the employee.
• Gratuity received up to Rs 350000 is exempt from Income tax under
Sec 10(10).
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BUNDLED LIFE COVER
ICICI Prudential Gratuity Plan offers greater value to the employees by
packaging gratuity with life insurance. It can be taken:
As a flat cover which can be a minimum of Rs 1000 per employee, or
On the basis of anticipated gratuity which is the amount paid over and
above the accrued gratuity of an employee in the event of his
premature death before retirement age, for the balance years of his
service.
The premiums for the bundled life cover are payable annually in
advance.
CONTRIBUTIONS
The contributions made towards the Gratuity liability will depend on the Actuarial
Valuation. You can estimate your gratuity liability based on an actuarial valuation
provided by a qualified actuary. As part of our value added services, we provide an AS-
15 Certification for the same. The Past Service Gratuity Liability payment can be made
over a period of five years. The annual contributions can be made in annually/
quarterly/monthly installments.
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PRODUCT OFFER
ICICI Prudential offers a market linked plan that offers a higher flexibility and
transparency than any other traditional or self-administered fund. It offers 4
fund options under the Group Gratuity Plan to meet the employee’s diverse
financial goals. The investments are made in accordance with the fund
objectives.
FUNDOPTION
ASSET ALLOCATIONOBJECTIVE
Short Term
Debt Plan
100% Money Market,
Debt Instruments
Protect capital deployed, as well
as provide suitable returns
through low risk investments debt
and money market instrumentsDebt Plan Max 100% Debt
Instruments; Max 25%
Money Market
Generate a steady accumulation
of income through instrument in
fixed income securities.Balanced Plan Min 80% debt and debt
related instruments;Max 20% Equity
Generate a good mix of long-term
capital appreciation along withcurrent income through
investment in equity and fixed
income instruments.Capital
Guarantee
Plan
100% Money Market,
Debt Instruments.
Provide suitable returns through
low risk investments in debt and
money market instruments while
protecting contributions invested
in this plan.
VALUE ADDED SERVICES
Dedicated account manager.
Settle claims and payouts within specified turn around times.
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Assistance in setting up of a new trust and transfer of existing
schemes.
Legal and taxation help desk for gratuity fund.
Financial planning for employees.
when employees join or leave the scheme?
• All new employees become a part of the group, if they meet the eligibility
criteria. The life cover starts from the date of joining the company.
• The particulars of the new employees may be submitted by the Employer
on a monthly basis. The term premiums are payable annually in advance (on
a pro-rata basis) and the annual contribution can be paid in the specified
instalments.
• In case of an individual leaving service or the group, life cover will cease
immediately.
• The proportionate premium will be refunded for the employees leaving the
scheme, except in case of death. The gratuity accrued will be paid to the
employee if eligible.
• For all death claims the life cover along with the accrued gratuity will be
payable to the employee’s beneficiary.
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RETIREMENT PLANNING WITH GROUP
SUPERANNUATION
After a valuable professional career with an organization, employees require
the security of a regular income flow when they retire. Organizations help
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employees secure there golden years by offering various kinds of retirement
benefits that allow an employee to enjoy the same quality of life post
retirement. Group Superannuation is one such efficient way to plan for
retirement.
ICICI Prudential GROUP SUPERANNUATION PLAN
ICICI Prudential offers a market linked defined contribution Superannuation
scheme that provides substantial benefits to both employers and their
employees. The employer can avail of tax benefits applicable to an approved
Superannuation trust. The scheme will provide for a retirement fund of each
member. A member would be able to choose from various pension options or
opt for partial commutations of the pension at the time of retirement.
FEATURES
• Wider choice of investments with Market Linked Plans - to meet
the diverse financial goals. We offer 5 investment options (short-term
debt, debt, balanced, growth and capital guarantee plan) where
investments will be made in accordance with the fund objectives.
• Control - Each member/employer can exercise greater control over
investments by choosing one or more of the investment options.
• Multiple Annuity Options - 5 annuity options and open market
option.
• Transparency - Transparency through Daily disclosure of Unit Value
and regular disclosure of the portfolio of each of the investment option.
•Flexibility - Flexibility through switching and contribution redirectionoption to enable reshuffling of portfolio.
• Low explicit charge structure with conditions for exit specified
upfront.
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• Enhanced service levels through faster claim settlement, easier
access to information and regular statements.
• Complete end-to-end solution in the legal and regulatory approval
process for scheme set up or transfer.
ELIGIBILITY
ICICI Prudential‘s Group Superannuation Plan covers
• Employer- employee groups.
• Group size of 25 and above
• Employees (members) between the age of 18 and retirement age of the
company .
EMPLOYER BENEFITS
• Annual contribution are treated as deductible business expenses u/s
36(1)(iv)
• Maximum contribution that an employer can make is 27% (provident
fund+ superannuation) of employee’s annual salary –rule 87
• Interest income on the fund is tax-free 10(25)(3)
EMPLOYEE BENEFITS
• Contributions by the employer are not treated as perquisites u/s 17(2)
• Interest on the fund is exempt from tax u/s 10(25)(iii)
• Commuted value (1/3rd )on retirement is tax-free u/s 10(13)
• Benefits payables on death are exempt from tax u/s 10(13)
• Employee’s contribution, if any, qualifies for tax exemption u/s 88
Superannuation Benefits payable:
On Retirement
On retirement the trustees/individual member would be able to choose from different
annuity options then available. A portion of the accumulated amount may be commuted
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for payment of lump sum on retirement etc., subject to the provisions of the scheme rules
and the provisions of Income Tax rules.
On Death
In the event of death of the employee, the accumulated amount will be used for payment
of benefits to the beneficiary as per the rules of the scheme.
On Withdrawal
In the event of leaving service of an employer, the employee has the option
to either transfer the money to an approved superannuation fund of the new
employer or opt for a deferred pension plan. All these will be subject to the
provisions of the rules of the scheme, approval of the Income Tax authorities
and appropriate deduction of tax at source, wherever applicable.
BENEFITS PAYABLE
Superannuation benefits are payable on retirement, death and resignation. In
either case, the accumulated amount is used for making payments to the
member or beneficiary (in case of death), subject to the provisions of the
scheme rules and the provisions of income tax rules.
CONTRIBUTIONS
Contributions can be made by employers only or by both employer and
employee
Contribution is defined as a % of salary of the employees (e.g. 15% basic for
defined contribution schemes. For defined benefit schemes it is dependent on the
funding requirement as per the actuarial valuation conducted)
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PRODUCT OFFERING
ICICI Prudential offers a market linked plan to meet the diverse financial goals
of the
employer and the employees. The plan offers 5 fund options under the
scheme.
FUND OPTIONS ASSET ALLOCTATION OBJECTIVE
Short term debt
plan
100% money market, debt
instruments.
Provide suitable returns
through low risk
investments debt and
money market instruments
while attempting to protect
the capital deployed in the
fund.Debt Plan Max 100% Debt
Instruments; Max 25%
Money Market
Generate a steady
accumulation of income
through instrument in fixed
income securities.Balanced Plan Min 80% debt and debt
related instruments; Max
20% Equity
Generate a good mix of
long-term capital
appreciation along with
current income through
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investment in equity and
fixed income instruments.Growth Plan Min 40% debt and debt
related instruments; max
20% equity
Provide long term capital
appriciation through
investments primarily inequity and related
instruments.Capital Guarantee
Plan
Min 80% debt and debt
related instruments ; max
20% equity
Generate a good mix of
long-term capital
appriciation along with
current income through
investment in equity and
fixed income instruments
while protecting the
contributions invested in
the plan.
VALUE ADDED SERVICES
Dedicated account manager.
Settle claims and payouts within specified turn around times.
Assistance in setting up of a new trust and transfer of existing
schemes.
Legal and taxation help desk for gratuity fund
Financial planning for employees.
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EDLI
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EMPLOYEE DEPOSIT LINKED INSURANCE
SCHEME (EDLI)
All employees to whom the Employee’s Provident Fund and Miscellaneous
Provision Act, 1952 applies, have a statutory liability to subscribe to
Employee’s Deposit Linked Insurance Scheme, 1976 to provide for the benefit
of life insurance to all their employees.
Under this scheme the insurance benefit is equal to the average balance to
the credit of the deceased employee in the provident fund during the last 12
months, provided that where such balance exceeds Rs 35000, insurance
cover would be Rs 35000 plus 25% of the amount in excess of Rs 35000
subject to a maximum of Rs 60000. Thus if the length of service is not
adequate and/or the salary is low, the average balance may be substantially
less and such that the benefit to the employee’s family is either inadequate
or non-existent.
ROLE OF ICICI PRUDENTIAL
Under section 17(2A) of the act, the employer may be exempted from
consulting to this scheme, if he/she has provided for better insurance benefit
through alternative scheme. ICICI Prudential Group Insurance Scheme in lieu
of EDLI has been accepted as one such better alternative.
EMPLOYER BENEFITS
Premium payable is usually less than the total contribution being paid
to Regional Provident Contribution; particularly when the salary level is
high and average age of the group is low.
Settlement of claim is quicker; ICICI Pru has a simplified claim
settlement process.
Premium paid is treated as normal business expense under sec 37 of IT
Act, 1962 for income tax purpose.
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EMPLOYEE BENEFITS
Each employee is covered for a sum assured ranging between 65000
to 100000 depending upon the current salary and service put in from
day one irrespective of the actual balance in the PF. Alternatively,
every employee can be covered for a uniform sum assured of Rs
65000.
Claim amount paid under the scheme will be completely tax exempted
under section 10(10)(d) of IT Act, 1962.
ADDITONAL COVER
In addition to the basic life cover ICICI Pru product offers additional cover for
accidental death as riders to the basic plan for an additional premium
ACCIDENT AND DISBILITY BENEFIT RIDER
On death due to accident caused by violent, external and visible
means, the sum assured under the rider will be paid. In case of a death
in a mass surface public transport, double the benefit will be payable.
If the employee is totally and permanently disabled as a result of an
accident, an additional benefit of 10% of the sum assured is paid every
year for 10 years commencing from the first anniversary of the
disability date.
ACCIDENTAL BENEFIT RIDER
Under this rider an amount equal to sum assured under the rider is
payable in the event of death of the life assured due to accident.
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FINANCIAL ANALYSIS
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BALANCE SHEET OF ICICI BANK
Sources of funds
Owner's fundEquity share capital 889.83 736.75 616.40 612.66 220.36Share application money - 0.02 - - 742.67
Preference share capital 350.00 350.00 350.00 350.00 -
Reserves & surplus 21,316.16 11,813.20 7,394.16 6,320.65 5,635.54Loan funds
Secured loans - - - - -
Unsecured loans1,65,083.1
799,818.78
68,108.58
48,169.31
32,085.11
Total1,87,639.1
6
1,12,718.7
5
76,469.1
4
55,452.6
238,683.69
Uses of fundsFixed assets
Gross block 5,968.57 5,525.65 5,090.20 4,812.98 4,494.29
Less : revaluation reserve - - - - -Less : accumulated depreciation 1,987.85 1,487.61 1,033.79 752.26 254.94
Net block 3,980.71 4,038.04 4,056.41 4,060.73 4,239.34
Capital work-in-progress 147.94 96.30 93.99 156.21 -
Investments 71,547.39 50,487.3542,742.8
6
35,462.3
035,891.08
Net current assetsCurrent assets, loans & advances 15,642.79 11,115.99 9,107.61 8,169.24 4,988.86
Less : current liabilities & provisions 25,227.88 21,396.16 18,019.49 17,056.93 16,207.58
Total net current assets -9,585.09 -10,280.17 -8,911.89 -8,887.68-
11,218.72
Miscellaneous expenses not written - - - - -
Total 66,090.96 44,341.5237,981.3
8
30,791.5
628,911.71
Contingent liabilities1,34,920.9
9
1,07,311.4
6
82,116.1
3
46,339.0
140,770.00
Number of equity
sharesoutstanding (Lacs)8898.24 7367.16 6130.21 6130.31 2203.59
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Key Ratios
Ratios(Rs crore)
Mar ' 06Mar ' 05Mar ' 04Mar ' 03Mar ' 02
Per share ratios
Dividend per share 8.50 8.50 7.50 7.50 2.00
Operating profit per share (Rs) 36.75 36.37 34.06 14.40 27.31
Net operating income per share (Rs) 196.87 160.69 187.90 190.10 122.99
Profitability ratiosOperating margin (%) 18.66 22.63 18.12 7.57 22.20
Gross profit margin (%) 15.10 17.64 13.44 3.23 19.84
Net profit margin (%) 14.12 16.32 13.67 9.86 9.47Leverage ratios
Long term debt / Equity 0.01 0.02 0.04 0.05 -
Total debt/equity 7.45 7.98 8.55 7.00 5.48Fixed assets turnover ratio 2.94 2.14 2.26 2.42 0.60
Liquidity ratios
Current ratio 0.62 0.51 0.50 0.47 0.30Quick ratio 6.64 4.98 4.18 3.84 3.27
Inventory turnover ratio - - - - -Component ratiosExports as percent of total sales - - - - -
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COMPETITORS
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Market share
79%
5%
2%
2%
12%
LIC
ICICI Prudential
Tata-AIG Life
Birla Sun Life
Others
Source:www.irda.com
The above pie chart depicts the existing Market share of the major
Insurance players in the Indian Insurance Industry. As it can be
seen clearly, 79% of the Insurance market is captured by LIC. There
are two basic reasons for this. First, it has been a psychological
mindset of the people that LIC is the safest and money is secured
with it because of the inherent government guarantee. This fact not
only acts as a hindrance for the private life insurers to penetrate
into the market but makes it equally difficult to make the
prospective client companies change their attitude.
Second, the 2% penalty charged by LIC for moving out to other
Insurance companies makes it all the more difficult for the Clients
to switch to other options.
When we look at other private players, ICICI Prudential grabs the
second place by capturing 5% of the market share. The attractive
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schemes and aggressive work policies of the company gives it an
edge over other private players in the market.
Birla Sunlife and TATA AIG are the two other private players having
a market share of 2% each. Other companies account for 12% of
the market share which include Bajaj Allianze, Kotak Mahindra and
HDFC etc.
COMPARITIVE ANALYSIS OF THE PRODUCT OFFERING
AND SERVICES BETWEEN ‘LIFE INSURANCE OF INDIA’
AND ‘ICICI PRUDENTIAL’
PARAMETER ICICI PRUDENTIAL LIC ADVANTAGEINVESTMENT
OPTIONS
Offers 5 fund
options -
Short Term Debt
Debt
Balanced
Growth
Capital Guarantee
No such options
provided.
Assets are to be
invested in min
50% govt.
securities and 15%
in infrastructuresector
Power to choose
fund to suit
client’s risk
appetite.
FUND MGMT
CONTROLS
No cross
subsidization
Marked to market
Investment in AA
and above rated
bonds
Risk adjustedreturns
Cross
subsidization is
present
Pooled fund –
lesser control
Investment in
high risk stategovt. securities
A strong
investment
policy and
control ensure a
quality portfolio
and steady
returns.
ACCESS TO
INFORMATION
Quarterly portfolio
declaration
NAVs declared
daily
No portfolio
disclosure
Limited access to
information
Transparency
gives control
over funds and
helps tracking
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Annual stmnts
summarizing year’s
transactions
the
performance.
SWITCHING
OPTIONS
No restriction on
no. of switches
Unlimited free
switches per year
No such option is
applicable
Flexibility to
reshuffleportfolio
With changing
market and
financial
condition
ACTUARIAL
VALUATION
Tied up with an
external qualifiedactuary to provide
gratuity valuation
& AS-15
certification
Option to use
actuary of own
choice
It offers
insurer’sstatement
No AS-15
certification is
provided
Bundled
actuarial
valuation from a
certified
professional
along with AS-15
certification as
part of best
accounting
practices.BUNDLED LIFE
COVER
Offers 2 options –
Anticipated cover
Group Term Cover
Provides only
anticipated
cover
Choice of life
cover benefit as
per
requirement /
salary / gradeCHARGE
STRUCTURE
No entry load if
fund size is over
25 lakhs
Administration
charges depend
on type of fund
No transparency
in charge
structure;
charged
implicitly
No exit
mechanism in
place – known to
vary between 1
Charges
specified upfront
& explicitly
which provides
transparency in
dealings
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to 10% TRUST
FORMATION
Assistance in
setting up trust or
migration of funds
& gettingapproval from CIT
Only filing is
done by LIC.
Follow up for CIT
approval iscompany’s
responsibility
Assistance in
documentation
& trust
formation oncompany’s
behalf for CIT
approval
ensures less
admin hassles
for the company
INTRODUCTION
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NEED OF THE STUDY
Life expectancy has been rising rapidly and today, one can now expect to live
much longer than the earlier generations. For people, this increase will mean
a longer retirement life, stretching into a couple of decades. So, it is more
critical then ever to plan adequately and wisely for those incremental
retirement years, keeping in mind that ones expenses will spiral upward, the
cost of living will increase and inflation will be ever present. Therefore one
needs a plan to ensure safety, risk cover, income security and regular returns
for the post retirement years.
Apart from the government, organizations play a significant role in this
regard by contributing towards their employees’ sunset years. This study of
the employee group retirement benefits provided by corporate and also
gauges the penetration levels of various insurance players across the state.
OBJECTIVES
To give an insight into the ‘Employee Retirement Benefits’ – its genesis
and objectives.
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To study the level of market penetration by various life insurance
players in Bangalore.
To study the distribution of various ‘Employee Group Retirement
Benefit Solutions’ across different sectors in the industry.
To study the employee strength wise distribution of various ‘Employee
Group Retirement Benefit Solutions’ in the industry.
Compilation of data base and client interaction.
METHODOLOGY The objectives of the present study were accomplished by conducting a
systematic market research. Market research is the systematic design,
collection, analysis and reporting of data and findings that are relevant to
different marketing situations facing the company. The marketing research
process adopted in the present study consisted of the following stages: -
DEFINING THE PROBLEM AND THE RESEARCH OBJECTIVE
The research objective states what information is needed to solve the
problem. The objective of the research was to study about the Employee
Group Retirement Benefit Solutions, provided by various companies across
the state and gauge the penetration levels of the insurance players in the
market.
DEVELOPING THE RESEARCH PLAN
Once the problem is identified, the next step is to prepare a plan for gettingthe information needed for the research. The present study adopted the
exploratory approach wherein there was a need to gather large amount of
information before making a conclusion.
COLLECTION AND SOURCES OF DATA
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Market research requires two kinds of data, i.e., primary data and secondary
data. Being a firm in the insurance industry, data gathering involved the
usage of both primary and secondary data though there was an extensive
usage of primary data. A well-structured and crisp questionnaire was
prepared, keeping in mind the calculated time corporate managers /
executives could devote towards answering the survey. Cold calls were made
to the corporate and it was enquired from the Finance / HR managers /
executives about the Group Retirement Benefits, the company provides to its
employees. Secondary data was collected from various journals, books and
web sites.
Sample size:
Cold calls were made to 2000 corporate out of which only 379 responded.
ANALYZE THE COLLECTED INFORMATION
This involved converting raw data into useful information. It involved
tabulation of data and using statistical measures on them for developing
frequency distributions and calculating the averages and dispersions.
REPORT RESEARCH FINDINGS
This phase marked the culmination of the marketing research effort. This
report with the research findings is a formal written document. The research
finding was used to propose the recommendations.
PROBLEMS ENCOUNTERED
The psychological mindset of people that the traditional monopoly,
LIC is the safest and money is secured with it because of the
inherent government guarantee. This fact not only acts as a
hindrance for the private life insurers to penetrate into the market
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but makes it equally difficult to make the prospective client
companies change their attitude.
The heavy exit penalty of 2% levied by the LIC acts as a restraint
for the companies to shift their funds to any other private life
insurance company. If the size of the corpus (fund) is high the
penalty will accordingly be high.
Lack of awareness about ‘Group Retirement Benefit Solutions’
among the prospective client companies.
The information required by the insurer from the prospective
company before presenting the product proposal, comes from the
latter’s confidential domains. Hence, not many are willing to share
this information database.
Reluctance on the part of employers to insure their employees. The
concept of providing the employees with retirement benefits has
not percolated as that of a long term liability which can even help in
retaining the employees in some cases and give them a secured
feeling of social and economic security for their golden years.
Many companies have discontinued with their Group
Superannuation Scheme after the announcement of 30% Fringe
Benefit Tax (FBT) in the budget 2004-05, being imposed over the
employers contribution.
‘Group Term Assurance Scheme’ is more of a rate war than
anything else. ICICI Prudential, respecting the company philosophy,
does not believe in giving in to lower rates, with a pragmatic
foresight.
LIMITATIONS
The allotted time period of 6 weeks for the study was relatively
insufficient, keeping in mind the long duration it can take at times, to
close a particular corporate deal.
The study might not produce absolutely accurate results as it was
based on a sample taken from the population.
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It was difficult getting time and access to senior level Finance/HR
managers (who had to be talked to, to get required information) due to
their busy schedules and prior commitments.
A few of the managers refrained from giving the required information
as he considered I to be from their confidential domains.
Mode of database collection was limited only to cold calling the
corporate.
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FINDINGS & SUGGESTIONS
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• Only 66% companies in the state provide ‘Gratuity’, which is a statutory provision to
be provided to employees as per the Gratuity Act, 1952. Out of them, only 49% fund
this liability to an insurance company while the remaining pay it to their employees
on their retirement / cessation of service / death.
Many of the corporate houses have withdrawn the ‘Superannuation’ benefit after the
announcement of the ‘Fringe Benefit Tax’ (FBT) on the employer’s contribution
towards the Superannuation fund, in this year’s Finance Budget. Employers say they
would rather give the contribution amount directly to their employees, who can
manage their tax liabilities accordingly rather than subject the contribution to dual
taxation.
Only 19% of the companies surveyed continue providing this benefit to their
employees, out of which 73% fund it to private life insurers while the remaining
either pay it on retirement / cessation of service / death of the employee or manage it
by self managed trusts.
More than half the companies have their funds with the ‘LIC’.
Laws of ‘Corporate Governance’ are not very strong in the ‘Newspaper’ industry, as
they do not believe in maintaining separate funds for an employee’s retirement. They
are content with paying the liability on employee’s retirement / cessation of service /
death (Pay – As – You – Go).
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Insurer V /s Self-Managed
73%
27%
insurer managed
self managed
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1. Companies provide Actuarial Services more than the normal service.
2. ICICI Prudential has shifted its focus from private companies to
Government companies.
3. It takes care of the legal formalities of forming the trust fund which
relaxes the client company’s pressures.
SUGGESTIONS:
1. The work pressure on any insurance company can be stressful.
Employer should take care of this fact.
2. Due to expansion of the market, there is a rising need for human
resources.
3. Stress relieving exercises can be conducted to relax the pressure.
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SWOT ANALYSIS
STRENGTHS
• ICICI Prudential Life Insurance Company is a joint venture between
ICICI Bank, a premier financial powerhouse, and Prudential plc, a
leading international financial services group headquartered in the
United Kingdom.
• Today the company is the No.1 private life insurer in the country and
was amongst the first private sector insurance companies to begin
operations.
• ICICI Prudential’s equity base stands at Rs. 925 crore with ICICI Bank
and Prudential plc holding 74% and 26% stake respectively.
• The company garnered Rs 860 crore of new business premium for a
total sum assured of over Rs 7,360 crore and wrote nearly 345,000
policies.
• ICICI Prudential has one of the largest distribution networks amongst
private life insurers in India, having commenced operations in 69 cities
and towns in India.
• The company has seven bancassurance tie-ups, having agreements
with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord
Krishna Bank and some co-operative banks, as well as over 160
corporate agents and brokers.
• It has also tied up with organisations like Dhan for distribution of
Salaam Zindagi, a policy for the socially and economically
underprivileged sections of society.
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• ICICI Prudential Life Insurance offers a range of innovative, customer-
centric products that meet the needs of customers at every life stage.
Its 20 products can be enhanced with up to 6 riders, to create a
customized solution for each policyholder.
• ICICI Bank is India's second-largest bank with total assets of about
Rs.112,024 crore and a network of about 450 branches and offices and
about 1750 ATMs.
WEAKNESSES
• Cost Focus only in major cities of India.
• structures tend to be high• Lot of 3rd party agents
• Backend process still need to be updated
• Service not up to the mark as per the expectations.
OPPRTUNITIES
• ICICI Prudential can leverage upon setting up Global branches as lot of
Indian going abroad
• Booming financial sector
• Still large chunk of the markets is to be tapped
• Catering to niche market with customized solutions
• Growth in back-office automation and consulting
• Focus on professional services segment
THREATS
• With more Financial muscle large companies may saturate the market
making newer companies difficult to survive and penetrate
• Companies with larger workforce
• Crowding-out effect with many companies setting up their units India
• Political Overhang from Outsourcing
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• Highly Fragmented Industry
CONCLUSION
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‘ Retirement Benefits’ in India in one form or the other are currently available
to only about 11% of the working population, including government
employees. This brings 89% of the working population in the
unorganized sector uncovered by any formal pension provision.
Also, in a recent survey conducted amongst the VRS population in
the government sector, only 12% of the respondents have replied in
affirmative on their ability to sustain on the income earned from
their pension. Hence, it can be potentially assumed from the above
facts that a large chunk of retirees in the country are either
uncovered or under covered.
The top most priority now in the area of pension reforms should be to widen
the net of pension receivers. With 11% coverage, the country will
see a far-reaching socio economic crisis threatening the balance of an economically rich young generation and deprived aged strata in
the next two decades. The dependence of 89% of non-pensioners on
the young independent generation will lead to a social crisis with
conflicting interests and priorities. Measures towards fiscal prudence
are important, but will leave this priority unanswered. In India, there
were 76 million people of an age greater than 60 in 2001 and
according to UN projection this is said to explode to over 142 million
by 2021. The longer retired people live, the greater is this strain onany pension system.
To address this impending disaster the government needs to think
beyond the immediate fiscal crisis. The corporate should also redraft
remuneration packages. It may result in a lower monthly take home,
but in the long run, it is wise to sacrifice immediate benefits for a
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more fulfilling, respectful and deserving life style in the golden
years.
BIBLOGRAPHY
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Bibliography
24 Apr. 2007 <http://iciciprulife.com>.
24 Apr. 2007 <http://insuranceindustry.com>.
25 Apr. 2007 <http://irdaindia.org>.
Business and Economy.
The Business Line 26 Apr. 2007.
"Employee Benifit Schemes." The Economic Times 22 Apr. 2007.
Employee Group Retirement Benifit Solutions.
The Outlook Money.
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