an analysis of performance of private sector life...

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AN ANALYSIS OF PERFORMANCE OF PRIVATE SECTOR LIFE INSURANCE

COMPANIES VIS A VIS PUBLIC SECTOR LIFE INSURANCE COMPANIES

An in depth analysis of the various parameters of performance for a Life Insurance

Company were identified and the data was subjected to analysis with the help of

ratios, correlation technique and percentage analysis. The various findings have

been as follows.

SINGLE INSURANCE PREMIUM: Premium collected by Life insurance companies

on individual lives is the single most important factor that determines the success

and performance of a life insurance company. Insurance is a product that is not

bought but is sold. The following table depicts the amount of premium collected in

Crores of rupees by the various life insurance companies, public and private.

Table 7.1Table showing amount of premium in Crores of rupees

INSURER 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 28515.87

56222.56 59996.57 53179.08 71521.90 87021.13 81562.13 76611.50

Bajaj Allianz

2716.77

4301.27 6674.48

4451.10 4451.1 3465.82 2717.31 2987.9

HDFC Standard

1042.65

1648.85 2685.37 2651.11 3257.51 4059.33 3857.47 4436.37

ICICI Prudential

2602.5

5162.13 8034.75 6811.83 6333.92 7862.14 4441.09 4808.02

Reliance 193.56

932.11 2751.05 3513.98 3920.78 3034.94 1809.29 1376.57

SBI Life 827.82

2563.84 4782.94 5386.64 7040.74 7589.58 6531.32 5182.8

Max life 471.36

712.11 1597.83 1842.91 1849.09 2061.39 1901.72 1899.34

Source: Company Annual Reports

The table above clearly shows that the overall growth rate of LIC from the year 2005

up to 2012 has increased by 168%. However the growth rate of HDFC during the

same period is 325%. ICICI Prudential has shown a growth rate of 84%, SBI Life

has shown a phenomenal growth rate of 500%. Reliance has increased by 611%

Bajaj Allianz has shown a growth of 146% within two years, however the growth

subsequently fell to 10% only by 2012-13. Max Life has shown a growth of 300%

during the same period. The average growth of the 6 private life insurance

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companies is 305%, almost double that of LIC. However in terms of consistency in

growth, LIC has shown consistent growth during the period showing an average of

200% in the second year and then maintaining a net average of about 20% – 30% in

all the years except three years 2008-09, 2011-12 and 2012-13. Growth rates of

private LIC s has shown tremendous volatility ranging from 500% to a negative

growth rate in some of the years. In the last year, most of the private companies

researched i.e., three out of five have shown growth, however public sector LIC has

a negative growth when compared to the last year. The following graph depicts

growth in premium among the various life insurance companies.

Graph 1 Growth in premium among life insurance companies

SINGLE INSURANCE PREMIUM (Single Year Growth rate)

The following table depicts the percentage growth rate in the single insurance

premium collected by public sector LIC and the individual private sector Life

Insurance Companies.

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

100000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC

Bajaj Allianz

HDFC Standard

ICICI Prudential

Reliance

SBI Life

Max life

135

Table 7.2: Table showing percentage growth in single insurance premium

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 97.16

6.71 -11.36 34.49 21.67 -6.27 -6.07

HDFC Standard 58.14

62.86 -1.28 22.87 24.61 -4.97 15.01

ICICI Prudential 98.35

55.65 -15.22 -7.02 24.13 -43.51 8.26

SBI Life 209.71

86.55 12.62 30.71 7.8 -13.94 -20.65

Reliance 381.56

195.14 27.73 11.58 -22.59 -40.38 -23.92

Bajaj Allianz 58.32

55.17 -33.31 0 -22.14 -21.6 9.96

Max life 51.08

124.38 15.34 0.34 11.48 -7.75 -0.13

Source: Annual Reports

The table above clearly depicts the percentage change in single life premiums

collected. The initial years have shown a spectacular growth when compared to the

past years. Private LIC s have even growth 381.56% when compared to a modest

97.16% growth being the highest growth reported by LIC in the Single insurance

premium sector. However the volatility in growth rates in private LIC s is clearly

evident as some of them have fallen by nearly 44%. Among the private companies,

the top two companies, SBI Life and ICICI Prudential have shown erratic growth

trends. This could be attributed to the changes in IRDA regulations in the year 2010

with regard to single premium policies. The year 2006 -07 and 2007 -08 showed

tremendous growth in the policies of the single premium sector. The withdrawal of

most of these products by both public sector LIC and private sector LIC s have led to

negative growth in single insurance premium policies.

TOTAL LIFE INSURANCE PREMIUM: Apart from single individual policies, a

company also sells group insurance schemes to corporate and other policy holders.

An insurance policy may be a single premium plan or a long term plan. The

following table depicts the total life insurance premium collected under both

individual and group plans by public sector and private sector life insurance

companies as listed below.

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Table 7.3 Total Life Insurance premium collected (Rs. In Crores)

Source: IRDA Annual Reports

INSURER 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 90792.22

127822.84 149789.99 157288.04 186077.31 203473.31 202889.28 208830.58

HDFC Standard

1569.91

2855.87 4858.58 5564.69 7005.10 9004.17 10202.40 11322.68

ICICI Prudential

4261.05

7912.99 13561.08 15385.22 16528.75 17880.63 14021.58 13538.24

SBI Life 1075.32

2928.49 5622.14 7212.10 10104.03 12945.29 13133.74 10450.03

Reliance 224.21

1004.66 3225.44 4932.54 6604.90 6571.15 5497.62 4057.39

Bajaj Allianz

3133.58

5345.24 9725.31 10624.52 11419.71 9609.95 1483.8 6892.7

Max life 788.13

1500.28 2714.60 3857.26 4860.54 6812.63 6390.53 6638.70

The table above clearly shows that the overall growth rate of LIC from the year 2005

up to 2012 has increased by 130%. However the growth rate of HDFC during the

same period is 621.23%. ICICI Prudential has shown a growth rate of 200%, SBI

Life has shown a phenomenal growth rate of 800%. Reliance has increased by a

whopping 1709%, Bajaj Allianz has shown a modest growth of 119% by 2012-13.

Max Life has shown a growth of 700% during the same period. The average growth

of the 6 private life insurance companies is 690%, five times that of LIC.

However in terms of consistency in growth, LIC has shown consistent growth during

the period showing an average of 200% in the second year and then maintaining a

net average of about 20% – 30% in all the years except three years 2008-09, 2011-

12 and 2012-13.Growth rates of private LIC s has shown tremendous volatility

ranging from 1709% to a negative growth rate in some of the years. In the last year,

most of the private companies researched i.e, three out of five have shown negative

growth, however public sector LIC has a positive growth when compared to the last

year.

The following graph shows the total amount of premium in crores of rupees

137

Graph 2 Graph showing total amount of premium collected


TOTAL LIFE INSURANCE PREMIUM - Single Year Growth Rate

Table 7.4: The following table depicts the percentage growth rate in the group

insurance premium collected by public sector LIC and the individual private sector

Life Insurance Companies.

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 40.79

17.19 5.01 18.30 9.35 -0.29 2.93

HDFC Standard 81.91

70.13 14.53 25.88 28.54 13.31 10.98

ICICI Prudential 85.71

71.38 13.45 7.43 8.18 -21.58 -3.45

SBI Life 172.34

91.98 28.28 40.10 28.12 1.46 -20.43

Reliance 348.09

221.05 52.93 33.90 -0.51 -16.34 -26.20

Bajaj Allianz 70.58

81.94 9.25 7.48 -15.85 -84.56 364.53

Max life 90.36

80.94 42.09 26.01 40.16 -6.20 3.88

Source: Company Annual Reports

0

50000

100000

150000

200000

250000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC

Bajaj Allianz

HDFC Standard

ICICI Prudential

Reliance

SBI Life

Max life

138

The table above clearly depicts the percentage change in total life premiums

collected. The initial years have shown a spectacular growth when compared to the

past years. Private LIC s have even growth 348.09% when compared to a modest

40.79% growth being the highest growth reported by LIC in the Single insurance

premium sector. However the volatility in growth rates in private LIC s is clearly

evident as some of them have fallen by nearly 84%. Among the private companies,

the top two companies, SBI Life and ICICI Prudential have shown erratic growth

trends. This could be attributed to the changes in IRDA regulations in the year 2010

with regard to unit linked policies. The year 2006 -07 and 2007 -08 showed

tremendous growth in the policies. The withdrawal of most of the unit linked

products by both public sector LIC and private sector LIC s have led to negative

growth in total life insurance premium.

SETTLEMENT OF DEATH CLAIM: The time taken for settlement of death claims is

also an important determinant of the client relationship strategies and settlement of

maturity and death claims go a long way in building up the image of the company.

The average time taken by an insurance company is about six months. However the

earlier the claim is settled and fewer the claims repudiated increases customer

retention and loyalty for the insurance company.

The following table depicts the number of individual claims settled and an analysis of

the time taken to settle death claims in different Companies

Table 7.5 Duration wise settlement of Death Claim Individual Category in terms of

Number of policies

2008-09 2009-10 2010-11 2011-12 2012-13

LIC Within 30 days of intimation

338629 457655 553197 604303 620881

31 – 90 days 111874 95463 84312 55957 60040 91 – 180 69544 6148 45041 32160 31873 181- 1 year 39502 35203 26944 14417 17345 More than 1 4840 5440 8025 5664 3406

139

Year Bajaj Allianz Within 30 days

of intimation 5550 7567 15469 17656 17635

31 – 90 days 3863 9524 6717 6083 5175 91 – 180 889 2964 1388 840 1376 181- 1 year 127 215 345 43 6 More than 1 Year

55 46 61 36 -

HDFC Standard Within 30 days of intimation

1214 1977 3384 4588 5338

31 – 90 days 753 1062 720 345 602 91 – 180 352 314 211 13 48 181- 1 year 190 115 39 4 - More than 1 Year

40 29 15 2 -

ICICI Prudential Within 30 days of intimation

7274 10740 12170 11270 13736


10 30 308 74 33

Reliance Within 30 days of intimation

3073 6779 10326 10574 13221


15 17 9 9 5

SBI Life Within 30 days of intimation

1765 4205 6572 10450 11217


20 35 2 9 2

Aviva Within 30 days of intimation

681 1474 1614 1669 1825

31 – 90 days 185 115 219 235 283

91 – 180 102 23 32 33 23

181- 1 year 41 13 16 13 -

More than 1 Year

23 10 25 56 3

Private total Within 30 days of intimation

23308 43368 70246 81949 90182

31 – 90 days 11679 20234 19753 23144 18595

91 – 180 4107 7130 4715 3564 4076

181- 1 year 1290 1254 1117 644 360

More than 1 Year

355 214 572 464 171


In the study period of five years LIC s individual claims have increased to 200% and

those of private companies have increased almost five times in all the companies.

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Right from the beginning the private companies have been very efficient in claim

settlement and almost 90% of the claims have been settled within 30 days of

intimation of the claim.

DURATION WISE SETTLEMENT OF DEATH CLAIM INDIVIDUAL CATEGORY

(NO. OF POLICIES) –Percentage analysis

The table below shows the speed in which individual death claims are settled by

various life insurance companies, both public sector LIC and top private LIC

companies.

Table 7.6 – Table showing Percentage of policies in terms of number of policies by

Life Insurance Companies

2008-09 2009-10 2010-11 2011-12 2012-13


60 % 76.29 % 77.1 % 84.81 % 84.64 %

31 – 90 days 19.82 % 15.91 % 11.75 % 7.85 % 8.18 % 91 – 180 12.32 % 1.02 % 6.28 % 4.51 % 4.35 % 181- 1 year 7 % 5.87 % 3.76 % 2.02 % 2.36 % More than 1 Year 0.86 % 0.91 % 1.12 % 0.79 % 0.46 %


47.63 % 56.53 % 77.45 % 92.65 % 89.14 %

31 – 90 days 29.54 % 30.37 % 16.48 % 6.97 % 10.05 % 91 – 180 13.81 % 8.98 % 4.83 % 0.26 % 0.8 % 181- 1 year 7.45 % 3.29 % 0.89 % 0.08 % 0 % More than 1 Year 1.57 % 0.83 % 0.34 % 0.04 % 0 %


78.23 % 74.18 % 80.28 % 78.73 % 95.44 %

31 – 90 days 13.58 % 15.41 % 10.8 % 18.49 % 2.52 % 91 – 180 6.16 % 7.02 % 5.05 % 2.04 % 1.76 % 181- 1 year 1.91 % 3.19 % 1.85 % 0.22 % 0.06 % More than 1 Year 0.11 % 0.21 % 2.03 % 0.52 % 0.23 %


It is evident from the table above that in the year 2008-09 LIC s claim settlement rate

within 30days of intimation was only 60%. However with increase in competition,

LIC became more efficient in settling claims because private companies specialized

in quick settlement of claims. Private companies have consistently showed high

claim settlement rates right through the period of study. It is thus proven that the

claim settlement procedure which was very slow in public sector LIC before the

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advent of private life insurance companies has now improved due to loss of

monopoly position of LIC. The table below is the continuation of the analysis of the

other private insurance companies’ duration of settlement of claims from the date of

intimation.

Table 7.7 Table showing Percentage of policies in terms of number of policies by

Life Insurance Companies

2008-09 2009-10 2010-11 2011-12 2012-13


54.11 % 69.83 % 79.67 % 92.25 % 88.49 %

31 – 90 days 29.58 % 23.96 % 18.52 % 7.41 % 10.88 %

91 – 180 12.39 % 4.88 % 1.69 % 0.18 % 0.56 %

181- 1 year 3.31 % 0.75 % 0.1 % 0.09 % 0.06 %

More than 1 Year 0.61 % 0.58 % 0.02 % 0.08 % 0.02 %


95.91 % 89.12 % 77.91 % 60.89 % 71.42 %

31 – 90 days 2.28 % 8.95 % 20.26 % 36.78 % 25.56 %

91 – 180 0.94 % 0.95 % 1.73 % 2.23 % 2.92 %

181- 1 year 0.41 % 0.76 % 0.04 % 0.06 % 0.08 %

More than 1 Year 0.47 % 0.22 % 0.07 % 0.05 % 0.03 %

Bajaj Allianz Within 30 days of intimation

52.94 % 37.25 % 64.51 % 71.6 % 72.9 %

31 – 90 days 36.85 % 46.88 % 28.01 % 24.67 % 21.39 %

91 – 180 8.48 % 14.59 % 5.79 % 3.41 % 5.69 %

181- 1 year 1.21 % 1.06 % 1.44 % 0.17 % 0.02 %

More than 1 Year 0.52 % 0.23 % 0.25 % 0.15 % 0 %


65.99 % 90.15 % 84.68 % 83.2 % 85.52 %

31 – 90 days 17.93 % 7.03 % 11.49 % 11.71 % 13.26 %

91 – 180 9.88 % 1.41 % 1.68 % 1.65 % 1.08 %

181- 1 year 3.97 % 0.8 % 0.84 % 0.65 % 0 %

More than 1 Year 2.23 % 0.61 % 1.31 % 2.79 % 0.14 %


57.21 % 60.07 % 72.87 % 74.66 % 79.54 %

31 – 90 days 28.67 % 28.02 % 20.49 % 21.09 % 16.4 %

91 – 180 10.08 % 9.88 % 4.89 % 3.25 % 3.59 %

181- 1 year 3.17 % 1.74 % 1.16 % 0.59 % 0.32 %

More than 1 Year 0.87 % 0.3 % 0.59 % 0.42 % 0.15 %


It is evident from the table above that the overall efficiency of settlement of claims

has consistently increased over the past five years among the private companies.

Companies with faster claim settlement rates have a competitive edge over the other

companies and are thus building goodwill by keeping clients’ interest their top most

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priority. Quick claim settlement is one of the major determinants in customer

satisfaction and determines the length of client’s association with the Life Insurance

companies and reduces the possibility of termination due to lapse of policy.

SETTLEMENT OF DEATH CLAIM – INDIVIDUAL CATEGORY BENEFIT AMOUNT

PAID (Rs. In Crores)

The following table depicts the benefit amount paid and the duration wise settlement

of death claim. Claims of LIC have increased almost twenty five times in terms of

amount in the past five years. Claims on private sector LIC s have also increased

tremendously over the past five years, ranging from five times in case of ICICI and

Reliance and to ten times in case of the other private life insurance companies over

the past five years.

Table 7.8 Table showing Duration wise settlement of Death claim under Individual

category and the benefit amount paid in Crores of rupees

2008-09 2009-10 2010-11 2011-12 2012-13


249.02 3340.12 4708.08 5369.01 5634.86

31 – 90 days 828.03 707.6 709.46 606.99 1102.53 91 – 180 504.84 445.83 378.43 360.50 306.56 181- 1 year 291.49 260.93 228.67 150.69 140.21 More than 1 Year 41.72 40.07 68.5 72.32 38.74


8.88 26.95 48.92 81.10 105.65

31 – 90 days 14.53 20.59 20.38 14.88 34.05 91 – 180 8.15 14.43 8.17 0.77 4.23 181- 1 year 5.1 2.38 1.16 0.10 - More than 1 Year 1.17 1.33 1.95 0.12 -


63.3 165.25 117.85 159.05 262.87



21 54.45 94.9 150.83 166.98



32.24 62.68 78.90 80.18 119.40

31 – 90 days 1.74 12.85 33.97 84.27 73.15 91 – 180 0.59 2.37 6.15 15 14.78 181- 1 year 0.28 1.56 0.24 34 0.33

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More than 1 Year 0.21 0.15 0.2 0.27 0.21 Bajaj Allianz Within 30 days of

intimation 80.61 93.22 188.009 228.09 226.75

31 – 90 days 73.86 143.85 103.56 100.90 85.28 91 – 180 17.07 50.87 26.52 24.72 37.17 181- 1 year 2.14 5.88 7.65 1019 0.05 More than 1 Year 0.76 1.10 1.02 0.77 -


14.09 21.83 28.25 32.07 49.79

31 – 90 days 4.43 2.5 5.76 17.22 24.95 91 – 180 2.54 0.43 0.95 2.26 5.16 181- 1 year 0.99 0.24 0.25 0.40 - More than 1 Year 0.33 0.37 0.87 1.46 0.07


288.94 599.04 927.48 1223.03 1492.11

31 – 90 days 231.33 372.52 391.6 483.38 487.23 91 – 180 83.69 152.31 126.32 114.98 147.62 181- 1 year 23.81 29.14 40.40 16.40 13 More than 1 Year 5.35 5.57 16.30 55.44 7.36


On an average claims of private companies have increased five times the amount

paid in five years. The table given below shows the percentage of amount of death

claims and the duration of their settlement in the category of individual claims.

SETTLEMENT OF DEATH CLAIM – INDIVIDUAL CATEGORY BENEFIT AMOUNT

PAID – Percentage Analysis

The following table depicts the benefit amount paid and the duration wise settlement

of death claim in terms of percentage.

Table 7.9 Table showing Duration wise settlement of Death claim in Individual

category in terms of Benefit paid in percentages

2008-09 2009-10 2010-11 2011-12 2012-13 LIC Within 30 days of

intimation 13 % 69.66 % 77.27 % 81.85 % 78.01 %



23.47 % 41.03 % 60.71 % 83.63 % 73.4 %

31 – 90 days 38.41 % 31.35 % 25.29 % 15.34 % 23.66 % 91 – 180 21.54 % 21.97 % 10.14 % 0.79 % 2.94 % 181- 1 year 13.48 % 3.62 % 1.44 % 0.1 % 0 % More than 1 Year 3.09 % 2.02 % 2.42 % 0.12 % 0 %

ICICI Prudential Within 30 days of 62.25 % 75.79 % 58.43 % 74.72 % 89.87 %

144

intimation



44.69 % 58.9 % 68.35 % 85.24 % 76.76 %



91.96 % 78.73 % 66.05 % 37.52 % 57.44 %



46.21 % 31.61 % 57.54 % 16.61 % 64.92 %

31 – 90 days 42.34 % 48.78 % 31.69 % 7.35 % 24.42 % 91 – 180 9.79 % 17.25 % 8.12 % 1.8 % 10.64 % 181- 1 year 1.23 % 1.99 % 2.34 % 74.19 % 0.01 % More than 1 Year 0.44 % 0.37 % 0.31 % 0.06 % 0 %


62.96 % 86.05 % 78.3 % 60.04 % 62.26 %

31 – 90 days 19.79 % 9.85 % 15.96 % 32.24 % 31.2 % 91 – 180 11.35 % 1.69 % 2.63 % 4.23 % 6.45 % 181- 1 year 4.42 % 0.95 % 0.69 % 0.75 % 0 % More than 1 Year

1.47 % 1.46 % 2.41 % 2.73 % 0.09 %


45.64 % 51.7 % 61.75 % 64.6 % 69.49 %

31 – 90 days 36.54 % 32.15 % 26.07 % 25.53 % 22.69 % 91 – 180 13.22 % 13.15 % 8.41 % 6.07 % 6.87 % 181- 1 year 3.76 % 2.52 % 2.69 % 0.87 % 0.61 % More than 1 Year

0.85 % 0.48 % 1.09 % 2.93 % 0.34 %


In the case of LIC, it is evident from the table that five years ago only 13% of the

amount paid out as claims happened within the first thirty days of claim intimation.

However on an average during the same period, nearly fifty percent of the claims of

private life insurance companies were settled within thirty days of intimation. This

percentage gradually and consistently increased to nearly seventy per cent in the

year 2012-2013. LIC shows erratic growth in claim settlement percentages.

145

SETTLEMENT OF DEATH CLAIM – GROUP CATEGORY BENEFIT (Number of

lives)

The table given below shows the settlement of group category death claims in

number of lives. It is very clear that LIC has almost monopoly position in terms of

number of lives insured under this category. Except ICICI, SBI and Reliance who

have been successful in selling group insurance none of the other private companies

have many successful plans for group schemes.

Table 7.10 Table showing Duration wise settlement of death claim in group category

in terms of number of lives – LIC, HDFC, ICICI Prudential

2008-09 2009-10 2010-11 2011-12 2012-13


219726 215044 228129 234205 243913


6 12 48 10 172


199 286 279 930 1514

31 – 90 days 6 - 3 - 12 91 – 180 4 - - - - 181- 1 year 2 - - - - More than 1 Year

1 - 1 - -

ICICI Prudential Within 30 days of intimation1637

998 1693 2896 4095 3517


- 4 1 2 -


The table above shows that even the claims of LIC has not shown much growth and

the number of claims have remained more or less the same with the total number of

group death claims increasing only by about 20,000 lives in the past five years. Most

private companies are yet to show much progress in this category. Claims in ICICI

have grown more than three times in the past five years.

146

Table 7.11 Table showing Duration wise settlement of death claim in group category

in terms of number of lives – SBI Life, Reliance Life, Bajaj Life, Aviva, Private Total

2008-09 2009-10 2010-11 2011-12 2012-13


14352 24389 10928 10956 10429

31 – 90 days 1292 989 906 969 740 91 – 180 402 143 86 60 14 181- 1 year 169 75 8 6 4 More than 1 Year 172 201 8 4 -


942 1820 1102 2220 4632

31 – 90 days 37 36 42 12 8 91 – 180 8 9 - 1 1 181- 1 year 3 2 - 2 - More than 1 Year 5 2 1 2 -


11291 33518 88273 64281 43666

31 – 90 days 1628 4545 7882 1540 1893 91 – 180 230 633 1767 208 363 181- 1 year 109 212 75 32 - More than 1 Year 42 80 43 6 -


2654 4466 10435 6415 2322

31 – 90 days 67 62 46 54 55 91 – 180 30 12 10 8 7 181- 1 year 4 7 4 1 3 More than 1 Year 4 3 7 1 2


32111 79328 171840 134724 98532

31 – 90 days 3892 8489 12882 5999 5824 91 – 180 1170 1650 3477 1029 803 181- 1 year 525 419 504 508 93 More than 1 Year 502 368 95 65 67


The tables above shows that the total claims of private sector LICs have shown an

increase by three times in the past five years. Growth in this category does not

follow an upward trend but has been fluctuating for the past five years not showing

any specific growth or decline pattern. Most private companies are yet to show

much progress in this category.

147

SETTLEMENT OF DEATH CLAIM – GROUP CATEGORY BENEFIT AMOUNT

(number of lives) –Percentage analysis

The table given below the percentage of death claims benefits paid under group

category is clearly depicted. Public sector LIC shows tremendous efficiency in

settlement of group category death claims with nearly hundred percent of the claims

being settled in the first thirty days of intimation. Claim settlement efficiency has

remained constantly good in the case of LIC.

Table 7.12 Duration wise settlement of Death claim under group category on the

basis of number of lives on percentage basis

2008-09 2009-10 2010-11 2011-12 2012-13 LIC Within 30 days

of intimation 98.84 % 99.8 % 97.85 % 96.21 % 99.82 %

31 – 90 days 0.8 % 0.09 % 1.25 % 1.08 % 0.11 % 91 – 180 0.36 % 0.04 % 0.62 % 2.68 % 0 % 181- 1 year 0 % 0.07 % 0.26 % 0.03 % 0 % More than 1 Year

0 % 0.01 % 0.02 % 0 % 0.07 %


93.87 % 100 % 98.59 % 100 % 99.21 %

31 – 90 days 2.83 % 0 % 1.06 % 0 % 0.79 % 91 – 180 1.89 % 0 % 0 % 0 % 0 % 181- 1 year 0.94 % 0 % 0 % 0 % 0 % More than 1 Year

0.47 % 0 % 0.35 % 0 % 0 %

ICICI Prudential Within 30 days of intimation1637

90.4 % 90.87 % 72.84 % 77.57 % 97.88 %


0 % 0.21 % 0.03 % 0.04 % 0 %


87.58 % 94.54 % 91.55 % 91.34 % 93.22 %


1.05 % 0.78 % 0.07 % 0.03 % 0 %


94.67 % 97.38 % 96.24 % 99.24 % 99.81 %

31 – 90 days 3.72 % 1.93 % 3.67 % 0.54 % 0.17 % 91 – 180 0.8 % 0.48 % 0 % 0.04 % 0.02 % 181- 1 year 0.3 % 0.11 % 0 % 0.09 % 0 % More than 1 Year

0.5 % 0.11 % 0.09 % 0.09 % 0 %

148


84.89 % 85.97 % 90.04 % 97.3 % 95.09 %


0.32 % 0.21 % 0.04 % 0.01 % 0 %


96.19 % 98.15 % 99.36 % 99.01 % 97.2 %


0.14 % 0.07 % 0.07 % 0.02 % 0.08 %


84.06 % 87.89 % 91.02 % 94.66 % 93.56 %


1.31 % 0.41 % 0.05 % 0.05 % 0.06 %


Though private companies too have been very efficient in claim settlement, the

above table shows that there has been a consistent increase in the percentage of

claims settled by private companies in the first thirty days of claim intimation.


PAID (Rs. In Crores)

The table given below shows the settlement of group category death claims in

amount paid. It is very clear that LIC has almost monopoly position in terms of

number of lives insured under this category. Only the top private companies ICICI,

SBI Life, Bajaj Allianz and Reliance Life have sold group insurance, none of the

other private companies have any plans for group schemes.

Table 7.13 Duration wise settlement of death claim under group category in terms of

benefits paid in Crores of rupees – LIC, HDFC, ICICI Prudential, SBI Life, Reliance

Life and Bajaj Allianz


intimation 970.13 1189.9 1364.47 1531.13 1692.01

31 – 90 days 29.11 1.99 19.84 44.87 3.43 91 – 180 5.77 0.93 5.59 10.04 0.02 181- 1 year 0.07 2.23 3.31 0.60 - More than 1 Year 0.07 0.23 0.30 0.12 1.91

149


2.22 2.36 2.77 6.44 16.35

31 – 90 days 0.2 - 0.02 - 4.14 91 – 180 0.13 - - - - 181- 1 year 0.12 - - - - More than 1 Year 0.04 - - - -


17.72 26.51 30.34 42.50 55.33

31 – 90 days 2.91 3.58 11.90 16.40 5.61 91 – 180 1.37 2.4 1.88 0.89 2.05 181- 1 year 0.34 0.55 0.95 0.08 - More than 1 Year - 0.3 - 0.09 -


111.62 135.74 148.65 171.48 192.02

31 – 90 days 26.26 23.52 24.49 28.43 28.93 91 – 180 6.31 3.72 3.53 3.23 0.93 181- 1 year 3.6 1.35 0.46 0.31 0.30 More than 1 Year 3.87 5.98 1.41 0.91 -


19.59 23.76 24.65 24.63 27.69

31 – 90 days 0.56 1.61 1.71 0.45 0.28 91 – 180 0.27 0.18 0 0.03 0.11 181- 1 year 0.16 0.01 0 0.51 - More than 1 Year 0.1 0.01 0.01 0.01 -


37.29 51.65 132.71 138.54 165.02

31 – 90 days 4.67 11.47 14.66 17.10 27.31 91 – 180 1 2.02 2.75 2.50 4.99 181- 1 year 0.5 0.71 0.45 0.13 - More than 1 Year 0.18 0.21 0.16 0.02 -


The table above shows that the claims of LIC have shown growth of about 100% in

the last five years. Most private companies are have group claims growth of about

five times in the past five years in terms of amount. Claims in ICICI have grown

more than three times in the past five years.


benefits paid in Crores of rupees – Aviva and Private Total

Aviva Within30 days of intimation

5.7 11.10 25.64 19.52 16.38

31 – 90 days 0.69 0.37 0.1 0.66 1.40 91 – 180 0.06 0.02 0.02 0.44 0.15 181- 1 year 0.02 0.03 0.01 - 0.01 More than 1 Year

0.02 0.01 0.02 0.05 0.05

Private total Within30 days of intimation

227.59 341.29 571.04 668.22 812.12

31 – 90 days 57.86 63.92 74.94 101.58 114.44

150

91 – 180 20.22 18.72 15.30 20.53 21.08 181- 1 year 9.23 5.52 3.30 3.29 1.67 More than 1 Year

7.43 9.63 1.74 1.38 0.37


The above table depicts the growth in total claims settled by private companies over

the past five years, the overall amount of claim settled within thirty days having

increased nearly four times in the year 2012-13 when compared to 2008-09


PAID –Percentage analysis


benefits paid in percentages – LIC, HDFC, ICICI Prudential and SBI Life.


intimation 96.52 % 99.55 % 97.92 % 96.49 % 99.68 %

31 – 90 days 2.9 % 0.17 % 1.42 % 2.83 % 0.2 % 91 – 180 0.57 % 0.08 % 0.4 % 0.63 % 0 %

181- 1 year 0.01 % 0.19 % 0.24 % 0.04 % 0 % More than 1 Year 0.01 % 0.02 % 0.02 % 0.01 % 0.11 %


81.92 % 100 % 99.28 % 100 % 79.8 %

31 – 90 days 7.38 % 0 % 0.72 % 0 % 20.2 % 91 – 180 4.8 % 0 % 0 % 0 % 0 % 181- 1 year 4.43 % 0 % 0 % 0 % 0 % More than 1 Year 1.48 % 0 % 0 % 0 % 0 %


79.32 % 79.51 % 67.32 % 70.88 % 87.84 %

31 – 90 days 13.03 % 10.74 % 26.4 % 27.35 % 8.91 % 91 – 180 6.13 % 7.2 % 4.17 % 1.48 % 3.25 % 181- 1 year 1.52 % 1.65 % 2.11 % 0.13 % 0 % More than 1 Year 0 % 0.9 % 0 % 0.15 % 0 %


73.6 % 79.7 % 83.26 % 83.91 % 86.43 %

31 – 90 days 17.32 % 13.81 % 13.72 % 13.91 % 13.02 % 91 – 180 4.16 % 2.18 % 1.98 % 1.58 % 0.42 % 181- 1 year 2.37 % 0.79 % 0.26 % 0.15 % 0.14 % More than 1 Year 2.55 % 3.51 % 0.79 % 0.45 % 0 %


The table above shows that LIC has been excellent in quick settlement of claims in

this category with most of the claims being settled within the first thirty days of

intimation. Private companies which are slowly picking up business in this line have

also showed a consistent increase in efficiency with most of the claims being settled

151

within a maximum period of thirty days and the remaining within ninety days. Very

few cases have gone beyond the time duration of six months.

The table below shows that almost all private companies have consistently increased

the efficiency in claim settlement and the private companies total also shows that

there is a 15% increase in the percentage of claims settled within the first thirty days,

with almost all of them being settled within six months.

Table 7.16 Duration wise settlement of death claim under group category in terms of benefits paid in percentages – Reliance, Bajaj Allianz & Aviva Reliance Within 30 days

of intimation 94.73 % 92.92 % 93.48 % 96.1 % 98.61 %

31 – 90 days 2.71 % 6.3 % 6.48 % 1.76 % 1 % 91 – 180 1.31 % 0.7 % 0 % 0.12 % 0.39 % 181- 1 year 0.77 % 0.04 % 0 % 1.99 % 0 % More than 1 Year

0.48 % 0.04 % 0.04 % 0.04 % 0 %


85.45 % 78.19 % 88.04 % 87.52 % 83.63 %


0.41 % 0.32 % 0.11 % 0.01 % 0 %


87.83 % 96.27 % 99.42 % 94.44 % 91.05 %

31 – 90 days 10.63 % 3.21 % 0.39 % 3.19 % 7.78 % 91 – 180 0.92 % 0.17 % 0.08 % 2.13 % 0.83 % 181- 1 year 0.31 % 0.26 % 0.04 % 0 % 0.06 % More than 1 Year

0.31 % 0.09 % 0.08 % 0.24 % 0.28 %


70.61 % 77.73 % 85.7 % 84.05 % 85.52 %


2.31 % 2.19 % 0.26 % 0.17 % 0.04 %


TOTAL NUMBER OF POLICIES AND AMOUNT SETTLED (Individual)

Table 7.17 The table shown below depicts a comparative analysis of policy claims

settled in terms of total number of policies and the total amount paid as claims on

individual policies

152

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC No. of policies 564389 653909 717529 35724745 36755451

Amount 4165.1 4799.55 6093.14 22033.88 41933.77

HDFC Standard No. of policies 2549 3497 4369 814726 1025739

Amount 37.83 66.58 80.58 2903.31 3294.26

ICICI Prudential No. of policies 9298 14479 15160 1028826 959958

Amount 101.69 128.04 201.68 3049.33 3420.87

SBI Life No. of policies 3262 6022 8249 881550 888670

Amount 64.98 92.44 138.84 3343.30 2800.92

Reliance No. of policies 3204 7797 13254 1093624 762532

Amount 35.06 79.61 119.46 1405.69 1117.24

Bajaj Allianz No. of policies 10484 20316 23980 1052336 730554

Amount 174.42 294.92 326.84 1805.81 1522.70

Aviva No. of policies 1032 1632 1906 180014 140073

Amount 22.38 25.37 36.08 527.71 430.31

Private total No. of policies 40739 72200 96403 8435592 7399173

Amount 633.12 1158.58 1502.10 22033.88 20307.10


Policy claims paid by LIC have increased around seven times over the past five

years in terms of amount disbursed and a tenfold increase in the number of policies

settled in terms of individual policies. During this period the total claims paid by all

private companies together has increased about 181 times the amount in the year

2008-09. Among the private companies, Aviva has shown a growth of about 140

times in five years, Bajaj Allianz has shown a growth of 17 times in volume, claims in

HDFC has grown 400 times, Reliance 237 times and SBI Life shows a positive

increase of 272 times the claims paid over a period of five years.

TOTAL NUMBER OF POLICIES AND AMOUNT SETTLED (Individual) Single

Year Growth Rate

Table 7.18 Table showing percentage change in total number of policies settled and

the amount paid

INSURER 2009-10 2010-11 2011-12 2012-13

LIC No. of policies 15.86 9.73 4878.86 2.89 Amount 15.23 26.95 261.62 90.31

153

HDFC Standard No. of policies 37.19 24.94 18547.88 25.90 Amount 76.00 21.03 3503.02 13.47

ICICI Prudential No. of policies 55.72 4.70 6686.45 -6.69 Amount 25.91 57.51 1411.96 12.18

SBI Life No. of policies 84.61 36.98 10586.75 0.81 Amount 42.26 50.19 2308.02 -16.22

Reliance No. of policies 143.35 69.99 8151.28 -30.27 Amount 127.07 50.06 1076.70 -20.52

Bajaj Allianz No. of policies 93.78 18.04 4288.39 -30.58 Amount 69.09 10.82 452.51 -15.68

Aviva No. of policies 58.14 16.79 9344.60 -22.19 Amount 13.36 42.22 1362.61 -18.46

Private total No. of policies 77.23 33.52 8650.34 -12.29 Amount 83.00 29.65 1366.87 -7.84


The table above shows that the claims settled by LIC in the year 2011-12 showed a

huge increase when compared to the previous year. Most of the companies show an

abnormal increase in the year 2011-12. The overall number of policies and amount

paid and settled in the last year showed a negative growth rate in all the private

companies combined.

The following graph shows the total number of policy claims settled in terms of

amount paid and number of lives.

154

Graph 3 Total number of policy claims settled & number of lives

Amount Paid


Graph 4 Total number of lives

No of Lives


-10000

0

10000

20000

30000

40000

50000

60000

70000

80000

2009-10 2010-11 2011-12 2012-13

Private total

SBI Life

Reliance

ICICI Prudential

HDFC Standard

Bajaj Allianz

Aviva

LIC

0

2000

4000

6000

8000

10000

12000

14000

2009-10 2010-11 2011-12 2012-13

Private total

SBI Life

Reliance

ICICI Prudential

HDFC Standard

Bajaj Allianz

Aviva

LIC

155

Table 7.19 TOTAL NUMBER OF POLICIES AND AMOUNT SETTLED (GROUP)

(Rupees in Crores)

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC No. of policies 222307 215485 233132 243429 245467

Amount 1005.15 1195.28 1393.51 1586.75 1709.08

HDFC Standard No. of policies 212 286 283 930 1526

Amount 2.71 2.36 2.78 6.44 20.49

ICICI Prudential No. of policies 1104 1863 3976 5279 3593

Amount 22.34 33.34 45.06 59.96 63.19

SBI Life No. of policies 16387 15817 11936 11995 11499

Amount 151.63 170.32 178.54 204.66 233.90

Reliance No. of policies 995 1869 1145 2237 4641

Amount 20.61 25.59 26.36 25.62 28.07

Bajaj Allianz No. of policies 13300 38988 28040 66067 45922

Amount 43.64 66.05 150.73 158.29 197.32

Aviva No. of policies 2759 4550 10502 6479 2329

Amount 6.49 11.53 25.79 20.67 17.99

Private total No. of policies 38200 9254 188798 142325 119970

Amount 322.33 439.08 666.31 794.99 1040.34


In the group category, there is almost consistent growth in claims paid and settled

amounts in the five year period given above. The overall private sector has shown

an abnormal variation in the number of policies paid and amount claimed in the

period of five years.

Analysis of Operating efficiency – The second determinant of performance of life

insurance companies is an analysis of profit and operating expenses of both private

and public sector Life Insurance Companies. An indepth analysis was made of all

the factors that determine the profitability of an insurance company and the various

factors are presented in the following charts and tables.

PROFIT BEFORE TAXATION AS PER SHAREHOLDERS’ ACCOUNT (IN LAKHS)

The following table is a representation of profits of various insurance companies over

a period of eight years through profit analysis and expense

156

Table 7.20 Table showing profit before taxation in lakhs

INSURER 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 63158

77362 84463 95735 106072 117180 131334 148992

HDFC Standard

-12875

-12556 -24351 -50296 -27518 -9900 27102 45572

ICICI Prudential

-2333

-69167 -154314 -88070 28053 83250 141372 156961

SBI Life 203

384 3475 -2664 27749 37045 55582 62217

Reliance -9840 -31511 76807 108491 28397 12929 3757 38042

Bajaj Allianz -9854

-7170 -21388 -7067 55699 108166 134958 134357

Aviva -14387

-13175 -20249 -49550 -34472 2875 7357 3200


The LIC of India due to the its head start and advantageous position of being the first

and only life insurance company since 1956 has been consistently making profits

and in the past eight years its profit has increased more than 200%. There is an

average increase of about 10,000 lakhs every year in premiums collected by LIC.

Among the private companies in the year 2005-06 all private companies surveyed

except SBI Life showed losses. Maximum loss reported was by AVIVA which was

the latest entry to the insurance segment. This is attributed to the fact that almost all

private companies which were still in the initial years of their existence had not yet

reached breakeven point. In the year 2006-07 too all private companies except SBI

Life recorded losses with ICICI Prudential reporting the highest loss which more than

doubled in the year 2007-08. However, Reliance and SBI Life showed profits in the

year 2007-08 and all other companies continued their loss making spree. The year

2008-09 too was not good for the private companies and losses were reported by all

companies except Reliance. SBI Life reported a loss for the first time after four years

however made up with a huge profit in the next year and the dramatic increase

continued up to 2012-13. Almost all the companies had a break even in the year

157

2009-10 except for HDFC Standard and Aviva. Profits of Bajaj Allianz has shown

dramatic increase from the year 2009-10 onwards thus indicating that the private

companies with just ten years in existence have taken over the insurance market

and have very well competed the market giant LIC in terms of profit. The profits of

Bajaj Allianz equalled to more than half of LIC s reported profit.

In the year 2010-11 too the increase in profits continued and only one

company HDFC Standard was still under losses. The profits of all the other private

companies showed an increasing trend except Reliance Life which showed a fifty

percent decrease in profits. Reliance continued to report low profits in the next year

2011-12 when all private companies had a steep increase in profits. In the year

2012-13 all insurance companies reported profits and except for Aviva which

showed a steep decline in profits by fifty percent and Bajaj Allianz which showed a

marginal decline in profits, all other private companies reported huge increase in

profits.

The following graph depicts the growth in profits in lakhs of rupees of public and

private companies.

158

Graph 5 Growth in profits of insurance companies


PROFIT BEFORE TAXATION SINGLE YEAR GROWTH RATE

The following table shows the growth rate of profit as per shareholder’s account for

the period of seven years showing rate of increase in profits of both LIC and private

sector life insurance companies

Table 7.21 Table showing profit before taxation – percentage of growth over

previous year

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 22.49 9.18 13.35 10.80 10.47 12.08 13.45

HDFC

Standard

-2.48 93.94 106.55 -45.29 -64.02 -373.76 68.15

ICICI

Prudential

2864.72 123.10 -42.93 -131.85 196.76 69.82 11.03

SBI Life 89.16 804.95 -176.66 -1141.63 33.50 50.04 11.94

Reliance 220.23 -343.75 41.25 -73.83 -54.47 -70.94 912.56

Bajaj Allianz -27.24 198.30 -66.96 -888.16 94.20 24.77 -0.45

Aviva -8.42 53.69 144.70 -30.43 -108.34 155.90 -56.50


-200000

-100000

0

100000

200000

300000

400000

500000

600000

700000

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

SBI Life

Reliance

ICICI Prudential

HDFC Standard

Bajaj Allianz

Aviva

LIC

159

Table 7.22 Table showing Net profit net profit earned by insurance companies after

tax

INSURER

3/31/2005

3/31/2006 3/31/2007

3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 70,836.50

63,158.01 77,362.03

84,462.59 95,734.88 106,071.68 117,180.37

131,334.29

148,992.49

HDFC -12,875.72

-12,556.11

-24,350.94

-50,296.31

-27,518.44

-9,900.21

27,101.54

45,147.91

ICICI -18,787.89

-64,890.72

-139,506.27

-77,969.96

25,796.85

80,762.28

138,417.37

149,593.92

SBI 203.16

383.99

3,475.43

3,475.43

27,749.14

37,045.22

55,582.14

62,217.09

Reliance

-76,806.78

-108,491.01

-28,378.84

-12,929.10

37,257.13

38,041.72

BAJAJ (9854) (7170) (21389) (7068) 54229 105704 131120 128564

AVIVA (14387) (13175) (20249) (49505) (34472) 2875 7357 3200


POLICY HOLDER’S ACCOUNT SURPLUS

It is mandatory for every life insurance company to transfer 95% of its profits as

bonus to policy holders’ accounts. Policy holders may opt to receive the bonus in

cash or accumulate the bonus for encashment at the time of maturity of policy. The

following table shows the amount of surplus in policy holders’ account.

Table 7.23 Table showing surplus in policy holders accounts in lakhs of rupees

INSURER 2005-

06

2006-

07

2007-

08

2008-

09

2009-

10

2010-

11

2011-

12

2012-

13

LIC 62177 75781 82959 92910 103092 113760 128123 143638

HDFC

Standard

255 339 7038 16664 19094 6698 37292 64211

ICICI

Prudential

1006 13601 32512 21293 129770 60760 133196 144968

SBI Life 0 1 8156 10845 19426 35112 58545 73151

Reliance 0 0 0 1587 8677 9621 37845 44428

Bajaj Allianz 6182 13788 19803 11550 40961 84095 100530 86247

Aviva 46864 75738 133337 111296 320967 208574 20659 26694


The table above indicates that policy holders account surplus in LIC has shown a

steady increase over the past seven years. LIC has shown a growth of more than

160

200% in terms of increase in policy holders’ account in the past seven years. The

surplus in policy holders accounts among its private counter parts varied

tremendously among the companies and within the company itself. ICICI has shown

a growth of about 144 times in the past seven years. Aviva shows abnormal surplus

which is dramatically increased by eight times in the year 2009-10 and shown to be

gradually depleting with a drastic fall in the years 2011-12 and 2012-13. Other

private companies have shown a gradual increase in policy holders’ surplus with

marginal decrease in the middle of the seven year period.

POLICY HOLDER’S ACCOUNT SURPLUS – PERCENTAGE GROWTH:

The following table is the representation in percentages the growth in policy holders’

account surplus in LIC and the private life insurance companies

Table 7.24 Single Year Growth Rate

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 21.88 9.47 12.00 10.96 10.35 12.63 12.11 HDFC Standard

32.94 1976.11 136.77 14.58 -64.92 456.76 72.18

ICICI Prudential

1251.99 139.04 -34.51 509.45 -53.18 119.22 8.84

SBI Life 0.00 8155.00 32.97 79.12 80.75 66.74 24.95

Reliance 0.00 0.00 0.00 446.75 10.88 293.36 17.39 Bajaj Allianz

123.03 43.62 -41.68 254.64 105.31 19.54 -14.21

Aviva 61.61 76.05 -16.53 188.39 -35.02 -90.10 29.21


LIC shows an average growth rate of 12.77% with not much of variation except in the

year 2006-07 where it saw a huge increase in the rate of growth by 22% over the

previous year. However this rate fell to 9.47% in the year 2007-08. During the years

following the growth rate has remained more or less around the average of 12

percent. Private companies show an extremely erratic growth trend indicating steep

increase and also decline in the years from 2006-07 to 2012-2013.

161

PERFORMANCE EVALUATION OF AGENCY MODEL OF INSURANCE

The agency model has always been the most popular mode of selling insurance.

The agency concept involves the recruitment of retired persons, housewives, self-

employed individuals or even students. The life insurance company provides

professional training and gets them to target their acquaintances, friends and

relatives and sell life insurance products. This strategy has always been used by life

insurance companies because of the fact that in India, life insurance is still sold and

not bought. The functioning of the agency model is always the biggest challenge to

an insurance company since this group of people leaves the company without

hesitation. Agents have by far been the most disloyal to the company especially in

the case of private companies. In the recent past Bankassurance has gained a lot of

popularity where in a person is forced to buy an insurance policy when he

approaches the bank for a loan. However the success of a life insurance company is

directly dependent on the training and development and maintaining of its agents.

Insurance companies now have both individual and corporate agents selling policies

on their behalf. The following table indicates the number of individual agents of

various life insurance companies

Table 7.25 Table showing number of individual agents of life insurers

INSURER 2005-06 2006-07

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC 1052993

1103047

1193744 1344856 1402807 1337064 1278234 1172983 1235716

HDFC Standard

34887 79109 144714 207626 198879 136009 106244 77503 140710

ICICI Prudential

72383 234460 306354 299879 241830 190407 138883 147547

233106

SBI Life 8128 25356 40643 68993 65532 29628 86989 94138 59915

Reliance 19965 95620 184194 149613 195565 189433 150590 124038 158431

Bajaj Allianz

109141 216191 250239 204941 167741 18967 173146 148000 184052

Aviva 10974 29052 35307 30838 32728 23219 19126 17470 27531

Private 370846 890152 1326748 1592579 1575476 1302328 1080651 949774 1298365


162

The above table shows the total number of agents of LIC and top private companies

along with the average number of agents. The average number of agents in LIC

1235716 is almost the same as the total of all the agents of private sector companies

put together. The Agency model is most popular as a brand name in LIC and it is

quite common for agents of other private companies be taken for granted that any

agent is a representative of the public sector LIC only. Among the private companies

the highest average number of agents is of ICICI with an average of 233106 active

agents. Bajaj Allianz has the second most average number of agents of 184052

followed by Reliance with an average of 158431 agents who are currently active.

Most of the companies except SBI Life and Bajaj Allianz saw a massive drop in the

number of agents in the year 2011-12. However the table shows that the number of

agents have been increasing and decreasing very erratically over the past seven

years of the study. The following graph depicts the number of agents of public and

private companies.

Graph 6 Number of Agents


0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

Private

Aviva

Bajaj Allianz

Reliance

SBI Life

ICICI Prudential

HDFC Standard

LIC

163

CORPORATE AGENTS

Apart of individual agents, Life insurance companies employ corporate agencies and

banks to sell policies. The policies sold by corporate agents have however not been

as many as those sold by individual agents. However this model is gaining more

popularity in the recent days. The following table states the number of corporate

agents of various life insurance companies.

Table 7.26 Table showing number of corporate agents of life insurance companies

INSURER 2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

Average

LIC 74 226 345 415 510 295 240 207 330.28

HDFC 15 33 848 371 374 8 8 9 238

ICICI 7 17 46 47 22 15 14 11 25.57

SBI 8 27 23 94 127 100 73 83 76.42

Reliance 4 12 39 126 225 67 45 14 76

Bajaj 26 87 520 682 864 289 26 87 368.71

Aviva 3 5 21 17 15 11 246 210 75.42


The table reveals that in spite of the fact that LIC was in existence nearly 58 years,

the concept of corporate agents was one of recent origin. Hence in this segment,

the private companies too are very close in their average number of corporate

agents. Among all life insurance companies, Bajaj Allianz has the highest average

number of corporate agents with 369 followed by LIC with an average of 330 agents.

ICICI has the least number of corporate agents with an average of only 26.

The following table depicts the growth in terms of percentage in the number of

corporate agents of various life insurance companies.

164

Table 7.27 Table showing growth in Number of corporate agents in percentages

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC 205.4054 52.65487 20.28986 22.89157 -42.1569 -18.6441 -13.75 32.38 HDFC 120 2469.697 -56.25 0.808625 -97.861 0 12.5 349.84

ICICI 142.8571 170.5882 2.173913 -53.1915 -31.8182 -6.66667 -21.4286 25.30 SBI 237.5 -14.8148 308.6957 35.10638 -21.2598 -27 13.69863 75.98

Reliance 200 225 223.0769 78.57143 -70.2222 -32.8358 -68.8889 79.24

Bajaj 234.6154 497.7011 31.15385 26.68622 -66.5509 -91.0035 234.6154 123.88

Aviva 66.66667 320 -19.0476 -11.7647 -26.6667 2136.364 -14.6341 350.18


The table above shows that the highest average growth rate 350% is that of AVIVA

however, it is seen that the pattern of growth of corporate agents in AVIVA is

abnormal and therefore not a correct representation. HDFC also reports average

growth rate of 350% but is highly erratic and cannot be considered as a true and

genuine representation of growth of corporate agents. LIC, ICICI, SBI and Bajaj

report a more realistic growth rate and it is seen that the growth of corporate agents

is much higher in private companies than in LIC. This is indicative of a future trend

among life insurance companies where in they will work towards forming more

corporate partnerships and tie ups for the sale of insurance products.

POLICIES SOLD UNDER THE AGENCY MODEL

The following table shows the average number of policies sold by the agents of LIC

and various private companies.

Table 7.28 Table showing the average number of policies sold by individual

and Corporate Agents

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC Individual 28 28 26 27 29

Corporate agents 2190 1606 1708 2194 2569

HDFC Standard Individual 4 3 3 3 4


ICICI Prudential Individual 4 3 3 2 2


SBI Life Individual 11 13 8 6 6


165

Reliance Individual 4 5 4 4 3


Bajaj Allianz Individual 6 5 4 3 3


Aviva Individual 7 3 3 3 3


Private total Individual 6 4 4 3 3



The table depicts that the individual agents of LIC have been most successful in

selling an average of 29 policies which is by far the highest among all insurance

companies. Among the private companies, agents of SBI Life have been the most

successful selling upto an average of 13 policies per agent. In the Corporate agent

sector HDFC far out beats the other companies with a total of 56628 policies sold in

the year 2012-13. The growth in this segment has been only in the last two financial

years in the case of HDFC and also in the case of ICICI Prudential which is next in

line in terms of policies sold by Corporate Agents.

The following graph depicts the number of policies sold by individual and corporate

agents of private and public sector life insurance companies.

Graph 7 Number of policies sold by individual


0

10

20

30

40

50

60

70

80

2008-09 2009-10 2010-11 2011-12 2012-13

Private total

SBI Life

Reliance

ICICI Prudential

HDFC Standard

Bajaj Allianz

Aviva

LIC

166

Graph 8 Number of policies sold by Corporate Agents


The following table shows the percentage of policies sold by public and private

sector life insurance agents individually and through Corporate agents

Table 7.29 Table showing Average Number of Policies by Individual and Corporate

Agents and percentage growth in the respective segments

INSURER 2009-10 2010-11 2011-12 2012-13 Average

LIC Individual 0 -7.14286 3.846154 7.407407 27.6

Corporate agents -26.6667 6.351183 28.45433 17.09207 2053.4

HDFC Standard Individual -25 0 0 33.33333 3.4

Corporate agents 64.48598 148.7216 2596.231 19.94662 21344.4

ICICI Prudential Individual -25 0 -33.3333 0 2.8

Corporate agents -4.01398 77.99811 23.74384 76.64748 14700.4

SBI Life Individual 18.18182 -38.4615 -25 0 8.8

Corporate agents -22.1594 -29.2168 22.51443 20.68063 4322.4

Reliance Individual 25 -20 0 -25 4

Corporate agents -21.5897 9.794521 -5.30256 8.827404 6476

Bajaj Allianz Individual -16.6667 -20 -25 0 4.2

Corporate agents -29.4956 -3.03266 37.69046 -39.3128 1423.2

0

20000

40000

60000

80000

100000

120000

2008-09 2009-10 2010-11 2011-12 2012-13

Private total

SBI Life

Reliance

ICICI Prudential

HDFC Standard

Bajaj Allianz

Aviva

LIC

167

Aviva Individual -57.1429 0 0 0 3.8

Corporate agents 37.65483 132.1536 82.60982 -16.9379 3937

Private total Individual -33.3333 0 -25 0 4

Corporate agents 23.26333 -13.6741 28.18826 99.92104 2743.8


The average of LIC is 28% and in case of private sector the percentage in case of

individual policies is a meagre 4%. However in case of Corporate agents, the private

sector companies far out beat LIC.

Performance of Agents

The following table depicts the policies written by agents of various life insurance

companies

7.30 Table showing number of policies in thousands

INSURER 2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

LIC 179564 189419 192428 210154 226058 240381 255845 270251 HDFC Standard

590 752 996 1244 1497 1598 1762 1938

ICICI Prudential

173 734 1037 1313 972 1090 1293 1502

SBI Life 352 411 420 489 579 789 1204 1724 Reliance 77 189 220 234 600 1939 2154 2327 Bajaj Allianz

395 511 540 721 941 1820 2283 2507

Aviva 34 51 48 62 62 152 254 317 Private 3545 4746 5740 7533 9007 12839 15430 17605


The agents of LIC have consistently been the highest sellers of policies right through

the period. It was found that due to severe competition from the private sector life

insurance companies, LIC reinvented itself, improved training and development of its

employees and agents and also designed new products that were customer centric

to affirm its position as highest policy seller in the industry. Over the period of eight

years, the total growth in the number of policies in LIC was more than 9 crores. The

average growth over the years has been about 1 crore policies.

168

Private companies are far behind in the number of policies sold with the total policies

being only 2% of the policies sold by LIC alone in the year 2005-06. Growth in the

whole private sector has been a little over 1,40,00,00,000 in terms of number of

policies sold with the major growth being shown in Bajaj Allianz.

The following graph depicts the number of policies sold in thousands by insurance

companies.

Graph 9 Number of policies sold

The following table depicts the percentage of growth in policies sold by LIC and other

private companies. The table shows that the rate of growth in LIC has been more or

less consistent with an average growth of about 6% throughout the period of eight

years. However in the overall private sector, there has been an average growth rate

of 26%. The average growth rate of HDFC is 19%, ICICI Prudential has an average

growth rate of a phenomenal 59% over the seven year period. SBI Life has average

growth rate of 27%, Reliance of 81%, being the company with the highest growth

rate, Bajaj Allianz has grown at 32% and Aviva has an average growth rate of 44%.

0

50000

100000

150000

200000

250000

300000

350000

Private

Aviva

Bajaj Allianz

Reliance

SBI Life

ICICI Prudential

HDFC Standard

LIC

169

Table 7.31 Table showing percentage growth in number of policies

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 5.488294 1.588542 9.211757 7.567784 6.335985 6.433121 5.630753

HDFC Standard

27.45763 32.44681 24.8996 20.33762 6.746827 10.26283 9.988649

ICICI Prudential

324.2775 41.28065 26.61524 -25.9711 12.13992 18.62385 16.16396

SBI Life 16.76136 2.189781 16.42857 18.40491 36.26943 52.59823 43.18937

Reliance 145.4545 16.40212 6.363636 156.4103 223.1667 11.08819 8.031569

Bajaj Allianz

29.36709 5.675147 33.51852 30.51318 93.41126 25.43956 9.811651

Aviva 50 -5.88235 29.16667 0 145.1613 67.10526 24.80315

Private 33.8787 20.94395 31.23693 19.56724 42.54469 20.1807 14.09592


Table 7.32 PREMIUM RECEIVED AND AGENT COMMISSION (Rupees in Lakhs)

INSURER

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC

Agent commission

956,809.66

1,003,324.33

1,211,031.28

1,330,867.71

1,403,563.27

1,479,026.03

Premium received

14,978,998.67

15,728,803.85

18,607,731.08

20,347,339.71

20,288,927.84

20,880,357.97

HDFC Standard

Agent commission

47,681.15

52,549.73

42,489.04

35,125.86

20,992.68

12,032.52

Premium received

35,125.86

42,489.04

52,549.73

47,681.15

57,763.94

63,939.56

ICICI Prudential

Agent commission

81,096.83

69,998.95

60,296.78

56,067.59

60,546.87

76,541.68

Premium received

1,356,106.12

1,535,622.08

1,652,875.41

1,788,062.90

1,402,157.80

1,353,823.80

SBI life

Agent commission

40,537.97

46,788.41

66,616.80

67,105.40

51,836.37

51,141.34

Premium received

562,213.72

721,210.32

1,010,402.65

1,291,164.29

1,313,373.84

1,045,003.29

Reliance

Agent commission

40,537.97

46,788.41

66,616.80

67,105.40

51,836.37

51,141.34

Premium received

562,213.72

721,210.32

1,010,402.65

1,291,164.29

1,313,373.84

1,045,003.29


The amount of commission paid by LIC has increased by over 590 crores and the

following table depicts the percentage of Premium received and Agents’ commission.

170

Except for HDFC all companies have almost the same average rate of commission

paid on premium received.

Table 7.33 Table showing Premium Received and Agent commission in percentages

INSURER LIC 15.65515 15.67669 15.36519 15.28878 14.4553 14.11764

HDFC Standard 0.736682 0.808549 1.236783 1.357437 2.751623 5.313896

ICICI Prudential 16.72206 21.93779 27.41233 31.8912 23.15822 17.68741

SBI Life 13.86882 15.41429 15.16738 19.24084 25.33692 20.43363

Reliance 11.69574 8.263472 10.51978 12.76441 13.81194 12.40303


The following table shows the Sum assured by the life insurance companies

Table 7.34 Table showing sum assured in Crores [

INSURER 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 1280159 1397568 1485380 1784880 2061034 2435396 2787732 3119331

HDFC Standard

11801 14253 16973 22251 29544 35376 48128 86110

ICICI Prudential

13438 15403 21644 28914 27347 36278 58660 77661

SBI Life 7254 9155 10997 14455 18018 29725 52245 81456

Reliance 1767 3339 4102 6069 8723 22050 30271 34735

Bajaj Allianz 10619 12554 12998 15195 19098 53055 46001 54302

Aviva 201 415 294 828 3146 10198 38757 60902

Private total 94205 116411 135496 177682 212483 344271 517060 723092


The above table depicts the sum assured by LIC and private sector life

insurance companies. The total value of sum assured by LIC has increased by more

than 18 lakh Crores. The total increase in sum assured by all private companies

together is 6.29 lakh Crores. Among the private companies, SBI Life has shown the

highest amount of sum assured and the growth over the past seven years amounted

to more than 74, 000 Crores. The following graph depicts the amount of sum

assured.

171

Graph 10 Amount of sum assured


The following table shows the percentage of growth in sum assured by all the life

insurance companies

Table 7.35 Table showing Sum Assured in Crores – Percentage growth

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average LIC 9.171439 6.283201 20.16319 15.47185 18.1638 14.4673 11.89494 14

HDFC Standard

20.7779 19.0837 31.09645 32.77606 19.74005 36.04704 78.91872 34

ICICI Prudential

14.62271 40.51808 33.58899 -5.41952 32.65806 61.69579 32.39175 30

SBI Life 26.20623 20.12015 31.44494 24.64891 64.97391 75.76114 55.91157 43

Reliance 88.96435 22.85115 47.95222 43.73043 152.78 37.28345 14.74679 58

Bajaj Allianz

18.22205 3.536721 16.9026 25.68608 177.804 -13.2956 18.04526 35

Aviva 106.4677 -29.1566 181.6327 279.9517 224.1577 280.0451 57.13807 157

Private total

23.572 16.3945 31.1345 19.58611 62.02284 50.18982 39.84683 35


0

500000

1000000

1500000

2000000

2500000

3000000

3500000

4000000

4500000

Private total

Aviva

Bajaj Allianz

Reliance

SBI Life

ICICI Prudential

HDFC Standard

LIC

172

In the above table LIC shows an increase steadily at an average rate of 14% in the

total sum assured. The private companies in total on the other hand have increased

at an average rate of 35% in sum assured

MARKETING OF INSURANCE PRODUCTS

The role of marketing in insurance cannot be overemphasized. Given that the nature

of the product is such that this is a product that is not bought but sold, insurance

companies take pain staking efforts in the P s of marketing, Product, pricing,

promotion, publicity. An insurance product is designed keeping in mind the various

needs of the customer, company’s goal and financial objectives and the general

condition of the economy and financial market and money market conditions. Every

product designed by an insurance company should be mandatorily be approved by

the IRDA. Marketing costs have been an imperative expenditure on the revenues of

the company the companies having to allocate huge amounts to gain new customers

and retain old clients. Client retention in insurance is a big challenge and hence

companies have expended a huge amount on marketing of products. The following

table depicts the amount spent on marketing by the public sector and private sector

life insurance companies.

Table 7.36 Table showing marketing expenses of life insurance companies ( Rs. In Crores) INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC 20,253.65

24,389.96

30,496.26

32,459.35

34,921.35

26,460.10

28,163.45

HDFC Standard

11,081.42

40,347.80

27,659.82

33,595.09

3,117.82

2,835.96

19,772.99

ICICI Prudential

3,357.43

11170.44 2,932.21

8,697.92

11,410.92

13,052.43

8,436.89

SBI Life 3,893.69

3684.62 3,000.24

3,622.85

3,927.14

4,686.20

3,802.46

Reliance 19,585.66

25,440.62

49528.78 43647.95 21,657.71

22,897.59

30,459.72


In spite of continuous marketing efforts, the average amount spent on marketing by

LIC is second in the industry to Reliance Company spending an average of more

173

than 30,000 Crores on marketing. The change in amount spent on marketing by LIC

has varied only slightly. Where as in private companies, there is a steep incline in

the marketing costs of HDFC in the year 2008-09, however due to severe cost

cutting, the expenditure drastically reduced in 2011-12. SBI Life has consistently

spent a nominal amount on marketing. Though marketing plays an important role,

the study did not reveal any direct correlation between amount spent on marketing

and premiums collected. The following table shows the percentage change in

marketing expenses incurred by life insurance companies.

Table 7.37 Table showing percentage change in marketing expenses

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 20.42254 25.03612 6.43715 7.584872 -24.2294

HDFC Standard 264.1032 -31.4465 21.45809 -90.7194 -9.04029

ICICI Prudential 232.7081 -73.7503 196.6336 31.19137 14.38543

SBI Life -5.36946 -18.574 20.75201 8.399188 19.32857

Reliance 29.89412 94.68386 -11.8736 -50.3809 5.72489


The above table reveals that there has been a sudden decrease in marketing

expenses incurred by LIC in the year 2012-13. Reliance Company has shown a

wide variation and so has the expenditure incurred by HDFC Standard which shows

a 264% increase in the second year followed by a negative growth in the third year

and fifth year. The following table shows the relationship between the Premium

received as against Marketing expenses of the companies.

Table 7.38 Table showing Premium Received / Marketing Expenses

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 LIC 739.5703 644.8885 610.1644 626.856 580.9892 789.1262

HDFC Standard

3.169798 1.05307 1.899858 1.419289 18.52703 22.546

ICICI Prudential

403.912 137.4719 563.6961 205.5736 122.8786 103.722

SBI Life 144.391 195.7353 336.7739 356.3946 334.4352 222.9959 Reliance 16.46837 19.38844 13.33547 15.05488 25.38412 17.66733 Source: IRDA Annual Reports

174

TRAINING AND DEVELOPMENT

An insurance company expends a lot on training of its sales officers, agency

development managers, development officers, agents and operations staff. This

training ranges from training to qualify for agency licensing examination to product

training and sales closing. Training is an ongoing process in an insurance company

because of the need for the agents to continuously be motivated and active. The

following table shows the amount of training expenses incurred by life insurance

companies

Table 7.39 Table showing Training Expenses incurred by Life Insurance companies (Rupees in Crores)

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average LIC 1,172.72 1,945.41 1,586.97 2,435.16 2,270.87 2,372.56 1,963.95 HDFC Standard

8,586.23 7,450.35 4,344.88 4,304.80 4,860.49 4,885.58 5,738.72

ICICI Prudential

31,443.61 16363.42 19,416.96 16,308.49 18,433.51 16,504.02 19,745.00

SBI Life 1,115.72 1,858.68 791.44 1,724.37 2,004.29 3,630.72 1,854.20 Reliance 3,431.22 2,211.08 530.70 369.77 382.08 743.71 1,278.09


The table shows that LIC has consistently been the company that spends least

amount on training its agents and employees. ICICI Prudential has been the

company that has spent the highest amount on training with training costs being the

highest in the year 2008-09. Among the private companies, Reliance Company has

incurred the least amount of expenditure on training.

The following table depicts the growth in the rate of training expenditure incurred in

public sector and private sector insurance companies.

Table 7.40 Table showing percentage growth in Training Expenses

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13 LIC 65.8887 -18.4249 53.44714 -6.74658 4.478019 HDFC Standard -13.2291 -41.6822 -0.92247 12.90861 0.516203 ICICI Prudential -47.9595 18.66077 -16.009 13.03015 -10.4673 SBI Life 66.59018 -57.4192 117.8775 16.23318 81.14744 Reliance -35.5599 -75.9982 -30.3241 3.329096 94.64772 Source: IRDA Annual Reports

175

Apart from the first year increase in training expenditure in the year 2008-09, LIC has

increased training expenditure in the year 2010-11 by more than 53%. Private

companies have been very erratic in the amount spent on training with a drastic

increase in one year followed by a decrease in the next year.

The following table shows the relationship between Premium Received and Training

Expenses. It was observed that though training is absolutely essential to sustain

agents and sales managers in the system, there is no direct proportion or correlation

in the amount of expenditure incurred on training to premiums collected.

Table 7.41 Table showing Premium Received / Training Expenses

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 LIC 12772.87 8085.084 11725.32 8355.648 8934.429 8800.771 HDFC Standard

4.090953 5.702959 12.09463 11.07628 11.88439 13.0874

ICICI Prudential

43.12819 93.84481 85.12534 109.64 76.0657 82.02994

SBI Life 503.9022 388.0229 1276.664 748.7745 655.2813 287.8226 Reliance 94.00268 223.0828 1244.563 1777.09 1438.866 543.9477 Source: IRDA Annual Reports

The following table shows the relationship between amount spent on training and

premiums collected

Table 7.42 Table showing Amount spent for training/ premium received

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 0.00008 0.00012 0.00009 0.00012 0.00011 0.00011 HDFC Standard 0.24444 0.17535 0.08268 0.09028 0.08414 0.07641 ICICI Prudential 0.02319 0.01066 0.01175 0.00912 0.01315 0.01219 SBI Life 0.00198 0.00258 0.00078 0.00134 0.00153 0.00347 Reliance 0.01064 0.00448 0.00080 0.00056 0.00069 0.00184 Source: IRDA Annual Reports

TRAINING EXPENSES / PREMIUM RECEIVED

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 1.23684547 0.852855192 1.196795257 1.119265641 0.113628158 HDFC Standard 133.886164 62.02452499 47.80895963 47.61265233 43.14861852

ICICI Prudential 106.558906 117.4738562 91.20758049 131.4652842 121.906688 SBI Life 25.7716892 7.832914194 13.3551586 15.26061883 34.74363231 Reliance 44.8263978 8.034943754 5.627173326 6.949916509 18.38413602


176

The following table depicts the Share Capital of Life insurance companies

Table 7.43 Table showing Share capital (in crores)

INSURER 2005-06

2006-07

2007-08 2008-09 2009-10

2010-11 2011-12 2012-13

LIC 5 5 5 5 5 5 100 100 HDFC 620 801.26 1271 1795.82 1968 1994.88 1994.88 19994.88

ICICI 1185 1312.3 1401.11 1427.26 1428.14 1028.46 1428.85 1428.85 SBI 425 500 1000 1000 1000 1000 1000 1000

Reliance 331 664 1147.7 1162.3 1164.65 1165.84 1196.32 1196.32

Bajaj 152.23 150.37 150.71 150.71 150.71 150.71 150.71 150.71

Aviva 458.70 758.2 1004.5 1491.8 1888.8 2004.9 2004.90 2004.90

Private 5887.05 8119.41 12291.42 18249.77 21015 23656.85 24831.92 25418.72


The capital structure of private life insurance companies cannot be compared with

LIC since LIC being a Government owned company has the same capital of 5

Crores. However among the private companies, HDFC has the highest amount of

capital. The overall capital structure of all private companies has increased 19531.67

Crores.

The following table shows the percentage increase in share capital

Table 7.44 Table showing change in share capital in percentages

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC 0 0 0 0 0 1900 0 28.75

HDFC 29.23548 58.62517 41.2919 9.587821 1.365854 0 902.3099 3805.09

ICICI 10.74262 6.767507 1.866377 0.061657 -27.9861 38.93102 0 1329.996

SBI 17.64706 100 0 0 0 0 0 865.625

Reliance 100.6042 72.84639 1.272109 0.202185 0.102177 2.614424 0 1003.516

Bajaj -1.22184 0.226109 0 0 0 0 0 150.8575

Aviva 65.29322 32.48483 48.5117 26.61215 6.14676 0 0 1452.088

Private 37.91984 51.38317 48.47568 15.15214 12.57126 4.967145 2.363088 17433.77


SOLVENCY The solvency of a life insurance company is one of the most important

determinants of customers’ trust and confidence in the company’s ability to pay the

177

amount invested by them along with bonus and interest. The following table depicts

the solvency position of the various life insurance companies

Table 7.45 Table showing Solvency of Life insurance companies

INSURER 2005-06 2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

LIC 1.3 1.5 1.52 1.54 1.54 1.54 1.54 1.54

HDFC Standard

2.9 2.05 2.38 2.58 1.80 1.72 1.88 2.17

ICICI Prudential

1.6 1.53 1.74 2.31 2.9 3.27 3.71 3.96

SBI Life 2.9 1.78 3.3 2.92 2.17 2.04 5.34 2.15

Reliance 2 1.62 1.65 2.5 1.86 1.66 3.53 4.29

Bajaj Allianz 2.8 2.45 2.34 2.62 2.68 2.86 5.15 6.34

Aviva 2.8 6.31 4.29 5.91 5.12 5.4 5.15 4.23


Except in one or two cases, the solvency ratios of all life insurance companies are

more or less very consistent. The following table shows the percentage change in

solvency rate of insurance companies.

Table 7.46 Table showing percentage change in Solvency rate of insurance

companies


INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC 15.38462 1.333333 1.315789 0 0 0 0 1.5025

HDFC Standard

-29.3103 16.09756 8.403361 -30.2326 -4.444444444

9.302326 15.42553 2.185

ICICI Prudential

-4.375 13.72549 32.75862 25.54113 12.75862069 13.45566 6.738544 2.6275

SBI Life -38.6207 85.39326 -11.5152 -25.6849 -5.99078341 161.7647 -59.7378 2.825

Reliance -19 1.851852 51.51515 -25.6 -10.75268817

112.6506 21.52975 2.38875

Bajaj Allianz

-12.5 -4.4898 11.96581 2.290076 6.71641791 80.06993 23.1068 3.405

Aviva 125.3571 -32.0127 37.76224 -13.3672 5.46875 -4.62963 -17.8641 4.90125

178

INVESTMENT INCOME

The profitability of an insurance company depends heavily on the different avenues

into which the company invests the amount collected from shareholders and policy

holders. The following table shows the income from investment of various life

insurance companies.

Table 7.47 Table showing Income from investment in lakhs of rupees

INSURER 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC 9585360 11239509 4277572 5837392 4568239

4004641

8433028

9623399 7196143

HDFC 207761 568603.2 -171931 56451 23224 37786 23255 73894 102380.4

ICIC 832719 465878 -57050 290977 95814 142318 (52921) 586289 288003

SBI Life 300489 592467 -169465 50325 21967 13074 61065 437394 163414.5

Reliance 146236 344097 -101379 -7414 3293 4542 71361 136500 74654.5

Bajaj 391237 993021 -322087 63985 27763 3124 (3943) 302577 181959.6

Aviva 45932 138010 -38925 14726 8490 9921 13525 55208 30860.88


It is clear from the table above that the income earned by LIC is the maximum when

compared to all other insurance companies. However it is highly inconsistent; the

income earned in the year 2005-06 is almost the same as the income earned in the

year 2012-13. In the year 2006-07 income shows a sudden increase in income and

the year 2007-08 shows a sudden fall in income. The average income earned by LIC

being 7196143 lakhs. Among the private companies ICICI has earned the highest

revenue with an average of 288003 lakhs and Bajaj follows at second place with

average revenue of 181959.6 lakhs and SBI Life stands third with an average

revenue of 163414.5 lakhs.

179

The following graph depicts the amount of income earned from investments

Graph 11 Investment income


The following table depicts the growth rate in Income from investment

Table 7.48 Table showing Growth in Income from investment in percentages

INSURER 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 17.25704 -61.9416 36.46508 -21.7418

-12.33731423 110.5814 14.11558

HDFC 173.6814 -130.237 -132.834 -58.8599

62.70237685 -38.456 217.7553

ICIC -44.0534 -112.246 -610.039 -67.0716

48.53570459 -137.185 -1207.86

SBI Life 97.16762 128.603- -129.696 -56.3497

-40.48345245 367.0721 616.2761

Reliance 135.3025 -129.462 -92.6868 -

144.416 37.92894018 1471.136 91.28095

Bajaj 153.8157 -132.435 -119.866 -56.6101

-88.74761373 -226.216 -7773.78

Aviva 200.4659 -128.204 -137.832 -42.3469

16.85512367 36.32698 308.1922


The above table shows a steep decline in the income of LIC by 62% in the year

2007-08 and the highest growth in LIC is in the year 2011-12 which records a high

growth rate of 110%. Among the private companies, the highest fall in income is in

the year 2008-9 when ICICI reports a fall of 610%. The highest growth rate among

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

Aviva

Bajaj

Reliance

SBI Life

ICIC

HDFC

LIC

180

private companies is in the year 2011-12 reported by Reliance with a growth of

1471%. The table shows high volatility in the rate of growth among all insurance

companies.

ANALYSIS OF TOTAL PREMIUM - BREAK UP YEAR WISE

A study on performance of life insurance companies has more significance when

considering premium collected as first year premium and renewal premium. The

following table is an analysis of Life insurance premium collected year wise,

separated as First year and renewal premium.

Table 7.49 Table showing Total premium break up (Rupees in Crores)

2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC First year 53179.08 71521.90 87012.35 81862.25 76611.5 74037.42

Renewal 104108.96 114555.41 116461.05 121027.03 132192.08 117668.9

Total 157288.04 186077.31 203473.40 202889.28 2088003.58 567546.3

HDFC First year 2651.11 3257.51 4059.33 3857.37 4436.07 3652.278

Renewal 2913.58 3747.60 4944.85 6344.93 6886.67 4967.526

Total 5564.69 7005.10 9004.17 10208.4 11322.68 8621.008

ICICI First year 6811.83 6333.92 7862.14 4441.09 4808.62 6051.52

Renewal 8544.39 10194.83 10018.49 9580.48 8729.62 9413.562

Total 15356.22 16528.75 17880.63 14021.58 13538.24 15465.08

SBI First year 5386.64 7040.74 7572.39 6541.32 5182.88 6344.794

Renewal 1825.46 3063.28 5339.25 6602.42 5267.15 4419.512

Total 7212.10 10104.03 12911.64 13133.74 10450.03 10762.31

Reliance First year 3513.98 3920.78 3034.94 1809.29 1376.57 2731.112

Renewal 1418.56 2684.12 3536.21 3688.33 2668.82 2799.208

Total 4932.54 6604.90 6571.15 5497.62 4045.39 5530.32

Bajaj Allianz

First year 4491.43 4451.10 3465.82 2717.31 2987.9 3622.712

Renewal 6133.09 6968.61 6144.13 4766.49 3904.8 5583.424

Total 10624.52 11419.71 9609.95 7483.8 6892.7 9206.136

AVIVA First year 724.56 798.37 745.39 801.86 687.4 751.516

Renewal 1268.31 1579.64 1599.79 1614.01 1453.27 1503.004

Total 1992.87 2378.01 2345.17 2415.87 2140.67 2254.518

PRIVATE First year 34152.01 38372.01 39368.65 32103.78 30749.58 34949.21

Renewal 30345.43 40997.93 48762.94 52079.05 47649.33 43966.94

Total 64497.44 79369.94 88131.60 84182.83 78398.91 78916.14


181

The table above reveals that in all quarters LIC leads in premium collection and it

has maintained its lead all through the years. However in the last two years it is seen

that the amount of premium collected by LIC has shown a declining trend though

there has been no major change in IRDA regulations. The growth in first year

premium collection has also been showing a positive growth in most of the private

life insurance companies, however in almost every life insurance company there has

been a decline in first year premium in the years 2011-12 and 2012-13. The growth

in first year premium of LIC over the five year period has been 23432.42 Crores.

Except for SBI Life all the other private life insurance companies show an almost

50% decrease in the first year premium from the year 2008-09 in the year 2012-13.

In the renewal premium category LIC has shown a consistent increase of about

10,000 Crores every year. Among private life insurance companies there has been a

positive in the first two years, however the latter years have shown a drastic fall in

the premium. The general slowdown in the economy and recessionary conditions

has been the major cause for fall in premium collection. The following graph depicts

the amount of premium collected

Graph 12 Premium collected


The following table shows the growth in total premiums in percentage over the past

four years.

0

500000

1000000

1500000

2000000

2500000

PRIVATE

SBI

Reliance

ICICI

HDFC

Bajaj Allianz

AVIVA

LIC

182

Table 7.50 Table showing growth in total premium – Break up in percentages

2009-10 2010-11 2011-12 2012-13

LIC First year 34.49255 21.65833 -5.91881 -6.41413

Renewal 10.03415 1.663509 3.920607 9.225253

Total 18.30353 9.348851 -0.28707 9.291345

HDFC First year 22.87344 24.61451 -4.97521 15.00245

Renewal 28.62527 31.94711 28.3139 8.538156

Total 25.88482 28.53735 13.37414 10.91532

ICICI First year -7.01588 24.12755 -43.513 8.275671

Renewal 19.31607 -1.7297 -4.37202 -8.88118

Total 7.635538 8.178961 -21.5823 -3.44712

SBI First year 30.70745 7.551053 -13.6162 -20.7671

Renewal 67.80866 74.29846 23.65819 -20.2239

Total 40.09831 27.78703 1.720153 -20.4337

Reliance First year 11.57662 -22.5935 -40.3847 -23.9166

Renewal 89.21441 31.7456 4.301781 -27.6415

Total 33.90464 -0.51098 -16.337 -26.4156

Bajaj Allianz

First year -0.89793 -22.1357 -21.5969 9.95801

Renewal 13.62315 -11.8313 -22.4221 -18.0781

Total 7.484479 -15.8477 -22.1245 -7.89839

AVIVA First year 10.18687 -6.63602 7.5759 -14.2743

Renewal 24.54684 1.275607 0.888867 -9.95905

Total 19.3259 -1.38099 3.014707 -11.3913

PRIVATE First year 12.35652 2.59731 -18.4534 -4.21819

Renewal 35.10413 18.94001 6.800472 -8.50576

Total 23.05905 11.03902 -4.48054 -6.87066


The table above shows that almost all companies report a negative growth in the

year 2012-13. The overall decline in first year premium collected by all private

companies is 4% and in renewal premiums the decline has been 8.5%. The

maximum decline has been reported by Reliance which has had a decline of 40% in

the year 2011-12 and 23% and 27% in the year 2012-13 in the first year and renewal

183

premium category respectively. LIC has suffered a growth decline of 6% in the year

2012-13 which is more than the decline in overall private sector which saw a decline

of only about 4%,

The following graph depicts the growth rate in the amount of premium collected

Graph 13 Growth rate in premium


UNIT LINKED POLICIES - The following table shows the amount of Linked premium

collected

Table 7.51 Table showing amount of Linked premium collected (Rupees in crores)

2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC First year 15122.57 28086.26 26502.19 4107.39 191.96 14802.07

Renewal 19574.53 19175.90 12694.60 10793.76 6338.40 13715.44

Total 34697.10 47262.15 39196.78 14901.15 6530.35 22517.51

HDFC First year 2266.58 2692.44 3493.54 2051.13 2430.35 2586.808

Renewal 2462.86 3081.19 3898.47 5068.63 4890.32 3880.294

Total 4729.45 5773.63 7392.01 7119.76 7320.67 6467.104

ICICI

First year 6395.52 6073.63 6082.84 2300.77 2634.51 4697.454

Renewal 8107.79 9746.75 9564.93 8662.29 7027.64 8621.88

Total 14503.31 15820.38 15647.77 10963.06 9662.15 13319.33

SBI First year 3230.69 4356.00 4465.98 2283.89 1295.81 3126.474

Renewal 1287.58 2444.60 4583.52 5403.39 3646.19 3473.056

Total 4518.27 6800.60 9049.49 7687.29 4942 6599.53


-200

0

200

400

600

800

1000

2009-10 2010-11 2011-12 2012-13

PRIVATE

SBI

Reliance

ICICI

HDFC

Bajaj Allianz

AVIVA

LIC

184

Renewal 1319.32 2567.85 3326.71 2713.24 1354.08 2256.24

Total 4760.51 6156.72 5058.73 3412.52 168.78 3911.452

Bajaj Allianz

First year 4197.07 3748.84 2436.27 841.38 566.05 2357.922

Renewal 5789.33 6536.42 5543.65 3452.02 1845.3 4633.344

Total 9986.40 10285.27 7979.93 4293.41 2415.36 6992.074

AVIVA First year 693.95 752.18 519.86 211.35 132.90 462.048

Renewal 1258.88 1570.66 1567.21 1459.32 1120.63 1395.34

Total 1952.83 2322.84 2087.07 1680.66 1253.54 1859.388


Renewal 26412.22 36419.61 42764.83 41450.32 31621.67 35733.73

Total 55949.96 68258.80 69805.28 54748.76 42299.18 58212.4


Due to change in IRDA regulations with regard to Unit Linked insurance products,

there has been a drastic fall in all companies in the first year premium collected by

life insurance companies in this segment. From the year 2008-09 to 2012-13 the

total difference in unit linked policy premium collected by LIC alone has fallen by a

whopping 14930.61 Crores. In that same period the private sector life insurance

companies which were predominantly selling unit linked products saw their

premiums fall by 18860.43 Crores. In the renewal premium segment, LIC has had a

fall of 13236.13 Crores and overall the premiums of LIC have fallen by 28166.75

Crores. The following graph depicts the premium collected in the unit linked

segment.

Graph 14 Unit linked Premium collected


0

10000

20000

30000

40000

50000

60000

70000

80000

Column2

2008-09

2009-10

185

The following table depicts the growth rate in unit linked policies in LIC and private

sector life insurance companies.

Table 7.52 Table showing growth in unit linked premium in percentage

2009-10 2010-11 2011-12 2012-13

LIC First year 85.72412 -5.64002 -84.5017 -95.3265

Renewal -2.03647 -33.7992 -14.9736 -41.2772 Total 906.1985 -17.0652 -61.9837 -56.1755

HDFC First year 18.78866 29.75368 -41.2879 18.48835

Renewal 25.10618 26.52482 30.01588 -3.51791 Total 22.07825 28.03055 -3.68303 2.821865

ICICI First year -5.03305 0.151639 -62.1761 14.50558

Renewal 20.21463 -1.86544 -9.43697 -18.8709 Total 9.081168 -1.09106 -29.9385 -11.8663

SBI First year 34.83188 2.524793 -48.8603 -43.263

Renewal 89.86005 87.4957 17.88734 -32.5203 Total 50.51336 33.06899 -15.0528 -35.7121

Reliance First year 4.291829 -51.7393 -59.1061 -52.8851

Renewal 94.63436 29.55235 -18.4407 -50.0936 Total 29.329 -17.834 -32.542 -95.0541

Bajaj Allianz First year -10.6796 -35.0127 -65.4644 -32.7236

Renewal 12.9046 -15.1883 -37.7302 -46.5443 Total 2.99277 -22.414 -46.1974 -43.7426

AVIVA First year 8.391094 -30.8862 -59.3448 -37.1185

Renewal 24.76646 -0.21965 -6.88421 -23.2088 Total 18.94737 -10.1501 -19.4728 -25.4138

PRIVATE First year 7.791558 -15.0718 -50.8202 -19.7101

Renewal 37.88924 17.42254 -3.07381 -23.7119 Total 21.99973 2.265613 -21.5693 -22.7395


The table above shows that there is a 95% negative growth in LIC s first year

premiums in the unit linked segment. However in the private sector the total decline

in all the companies together has been only 20% in the first year premium and 24%

in renewal premiums. The overall decline in private sector is only about 23% where

as in LIC the fall in the renewal premium sector is 41% and in the total premium the

decline is 56%. Every private company has seen the fall the maximum fall being

shown in Bajaj Allianz which has seen a de growth of 65% in this segment. Though

the maximum policies in the unit linked segment have been sold by private sector

186

companies, it is clear that LIC has suffered a de growth at a higher percentage when

compared to private companies.

NON UNIT LINKED OR TRADITIONAL POLICIES PREMIUM COLLECTION

The following table shows the amount and average of non-unit linked premium

collected by insurance companies.

Table 7.53 Table showing Non unit linked premium (In crores of rupees)

2008-09 2009-10 2010-11 2011-12 2012-13 Average

LIC First year 38056.51 43435.65 60510.16 77754.85 76419.54 59235.34

Renewal 84534.43 95379.51 103766.45 110233.27 125853.68 103953.5

Total 122590.94

138815.16

164276.61 187988.13 202273.33 163188.8

HDFC First year 121.29 31.67 330.60 1806.34 2005.72 859.124

Renewal 450.72 666.41 1046.37 1276.3 1996.29 1087.218

Total 835.24 1231.47 1612.16 3082.65 4002 2152.704

ICICI First year 416.31 260.29 1779.30 2140.32 2174.1 1354.064

Renewal 436.60 448.08 453.56 918.2 1701.98 791.684

Total 852.91 708.37 2232.86 3058.52 3876.09 2145.75

SBI First year 2155.95 2684.75 3106.41 4247.43 3887.7 3216.448

Renewal 537.88 618.68 755.74 1199.03 1620.96 946.458

Total 2693.83 3303.43 3862.15 5446.46 5508.03 4162.78


Renewal 99.24 116.27 209.50 975.08 1314.75 542.968

Total 172.03 448.17 1512.42 2076.10 2357.6 1313.264

Bajaj Allianz

First year 294.36 702.26 1029.55 1875.92 2421.85 1264.788

Renewal 343.76 432.19 600.48 1314.47 2855. 1109.18

Total 638.12 1134.45 1630.02 3190.39 4477.34 2214.064

AVIVA First year 30.61 46.20 225.53 580..51 554.4 287.45

Renewal 9.43 8.98 32.57 154.70 332.64 107.664

Total 40.04 55.18 258.10 735.2 887.14 395.132


Renewal 3933.21 4578.32 5998.12 10628.72 16027.46 8233.166

Total 8547.47 11111.14 18326.31 29434.09 36099.73 20703.75


In the non-unit linked segment, it is seen that there is a consistent increase in

premiums collected by LIC in the years from 2008-09 to 2012-13. The growth has

187

been consistent in both first year and renewal premiums collected. The overall

status among private companies also has been a positive growth in spite of

recessionary conditions prevailing in the economy. First year and renewal premiums

have grown consistently with just a few exceptions where in premiums have reduced

as depicted in the table below.

The following graph depicts the growth rate in the amount of premium collected in

non-linked segment.

Graph 15 Growth rate in non-linked premium segment


The table below shows the growth in percentage in Non linked premiums collected

by life insurance companies

Table 7.54 Table showing Growth in Non-linked premium

2009-10 2010-11 2011-12 2012-13

LIC First year 14.13461 39.3099 28.49883 -1.71733

Renewal 12.82919 8.79323 6.232091 14.17032 Total 13.23444 18.34198 14.4339 7.59899

HDFC First year -73.889 943.8901 446.3823 11.03779

Renewal 47.85454 57.01595 21.97406 56.41229 Total 47.43906 30.91346 91.21241 29.82337

ICICI First year -37.4769 583.5837 20.29 1.578269

Renewal 2.629409 1.222996 102.4429 85.36049 Total -16.9467 215.211 36.97769 26.7309

0

50000

100000

150000

200000

250000

300000

2008-09 2009-10 2010-11 2011-12 2012-13 Average

PRIVATE

SBI

Reliance

ICICI

HDFC

Bajaj Allianz

AVIVA

LIC

188

SBI First year 24.52747 15.70575 36.73115 -8.46936

Renewal 15.02194 22.15362 58.65642 35.18928 Total 22.62949 16.91333 41.02145 1.130459

Reliance First year 355.9692 292.564 -15.496 -5.28237

Renewal 17.16042 80.18405 365.432 34.83509 Total 160.5185 237.4657 37.27007 13.55908

Bajaj Allianz First year 138.5718 46.60525 82.20776 29.10199

Renewal 25.72434 38.93889 118.9032 117.1978 Total 77.78004 43.68372 95.72705 40.33833

AVIVA First year 50.93107 388.1602 157.3981 -4.49777

Renewal -4.772 262.6949 374.977 115.0226 Total 37.81219 367.7419 184.8508 20.66649

PRIVATE First year 41.57893 88.71161 52.53934 6.737076

Renewal 16.40162 31.01138 77.20086 50.79389 Total 29.99332 64.93636 60.61111 22.64599


The table above shows the percentage of growth and decline in the first year,

renewal and total premium collected. The highest growth rate is reported in the year

2010-11 by Aviva which shows a 388% growth in one year and HDFC reports

maximum fall in this segment in the year 2009-10 with a decline of 74%. However in

most of the cases there is a positive growth and this is seen in the overall total in

premiums collected by private companies. However LIC shows a marginal decline of

nearly 2% in the year 2012-13.

LAPSATION OF POLICY

Surrender and lapsation of policies is one of the major challenges that an insurance

company has to face. Customer dissatisfaction leading to lapsation of policy is widely

prevalent both in LIC and especially in the private sector. This is more so in the

wake of mis selling of insurance products, promise of false and unrealistic returns

and high rate of allocation charges that are hidden from the client when the policy is

sold. The following table shows the number of policies lapsed in the years from

2005-06 to 2012-13.

189

Table 7.55 Table showing forfeiture/lapsed policies in respect of non-linked business

Insurers 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC

No, policies in '000

9568.88 7773.00 11008.50 7372.61 9744.37 11483.44 12512.517 14819.45

S.A (Crore)

61640.0 63206.46

73685.88 52926.09 114767.41

89860.47 109789.55 13.44

LapesRatio(no,p) (%)

6 4 4 5 5 5.6

HDFC Standard


40.55 29.32 36.47 76.07 114.09 80.54 73.8 109.52

S.A (Crore)

793.56 787.29 908.73 1524.00 2716.23 2777.51 3271.56 5624.63

LR(no,p) (%)

4 6 8 5 4.2 5.6

ICICI Prudential


136.54 179.97 439.24 776.76 968.89 547.89 525.42 511.29

S.A (Crore)

1377.46 2460.90 6853.82 25269.40 32353.92

16581.87 10109.19 9538.24

LR(no,p) (%)

40 53 81 46 41.9 34.1

SBI Life


31.52 85.29 78.84 47.89 46.49 54.37 109.023 202.30

S.A (Crore)

459.43 772.89 1108.38 1355.59 5903.89 2035.08 3991.71 0.79

LR(no,p) (%)

16 9 7 7 9.4 12.3

Reliance


17.58 47.13 43.46 90.91 80.96 202.12 793.652 588.82

S.A (Crore)

259.80 691.90 662.53 678.68 1531.28 2362.68 8200.19 9614.35

LR(no,p) (%)

21 40 31 16 38.5 25.8

Bajaj Allianz


66.47 77.42 105.91 96.14 160.62 156.33 454.58 459.24

S.A (Crore

2417.74 2364.27 2392.49 1723.27 10852.05

4944.94 1943.75 9940.77

LR(no,p) (%)

19 14 17 11 21.4 18.7

AVIVA Life


18.60 24.19 39.71 32.47 37.36 33.28 57.11 63.02

S.A (Crore

48.99 3.23 124.86 165.63 377.58 1290.80 3142.86 5969.41

LR(no,p) (%)

80 59 24 31 27.8 21.7

Private Total


617.19

884.1

1287.6

1732.316

2608.59

2567.96

3533.116

12046.01

S.A (Crore)

12436.55

16093.99

25103.29

46616.26

100033.8

68435.78

83400.48

73332.62

LR(no,p) (%)

-278

-386

-395

-531

-398

511.1

553


190

The Lapse forfeiture ratio is highest among private companies with AVIVA showing a

lapse ratio of 80. In terms of amount of number of policies and sum assured, LIC

has maximum number of policies that have lapsed or have been forfeited.

CAPITAL EMPLOYED IN INSURANCE COMPANIES – SHAREHOLDERS FUNDS

AND POLICY HOLDERS FUNDS

The following is an analysis of shareholders funds and funds of policy holders in the

various life insurance companies

Table 7.56 Table showing total investment of capital and policy holders funds (Rupees in lakhs) 2008 2009 2010 2011 2012 2013 LIC

Shareholders 29320 31950 35376 38257 33005 45659

Policyholders 60539701 63896170 83304127 97016710 107018081 118777524 HDFC STANDARD

Shareholders 42131 42916 63048 69997 589442 83385 Policyholders 232990 301527 434154 533498 799026 1072733

ICICI PRUDENTIAL


SBI LIFE

Shareholders 100586 93537 72830 96508 136081 2168786

Policyholders 385751 682835 1088751 1466870 181159 23884 RELIANCE


BAJAJ ALLIANZ


AVIVA

Shareholders 25348 35162 40674 58556 76155 80192

Policyholders 9621 15450 9121 24967 77919 15156 PRIVATE Shareholders 57781 695261 918875 1253194 1853570 2434096 Policyholders 1640682 2308588 3428103 4738070 6376718 8736837


It is evident from the above table that shareholders funds in LIC are the basic

minimum. LIC operates only policy holders’ funds. However in the case of private

insurers, the capital base is strong and shows a positive growth over the years. LIC

has shown a growth of 16339 lakhs over the past six years in shareholders’ funds

and in the case of policy holders’ funds there has been a tremendous increase of

58237823 lakhs in the past six years. In all the private companies taken together,

there is an increase of 2376315 lakhs in the shareholders funds and an increase of

7096155 lakhs in the policy holders’ funds.

191

The following table shows the growth in percentage in shareholders and policy

holders’ funds

Table 7.57 Table showing growth in total investment in percentage and average

growth in lakhs

2009 (%)

2010 (%)

2011 (%)

2012 (%)

2013 (%)

Average growth in Lakhs

LIC

Shareholders 8.969986 10.723 8.143939 -13.7282 38.33965 35594.5

Policyholders 5.544244 30.37421 16.46087 10.30892 10.98828 88425386 HDFC STANDARD

Shareholders 1.863236 46.91024 11.02176 742.0961 -85.8536 148486.5 Policyholders 29.41628 43.98512 22.8822 49.77113 34.25508 562321.3

ICICI PRUDENTIAL

Shareholders 213.7191 94.11036 53.8073 75.9202 41.49974 208858.3 Policyholders -0.95353 30.44599 61.94495 26.23694 23.88637 648953.7

SBI LIFE

Shareholders -7.00793 -22.1378 32.51133 41.00489 1493.746 444721.3

Policyholders 77.01445 59.44569 34.72961 -87.65 -86.816 638208.3 RELIANCE

Shareholders 77.60878 -6.43273 2.285343 164.0794 127.9813 77263.33 Policyholders 35.47622 53.63626 88.26479 86.78364 68.95341 118202.7

AVIVA

Shareholders 38.71706 15.67601 43.9642 30.05499 5.301031 52681.17

Policyholders 60.58622 -40.9644 173.731 212.088 -80.549 25372.33 BAJAJ ALLIANZ

Shareholders -32.8452 100.8239 52.20075 53.07983 30.19669 235020.7

Policyholders 58.07925 49.12414 18.2394 42.48507 50.34357 432479.2 PRIVATE Shareholders 1103.269 32.1626 36.38351 47.90767 31.31935 1202130

Policyholders 40.70905 48.49349 38.21259 34.58471 37.0115 4538166


The above table is an indicator of growth in the policy holders’ funds and

shareholders’ funds in all the life insurance companies. LIC shows a decline in

shareholders’ funds in the year 2012 and HDFC shows a huge decline in policy

holders’ funds of 88% and 87% in the years 2012 and 2013 respectively. Overall

private companies have only shown growth up to an average rate of 40% in policy

holders’ funds.

ANALYSIS OF PERFORMANCE THROUGH OTHER PERFORMANCE

PARAMETERS

In continuation of the analysis of performance, the following is analysis of the total

amount of Sum assured that is in force by the various life insurance companies. The

following table shows the amount of sum assured.

192

Table 7.58 Table showing sum assured in force (Rupees in crores)

INSURER

3/31/2005

3/31/2006

3/31/2007

3/31/2008

3/31/2009

3/31/2010

3/31/2011

3/31/2012

3/31/2013

LIC 1,292,794.87

1,539,943.84

2,104,340.16

2,298,188.94

2,745,080.10

3,112,936.85

3,475,163.11

3,862,497.27

3,942,351.25

HDFC 4,773,040.00

6,719,297.00

4,574,300.00

5,715,800.00

7,261,000.00

9,891,700.00

13,871,800.00

20,185,800.00

ICICI 4,587,700.00

9,233,400.00

15,999,500.00

18,790,200.00

18,375,660.01

17,376,443.41

24,168,600.00

27,577,100.00

SBI 5,437,167.93

6,483,775.34

6,450,300.00

8,589,600.00

Reliance

44,264.58

67,983.49

65,933.12

130,099.37

123,409.46

125,792.34


The above table indicates that the amount of sum assured of LIC has increased by

2649556.38 Crores, indicating a growth rate of 205%. There is a continuous steady

increase in the amount of sum assured by LIC. The Sum assured in private

insurance companies also has increased steadily in HDFC the growth is 15412760 in

the past nine years recording a growth of 322.91%. ICICI records a growth of

22989400 Crores resulting in a growth rate of 501.10%.

The following table shows the yield on policy holders’ account which is an important

indicator of performance

Table 7.59 Table showing Yield on Policy Holders’ Account

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 8.68% 8.21% 7.83% 7.71% 7.59% 7.39% 7.70% 7.90% HDFC 13.67% 8.69% 8.97% 8.20% 6.40% 9.31% 9.56% 8.54%

ICICI 24.00% 8.00% 13.00% -20.40% 40.00% 10.20% -0.20% 9.10%

SBI 8.00% 6.00% 5.00% -12.00% 21.00% 8.00% 1.00% 9.00%


The above table shows a consistent growth rate of about 8% in LIC. Private

companies have shown very erratic return as seen above. HDFC shows consistently

highest yield with no negative returns over the entire period. ICICI shows high

returns of 40% in the year ended 31.3.2010 however there is a wide variation in

193

returns of ICICI. SBI also has very inconsistent yield on investment as shown above

with yield ranging between -12% and a maximum of 21% in two subsequent years.

The following table shows yield on Shareholders account

Table 7.60 Table showing Yield on Share Holder's account

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013 LIC 6.54% 6.98% 5.34% 9.15% 8.69% 9.03% 7.12% 8.40% HDFC 10.60% 7.04% 8.04% 7.49% 6.30% 8.55% 9.30% 8.82% ICICI 4.00% 5.00% 11.00% 8.10% 3.20% 6.50% 8.00% 9.80% SBI 11.00% 8.00% 7.00% 7.00% 7.00% 4.00% 7.00% 8.00%


The above table shows a consistent growth rate of about 7-8% in LIC. Private

companies have also shown consistency in return as seen above. HDFC shows

consistently highest yield with no negative returns over the entire period. ICICI also

shows relatively steady rate of yield averaging about 8%. SBI also has very

consistent yield on investment as shown above with yield ranging between 4% and a

maximum of 11% in the five year period. The following graph depicts the yield on

shareholders account

Graph 16 Yield on shareholders account


The following table shows the Salary expenses of life insurance companies

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

SBI

ICICI

HDFC

LIC

194

Table 7.61 Table showing Salary paid in Lakhs of rupees

INSURER 2006-07 2007-08 2008-09 2009-10

2010-11 2011 3/31/2012 3/31/2013

LIC 359,896.29 407,361.25 504,792.79 577,371.12

805,245.72

1,205,528.10

1,009,986.37

1,189,491.49

HDFC 11,179.23 19,054.28 40,291.41 66,213.51

61,029.63 62,421.87

54,746.48 60,920.81

ICICI 30,242.62 53,697.06 108,824.85 109105.35

92,773.50 86,400.90

76,388.82 76,913.69

SBI 3,453.21 10,027.79 16,737.60 24,093.35

30,914.67 38,528.99

42,765.11 46,620.25

Reliance 40,694.22 75,552.55

57,065.13 64,832.95

52,907.68 50,237.77


Salaries paid by LIC have increased by 829595.20 lakhs and has increased by 230%

in the eight year period. Private companies also have relatively stable amount of

salaries paid over the period. However ICICI shows a wide variation in salaries paid.

OPERATING EXPENSES

The amount spent on operating expenses is a major determinant of performance of

an insurance company. In the recent past it is seen that insurance companies are

cutting down costs by closing down local offices, reducing work force and increasing

productivity and efficiency among employees. The following table shows the amount

of operating expenses paid by insurance companies.

Table 7.62 Table showing Operating expenses related to insurance business (in lakhs of rupees)

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 604156 708584 830932 906429 1224582 1698028 1491440 1670766 HDFC 39849 57674 101298 176007 150904 149521 126988 134377 ICICI 72500 152296 291994 274059 256915 218739 200347 203863 SBI 18996 32238 44694 62050 75298 88299 102393 115105

Reliance 11593 42904 103076 192297 163673 156270 128125 127506

Bajaj 48681 107302 200434 187579 177163 160658 140628 160030

Aviva 25498 42749 67601 77390 71019 56873 59451 51379 Private 356949 650000 1199741 1676761 1666046 1596202 2816466 1485404


195

The above table shows that there is a steady increase in the operating expenses of

LIC, the amount being increased by 1066610 lakhs over the eight year period,

resulting in an overall growth of 176.54%. In case of total operating expenses of

private companies, there is an increase of 1128455 lakhs, indicating an overall

growth of 316.13%. Many of the private companies like SBI show a consistent

increase in operating expenses, however ICICI has reduced operating expenses

from the fourth year onwards.

The following table shows the amount of administration expenses paid by insurance

companies

Table 7.63 Table showing Administration expenses ( in lakhs of rupees)

INSURER

3/31/2006 3/31/2007 3/31/2008 3/31/2009

3/31/2010 3/31/2011

3/31/2012

3/31/2013

LIC 203,480.75

254,974.10

277,548.58

261,910.28

335,375.47

125,586.35

402,743.88

412,789.67

HDFC 16,528.48 23,159.81 36,059.75 54,933.39

49,555.35 41,546.70

51,172.03

48,119.49

ICICI 22,333.36 54,658.73 102,532.60

98,540.58

127,064.41

99,035.28

86,550.06

92,166.95

SBI 10,877.66 16,502.48 21,162.68 30,204.71

37,256.35 41,251.54

49,121.70

54,762.35

Reliance

38,531.30 86,557.07

54,038.48 44,475.92

51,591.46

52,161.00


The above table shows that there is a steady increase in the administration

expenses of LIC, the amount being increased by 209308.92 lakhs over the eight

year period, resulting in an overall growth of 102.86%. Many of the private

companies show consistent increase in administration expenses.

The following table shows the amount of financial charges paid by insurance

companies

196

Table 7.64 Table showing Financial Charge ( in lakhs of rupees)

INSURER

3/31/2005

3/31/2006

3/31/2007

3/31/2008

3/31/2009

3/31/2010

3/31/2011

3/31/2012

3/31/2013

LIC 7,447.54

8,098.45

10,109.68

9,462.72

10,808.88

10,879.83

11,017.94

9,287.80

9,743.40

HDFC 49.62 113.91 506.66 379.54 29.74 313.25 448.61 1,462.59

ICICI 1,039.69

2,183.73

17,904.36

3188.7 8,386.42

2,429.67

1,579.92

1,359.82

SBI 77.25 160.42 320.55 333.12 486.03 555.53 440.59 446.62

Reliance

432.59 1,809.29

1,514.92

1,171.25

943.47 872.33


The above table shows that there is no consistency in the payments of financial

charges by LIC, the amount being increased by just 2295.86 lakhs over the eight

year period, resulting in an overall growth of 30.82%. Many of the private companies

show consistent increase in financial charges.

The following table shows the amount of marketing charges paid by insurance

companies.

Table 7.65 Table showing Marketing expenses (in lakhs of rupees)

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 13,561.23 21,455.93 20,253.65 24,389.96 30,496.26 32,459.35 34,921.35 26,460.10 HDFC 8,660.42 9,243.83 11,081.42 40,347.80 27,659.82 33,595.09 3,117.82 2,835.96

ICICI 5,614.71 10,542.69 3,357.43 11170.44 2,932.21 8,697.92 11,410.92 13,052.43 SBI 3,835.84 3,243.15 3,893.69 3684.62 3,000.24 3,622.85 3,927.14 4,686.20

Reliance 19,585.66 25,440.62 49528.78 43647.95 21,657.71 22,897.59


The above table shows that there is a steady increase in the marketing expenses of

LIC, the amount being increased by 12898.87 lakhs over the eight year period,

resulting in an overall growth of 95%. Many of the private companies show

inconsistent changes in the amount spent on marketing which is a very essential

expenditure for an insurance company.

The following table shows the amount of Training expenses paid by insurance

companies.

197

Table 7.66 Table showing Training expenses (in lakhs of rupees)

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 911.71 1,308.62 1,172.72 1,945.41 1,586.97 2,435.16 2,270.87 2,372.56 HDFC 2,186.30 4,302.82 8,586.23 7,450.35 4,344.88 4,304.80 4,860.49 4,885.58

ICICI 7,888.04 18,351.78 31,443.61 16363.42 19,416.96 16,308.49 18,433.51 16,504.02 SBI 292.07 810.61 1,115.72 1,858.68 791.44 1,724.37 2,004.29 3,630.72

Reliance 3,431.22 2,211.08 530.70 369.77 382.08 743.71


The above table shows that there is a steady increase in the training expenses of

LIC, the amount being increased by 1460.85 lakhs over the eight year period,

resulting in an overall growth of 160.23%. Many of the private companies show

inconsistent changes in the amount spent on training which is a very essential

expenditure for an insurance company. During the years 2008 to 2009, private

companies increased their spending on training and this is seen to be gradually

decreasing in the following years. However the table reveals that the amount spent

on training by private companies like ICICI and HDFC is extremely high when

compared to LIC.

The following table shows the amount of other expenses paid by insurance

companies.

Table 7.67 Table showing other expenses ( in lakhs of rupees)

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 18,207.63 13,374.53 17,701.60 30,003.09 40,998.17 36,164.96 32,229.85 29,909.06 HDFC 1,245.43 1,799.38 4,772.44 6,682.24 7,146.46 7,338.95 12,643.04 16,152.33

ICICI 5,381.95 12,861.88 27,930.90 35504.07 6,341.83 5,867.22 5,984.05 3,865.97 SBI 460.45 810.75 1,463.49 1,875.81 2,849.39 2,615.36 4,134.02 4,958.84

Reliance 400.87 726.22 995.24 1,772.30 642.60 593.88


The above table depicts the amount spent on other expenses by life insurance

companies. The table shows no particular trend in the amount spent by LIC. Private

companies too show a lot of variation especially ICICI shows a dramatic increase in

the year ended 31.3.2008 and 31.3.2009 and then a sudden fall in the following

198

years. The following table indicates the Operating surplus of the various insurance

companies.

Table 7.68 Table showing Operating surplus ( in lakhs of rupees)

INSURER 3/31/2006 3/31/2007 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 62,177.05 75,780.89 82,958.97 92,911.58 103,092.27 113,761.71 128,122.90 143,638.18

HDFC 255.15 339.70 7,038.06 16,663.98 19,094.09 6,698.09 37,291.54 64,210.74

ICICI 10.06 136.02 325.11 212.93 1,297.70 607.60 1,331.96 1,449.68

SBI 252,787.54 8,156.13 10,845.49 17,775.28 33,552.00 59,693.65 73,839.54

Reliance 103075.86 192296.83 163673.25 156270.14 128125 127506.28


All companies show a positive operating surplus. However, LIC shows a growth in

operating surplus to the extent of Rs. 81461.13 lakhs in the period of eight years

resulting in an increase of 131.01%. Private companies too show a marked increase

in operating surplus in the eight year period. However the growth in the surplus has

been very inconsistent. The following table shows the relationship between

Operating Expenses on premium received.

Table 7.69 Table showing Premium received /Operating Expenses (in lakhs of

rupees)

INSURER 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 576.286029 658.1038817 834.5208759 735.1004449 80.01739154

HDFC 3162.92552 2154.201939 1660.575045 1243.955958 1186.794999

ICICI 1784.67748 1554.352265 1223.329379 1428.847534 1505.830891

SBI 860.359673 745.2273994 683.8712975 779.6179915 1101.480091

Reliance 3898.53909 2478.054172 2378.122551 2330.553949 3151.883996

Bajaj 1765.52917 1551.379151 1671.788095 1879.098854 2321.731687

Aviva 3883.34412 2986.488703 2425.112039 2460.852612 2400.136406


199

The table above shows the amount spent on operating expense in relation to

premium received. It is seen that LIC spends the least amount on operating

expenses in relation to premium received. Private companies however have been

incurring very high expenditure on operating expenditure as indicated above.

The table below shows the Net profit on Share Capital

Table 7.70 Table showing net profit/share capital

INSURER 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 1,689,251.80 1,914,697.60 2,121,433.60 2,343,607.40 131,334.29 148,992.49

HDFC -1,915.89 -2,800.74 -1,398.29 -496.28 1,358.55 225.80

ICICI -9,956.84 -5,462.91 1,806.33 7,852.74 9,687.33 10,469.53

SBI 347.54 347.54 2,774.91 3,704.52 5,558.21 6,221.71

Reliance -6,692.23 -9,334.17 -2,436.68 -1,108.99 3,114.31 3,179.90

Bajaj -14,192.16 -4,689.80 35,982.35 70,137.35 87,001.53 85,305.55

Aviva -2,015.83 -3,318.47 -1,825.07 143.40 366.95 159.61


Most of the private companies are showing a negative return on share capital.

However because of the fact that LIC has a capital of only 5 crore, it shows a very

high return on share capital. SBI Life shows a very high return on share capital as

also Bajaj Allianz. The following table shows the profit before taxation in relation to

total shareholders’ investment.

Table 7.71 Table showing Profit before taxation as per shareholders’ account (in

lakhs)/Total shareholders’ investment

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 288.072988 299.640063 299.841701 306.296887 397.92153 326.31464

HDFC Standard

-57.7982958 -117.196384 -43.6461109 -14.1434633 4.5979079 54.652515

ICICI Prudential

-731.276656 -133.034244 21.8306187 42.1205483 40.659072 31.902902

SBI Life 3.45475513 -2.84807082 38.1010573 38.3854188 40.844791 2.8687478

Reliance 345.619403 274.869521 76.8920419 34.2263402 3.7661895 16.727273

Bajaj Allianz -18.6649678 -9.18364695 36.0422679 45.9873814 37.482503 28.660931

Aviva -79.8840145 -140.919174 -84.75193 4.90982991 9.6605607 3.990423


200

LIC shows a very high profit as per shareholders account in relation to shareholders’

investment. However private companies too show a relatively high return.The

following table shows the profit before taxation in relation to total policyholders’

investment.

Table 7.72 Table showing Policy Holders’ Account Surplus (in lakhs)/Total

shareholders’ investment

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 0.13703239 0.14540778 0.12375377 0.11725815 0.1197209 0.1209303

HDFC Standard

3.0207305 5.5265366 4.3979786 1.25548737 4.6671823 5.9857392

ICICI Prudential

9.42568057 6.23256576 29.1188066 8.41878903 14.619637 12.843814

SBI Life 2.11431727 1.58823142 1.78424635 2.39366815 32.316915 306.27617

Reliance 0 4.63141306 16.4820971 9.70719994 20.442944 14.20446

Bajaj Allianz 13.4833526 4.97478152 11.8308142 20.5424406 17.234876 9.8349383

Aviva 1385.89544 720.36246 3518.98915 835.398726 26.513431 176.12827


Since LIC has extremely small amount of shareholders investment, there is no

logical conclusion for comparison of policy holders’ surplus with Total shareholders’

investment. However among the private companies, it is obvious that some

companies are showing huge amount of return. Aviva shows a surplus 1385 times of

shareholders’ investment. The following table shows the Total investment with

relation to Operating Surplus.

Table 7.73 Table showing Total Investment/Operating Surplus


INSURER 3/31/2008 3/31/2009 3/31/2010 3/31/2011 3/31/2012 3/31/2013

LIC 0.14 0.15 0.12 0.12 0.12 0.12

HDFC 2.56 4.84 3.84 1.11 2.69 5.55

ICICI 0.09 0.05 0.23 0.07 0.11 0.09

SBI 1.68 1.40 1.53 2.15 18.82 3.37

Reliance 216.93 260.79 182.72 114.16 44.97 23.60

201

Since LIC has extremely small amount of shareholders investment, there is no

logical conclusion for comparison of policy holders’ surplus with Total shareholders’

investment. However among the private companies, it is obvious that some

companies are showing huge amount of return. Reliance shows a huge amount of

investment when compared to return.

Table 7.74 Table showing Operating Expenses/Net Premium (%)

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 5.76 6.58 8.35 7.35 0.8

HDFC Standard 31.63 21.54 16.61 12.44 11.87

ICICI Prudential 17.85 15.54 12.23 14.29 15.06

SBI Life 8.6 7.45 6.84 7.8 11.01

Reliance 38.99 24.78 23.78 23.31 31.52

Bajaj Allianz 17.66 15.51 16.72 18.79 23.22

Aviva 38.83 29.86 24.25 24.61 24

Private 26 20.99 18.11 33.46 18.95


The table above depicts the ratio between operating expenses as a percentage of

net premium. It is clearly seen that operating expenses of LIC as a percentage of

Net premium is very less when compared to Private companies. All private

companies spend on an average about 25% of premium as operating expenses.

However LIC shows high degree of operational efficiency. Among the private

companies, SBI Life is the only company which has average operating expenses on

net premium ratio of just 8.34%.

Table 7.75 Table showing Investment income/Net premium (%)

INSURER 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 37.11 24.55 19.68 41.56 46.1

HDFC Standard 9.04 3.14 1.45 5.98 38.63

ICICI Prudential -0.48 0.2 0.25 5.09 10.08

SBI Life 2.04 0.84 0.77 1.03 5.28

Reliance 12.97 4.2 0.48 -0.72 74.8

Bajaj Allianz 27.39 8.39 14.81 -7.07 8.506

Aviva 28.33 9.77 16.11 9.63 34.52


202

The table above shows that LIC has consistently reported an average profit of 33.80

investment income over its net premium. HDFC shows a 545% growth in the year

2012-13 when compared to the previous year. Most of the private companies show

only positive yet erratic growth rate.

Table 7.76 Table showing Loss Ratio on Net Claim/Net Premium

Insurer 2008-09 2009-10 2010-11 2011-12 2012-13

LIC 0.23 0.28 0.34 0.4 0.05

HDFC Standard 7.13 12.15 32.49 46.3 68.81

ICICI Prudential 4.43 3.99 7.28 8.8 9.29

Bajaj Allianz 20.77 63.14 110.21 112.97 192.67

Aviva 35.02 57.2 121.4 122.87 200


The table above shows that LIC s loss ratio is very negligible however Bajaj Allianz

shows a high and inconsistent loss ratio. Other private companies like ICICI show

very little loss.

Evaluation of Training effectiveness in public sector LIC and private sector

Life Insurance companies – Findings of Survey

Training in Insurance Industry

Insurance industry in India For the last couple of years, the life insurance industry

went through a transition phase that has changed the dynamics and approach of the

insurance players. After a strong growth phase, the Indian life insurance industry is

now stabilizing. The industry is facing a number of challenges involving the macro-

economic environment, consumer sentiment and rapid regulatory changes. As a

consequence, the insurance players are struggling with slow growth, rising costs,

deteriorating distribution structure and other constraints. The industry players are re-

configuring their business model, product mix and distribution structure to achieve a

bigger pie of market share. Life insurance penetration in India was always low, but,

worryingly enough, it has been falling even lower for last two consecutive years. New

203

regulations enforced by the insurance regulator effective September 2010, are partly

responsible for curbing the scope of Unit Linked Insurance Plans (ULIPs). The share

of linked business is declining year after year. In distribution channel mix,

Bancassurance channel is gaining more prominence due to its cost effectiveness

and wide network availability. During the year, the industry strengthened its focus

towards enhancing professional delivery of products and services, customer

satisfaction and operational efficiency. In financial year 2012-13, the industry has

witnessed a de-growth of 6.3% in new business premium income. With low

insurance penetration as compared to the large Indian population base, there is

tremendous scope for the life insurers to capitalize on.

Training Function: Insurance company training programs not only help employees

and students develop current and relevant skills, but also allow professionals to gain

a competitive advantage in the job market. Insurance professionals often seek

continuing education within companies to advance their careers, and develop deep

knowledge about the insurance industry. Formal training programs allow participants

to learn about the latest news and trends around specialties, including actuarial

calculations, insurance policy insurance and accounting.

The curriculum in insurance company training courses varies according to the

professional goals of the student, the organization and program objectives. For

instance, a typical program for an insurance sales agent might include a course on

the fundamentals of insurance planning, effective selling, account building,

negotiation tactics and retirement planning. An underwriting training class could

focus on the different types of insurance businesses and evaluation best practices.

Additionally, human resources departments within some insurance companies offer

management training programs. Courses range from improving oral and written

204

communication skills to managing stress and prioritizing projects.Skills development:

Students pick up a variety of skills-oral communications, decision-making and

negotiation skills-during company insurance training. Other abilities emphasized and

taught during insurance training programs include delivering customer service, as

well as building strong relationships with customers. Professionals also learn how to

measure and assess results; develop clearly defined strategies when selling and

marketing to clients, and lead teams with confidence.

Training program for sales managers:

The training program duration is 15 – 20 days, they get training on product

knowledge, they are trained on how to motivate and encourage Advisors.

Training program for Advisors:

The training program duration is 15 – 20 days, they are trained on product

knowledge, convincing skills and objection Handling.

Training program for operations executives:

They will get training on customer database files, they are trained in taking care of

the customer files, well trained in product information and documentation, renewals

will be informed periodically.

Every company offers training programs to help you understand their products and

give you some advantage in sales. The programs often include data gathering and

analyzing to locate the client's needs. Since life insurance has many different uses,

the company training also touches on several of the ways clients benefit from

policies. This training covers buy/sell business arrangements, estate planning,

deferred compensation programs, key man insurance and others.

Other skills for employees in Life Insurance Companies:

205

Interpersonal skills, excellent communication skills, Understanding nature, client care

and interest, aggressiveness, convincing skills, ability to motivate others and a keen

interest to learn are the other skills that are imperative for employees of insurance

companies.

Potential for employees in insurance industry - Companies desiring to increase its

Internet marketing presence during the 2008 to 2018 decade will hire educated

workers trained in the latest computer and Internet technologies according to the

Bureau of Labor Statistics. Also, factors such as population growth will drive demand

for the insurance business. Consumers will need to purchase housing insurance, car

insurance and other liability policies to protect against loss, theft or injury. However,

the rapid advancement of technology in the sector could curb hiring in insurance

companies. Internet technologies allow customers to conduct research on their own,

as well as receive price quotes and submit insurance claims without the assistance

of a trained professional.

The position of a life insurance agent varies dramatically in not only pay but also the

area of life insurance in which you work. You might start out with a salary but this

often lasts a short time until you finish the company training. Once you complete the

training, normally the position is commission-only pay. Training for a position in life

insurance sales may take as little as a month to get the basic license.

Training for Licensing - In order to sell life insurance products, you have to have a

license. The IRDA has strict rules with regard to licensing and certification of agents.

Agents are provided mandatory training to enable them to successfully complete the

examination conducted by the IRDA. The Regulator requires all agents to take a test

in order to receive a license. It is compulsory to take pre-test training either live in the

classroom or online before the test is taken. As per IRDA Guideline, until a person

206

passes out IRDA examination he cannot sell insurance. For this, person has to get

attached with a insurance company as agent, financial consultant or corporate

broker or a person has to be the employee of Insurance company.

Then he has to undergo a offline or online 50 hour training (mandatory) to get eligible

to give the exam. Whichever company he will completes training with, will give letter

of completion, which is mandatory to carry along while appearing for the exam.

Once the person passes the exam, he can sell insurance for only one company ( in

case of individual) and for many companies( if it’s a company as corporate broker).

As per IRDA Guideline an Individual cannot sell life & general insurance of more

than one company. Normally the classes for preparation are one to four days. In

addition to the classroom study, it's advisable to study at home also. Once the

training is completed the agent receives a certificate to validate the training

completed. The certificate is required to sit for the examination.

Leadership Training for Success

All managers need methods. Leaders need to know the most effective techniques for

guiding teams, mentoring individuals, and validating the results. Without solid

methods, managers will revert use a one-size-fits-all approach to leadership that

reflects the leader's personality, rather than the employees' needs. Committed,

mentoring leadership is essential to employee morale, productivity and retention

ANALYSIS AND INTERPRETATION OF FINDINGS OF SURVEY:

The following are the findings of the survey conducted among the employees and

agents of public sector LIC and 10 private sector LIC s SBI Life, ICICI Prudential,

HDFC Life, Max Life, Bajaj Life, Met Life, Birla Sun Life, ING Vysya, TATA AIG and

Reliance Life.

207

Table 7.77 Table showing Training Expenses incurred by Life Insurance companies

(Rupees in Crores)

INSURER 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Average

LIC 1,172.72 1,945.41 1,586.97 2,435.16 2,270.87 2,372.56 1,963.95

HDFC

Standard

8,586.23 7,450.35

4,344.88

4,304.80 4,860.49

4,885.58

5,738.72

ICICI

Prudential

31,443.61 16363.42

19,416.96

16,308.49 18,433.51

16,504.02

19,745.0

0

SBI Life

1,115.72 1,858.68

791.44

1,724.37 2,004.29

3,630.72 1,854.20

Reliance 3,431.22 2,211.08

530.70

369.77 382.08

743.71 1,278.09

The table shows that LIC has consistently been the company that spends least

amount on training its agents and employees. ICICI Prudential has been the

company that has spent the highest amount on training with training costs being the

highest in the year 2008-09. Among the private companies, Reliance Company has

incurred the least amount of expenditure on training.

Table 7.78 – Evaluation of training in Public Sector LIC and Private Life Insurance

Companies

208

PARTICULARS

LIC OTHER PRIVATE INSURANCE

Not at all true

A little true

Some what true

True to a great extent

Very true

Not at all true

A little true

Some what true

Tue to a great extent

Very true

Induction training is important in the organisation

50

50 2.2 67.4 30.4

Well planned induction programme

16.7 66.7 16.7 34.8 30.4 31.5 3.3

Sufficient duration 66.7 33.3 15.2 59.8 25 Opportunity to learn comprehensively

16.7 83.3 21.7 55.4 19.6 3.3

Well defined norms and values

33.3 16.7 50 2.2 22.8 39.1 35.9

Support from senior management

33.3 66.7 4.3 19.6 39.1 34.8 2.2

Usefulness to the new recruits

50 33.3 16.7 18.5 54.3 27.2

Periodical evaluation

16.7 16.7 50 16.7 4.3 26.1 40.2 19.6 9.8

Help to acquire technical knowledge

66.7 33.3 2.2 26.1 45.7 22.8 3.3

Emphasis on developing managerial capability

16.7 33.3 16.7 33.3 2.2 23.9 51.1 16.3 6.5

Development of human relation competencies through training

16.7 16.7 66.7 4.3 23.9 44.6 27.2

Adequate importance to training

50 50 6.5 26.1 50 14.1 3.3

Training based on developmental need

16.7 50 33.3 13 20.7 42.4 20.7 3.3

Sponsored training takes training seriously

33.3 50 16.7 10.9 26.1 37 22.8 3.3

Participation by the employees in determining training need

50 16.7 33.3 10.9 17.4 55.4 16.3

Knowledge of the requirement

16.7 16.7 33.3 33.3 29.3 43.5 14.1 13

Achievement of objective through training

16.7 50 33.3 2.2 21.7 50 26.1

Improvement in performance after training

33.3 50 16.7 18.5 47.8 33.7

Competent faculty to handle the

66.7 33.3 20.7 57.6 21.7

209

Source: Training survey

The table above clearly suggests that induction training provided by some private

companies is extremely professional. Some of the companies like Max Life

Insurance Co. provide training to candidates who are recruited after a stringent

screening process. The private companies spend a lot of money on training.

However it was found that in some private companies training is done in a very

haphazard manner and they lack integrity. The trainees do not take the programmes

seriously nor do they adhere to training norms. Training provided by LIC ranks

second in terms of induction training. However periodic evaluation, planning and

review of on-going training programmes are ranked higher in LIC than among most

private sector.

Analysis of findings of the Survey

Ø Analysis of Customer awareness and preference for Life Insurance as an

investment tool

Why Awareness is Important

The growing need for financial education for the families to take better financial

decision and to increase their economic security has been widely recognized. It is

felt that well informed and well educated customers can create economic ripples.

training programme Competency in implementing action plan by trainee after training

16.7 50 16.7 16.7 12 67.3 20.7

Selection of external training programmes after collecting information about quality

50 50 4.3 13 62 20.7

Commitment by learner about implementing learnt skill

50 33.3 16.7 7.6 30.4 39.1 22.8

Impact of the training on return on investment

50 50 2.2 15.2 56.5 26.1

Rating of company with regard to the level of training

33.3 (2nd

8.7 (2

nd

rank)

63 (3

rd

rank)

28.3 (4

th

rank)

210

They make better financial decisions for themselves and their families, increasing

their economic security and well-being. Secured families are more involved in

their communities as home owners and voters. They are more involved as

parents with their children’s schools and teachers, enabling better educational

and economic outcomes for their children. They contribute to vital, thriving

communities, further fostering community economic development. Thus, being

financially literate is not only important to the individual household and family, it is

also important to communities and societies. (Hogarth, Jeanne M.,2006).

Insurance companies can address the problem of financial illiteracy of consumers

by educating them. This point was corroborated by the Max New York–NCAER

survey (NCAER, 2008) which showed that even though a majority of Indian

households are good savers, they do not undertake financial planning and are

financially at risk. Households need to understand the risk of both ‘living too long’

and ‘dying too young’. Further, in urban India and amongst the salaried class,

insurance is largely used as a tax saving tool, rather than for protection against

risk. There is need to reorient the consumer about the benefits of life insurance

for both financial protection as well as for long-term wealth creation. The

importance of insurance is unquestionable in modern economies as it serves a

broad public interest and is vital to individuals’ security. Advocacy can typically: (i)

heighten individuals’ awareness and responsibility towards potential risks;

(ii) enhance understanding of insurance mechanisms that can cover these risks;

and

(iii) enable the development of consumers’ knowledge and capacity in order to

make informed decisions as regards insurance matters(OECD, 2006).

211

Private insurers have introduced many innovative products and offer incentives

on policies in order to woo consumers. The market share of private insurers has

increased steadily on the basis of total premium from 14.25 per cent in 2005–06

to 29.90 per cent in 2009–10. In today’s context, though the customer has a

variety of products to choose from, wise choices are possible only with requisite

awareness. Besides, it is not enough for the customer to have knowledge only of

the various policies available. It is possible that a customer has problems with a

particular policy and should ideally be aware of organisations that look into

grievances and make prompt payment of claims. The customer must also be

informed about the lapse of policies, revival of policies, and the value of a policy

in case of surrender. Hence, the customer must not only choose a product which

is suitable, but also engage with a company in which the agents provide correct

information.

The results of the Max New York Life–NCAER Survey on India Financial

Protection (NCAER, 2008) indicates that awareness of life insurance stands at a

high of 78 per cent on an all-India level with more urban households (90%) aware

of it than rural households (73%). The level of awareness has increased with

education, age and income levels. However, ownership of insurance products

was low at only 24 per cent. Further, it was the salaried class that tended to buy

insurance the most, followed by businessmen. Also, as compared to others

married people are more likely to buy insurance.

A recent study by McKinsey & Company indicates that consumers have an unmet

need for long-term savings products and a preference for insurance vis-à-vis

other investment products. Consumers rank insurance higher than other

investment options because of the ease and convenience in investing, and in

212

obtaining tax benefits and protection cover. Indian consumers perceive life

insurance as a low-risk and high-return investment, this being a perception driven

by the awareness of LIC’s performance and its record of delivering stable returns

over the years. According to the study, India’s insurance market has grown over

the past ten years. Liberalisation of the sector has enabled the entry of a number

of new players who have contributed to the growth, (over 40 per cent per annum),

by enhancing product awareness and promoting consumer education and

information. However, the market is still in a nascent stage.1

Both insurance penetration and density have increased significantly over the

years, especially with the opening up of the insurance industry to the private

sector. However, the increase has been marginal as far as the non-life insurance

sector is concerned. India’s insurance penetration is lower than the world

average which in 2009 was 7.0 per cent, while for India it was 5.2 per cent.

Although, the penetration of Indian insurance is higher than that of some South

Asian countries like Pakistan (0.7%), Bangladesh (0.9%) and Sri Lanka (1.4%), it

lags behind other Asian countries like Japan (9.9%), South Korea (10.4%) and

Singapore (6.8%).2

Insurance markets in India are showing clear signs of expansion, requiring insurers

to be innovative in their approach towards achievement of sustainable growth. The

report explores underlying trends in customer awareness levels and their

implications on insurers. An in-depth study was made on the preferences of the

customers on their choices for long term savings.

1 The Journal of Insurance Institute of India, Mumbai, July–December, 2007, p.120.

2 Article in Economic Times “Life insurance companies may get to sell old products under new rules” 7

th January 2013

213

INSURANCE EDUCATION

Consumers today have choices of both products and insurers and are discovering

insurance as a financial product satisfying much more than mere requirement of a

tax saving device. Advancement of technology, media revolution, quality orientation

and intense competition created a dire need of educating the customers. During the

post-liberalisation period, most of the private players entered the insurance market.

This resulted in creating awareness about the significance of insurance to the under-

privileged sections of the society.

The Insurance Institute of India, Mumbai prepared good reading books for insurance

awareness of customers. The Institute has also played an important role in

conducting pre-recruitment examination for insurance agents. Some of the other

institutes and also universities have introduced insurance topics in their curriculum of

graduate and post-graduate courses of both regular and distance education

programmes. The College of Insurance has moved to a leadership position in

insurance education at present. It is a place for research, dissemination of

information and leadership development for the insurance industry. As insurance

awareness in India is very poor, this could be a potential area of activity for both the

College of Insurance and also the Associated Institutes.3

Insurance education is a very important administrative and economic function to any

insurer. It is a tool for managing economic development of the country. The

orientation that insurance education today must seek to develop is a keen

understanding of insurance customers, the benefits they seek and the aspirations

they have of financial products and services, coupled with skills of customer

cultivation, customer service and long-term customer retention. The insurance

3 The Journal of Insurance Institute of India, Mumbai, July–December, 2007, p.120.

214

education ensures the strength, weaknesses, opportunities and threats of various

strategies and reduces the gap between the insurance agent and the policyholder.

The insurance literacy alone can empower consumers to be better insurance

shoppers, allowing them to obtain insurance services at lower cost.

Further, insurance education provides the insured to understand the different

innovative products of the insurers and the associated risks involved therein. The

market efficiency, the transparency and the competitive practices of the insurers are

also made known to the customers through education. It also helps to monitor

insurance market regularly and advises the investors to take decisions judiciously

and efficiently. After liberalization of the insurance sector, many new insurance

players entered the market and put increased emphasis on customer education,

service and finding new and imaginative ways of rendering the same.4

The LIC has been spreading the awareness programme to rural areas through

village panchayats and village servants. The development officers are also working

aggressively for selling insurance products in rural areas. The life insurance agents

are also the real heroes of the insurance sales programmes of these areas. The

IRDA is in touch with the Indian Institutes of Management and Institute of Chartered

Accountant of India to have insurance as a subject in their curriculum. Imparting

training to sales force is not a onetime activity. From time to time, their knowledge is

to be upgraded. The newcomers will get better results only through the right type of

training imparted to them by the insurers. The technology up-gradation training

becomes very important for the survival of agents in this era of competition. The

private players are also introducing innovative insurance products and hence training

is necessary and utmost important to agents. As a result of the changes in family

4 Article In Business Line Chennai, Jan. 30, 2011: ‘Life insurance sector must relook at cost structure”

215

structures and changing attitudes of consumers, customer service is faced with new

challenges with every passing day. Some customers want service to be delivered at

all times. They demand that service is to be delivered to their doorsteps instead of

them having to come to the service delivery points. Customers are quick to switch

loyalties when they get a better deal from a competitive service provider. Any slip-up

on the part of the service provider may cause customers to dump the service

provider and switch over to a new one.86.

FINDINGS OF THE SURVEY

The following are the findings of the primary data survey conducted among

employed persons in and around the City of Mangalore and Dakshina Kannada

District

Table 8.1 - Sex of Respondents

Sex No. of Respondents Percentage Male 71 51% Female 69 49% 140 100

The representation of men and women were almost equal

Table 8.2 Residential Status Residential Status No. of Respondents Percentage Resident in India 140 99% Non resident 1 1% Foreign national 0 0

99% of the respondents were Resident in India who were employed in an around the city of Mangalore.

Table 8.3 Age and Number of Policies

Age__________ No. of Policies

20 - 30 30 - 40 40 - 50 50 - 60 60 &above

0 4 4 4 1 1 1 18 12 3 3 0 2 17 7 5 4 1

3 - 5 9 22 11 4 1 5 - 10 2 3 2 3 0

More than 10 0 1 1 0 0 Source: Insurance Awareness Primary Data Survey - 2010

216

Table 8.4 Correlations of Age Vs Number of Policies

Pearson’s Correlation P value N

Age Vs Number of

policies

0.176 0.019 140

Source: Insurance Awareness Primary Data Survey - 2010

Correlation is significant at the 0.05 level (1-tailed).

1. Ho there is no relationship between age and number of policies. The correlation

between age and number of policy is 0.176 which indicates 17.6% positive

relationship between these variables. P value is 0.019 and is significant at 5%.

Hence. Hypothesis is rejected at 5%. So it is concluded that there is relationship

between age and number of policies.

Table 8.5 - Awareness of mechanism

Awareness of mechanism

of insurance policy

No. of Respondents Percentage

Aware 134 95%

Not aware 7 5%

140 100


Table 8.6 – Annual Income and Number of Policies owned

Annual

Income_

No. of

Policies

Below 2

lakhs

2 – 5 Lakhs 5 – 10

Lakhs

10-20

Lakhs

20 – 50

Lakhs

0 8 1 1 1

1 30 7 0 0 0

2 18 13 2 0 0

3 - 5 14 26 5 1 0

5 - 10 0 6 1 1 0

More than 10 0 3 0 0 0


217

Table 8.9 Correlations of Sources of Revenue and Number of Policies

Pearson’s Correlation P value N Sources of Revenue Vs Number of policies

0.57 0.252 140

Source: Insurance Awareness Primary Data Survey – 2010

Table 8.7Correlations of Number of policies and Annual income

Pearson’s Correlation

P value N

Number of policies Vs Annual Income

0.318 0.000 140

Correlation is significant at the 0.01 level (1-tailed).


2. Ho there is no relationship between income and number of Policies.

The correlation between income and number of policies is 0.318 which

indicates 31.8% positive relationship between these variables p value is

0.000 and is significant at 1%. Hence hypothesis is rejected at 1%. So it

is concluded that there is relationship between income and number of

policies.

Table 8.8 Whether premium paid is worth the benefits

No. of Respondents Percentage Yes 91 64.5% No 46 32% May be 4 3% 140 100


Majority of the respondents were of the opinion that the premium paid for

the policy was well worth the benefits that were assigned them on an

insurance policy.

218

1. Ho there is no relationship between number of policies and source of

revenue and number of policies. The correlation between policy used as source of revenue

and number of policies is 0.057 which indicates 5.7% positive relationship between

these variables p value is 0.252. Hence hypothesis is accepted at 5%. Hence it is

concluded that there is no correlation between number of policies and source of revenue.

2. Chi-Square Test

Frequencies – Table 8.10

Sex of the population and Awareness as means of savings and

financial security

Sex Observed N Awareness Observed N

Male 71 Aware 129

Female 69 Not aware 11

Total 140 Total 140


Table 8.11 Test Statistics

Sex of the

population

Awareness as

means of

savings and

financial

security

Chi-Square .029a 99.457a

df 1 1

P value .866 .000

a. 0 cells (.0%) have expected frequencies

less than 5. The minimum expected cell

frequency is 70.0.


Ho there is no association between sex and awareness about insurance as

219

means of Savings and as financial security. P value is >0.05, hence it is concluded that

there is no association between the gender and awareness about insurance as means

of savings. Hypothesis is accepted at 5% significant level.

Chi-Square Test

Frequencies

Table 8.12 Sex of the population Vs Awareness about

Sum assured

Sex Observed N Awareness Observed N

Male 71 Yes 129

Female 69 No 11

Total 140 Total 140


Table 8.13 Test Statistics

Sex of the population

Awareness about sum assured

Chi-Square .029a 99.457a

df 1 1

P value .866 .000

0 cells (.0%) have expected frequencies less

than 5. The minimum expected cell frequency

is 70.0.


5. Ho there is no association between gender and awareness about sum

assured. Since the P value is >0.05, Ho is accepted at 5% level of significance.

Hence it is concluded that there is no association between gender and

awareness about sum assured.

220

Sex of the population N Mean Std. Deviation

Std. Error Mean

Number of policy Male 71 3.35 1.084 .129

Female 69 2.75 1.168 .141


Table 8.15 Independent Samples Test – Number of Policies and sex of

customer

Levene's Test for Equality of Variances t-test for Equality of Means

F P value t df

P

value

Number of policy Equal

variances

assumed

.753 .387 3.144 138 .002

Equal

variances not

assumed

3.140 136.530 .002


5. Ho there is no significance difference between gender and number of

policies. Since P value is <0.01 null hypothesis is rejected at 1% level of significance.

Hence it is concluded that there is significant difference between gender and

number of policies.

Table 8.16 Independent Samples Test – Necessity to cover risk


F P value t df P value

Necessity to cover risk

Equal variances assumed

2.535 .114 -.765 138 .446

Equal variances not assumed

-.767 134.884 .444

Table 8.14 Group Statistics – Sex of population

221

6. Ho there is no significance difference between gender and preference for

insurance as a necessity to cover risk. Since the P value is >0.05 , Ho is accepted at 5%

level of significance. Hence it is concluded that there is no significant difference in gender

and preference of LIC as a means to cover risk.

Table 8.17 Independent Samples Test – Benefit for premium paid



Benefit for premium paid


1.555 .215 -.623 138 .534


-.624 137.958 .534


7. Ho there is no significant difference between gender and opinion

regarding insurance premium paid is worth to cover the risk. Since the P value is >

0.05, null hypothesis is accepted at 5% level of significance. Hence it is concluded

that there is no difference in gender and opinion regarding premium paid

is worth to cover the risk.

Table 8.18 Independent Samples Test – Sources of Revenue



Sources of revenue


11.398 .001 1.664 138 .098


1.668 135.438 .098

222


Ho there is no significant difference between gender and insurance used as

source of revenue. Since the P value is >0.05, null hypothesis is accepted at 5% level of

significance. Hence it is concluded that there is no difference between gender and

insurance used as source of revenue.

Table 8.19 Preference of Insurance Policies over other instruments of investment

Insurance policies are better than

No. of Respondents Percentage

FD's 30 21% MF 33 25% Gold 8 5% RD's 30 21% NSC 25 18% SB a/c 64 45%


Table 8.20 Necessity of Life insurance products

Rating of life insurance policy

No. of Respondents

Percentage

Very essential 42 30 Essential 95 67 Unnecessary 3 2 Useless 1 1


Conclusions and suggestions

It is very clear from the analysis of the data and the statistical analysis that follows

that the employed public considers life insurance as an effective measure of social

security. Most of the insured public consider that insurance is better than other

investment products and the benefits received on an insurance policy far outweighs

the price paid as premium on the insurance policy. Most of the insured population is

aware of the basic terms, principles and concepts of life insurance. However it was

also found out that a certain percentage of the insured population, though a minority

still is not convinced that life insurance is a good measure of social security. Hence

223

the insurance companies should enhance customer satisfaction and introduce need

based products that enable the customers to derive maximum benefits from an

insurance policy. Further it is absolutely essential for the representatives of the

insurance company explain the product and the benefits and costs of it to the

customer clearly without any ambiguity so as to create more trust and confidence in

the mind of the customer regarding the company that they are dealing with and the

product that they are purchasing. Mis selling of any product at any time should be

avoided on all counts since the contract of insurance operates on uberrimaefidei

(utmost good faith) and this applies not only to the insured but also to the company

which sells the policy. This will ensure that the customers have no grievances with

the insurance company after they have sold the product to the customer.

Ø Analysis of shift of customer preference from Public sector LIC to private Life Insurance companies

DATA COLLECTION AND ANALYSIS AND INTERPRETATION OF DATA

Primary data was obtained from the insured population of 722 respondents who

were policy holders of LIC and ten private companies. The ten private companies

were – SBI Life, ICICI Prudential, Reliance Life, HDFC Life, Bajaj Allianz, Max Life,

Met Life, ING Vysya, Birla Sun life and Tata AIA. Secondary data was obtained from

various IRDA publications, insurance company websites, newspaper articles and

related journals.

The following were the results of the survey of 722 respondents conducted among

policy holders of LIC and ten private companies in various cities of South India and

Mumbai.

Table 8.21 Sex of Respondents Sex No. of Respondents Percentage Male 460 63.7% Female 262 36.3% 722 100

224

Majority of the respondents interviewed were male as they were the bread winners in

most of the cases.

1. Ho there is no association between gender and preference for insurance

sector.

H1There is association between gender and preference for insurance sector.

Table 8.22 Gender of the sample * Preference for public or private sector Cross tabulation

Preference for public or private sector

Total

LIC only Private Private and

LIC

Gender of the sample Male Count 148 42 270 460

Expected Count 156.7 37.6 265.7 460.0

% within Gender of the sample

32.2% 9.1% 58.7% 100.0%

% within Preference for public or private sector

60.2% 71.2% 64.7% 63.7%

% of Total 20.5% 5.8% 37.4% 63.7%

Female Count 98 17 147 262

Expected Count 89.3 21.4 151.3 262.0


37.4% 6.5% 56.1% 100.0%


39.8% 28.8% 35.3% 36.3%

% of Total 13.6% 2.4% 20.4% 36.3%

Total Count 246 59 417 722

Expected Count 246.0 59.0 417.0 722.0


34.1% 8.2% 57.8% 100.0%


100.0% 100.0% 100.0% 100.0%

% of Total 34.1% 8.2% 57.8% 100.0%

Source: Customer Preference Primary Data Survey - 2012

Table 8.23 Chi-Square Tests

Value df P value

Pearson Chi-Square 2.960a 2 .228

N of Valid Cases 722

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 21.41.

Source: Customer Preference Primary Data Survey - 2012 P value is <0.01 so null hypothesis is accepted at 1% significant level. Hence it is

concluded that there is no association between gender and preference for sector

2. Ho There is no association between Marital status and preference for sector

H1 There is an association between Marital status and preference for sector

225

Table 8. 24 Marital status of the population * Preference for public or private sector Cross tabulation


Total

LIC only Private Private and LIC

Marital status of the population

Single Count 72 39 157 268

Expected Count 91.3 21.9 154.8 268.0

% within Marital status of the population

26.9% 14.6% 58.6% 100.0%


29.3% 66.1% 37.6% 37.1%

% of Total 10.0% 5.4% 21.7% 37.1%

Married Count 168 20 256 444

Expected Count 151.3 36.3 256.4 444.0


37.8% 4.5% 57.7% 100.0%


68.3% 33.9% 61.4% 61.5%

% of Total 23.3% 2.8% 35.5% 61.5%

Widow/Widower Count 6 0 2 8

Expected Count 2.7 .7 4.6 8.0


75.0% .0% 25.0% 100.0%


2.4% .0% .5% 1.1%

% of Total .8% .0% .3% 1.1%

Divorced Count 0 0 2 2

Expected Count .7 .2 1.2 2.0


.0% .0% 100.0% 100.0%


.0% .0% .5% .3%

% of Total .0% .0% .3% .3%

Total Count 246 59 417 722

Expected Count 246.0 59.0 417.0 722.0


34.1% 8.2% 57.8% 100.0%


100.0% 100.0% 100.0% 100.0%

% of Total 34.1% 8.2% 57.8% 100.0%



Value df P value



a. 6 cells (50.0%) have expected count less than 5. The minimum expected count is .16.


226

P value is <0.01 so null hypothesis is rejected at 1% significant level. Hence it is

concluded that there is a significant association between Marital status and

preference for sector.

3. Ho There is no association between preference for insurance sector and public

perception

H1There is association between preference for sector and public perception

Table 8.26 Public perception * Preference for public or private sector Cross tabulation


Total


LIC

Public perception Yes Count 136 40 297 473

Expected Count 161.2 38.7 273.2 473.0

% within Public perception 28.8% 8.5% 62.8% 100.0%


55.3% 67.8% 71.2% 65.5%

% of Total 18.8% 5.5% 41.1% 65.5%

No Count 110 19 120 249

Expected Count 84.8 20.3 143.8 249.0



44.7% 32.2% 28.8% 34.5%

% of Total 15.2% 2.6% 16.6% 34.5%

Total Count 246 59 417 722

Expected Count 246.0 59.0 417.0 722.0



100.0% 100.0% 100.0% 100.0%

% of Total 34.1% 8.2% 57.8% 100.0%



Value df P value






concluded that there is association between preference for sector and public

perception about insurance. Study reveals the fact that private insurance companies

have changed the public perception of insurance.

227

4. Ho There is no association between preference for sector and efficiency in

settling the insurance contract

H1 There is association between preference for sector and efficiency in

settling the insurance contract

Table 8.28 Efficiency in closing the contract of Business of private insurance co and LIC * Preference for public or private sector Cross tabulation


Total


LIC

Efficiency in closing the contract of Business of private insurance co and LIC

Agree Count 84 36 166 286

Expected Count 97.4 23.4 165.2 286.0

% within Efficiency in closing the contract of Business of private insurance co and LIC

29.4% 12.6% 58.0% 100.0%


34.1% 61.0% 39.8% 39.6%

% of Total 11.6% 5.0% 23.0% 39.6%

Disagree Count 72 14 42 128

Expected Count 43.6 10.5 73.9 128.0

% within Efficiency in closing the contract of Business of pvt insurance co and LIC

56.2% 10.9% 32.8% 100.0%


29.3% 23.7% 10.1% 17.7%

% of Total 10.0% 1.9% 5.8% 17.7%

Partially agree Count 90 9 209 308

Expected Count 104.9 25.2 177.9 308.0


29.2% 2.9% 67.9% 100.0%


36.6% 15.3% 50.1% 42.7%

% of Total 12.5% 1.2% 28.9% 42.7%

Total Count 246 59 417 722

Expected Count 246.0 59.0 417.0 722.0


34.1% 8.2% 57.8% 100.0%


100.0% 100.0% 100.0% 100.0%

% of Total 34.1% 8.2% 57.8% 100.0%



Value df P value





228


concluded that there is association between preference for sector and efficiency in

settling the contract

5. H0 there is no association between preference for sector and formalities at the

time of inception

H1 There is association between preference for sector and formalities at the

time of inception

Table 8.30 Formalities at the time of inception * Preference for public or private sector Cross tabulation


Total


LIC

Formalities at the time of inception

Agree Count 84 28 132 244

Expected Count 83.1 19.9 140.9 244.0

% within Formalities at the time of inception

34.4% 11.5% 54.1% 100.0%


34.1% 47.5% 31.7% 33.8%

% of Total 11.6% 3.9% 18.3% 33.8%

Disagree Count 82 15 73 170

Expected Count 57.9 13.9 98.2 170.0


48.2% 8.8% 42.9% 100.0%


33.3% 25.4% 17.5% 23.5%

% of Total 11.4% 2.1% 10.1% 23.5%

Partially Agree Count 80 16 212 308

Expected Count 104.9 25.2 177.9 308.0


26.0% 5.2% 68.8% 100.0%


32.5% 27.1% 50.8% 42.7%

% of Total 11.1% 2.2% 29.4% 42.7%

Total Count 246 59 417 722

Expected Count 246.0 59.0 417.0 722.0


34.1% 8.2% 57.8% 100.0%


100.0% 100.0% 100.0% 100.0%

% of Total 34.1% 8.2% 57.8% 100.0%

Source: Customer Preference Primary Data Survey – 2012


Value df P value





229


concluded that there is association between preference for sector and formalities at

the time of processing the contract. Shift in the preference is found mainly due to this

reason.

6. H0 there is no association between preference for sector and need based and

flexibility offered

H1 there is association between preference for sector and need based and

flexibility offered

Table 8.32 Need based and flexibility of private insurance products over LIC * Preference for public or private sector Cross tabulation


Total


LIC

Need based and flexibility of private insurance products over LIC

yes Count 60 26 124 210

Expected Count 71.6 17.2 121.3 210.0

% within Need based and flexibility of pvt insurance products over LIC

28.6% 12.4% 59.0% 100.0%


24.4% 44.1% 29.7% 29.1%

% of Total 8.3% 3.6% 17.2% 29.1%

no Count 84 14 56 154

Expected Count 52.5 12.6 88.9 154.0


54.5% 9.1% 36.4% 100.0%


34.1% 23.7% 13.4% 21.3%

% of Total 11.6% 1.9% 7.8% 21.3%

somewhat Count 102 19 237 358

Expected Count 122.0 29.3 206.8 358.0


28.5% 5.3% 66.2% 100.0%


41.5% 32.2% 56.8% 49.6%

% of Total 14.1% 2.6% 32.8% 49.6%

Total Count 246 59 417 722

Expected Count 246.0 59.0 417.0 722.0


34.1% 8.2% 57.8% 100.0%


100.0% 100.0% 100.0% 100.0%


230


Value df P value






concluded that there is association between preferences for sector need based

product and flexibility offered.

7. H0 there is no association between preference for sector and superiority of

product

H1 there is association between preference for sector and superiority of

product


Table 8.35Chi-Square Tests

Value df P value



a. 2 cells (13.3%) have expected count less than 5. The minimum expected count is .82.



concluded that there is association between preference for sector and superiority of

product.

8. H0 There is no association between sector and choice to customer in terms of

product and service

H1 There is association between sector and choice to customer in terms of

product and service

Table 8.34 Preference for public or private sector * Private company products are superior to those offered by LIC Cross tabulation

Count

Private company products are superior to those offered by LIC

Total

Highly professional

services Huge

savings Excellent returns High life cover Any other


LIC only 97 96 26 21 6 246

Private 29 17 10 1 2 59

Private and LIC

160 117 86 52 2 417

Total 286 230 122 74 10 722

231

Table 8.36 Preference for public or private sector * Arrival of private companies have given varied choice to customers in terms of products and services Cross tabulation

Count

Arrival of private companies have given varied choice to customers in terms of products and services

Total Agree Disagree


LIC only 185 61 246

Private 44 15 59

Private and LIC 374 43 417

Total 603 119 722



P value is <0.01 so null hypothesis is rejected at 1% significant level. Hence it is concluded

that there is association between preference for sector and quality product

9. H0 There is no association between preference for sector and objective of buying policy

H1 There is association between preference for sector and objective of buying policy

Table 8.38 Preference for public or private sector * Objective of buying policy Cross tabulation

Count

Objective of buying policy

Total

life cover Investment for

pension

Investment for Children education Tax benefits

Agents persuasion


LIC only 162 31 14 26 13 246

Private 34 2 7 14 2 59

Private and LIC 186 50 68 84 29 417

Total 382 83 89 124 44 722



Value df P value



a. 1 cells (6.7%) have expected count less than 5. The minimum expected count is 3.60.



Value df P value




232


concluded that there is association between preference for sector and objective of

buying policy.

10. H0 there is no correlation between number of policies and time taken to settle the

policy. H1 there is correlation between number of policy and time taken to settle the policy

Table 8.40 Correlations

No of insurance policies

The time taken to resolve the problem

No of insurance policies Pearson Correlation 1 -.007

P value .861

N 722 722

The time taken to resolve the problem

Pearson Correlation -.007 1

P value .861

N 722 722


Null hypothesis is rejected. There is a strong positive correlation between number of

insurance policies and the time taken to resolve the problem. So it is concluded that there is

a correlation between number of policy and time taken by insurance companies.

11. H0 there is no preference for private sector but LIC only H1 There is preference for private sector

Table 8.41 Table showing preference for public or private sector -Statistics

N Valid 722

Missing 0

Mean 2.24

Std. Deviation .929

Variance .863 Source: Customer Preference Primary Data Survey – 2012

Table 8.42 Table showing Preference for public or private sector

Frequency Percent

Valid Percent Cumulative Percent

Valid LIC only 246 34.1 34.1 34.1

Private 59 8.2 8.2 42.2

Private and LIC

417 57.8 57.8 100.0

Total 722 100.0 100.0


233

Table 8.43 Table showing preference for private over public


Observed N Expected N Residual

LIC only 246 240.7 5.3

Private 59 240.7 -181.7

Private and LIC

417 240.7 176.3

Total 722


Table 8.44 Table showing Test statistics for preference of private over public


Chi-Square 266.446a

df 2

P value .000

a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 240.7.



that there is preference for private sector and not LIC only.

12. H0 All companies have equal credibility due to government assurance H1 LIC has more credibility due to government assurance

Table 8.45 Table showing credibility of LIC due to Government assurance - Statistics

N Valid 722

Missing 0

Mean 1.39

Std. Deviation .489

Variance .239 Source: Customer Preference Primary Data Survey - 2012

234

Table 8.46 Table showing credibility due to government assurance

Frequency Percent Valid Percent Cumulative Percent

Valid Yes 437 60.5 60.5 60.5

No 285 39.5 39.5 100.0

Total 722 100.0 100.0



Table 8.48 Table showing Test Statistics of Credibility of LIC

Credibility due to govt assurance

Chi-Square 32.000a

df 1

P value .000




that all companies have equal credibility due to Government assurance.

13. H0 Private companies’ products are not more need based and flexible when

compared to LIC

H1 Private Companies products are more need based and flexible when compared to

LIC

Table 8.47 Table showing credibility of LIC due to Government assurance

Credibility due to government assurance


Yes 437 361.0 76.0

No 285 361.0 -76.0

Total 722

235

Table 8.49 Table showing statistics of need based and flexibility of private company insurance products

N Valid 722

Missing 0

Mean 2.20

Std. Deviation .864


Table 8.50 Table showing need based and flexibility of private insurance products over LIC

Frequency Percent Valid Percent

Cumulative Percent

Valid Yes 210 29.1 29.1 29.1

No 154 21.3 21.3 50.4

Somewhat 358 49.6 49.6 100.0

Total 722 100.0 100.0 Source: Customer Preference Primary Data Survey - 2012

Table 8.51 Table showing Need based and flexibility of private insurance products over LIC


Yes 210 240.7 -30.7

No 154 240.7 -86.7

Somewhat 358 240.7 117.3

Total 722


Table 8.52 Table showing Test statistics of Need based and flexibility of private companies products over LIC

Need based and flexibility of private insurance products over LIC

Chi-Square 92.321b

df 2

P value .000

b. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 240.7.


236


that .Private companies’ products are more need based and flexible when compared to LIC

14. H0 There is no significant difference in the efficiency of private companies in closing

the contract of business when compared to LIC

H1 There is significant difference in the efficiency of private companies in closing the contract

of business when compared to LIC

Table 8.53 Table showing Statistics of efficiency in closing the contract by private

insurance companies over LIC

N Valid 722

Missing 0

Mean 2.03

Std. Deviation .907


Table 8.54 Table showing efficiency in closing the contract of Business of

private insurance company and LIC


Cumulative

Percent

Valid Agree 286 39.6 39.6 39.6

Disagree 128 17.7 17.7 57.3

Partially agree 308 42.7 42.7 100.0

Total 722 100.0 100.0


Table 8.55 Table showing efficiency in closing the

contract of business of private insurance

companies

Efficiency in closing the contract of Business of

private insurance co and LIC


Agree 286 240.7 45.3

237

Disagree 128 240.7 -112.7

Partially

agree 308 240.7 67.3

Total 722


Table 8.56 Table showing Test Statistics of Efficiency in closing the contract

Efficiency in closing the contract of

Business of private insurance co and LIC

Chi-Square 80.122b

df 2

P value .000

b. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell

frequency is 240.7.



that there is significant difference in the efficiency of private companies in closing the

contract of business when compared to LIC

15. H0 There is no significant difference in the formalities at the time of inception in LIC

when compared to private companies

H1 There is significant difference in the formalities at the time of inception in LIC

when compared to private companies

Table 8.57 Table showing Statistics of formalities at the time of inception

N Valid 722

Missing 0

Mean 2.09

Std. Deviation .870


238

Table 8.58 Table showing formalities at the time of inception


Cumulative

Percent

Valid Agree 244 33.8 33.8 33.8

Disagree 170 23.5 23.5 57.3

Partially

Agree

308 42.7 42.7 100.0

Total 722 100.0 100.0


Table 8.59 Table showing formalities at the time of inception



Agree 244 240.7 3.3

Disagree 170 240.7 -70.7

Partially Agree 308 240.7 67.3

Total 722




that there is significant difference in the formalities at the time of inception in LIC when

compared to private companies

Table 8.60 Table showing Test statistics of Test Statistics don formalities at the time of

inception


Chi-Square 39.634b

df 2

P value .000


frequency is 240.7.

239

16. H0 Private companies have not changed public perception of insurance

H1 Private Companies have changed public perception of insurance

Table 8.61 Table showing statistics on change in public perception

N Valid 722

Missing 0

Mean 1.34

Std. Deviation .476


Table 8.62 Table showing change in public perception

Public perception


Cumulative

Percent

Valid Yes 473 65.5 65.5 65.5

No 249 34.5 34.5 100.0

Total 722 100.0 100.0


Table 8.63 Public perception


Yes 473 361.0 112.0

No 249 361.0 -112.0

Total 722


Table 8.64 Table showing Test Statistics on public perception

Test Statistics

Public perception

Chi-Square 69.496a

df 1

240

P value .000

a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell

frequency is 240.7.


P value is <0.01 so null hypothesis is rejected at 1% significant level. Hence concluded that

Public perception has shifted towards private companies

17. Ho Monopoly position of LIC put the customer at a disadvantage

H1 Monopoly position of LIC did not put the customer at a disadvantage

Table 8.65 Table showing statistics with regard to Monopoly position of LIC

N Valid 722

Missing 0

Mean 1.49

Std. Deviation .500


Table 8.66 Table showing Test statistics of monopoly position of

LIC put the customer at disadvantage


Cumulative

Percent

Valid Yes 366 50.7 50.7 50.7

No 356 49.3 49.3 100.0

Total 722 100.0 100.0


Table 8.67 Table showing disadvantage of

Monopoly position of LIC


Yes 366 361.0 5.0

No 356 361.0 -5.0

Total 722


241

Table 8.68 Table showing Test Statistics on Monopoly position of LIC putting customer at a disadvantage

Monopoly position of LIC put the customer at disadvantage

Chi-Square .139a

df 1

P value .710



P value is >0.01 so null hypothesis is accepted at 1% significant level. Hence it is concluded

Monopoly position of LIC did not put the customer at a disadvantage

18. H0 Arrival of private companies have not given varied choice to customers in terms of

products and services

H1 Arrival of private companies have not given any additional varied choice to

customers in terms of products and services

Table 8.69 Table showing Test Statistics on whether arrival of private

companies have given varied choice to customers

N Valid 722

Missing 0

Mean 1.16

Std. Deviation .371



Table 8.70 Table showing opinion on arrival of private companies have given

varied choice to customers in terms of products and services


Cumulative

Percent

Valid Agree 603 83.5 83.5 83.5

Disagree 119 16.5 16.5 100.0

Total 722 100.0 100.0

242

Table 8.71 Table showing public opinion on

arrival of private companies

Arrival of private companies have given

varied choice to customers in terms of

products and services


Agree 603 361.0 242.0

Disagree 119 361.0 -242.0

Total 722


Table 8.72 Table showing Test statistics on arrival of private companies have given varied

choice to customers in terms of products and services

Arrival of pvt companies have given varied

choice to customers in terms of products

and services

Chi-Square 324.454a

df 1

P value .000


frequency is 240.7.


P value is <0.01 so alternative hypothesis is accepted at 1% significant level. Hence it is

concluded that arrival of private companies have given varied choice to customers in terms

of products and services

19. Ho Customers preferences has not shifted from LIC towards Private insurance

companies

H1 Customers preference has shifted from LIC towards private insurance companies

243

Table 8.73 Table showing Statistics of customer preference shift from pubic to private

Customers preferences has shifted from LIC towards Private insurance

N Valid 722

Missing 0

Mean 2.27

Std. Deviation .859


Table 8.74 Table showing customers preferences shifted from LIC towards

Private insurance


Cumulative

Percent

Valid Yes 194 26.9 26.9 26.9

No 136 18.8 18.8 45.7

To a certain

extent

392 54.3 54.3 100.0

Total 722 100.0 100.0


Table 8.75 Table showing customer preference shift from Public to Private

sector

Customers preferences has shifted from LIC towards Pvt insurance


Yes 194 240.7 -46.7

No 136 240.7 -104.7

To a certain extent 392 240.7 151.3

Total 722


Table 8.76 Table showing customer preference shift from Public to Private sector.

Customers preferences has shifted from LIC

towards Private insurance companies

244

Chi-Square 149.729b

df 2

P value .000


frequency is 240.7.



concluded that Customers preference has shifted from LIC towards private insurance

companies

20. Ho LIC was not unsuccessful in reaching the insurance market before the arrival of

private companies H1 LIC was unsuccessful in reaching the insurance market before the arrival of private companies

Table 8.77 Table showing Statistics of coverage of Insurance markets before year 2000

N Valid 722

Missing 0

Mean 1.46

Std. Deviation .498

Variance .249


Table 8.78 Table showing coverage of Insurance markets before year 2000

Frequency Percent Valid Percent Cumulative Percent

Valid Yes 392 54.3 54.3 54.3

No 330 45.7 45.7 100.0

Total 722 100.0 100.0


245

Table 8.79 Table showing coverage of

Insurance markets before year 2000 –

Test statistics

The coverage of insurance markets

earlier to 2000 less than 20%


Yes 392 361.0 31.0

No 330 361.0 -31.0

Total 722


Table 8.80 Table showing coverage of Insurance markets before year 2000

Test Statistics

The coverage of insurance markets earlier to

2000 less than 20%

Chi-Square 5.324a

df 1

P value .021


frequency is 240.7.



concluded that LIC was unsuccessful in reaching the insurance market before the arrival of

private companies

21. Ho LIC does not have more pending claim cases when compared to private

companies

H1 LIC has more pending claim cases when compared to private companies

246

Table 8.81 Table showing More pending settlement cases in LIC than private sector

Statistics

More pending settlement compared to private insurance co

N Valid 722

Missing 0

Mean 1.63

Std. Deviation .484


Table 8.82 Table showing pending cases in LIC

more pending settlement compared to pvt insurance co


Cumulative

Percent

Valid Yes 270 37.4 37.4 37.4

No 452 62.6 62.6 100.0

Total 722 100.0 100.0



Table 8.83 Table showing Statistics on

pending cases in LIC whether there is any

change

More pending settlement compared to

private insurance co


Yes 270 361.0 -91.0

No 452 361.0 91.0

Total 722

247

Table 8.84 Table showing Test Statistics on pending cases in LIC whether there is any change

Test Statistics

More pending settlement compared to pvt insurance co

Chi-Square 45.878a

df 1

P value .000




that LIC has more pending claim cases when compared to private companies

22. Ho LIC does not have products and facilities according to need of customers

H1 LIC has products and facilities according to need of customers

Table 8.85 Table showing statistics of Availability of facility according to need

N Valid 722

Missing 0

Mean 1.81

Std. Deviation .856



Table 8.86Table showing availability of facility according to need


Cumulative

Percent

Valid Yes 348 48.2 48.2 48.2

No 166 23.0 23.0 71.2

Partially 208 28.8 28.8 100.0

Total 722 100.0 100.0

248

Table 8.87 Availability facility according to need


Yes 348 240.7 107.3

No 166 240.7 -74.7

Partially 208 240.7 -32.7

Total 722


Table 8.88 Table showing Availability of products according to need

Chi-Square 75.468b

df 2

P value .000


frequency is 240.7.



LIC has products and facilities according to need of customers

23. Ho Private companies do not have more products and facilities according to need of

customers

H1 Private Companies have more products and facilities according to need of

customers

Table 8.89 Table showing statistics of facilities provided by private companies’ according to

the needs

N Valid 722

Missing 0

Mean 1.78

Std. Deviation .771


249

Table 8.90 Table showing facilities provided by private companies

according to the needs


Cumulative

Percent

Valid Yes 312 43.2 43.2 43.2

No 258 35.7 35.7 78.9

Partially 152 21.1 21.1 100.0

Total 722 100.0 100.0


Table 8.91 Table showing facilities provided

by private companies according to needs


Yes 312 240.7 71.3

No 258 240.7 17.3

Partially 152 240.7 -88.7

Total 722


Table 8.92 Table showing facilities provided by private companies according to needs

Test Statistics

Facilities provided by private companies’

according to the needs

Chi-Square 55.058b

df 2

P value .000


frequency is 240.7.



Private companies have more products and facilities according to need of customers

24. Ho LIC has exclusive special services for high value customers H1 LIC does not have exclusive special services for high value customers

250

Table 8.93 Table showing Statistics for exclusive special services for high value LIC

customers

N Valid 722

Missing 0

Mean 2.05

Std. Deviation .656


Table 8.94 Table showing special services for high value LIC customers

Exclusive special services for high value LIC customers


Cumulative Percent

Valid Yes 138 19.1 19.1 19.1

No 410 56.8 56.8 75.9

Partially 174 24.1 24.1 100.0

Total 722 100.0 100.0 Source: Customer Preference Primary Data Survey – 2012

Table 8.95 Table showing special services

for high value LIC customers


Yes 138 240.7 -102.7

No 410 240.7 169.3

Partially 174 240.7 -66.7

Total 722


Table 8.96 Table showing Test Statistics of Exclusive special services for high value LIC customers

Exclusive special services for high value LIC customers

Chi-Square 181.407b

df 2

251

P value .000

b. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 240.7.


P value is <0.01 so null hypothesis is rejected at 1% significant level. Hence concluded that LIC does not have exclusive special services for high value customers

25. Ho Private companies have exclusive special services for high value customers H1 Private companies do not have exclusive special services for high value customers

Table 8.97 Table showing Exclusive services for high value private insurance

companies

N Valid 722

Missing 0

Mean 2.04

Std. Deviation .655


Table 8.98 Table showing Exclusive services for high value private insurance companies


Cumulative Percent

Valid Yes 142 19.7 19.7 19.7

No 412 57.1 57.1 76.7

Partially 168 23.3 23.3 100.0

Total 722 100.0 100.0 Source: Customer Preference Primary Data Survey - 2012

Table 8.99 Table showing Exclusive services for high value

private insurance companies


Yes 142 240.7 -98.7

No 412 240.7 171.3

Partially 168 240.7 -72.7

Total 722


252

Table 8.100 Table showing Test Statistics for high value private insurance companies

Exclusive special services for high value pvt

insurance co customers

Chi-Square 184.366b

df 2

P value .000


frequency is 240.7.


P value is <0.01 so null hypothesis is rejected at 1% significant level. Hence concluded that Private companies do not have exclusive special services for high value customers

26. Ho Policy holders do not have complete faith in the agents of LIC

H1 Policy holders have complete faith in the agents of LIC

Table 8.101 Table showing Test Statistics for Policy faith in LIC agent/Company

N Valid 722

Missing 0

Mean 1.57

Std. Deviation .789


Table 8.102 Table showing Test Statistics for faith in LI C Agent or

Company


Cumulative

Percent

Valid Yes 446 61.8 61.8 61.8

No 140 19.4 19.4 81.2

Partially 136 18.8 18.8 100.0

Total 722 100.0 100.0


253

Table 8.103 Table showing policy holders

faith in LIC Agent or Company


Yes 446 240.7 205.3

No 140 240.7 -100.7

Partially 136 240.7 -104.7

Total 722


Table 8.104 Table showing Test Statistics of faith in LI C Agent or Company

Test Statistics

Policy holders faithfulness LIC insurance

agent/ insurance co

Chi-Square 262.814b

df 2

P value .000


frequency is 240.7.



that Policy holders have complete faith in the agents of LIC

27. Ho Policy holders do not have complete faith in the agents of Private Companies

H1 Policy holders have complete faith in the agents of Private Companies

Table 8.105 Table showing Test Statistics of faith in Private sector Agent or Company

N Valid 722

Missing 0

Mean 1.82

Std. Deviation .745


254

Table 8.106 Table showing faith in Private sector Agent or

Company by Policy holders


Cumulative

Percent

Valid Yes 278 38.5 38.5 38.5

No 298 41.3 41.3 79.8

Partially 146 20.2 20.2 100.0

Total 722 100.0 100.0


Table 8.107 Table showing faith in Private

sector Agent or Company by Policy holders


Yes 278 240.7 37.3

No 298 240.7 57.3

Partially 146 240.7 -94.7

Total 722


Table 8.108 Table showing Test Statistics of faith in Private sector Agent or Company by

Policy holders

Chi-Square 56.687b

df 2

P value .000


frequency is 240.7.



that Policy holders have complete faith in the agents of private companies.

28. Ho Surrender of insurance policies is more in private companies

H1 Surrender of insurance policies is not more in private companies

255

Table 8.109 Table showing Test Statistics of surrenders of insurance policies by insured

N Valid 722

Missing 0

Mean 1.80

Std. Deviation .404


Table 8.110 Table showing surrenders of insurance company

whether more in private company


Cumulative

Percent

Valid Yes 148 20.5 20.5 20.5

No 574 79.5 79.5 100.0

Total 722 100.0 100.0


Table 8.111 Table showing surrenders of insurance company


Yes 148 361.0 -213.0

No 574 361.0 213.0

Total 722


Table 8.112 Table showing Test Statistics of surrenders of insurance policies

Chi-Square 251.352a

df 1

P value .000


frequency is 240.7.



256

Surrender of insurance policies is not more in private companies

29. Ho Returns offered by LIC is more than the return offered by private companies

H1 Returns offered by LIC is not more than the return offered by private companies

Table 8.113 Table showing return offered by LIC more than other insurance companies

N Valid 722

Missing 0

Mean 2.29

Std. Deviation .863

Variance .745


Table 8.114 Table showing returns offered by LIC more than other

insurance company.


Cumulative

Percent

Valid Yes 194 26.9 26.9 26.9

No 124 17.2 17.2 44.0

May be 404 56.0 56.0 100.0

Total 722 100.0 100.0


30. Ho There is a direct relationship between the age of the population and the number of

insurance policies

H1 There is no direct relationship between the age of the population and the number

of insurance policies.

Table 8.115 Table showing relationship between age of the population and No, of

insurance policies- Descriptive Statistics

Mean Std. Deviation N

Age of the population 2.19 1.132 722

No of insurance

policies

1.76 .651 722


257

Table 8.116 Table showing correlation between age of the population and No. of insurance policies

Correlations

Age of the population


Age of the population Pearson Correlation

1 .240**

P value .000

N 722 722


Pearson Correlation

.240** 1

P value .000

N 722 722

**. Correlation is significant at the 0.01 level (2-tailed). Source: Customer Preference Primary Data Survey - 2012

31. Ho There is a direct relationship between the age of the population and the total risk

coverage

H1 There is no direct relationship between the age of the population and the total risk

coverage

Table 8.117 Table showing correlation between age of the population and No, of

insurance policies

Descriptive Statistics

Mean Std. Deviation N

Age of the

population

2.19 1.132 722

Total risk coverage 2.03 1.169 722 Source: Customer Preference Primary Data Survey - 2012

Table 8.118 Table showing correlation between age of the population

and Total risk coverage - Correlations

Age of the

population

Pearson

Correlation

1 -.004

P value .906

N 722 722

Total risk coverage Pearson

Correlation

-.004 1

P value .906

N 722 722 Source: Customer Preference Primary Data Survey - 2012

258

32. Ho There is no correlation between number of policies and agents advice

H1 There is correlation between number of policies and agents advice

Table 8.119 Table showing correlation between Number of Insurance policy and Agent’s

advice

Mean Standard Deviation

Correlation P value

No. of Insurance policy

1.76 0.651 -0.04 0.708

Agent’s Advice 2.32 1.285 Source: Customer Preference Primary Data Survey - 2012 Since P value >0.05., null hypothesis is accepted at 5% level of significance. Hence it is

concluded that there is no correlation between number of policies and agents advice

Table 8.120 Table showing correlation between age of the population and

Agents advice before purchase- Correlations

No of

insurance

policies

Agent advice

before

purchase

No of insurance policies Pearson

Correlation

1 -.014

P value .708

N 722 722

Agent advice before

purchase

Pearson

Correlation

-.014 1

P value .708

N 722 722 Source: Customer Preference Primary Data Survey - 2012

33. Ho There is no correlation between number of insurance policies and terms and

conditions of the policy

H1 There is correlation between number of insurance policies and terms and

conditions of the policy

Table 8.121 Table showing correlation between Number of policy holders and terms of

conditions Mean Standard

Deviation Correlation P value

No. of Insurance 1.76 0.651 0.085 0.022

259

policy Terms and Conditions

2.11 1.299


P value is < 0.05, so null hypothesis is rejected at 5% level of significance. Hence it’s

concluded that there is correlation between number of insurance policies and terms and

conditions of the policy.

Table 8.122 Table showing correlation between Number of insurance

companies and Terms and conditions

Correlations

No of insurance

policies

Terms and

condition

No of insurance

policies

Pearson

Correlation

1 .085*

P value .022

N 722 722

Terms and condition Pearson

Correlation

.085* 1

P value .022

N 722 722

*. Correlation is significant at the 0.05 level (2-tailed). Source: Customer Preference Primary Data Survey - 2012

The data obtained was subjected to statistical analysis and with the help of Chi

Square and Correlation techniques the results were obtained. The study revealed

that in the survey conducted among 722 respondents from all over South India and

Maharashtra, 83.5% of the respondents feel that the entry of the private life

insurance companies have given variety to customers in terms of products offered

and 51% of them feel that the monopoly position of LIC in the past put them at a

disadvantage. 61% of the respondents feel that private companies are equally

secure when compared to LIC. 79% of the respondents feel the products offered by

private Life Insurance Companies are more need based when compared to LIC.

Due to quick service by private companies, 82% prefer services of private

companies. According to information obtained from IRDA websites it was found that

95% claim settlement cases that were pending were of the public sector giant LIC.

Private companies settled claims very quickly comparatively. However the loyalty of

260

the agents and employees of LIC to their clients was much more when compared to

those of private sector Life Insurance Companies.

Table 8.123 Summary of important findings

Yes No Partially

1. Private insurance company are equally secured 60.5 39.5

2. Products offered by private Insurance Company are more need based

(Mean 22 Std. Deviation 0.864)

29.1 21.2 49.6

3. Quick service by Private [Test results 2.03 0.907 0.823] 39.6 17.7 42.7

4. Preliminary difficulties with LIC 33.8 23.5 42.7

5. Monopoly position of LIC till year 2000 put customers at a disadvantage 50.7 49.3

6. Availability of facilities for online payment of renewal premium is made

available by LIC

34.1

7. Availability of facilities for online payment of renewal premium is made

available by private LIC’s

57.2

8. Entry of private companies have given more choice and customer centered

products

83.5 16.5

9. Shift in customers preference from LIC to private companies 26.9 18.8 54.3

10. Awareness about failure of LIC to spread the market for insurance beyond

20% of population

54.3 45.7

11. Awareness about maximum pending claim settlements of LIC 37.4 62.6

12. Public sector LIC uses advanced technology and facilities according to

customer’s need.

48.2 23 28.8

13. Private sector LIC uses advanced technology and facilities according to

customer’s need.

43.2 35.7 21.1

14. LIC ‘s exclusive service to High value customers 19.1 56.8 24.1

15. Private LIC ‘s exclusive service to High value customers 19.7 57.1 23.3

16. Customer’s faith on agents of LIC 61.8 19.4 18.8

17. Customer’s faith on agents of LIC 38.5 41.3 20.2

18. Surrender value of amount invested in ULIP’s are less than amount

invested

20.5 79.5

19. Return on LIC’s policies are greater than return on policies of private

companies

25.9 17.2 56

20. Availability of products are more after private companies have entered the

insurance market

65.9 34.1

21. Do the agents of LIC follow up on lapsed policies 8.2 91.8

22. Do the agents of private LIC’s follow up on lapsed policies 65.3 34.7

23. Difficulty in reinstatement of lapsed policy in LIC 85.3 14.7

24. Difficulty in reinstatement of lapsed policy in private Companies 20.4 79.6

25. LIC has tried to sell more and more products to existing policy holders 30.4 69.6

26. Private companies try to sell more and more products to existing policy

holders

67.4 32.6


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GREEN MANAGEMENT - Findings of the Study

Environmental management focuses on continuous improvement of environmental

management systems for corporate sustainability. In this study an attempt has been

made to evaluate the measures adopted by Life Insurance Companies to ensure

protection of environment and elimination of wastage of resources. The following is

the report of the survey conducted in 11 Life Insurance Companies in their Local

General Offices in Mangalore.

Green Initiatives at Life Insurance Corporation were nil.

Green Initiatives at HDFC Life Insurance Company

India’s second largest private sector lender, HDFC Bank, has launched “green

banking” for which it has constituted an Environment Management Committee to

implement its green banking initiatives. The bank has tied up with environmental

organisations and NGOs to the areas of tree plantation, watershed management and

alternate energy. Beginning with Nasik, Nagpur, Pune, Mumbai and New Delhi, the

bank has spread the tree plantation initiative to other parts of the country.

Environmental Initiatives – HDFC Life has always believed that establishing a strong

and ethical foundation in an essential pre requisite for long term sustainable growth.

Their focus is on maintaining the quality of their business and creation of long term

value for policy holders and stakeholders. In keeping with the “HDFC Life Way” of

giving back to the society, in the past few years, they have contributed their bit to the

society. Major CSR Projects and Environment Initiatives undertaken in the last two

years include Children Education Project, Teach for India and Payroll giving.

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Green Initiatives in ICICI group

ICICI Bank’s green initiative is to make healthy environment in the organisation by

creating intrapersonal skills among the customer and understanding between

employees of the organisation. ICICI group has launched a “Go Green initiative”

across the group to move processes and customers to cost-efficient, automated

channels and build awareness about the environment. ICICI ‘s Go green initiative

saved 30000 trees in 2009-2010. As responsible corporate citizens they believe that

every small GREEN step taken today would go a long way in building a greener

future and that each one of them can work towards a better global environment.

ICICI group’s Green Initiatives aimed at customers are driven by the objective of

collaborating with each of their customers and making GREEN a part of all their

lives. These initiatives range from green offerings/incentives, green engagement to

green communication to their customers.

Green products and services included Mobile banking and payment of policy

premium anytime anywhere through internet banking, i-mobile banking etc. This

reduces the carbon footprint of the customers by ensuring they do not have to resort

to physical statements or travel to their insurance offices to pay their premium.

Most of the communication to the policy holders are done on line thus saving paper

and enormous amount of time and energy involved in writing of cheques and mailing

the cheques and collection of cheques.

As part of Green Engagements, ICICI has conducted Green themed events with their

customers during Diwali to build awareness about the environment amongst

employees and customers alike. During this event money plants were presented to

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their customers as a token of prosperity and also as a token of their collective

responsibility in building a greener society.

Earth Hour which is the world’s largest global climate change event, had the ICICI

group furthering its Green commitment by pledging its support to the event.

ICICI group celebrated the World Environment Day on June 5th and to mark the

occasion, branches across the country undertook a number of activities. Branches

along with their customers took the green pledge through signature campaigns,

planted and distributed saplings, conducted drawing and competition for children and

conducted cycle rallies.

Green communication – ICICI group has extensively capitalized on the existing

internal media, statements, inserts, credit cards, charge slips to reach out to the

customers and seek their collaboration in the Go Green movement. The

communication on online premium pay, online funds transfer and accessing policy

details online are aimed at migrating customers to paperless and commute free

mode of conducting some of the their major transactions.

Green Partners – ICICI group is working and looking forward to partnerships with

national and international green organisations and NGO’s. In the past ICICI group

has been associated with BNHS in the past and has also partnered the Green

Governance Awards set up by BNHS to recognize and appreciate the participant

organisations efforts beyond meeting the statutory compliance for protection and

conservation of the environment.

Green Initiatives at SBI Life Insurance Company were nil.

Green Initiatives at Reliance Life Insurance Company

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Reliance Power believes in using the best technology for all its business to lessen

the environmental impact. The Reliance Life Insurance company adopted the green

initiatives as following. The Reliance Life Insurance utilizes the leadership in energy

and environmental design standard to determine if the building is considered green.

They have also been driving a quiet revolution over the past decades or so by

increasing incentives for business owners to go green and adopt more eco-friendly

businesses and infrastructure. Reliance insurance began to offer green discount to

clients. These discounts can be expected to become a regular part of risk

management as more and more businesses could adopt and insist on green

initiatives and system

Green Initiatives at Bajaj Allianz Life Insurance Company

• The study conducted in Bajaj Allianz Life Insurance Company revealed the

following green initiatives taken by the company. The various roles as

insurance solution provider, long term investor and as a corporate citizen

have given rise to the initiatives.

• As a solution provider they support clients and business partners with the right

financing, insurance or asset management solution for coping with the effects

of climate change.

• As a long term investor they focus on promoting low-carbon technologies and

provide financing to help drive the huge investments required to shift to a low

carbon economy.

• As a corporate citizen they are exposed to the real impacts of climate change

and make use of their expertise to communicate their insights and best

practices to their stake holders.

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Products and Solutions

• Solar Energy – In May 2010 Allainz had bought the first 8 solar plants in Italy.

• Wind power – Over EURO 800 Million investments in wind parks were made

in Italy and Germany and France with total capacity exceeding 450 MW.

• Green products – Over 70 products focus on carbon reduction, mitigation of

climate risks and the carbon market.

• Low carbon markets – Renewables & Clean Technology Projects, Energy

saving and energy efficiency, Emissions trading markets (CDM), Alternative

asset classes like forests, Low energy buildings and materials and Alternative

traffic technology.

Green Initiatives at TATA AIG Life Insurance Company

In TATA AIG as part of green initiatives, the green channel settlement has been

introduced based on customer research which reveals the two biggest concerns of

customers today. Green channels settlement which came with a unique warranty on

accident repairs from auto secure garages, has been designed keeping in mind

convenience and user friendly service with quality. Tata group has given a green

settlement to all of its business and plant operations in a bid to reduce its carbon

footprints and mitigate its environmental impacts. While most organisation are still

formulating their strategy on climate change, the company has already rolled its

sleeves and have begun to tackle the issue. The company’s brief to its architects

was to create a world class infotech facility without destroying natural habitat.

Green Initiatives at Birla Sun Life Insurance Company

At Sun Life, being a sustainable company means paying attention to a range of

environmental, social and governance matters that interact with their business.

266

While the definition of sustainability has evolved beyond its financial roots taking

action today to achieve a greener tomorrow continues to be an important area of

focus in their approach to sustainability. They have continued to focus on their

environmental practices making progress in such area as sustainability certifications

in their real estate assets, investments in clean and renewable energy projects and

measuring and reporting on greenhouse gases. They constantly seek better way to

be more efficient in their premises and the way we carry out their business.

In their buildings, they are taking significant steps to reduce their environmental foot

print by consuming less, diverting more waste and by adopting sustainable building

and development practices. They occupy approximately 2.8 million square feet of

office space in Canada alone. In 2011 throughout the organization they completed

several energy and water efficiency projects and achieved sustainable improvements

in their overall sustainability profile. They actively monitor and manage the

environmental footprint of their existing properties.

In their business, their efforts to promote paperless, electronic services continued in

2011-12 leveraging the use of online services, personal electronic devices and web

based transactions. They have been able to reduce the need for tens of millions of

pages of paper each year as well as saving the energy it takes to produce and

distribute paper documents

Birla Sun Life has been investing in clean and renewable energy for more than 28

years. In 2011 – 12 they financed approximately $217 million in five clean and

renewable energy projects. This includes natural gas renewable projects which are

considered environmentally preferable as they use otherwise waste heat from

neighbouring industries.

267

Green Initiatives at Met Life Insurance Company

As a leading global provider of insurance, annuities and employee benefit programs

serving 90 million customers in more than 60 countries they are aware that their

“green” initiatives can potentially have a significant impact on the global environment.

Met Life Ranked among News Week’s Top green US companies with the following

green initiatives taken by them

Met Life’s green house gas emissions, • Water Use, Environmental policies and

Green programs. Met life is committed to addressing its environmental impact

by reducing carbon emissions, implementing recycling and energy efficiency

programs in its facilities and conserving natural resources by investing in renewable

energy projects

Reduction in Environmental Footprint – In the last three years, the MetLife Stadium

has provided five updates documenting its green initiatives. Met Life has signed a

Memorandum of Understanding (MOU) pledging to become an environmental

steward by implementing a number of green initiatives that would reduce its carbon

footprint and further improve their plant’s environment.

Green Initiatives at ING Vysya Life Insurance Company

ING Vysya Life insurance has been conducting a series of sapling distribution drives

and blood donation camp as part of an initiative to protect and celebrate life. The

campaign was started on June 5th which is World Environment Day and the total

budget for the venture is Rs. 20 lakh. The company linked its commitment for life

protection to this green initiative and hoped that more individuals and companies

would join this drive to improve Mumbai. In addition to providing life protection, this

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commitment is expressed in their efforts to create awareness for a greener and

cleaner Mumbai.

Conclusions and Suggestions

Insurance industry has to re-think its role in prompting good corporate citizenship by

creating innovative insurance products at reduced premiums or with green policy

terms. Green insurance products include premium reward and coverage

enhancement for hybrid cars, buildings constructed to be more robust against

extreme weather conditions, pollution legal liability and remediation cover, and

specialist insurance for renewable energy projects. These are some of the ideas on

which general insurance industry has to ponder over. It was found that Green

Initiatives in Life Insurance Companies were at the inception stage. In most of the

companies their foreign counterparts and partners played a major role in

environment protection in their respective countries. However the initiatives in the

home countries have not yet taken off in any noticeable manner. It was also found

that in those companies which had the parent company in the banking industry

especially private banks, for example ICICI, HDFC etc, the banks were ahead in

implementing green initiatives to a much larger extent when compared to the

subsidiary life insurance company. It was found that there were absolutely no green

initiatives undertaken in the public sector Insurance giant Life Insurance Corporation

of India. The same was true in the case of SBI Life insurance company which is also

a subsidiary of the biggest public sector bank SBI. All insurance companies should

therefore understand the need of the hour to protect environment as a top priority

and initiate a lot of activities within the organisation and among its policy holders to

create awareness about environment protection and also to take concrete steps to

incorporate it into its major policies.

an analysis of performance of private sector life...

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