market segmentation of aviva life insurance

7/27/2019 Market Segmentation of Aviva Life Insurance

1/84

A

PROJECT REPORT

ON

MARKET SEGMENTATION OF AVIVA LIFE

INSURANCE

Submitted in Partia Fu!iment "! t#e Re$uirement "! %ae"r "!

%u'ine'' Studie' (%%S)

UN*ER T+E GUI*ANCE OF, SU%MITTE* %-,

MRS. NEELOFER /ARG+AM FA/EL +A0 ALAM-AR

R" N". 112+ON23415

SESSION, 641426415

JAMIA MILLIA ISLAMIA UNIVERSIT-NE7 *EL+I2114468

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PREFACE

The health care system in India is characterized by multiple systems of medicine,

mixed ownership patterns and different kinds of delivery structures. Public sectorownership is divided between central and state governments, municipal and

Panchayat local governments. Public health facilities include teaching hospitals,

secondary level hospitals, firstlevel referral hospitals !"#"s or rural hospitals$,

dispensaries% primary health centres !P#"s$, subcentres, and health posts. &lso

included are public facilities for selected occupational groups like organized work

force !'(I$, defence, government employees !")#($, railways, post and telegraph

and mines among others. The private sector !for profit and not for profit$ is thedominant sector with *+ per cent of people seeking indoor care and around + to -+

per cent of those seeking ambulatory care !or outpatient care$ from private health

facilities. hile India has made significant gains in terms of health indicators

demographic, infrastructural and epidemiological, it continues to grapple with newer

challenges. /ot only have communicable diseases persisted over time but some of

them like malaria have also developed insecticideresistant vectors while others like

tuberculosis are becoming increasingly drug resistant. #I0 &I2( has of late

assumed extremely virulent proportions.

The 133+s have also seen an increase in mortality on account of noncommunicable

diseases arising as a result of lifestyle changes. The country is now in the midst of a

dual disease burden of communicable and no communicable diseases. This is coupled

with spiraling health costs, high financial burden on the poor and erosion in their

incomes. &round 456 of all people hospitalized in India in a single year fall below

the poverty line due to hospitalization !orld 7ank, 4++-$. &n analysis of financing

of hospitalization shows that large proportion of people% especially those in the

bottom four income 8uintiles borrow money or sell assets to pay for hospitalization

!orld 7ank, 4++-$ This situation exists in a scenario where health care is financed

through general tax revenue, community financing, out of pocket payment and social

and private health insurance schemes. India spends about 5.36 of )2P on health

!#9, 4++-$. The per capita total expenditure on health in India is :(; 4


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total health expenditure is around *6 of )2P, with breakdown of public expenditure

!+.36$% private expenditure !5.+6$. The private expenditure can be further classified

as outofpocket !==P$ expenditure !uture )enerali

Insurance "o. @td. and >uture )enerali Indian @ife insurance "o. @td. were granted

"ertificate of 9egistration in 4++-+C and are in the process of commencing

operations.


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ACKNO7LE*GEMENT

I have prepared this study paper for the Mar9et Se:mentati"n "! AVIVA Li!e

In'uran&e.Duite frankly, I have derived the contents and approach of this study

paper through discussions with colleagues who are also the students of this course as

well as with the help of various 7ooks, Aagazines and /ewspapers etc.

I would like to give my sincere thanks to a host of friends and the teachers who,

through their guidance, enthusiasm and counselling helped me enormously. &s I think

there will be always need of improvement. &part from this, I hope this study paper

would stimulate the need of thinking and discussion on the topics like this one.

FAZEL HAQ ALAMYAR

Roll No. 11-HON-6013

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TA%LE OF CONTENTS

T";i& Name Pa:e N".

C#a;ter21, Intr"du&ti"n "! t#e C"m;an< 12=

C#a;ter26, Pr"!ie > Or:ani?ati"n Stru&ture "! t#e &"m;an< 1426@

C#a;ter25, Obe&tiBe' "! t#e Stud< 68263

C#a;ter2@, Met#"d"":< Ad";ted 626=

C#a;ter28, C"n&e;tua *i'&u''i"n 542@8

C#a;ter23, Ana


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C+APTER21

INTRO*UCTION OF T+E COMPAN-

-


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1.1. INTRO*UCTION OF T+E COMPAN-

&viva has presence in 4* countries and has 5+ 7ancassurance partners and *3,+++

employees, with over 5+ million customers worldwide. &vian has pioneered7ancassurance in the country through its tieups with 44 leading private and

nationalised 7anks in the country. &viva also focuses on 7ancassurance worldwide

and has a proven track record of successful 7ancassurance relationships. &viva is a

leading 7ancassurer in countries such as >rance, Italy, (pain, &ustralia and /ew

Eealand.

In India, &viva has a long history dating back to 1C


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1C-+ F13*@ife Insurance concept was accepted with almost 4*+

Private @ife Insurance "ompanies

13*

Aerging of almost 4*+ Private (ector @ife Insurance

"ompanies in one nationalized

@ife Insurance "orporation of India

133* Proposal to privatize life insurance business

June 4+++ 9egistration process was notified

&ugust 4+++ &pplication was filed

=ctober 4+++ 1stlicense was issued with introduction of I92&

4++42uring the month of January, 11 @ife and /on@ife

Private Insurance license were issued

In order to elaborate the above path lets go through the history of @ife Insurance

(ector.

=n inanceL as he was then called to launch the 7harat

Insurance "ompany at @ahore !1C3$ in PunGab.

Prior to 1314, India had no legislation for regulating insurance. The @ife Insurance

"ompanies &ct 1314 and the Provident >und &ct 1314 were passed.

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The Insurance &ct 13


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%u'ine'' !i:ure be!"re t#e intr"du&ti"n "! IR*A

Population 1.++ 7illion

Insurable Population +.


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PriBate In'urer' in Indian In'uran&e Mar9et

Re:i'trati"n N". *ate "! Re:i'trati"n Name "! t#e C"m;an" (tandard with 15


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remaining other players have doubled their premium in a span of one year, whereas

7irla (unlife and (7I life have failed to collect the premium consistently and

registered negative growth rates -.3


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Insurance is a contract whereby, in return for the payment of premium by the insured,

the insurers pay the financial losses suffered by the insured as a result of the

occurrence of unforeseen events. ith the help of insurance, large number of people

exposed to a similar risk makes contributions to a common fund out of which the

losses suffered by the unfortunate few, due to accidental events, are made good.

This is the current scenario of the global Insurance Industry and now, let us looks at

the basic functions of insurance. hile conceding that insurance is a risktransfer tool,

corporate should be made to understand that it does not suffice merely to transfer the

risk but they have to participate in the effort of loss prevention. /ew but they have to

participate in the effort of loss prevention. /ew techni8ues and technology have to be

adopted from time to time in order to improve performance and this has special

significance to the order to improve performance and this has special significance to

the Indian Insurance Industry. The Indian insurance industry has always suffered from

drawbacks like lack of proper understanding of the purpose of insurance, lopsided

growth etc. ith the opening up of the industry, it is hoped that the new entrants with

their better channels would spread the real message of insurance, leading to a dynamic

growth. 'mphasis should be on finding new technological avenues, although it has

been observed world over that for selling insurance, an eyetoeye contact is essential.Internet can be used for better servicing which would eventually, lead to business

development. ith the entry of foreign companies into the insurance arena, a fresh

life has been inducted and there is a great deal of optimism in the air that the market

would automatically create a vibrant competition leading to the customer being the

ultimate winner.

1*


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C+APTER6

PROFILE > ORGANI/ATION STRUCTURE

OF T+E COMPAN-

1


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6.1 PROFILE > ORGANI/ATION STRUCTURE OF T+E

COMPAN-

AVIVA LIFE INSURANCE

&viva is :B?s largest and the world?s fifth largest insurance )roup. It is one of the

leading providers of life and pensions products to 'urope and has substantial

businesses elsewhere around the world. ith a history dating back to 13, &viva has

a 5* millioncustomer base with presence in 4- countries. It has Oinancial #ealth "heckL !>#"$ &viva?s sales force has been able to establish its

credibility in the market. The >#" is a free service administered by the >P&s for a

needbased analysis of the customer?s longterm savings and insurance needs.

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2epending on the life stage and earnings of the customer, the >#" assesses and

recommends the right insurance product for them.

&viva pioneered the concept of 7anc assurance in India, and has leveraged its global

expertise in 7anc assurance successfully in India. "urrently, &viva has 7anc

assurance tieups with &7/ &mro 7ank, The @akshmi 0ilas 7ank @td., PunGab N

(ind 7ank, Indus land 7ank, "ooperative 7anks and 9egional 9ural 7anks.

hen &viva entered the market, most companies were offering traditional life

products. &viva started by offering the more modern :nit @inked and :nitised ith

Profit products to the customers, creating a uni8ue differentiation. &viva?s products

have been designed in a manner to provide customers flexibility, transparency and

value for money. It has been among the first companies to introduce the more modern

:nit @inked products in the market. Its products include whole life !@ifelong and

@ifeline$, endowment !@ifesaver, 'asy @ife Plus, @ifesaver Plus and$, child policy

!&viva @ittle Aaster$ single premium !@ife 7ond and @ife 7ond Plus$, Pension

!Pension Plus and (ecure Pension$, Term !@ife (hield$, fixed term protection plan

!>reedom @ife Plan$, health insurance !&viva #ealth Plus$, traditional endowment

!2han 0riddhi, &viva Aoney 7ack$ and a tax efficient investment plan with limited

premium payment term !@ife7ond*$. &viva products are modern and contemporary

unitised products that offer uni8ue customer benefits like flexibility to choose cover

levels, indexation and partial withdrawals.

&viva?s >und management operation is one of its key differentiators. =perating from

Aumbai, &viva has an experienced team of fund managers and the range of fund

options includes :nitised ithProfits >und and seven :nit @inked funds Protector

>und, (ecure >und, 7alanced >und, )rowth >und, 'nhancer >und, Index >und and7ond >und

Vi'i"n

ABiBa 2where exceeding expectations through innovative solutions is our way of

life. This is the compelling vision that &viva India has created through the active

contribution of its employees. These lines not only define the way we live and work

but also serve as a reminder to deliver the best to our customers, shareholders,

colleagues, partners N employees at all times. 'mbedded in this vision are the core

1C


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values of Integrity, "ustomer centricity, Passion for winning, Innovation and

'mpowered team that we have collectively defined and committed to working

towards.

&viva @ife Insurance India is a private insurance company formed from collaboration

between the &viva insurance group of :B and the 2abur group, one of IndiaHs oldest

and top producers of traditional health care products. &vivaHs products are meant to

provide customers flexibility, transparency and value for money.

+i't"r< 2

&viva insurance group in :B with a history dating back to 13, today stands as one

of the leading provider of life and pension products to 'urope and other parts of the

world. The history of &viva @ife Insurance India starts at 1C#"$ programme it has been successful in

setting up its position in the Indian market. The >#" is a free service administered by

the >P&s which analyses the customerHs longterm savings and insurance needs and

depending on the life stage and earnings of the customer it selects the proper

insurance product for them.

&viva @ife Insurance India initiated the concept of 7anc assurance in India and at

present it has 7anc assurance tieups with &7/ &mro 7ank, &merican 'xpress 7ank,

"anara 7ank, "enturion 7ank of PunGab, The @akshmi 0ilas 7ank @td. and PunGab N

(ind 7ank, 11 "ooperative 7anks in )uGarat, 9aGasthan, Jammu N Bashmir, 7ihar,

est 7engal, &ndhra Pradesh and Aaharashtra and one regional 7ank in (ikkim. This

has helped to distribute &viva products in nearly


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&viva @ife Insurance India offers more modern :nit @inked and :nitized with Profit

money products to the customers. >ollowing the I92& guidelines, with effect from 1

July 4++, these unit linked products have been modified. The products of &viva

insurance group of India are

@ifelong@ifesaver or 'asy @ife PlusMoung &chiever@ife 7ond and @ife 7ond PlusPension Plus@ife (hield>reedom @ife Plan@ife7ond*

The fund management an operation of &viva @ife Insurance India is controlled from

Aumbai and the fund options includes :nitized ithProfits >und and four :nit

@inked funds

Protector >und The fund comprises of debt securities in the range of +1++6,

e8uities in the range of +4+6 and money market and cash in the range of +4+6.(ecure >und The fund comprises of debt securities in the range of *+1++6,

e8uities in the range of +4+6 and money market and cash in the range of +4+6.

7alanced >und The fund comprises of debt securities in the range of *+3+6,

e8uities in the range of +5*6 and money market and cash in the range of +1+6.)rowth >und The fund will comprise of debt securities in the range of +*+6,

e8uities in the range of +C*6 and money market and cash in the range of +4+6.This fund provides investment security to the capital of the customers.

Through their association with 7asics !a micro financial institution$ and other /)=s,

&viva @ife Insurance India have been able to reach out to those underprivileged who

had no access to insurances till day. In &viva @ife Insurance India, thus, bycombining protection and long term savings the customers can safeguard and provide

life products for their family with their changing needs.

Pr"du&t P"rt!"i" "! AVIVA Li!e In'uran&e

Investments in life insurance provide the dual benefit of saving for your future

financial re8uirements as well as financial security for your dependants in case of

4+


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your death. :nlike other investment instruments !term deposits, mutual funds and

stock market securities etc.$, the nature of life insurance products is such that they are

designed for the long term !1+ years or more$ and provide the best results when they

are continued for their full term.

The right investment strategies wonHt Gust help you plan for a more comfortable

tomorrow they will help you get Bal Par "ontrol. &t &viva, life insurance plans are

created keeping in mind your changing needs and your familyHs. =ur life insurance

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

savings needs.

&viva offer our customers a full range of transparent, flexible and value for money

products that include whole life !@ifelong, &viva @ifeline$, endowment !@ifesaver,

(ave )uard, 'asy @ife Plus, @ifesaver Plus, @ifesaver (uper ,&viva (achin "entury$

and traditional endowment !2han 0riddhi, &viva Aoney back$, child plan !&viva

@ittle Aaster$ single premium !@ife 7ond Plus$, pension !Pension Plus, (ecure

Pension$, term !@ife (hield$, fixed term protection cum savings plan !>reedom @ife

Plan$, health plan !&viva #ealth Plus$,with profits plan !&viva Aoney 7ack$ and a

shortpay recurring premium investment cum protection plan !@ife7ond*$. &viva

products are modern and contemporary unitized products that offer uni8ue customer

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

uni8ue investment options like a (ystematic Transfer Plan to get the benefit of

systematic investments and an &utomatic &sset &llocation Plan which changes the

risk structure on your investments as your age increases. e also have < rural plans

which are a low cost term plan F &mar (uraksha and 4 endowments F &nmol

(uraksha and Jana (uraksha. e also offer you a choice of investment options. Mou

can choose between our :nit @inked >und and our ith Profits >und !only on

Pension Plus$.

The ith Profits >und guarantees that the selling price of the units will never fall. The

unit value of this fund is increased by crediting bonuses on a daily compounding

basis. The fund provides investment security to your capital. The :nit @inked >unds

are designed to provide relatively more progressive capital growth wherein you

automatically receive the benefit related to the investment performance of the fund.

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:nder our :nit@inked Insurance Plans we offer a choice of :nit@inked >und

options

%"nd Fund, To generate a steady income through investment in high 8uality fixed

income securities. The fund comprises of 1++6 debt and money market and no

e8uities.

Pr"te&t"r Fund, Progressive returns on your investment by investing higher

element of assets in debt securities, with minimum exposure to e8uities. The fund

comprises of debt securities in the range of +1++6, e8uities in the range of +4+6

and money market and cash in the range of +5+6.

Se&ure Fund, The investment obGective of this fund is to provide progressive

return on your investment with a minimum guarantee on maturity. The fund comprises

of debt securities in the range of *+1++6, e8uities in the range of +4+6 and money

market and cash in the range of +5+6. Initially the e8uity exposure will be 1+ 6.

%aan&ed Fund,The investment obGective of this fund is to provide capital growth

by availing opportunities in debt and e8uity markets and providing a good balance

between risk and return. The fund comprises of debt securities in the range of *+

3+6, e8uities in the range of +5*6 and money market and cash in the range of +

5+6.

Gr"Ht# Fund, The investment obGective of this fund is to provide high capital

growth by investing higher element of assets in the e8uity market. The fund will

comprise of debt securities in the range of +*+6, e8uities in the range of TM. The

fund comprises of debt and money market securities in the range of +4+6 and

e8uities in the range of C+1++6.

En#an&er Fund,To provide aggressive, long term capital growth with high e8uity

exposure. The fund will comprise of debt and money market in the range of +5+6

and e8uities in the range of +1++6.

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&viva also offers a whole range of group insurance and savings products catering to

pensions, gratuities, credit protection and pure protection. e have a dedicated team

that works with corporate across the country.

IndiBidua

&t &viva we are dedicated to helping you make the most out of your life, and that

includes all your savings and protection re8uirements. e are here when you need to

make informed financial decisions for you, and for your loved ones.

&viva offer products under the following six categories for individuals

1. 7#"e Li!eF &s the name suggests, these products continue throughout your life

and pay out to your dependants only upon your death. These are useful if you want to

create a financial corpus for your family.

@ife @ong&viva @ifeline

6. Pure Term F Pure term products are designed to provide your dependants

financial protection at a low cost in case of your death.

@ife (hield

5. End"Hment'F 'ndowment products are meant to help you create a corpus to

meet financial needs during your lifetime. These products also provide a financial

cover in case of death

'asy @ife Plus

@ife 7ond@ifesaver(afeguard@ifesaver Plus@ifesaver (uper>reedom @ife Plan&viva 2han0riddhi&nmol (uraksha&viva (achin "entury&viva Aoney 7ack

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@. Sin:e Premium F single premium products are meant for lump sum

investments. These products are meant for maximizing your investment returns while

providing tax benefits on your investment.

@ife 7ond Plus

8. Pen'i"n Pan'Fpension products as the name suggests are meant for retirement

planning and aim to maximize your post retirement income

Pension Plus(ecure Pension

3. C#id Pan'F child plans are meant for investments benefiting your child whenhe she need them. Investments in these plans can be used for needs like funding

higher education, setting up a business, marriage expenses etc.

&viva @ittle Aaster

. +eat# Pr"du&t'hen it comes to healthcare there can be no compromises.

'ven though healthcare comes with huge cost implication and at most unexpected of

times. =ne must at all time be prepared to meet this contingency by setting aside acertain sum of money in form of saving or premiums for health assurance.

&viva #ealth Plus

Gr"u;

&viva )roup products are designed keeping in mind the special re8uirements of

organisations and large groups

"orporate @ife"redit /et(uperannuation&viva Aoney 7ack&viva India 7ond)roup )ratuity

"redit Plus@oan (uraksha

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)roup (hield

Rura

&t &viva we have specially designed products for the rural sector

&mar (urakshaJana (uraksha

ORGANI/ATION C+ART

4*


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6.6. Pr"bem' "! t#e Or:ani?ati"n

In todayHs scenario, Insurance companies must move from selling insurance to

marketing an essential financial product. Technology is the main factor for 7rokers to

reach to customers. They are working upon it and 7roking can be huge success if theyare able to leverage upon the technology factor. The touch point with the ultimate

customer is the distributor or the 7roker and the role played by them in insurance

markets is critical. It is the distributor who makes the difference in terms of the

8uality of advice for choice of product, servicing of policy post sale and settlement of

claims. There was a time when captive agents wrote the bulk of an insurance

company?s business. 7ut increasingly people are buying insurance products from

independent producers and institutional channels such as banks, brokerdealers, I>&s

and wire houses. Aanaging a captive agency force is an expensive business.

Independent producers and institutional channels are likely to bring new efficiencies

into the distribution framework and corner a larger percentage of the policies written.

>or instance, banks and large brokerdealers already have huge networks in place,

existing relationships with customers and brand e8uity. This proGect is an attempt to

do a Aarket &nalysis of @ife Insurance 7usiness done through 7rokers for the past ortune 1++ company and an expert in life

insurance. It was the first insurance company to offer cash dividends to policy

owners. In 1C35, /ew Mork @ife pioneered the then unheardof concept of insuring

women at the same rate as men.

%ira Sun Li!e In'uran&e C"m;an< Limited

7irla (un @ife Insurance is the coming together of the

&ditya 7irla group and (un @ife >inancial of "anada to

enter the Indian insurance sector. The &ditya 7irla )roup, a multinational

conglomerate has over -* business units in India and overseas with operations in

"anada, :(&, :B, Thailand, Indonesia, Philippines, Aalaysia and 'gypt to name a

few.

ICICI Prudentia Li!e In'uran&e

I"I"I Prudential @ife Insurance is a Goint venture

between the I"I"I )roup and Prudential plc, of the :B.

I"I"I started off its operations in 13** with providing finance for industrial

development, and since then it has diversified into housing finance, consumer finance,

mutual funds to being a 0irtual :niversal 7ank and its latest venture @ife Insurance.

Metr";"itan Li!e

Aet@ife India proudly carries a 1


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institutional customers. The Aet@ife "ompanies serve approximately 14 million

individuals in the :.(. and companies and institutions with ortune 1++ companies.

OM K"ta9 Ma#indra Li!e In'uran&e

'stablished in 13C* as Botak "apital Aanagement >inance

promoted by :day Botak the company has come a long way

since its entry into corporate finance. It has dabbled in

leasing, auto finance, hire purchase, investment banking, consumer finance, broking

etc. The company got its name Botak Aahindra as industrialists #arish Aahindra and

&nand Aahindra picked a stake in the company.

Ab"ut ING V


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6.@. S.7.O.T Anairms undertake (wot analysis to understand the external and internal environment.

(=T, stands for (trength, eakness, =pportunities and Threats.

STRENGT+,

(trong capital and reserve base.

The company provides customer service of the highest order.

(trong and well spread network of 8ualified intermediaries and sales person.

#uge basket of product range which are suitable to all age and income groups.

@arge pool of technically skilled manpower with in depth knowledge and

understanding of the market.

7EAKNESS,

@ow customer confidence on the private players

#eavy management expenses and administrative costs.

0ertical hierarchical reporting structure with many designations and cadres

leading to power politics at all levels without any exception.

OPPORTUNIT-,.

There will be inflow of managerial and financial expertise from the world?s

leading insurance markets. >urther the burden of educating consumers will also be

shared among many players.

International companies will help in building world class expertise in local market

by introducing the best global practices.

T+REAT,

=ther private insurance companies also vying for the same uninsured population.

7ig public sector insurance companies like &viva @ife Insurance "orporation

!@I"$ of India, /ational Insurance "ompany @imited, =riental Insurance @imited,

/ew India &ssurance "ompany @imited and :nited India Insurance "ompany

@imited. People trust and go to them more.

Poaching of customer base by other companies.


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Aost people don?t understand the need or are not willing to take insurance

policies in general.

C+APTER5

O%JECTIVES OF T+E STU*-


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5.1 O%JECTIVES OF T+E STU*-

5.6 Obe&tiBe "! ;r"e&t

To 'stimate life insurance business intermediated by 7rokers over the last three

years and proGections for the period 4++-4+1+

To assess opportunity for distribution of Insurance through brokers and way

forward.

To Identify imperatives for growth F products, commissions, technology interface,

service capability etc.

5.5 Re'ear "be&tiBe'

To &ssessment the opportunity and 9isks involve in insurance sector in view of

&viva.

&nalyze the customer perception about &viva @ife insurance company

5.@ SCOPE OF T+E STU*-

(cope of the study is to collect information regarding the manpower planning,

recruitment N selection process of the &viva @ife insurance company

To analyze the level of satisfaction of the employees in respect of the process

followed in the organization

5.8 SIGNIFICANCE

The study provides a complete knowledge of various fundamental concept related

to recruitment N selection process.

5.3 MANAGERIAL USEFULNESS OF T+E ORGANI/ATION

The study helps in finding the weaknesses, if any in the organization and the steps

taken to avoid them

The suggestions from the employees will help management to make changes in

the desired field


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C+APTER2@,

MET+O*OLOG- A*OPTE*


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@.1 MET+O*OLOG- A*OPTE*

*ata '"ur&e'

Primary data through 8uestionnaire and for the I have used internet, book and Gournal.

Primar< data

Primary data collected through the 1++ customer in 2elhi N /"9 who are using

&viva? product

Se&"ndar< data

(econdary data consist of information that already exits somewhere, having been

collected for some other purpose. In this study secondary data was collected from

company websites, magazines and brochures. I have collected from the various place

i.e. Internet, 7ook and Gournal.

0ue'ti"nnaire de'i:n !"rmati"n

Duestionnaire is a made by systematic way of solving a problem it includes the

research methods for solving a problem it includes the research methods for solving

the problem also it is keeping the obGective and title in mind it developed.

Sam;e de'i:n 'am;e eement unit

&fter due consultation with the many company supervisor in 2'@#I as well as with

the college guide, also keeping in mind the re8uirements of the company for the

research, the sample size that was found to be appropriate for the study was *+.

Etent

I have cover customer and the marketing manager their view towards the &viva life

insurance product segmentation.

Time !rame

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9andom sampling method used in this research paper

Limitati"n' "! re'ear

The following limitations can be pointed out from the research that I conducted in

relation to the problems that were given to me by 2'@#I 2istrict only.

a$ The sample size chosen for the 8uestionnaire was only 1++ and that may not

represent the true picture of the consumer perception about the @ife Insurance

sector.b) The research got confined to the city of 2elhi. The respondent belonged only

to 2elhi and not others who were out of 2elhi.


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C+APTER8

CONCEPTUAL *ISCUSSION


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8.1 CONCEPTUAL *ISCUSSION

8.6 INSURANCE IN*USTR- IN IN*IA

The insurance sector in India has come a full circle from being an open competitive.

Aarket to nationalization and back to a liberalized market again. Tracing the

2evelopments in the Indian insurance sector reveals the irst, the life insurance companies were nationalized in

13*, and then the general insurance business was nationalized in 13-4. =nly in 1333

private insurance companies have been allowed back into the business of insurance

with a maximum of 46 of foreign holding. In what follows, we describe how and

why of regulation and deregulation. The entry of the (tate 7ank of India with its

proposal of banc assurance brings a new dynamics in the game. e study the

collective experience of the other countries in &sia already deregulated their markets

and have allowed foreign companies to participate. If the experience of the other

countries is any guide, the dominance of the @ife Insurance "orporation is not going

to disappear any time soon.

The Indian insurance market, with a population of over one billion, offers tremendous

opportunities and can easily sustain 1++ insurers. The development of the insurance

sector will result in higher domestic savings and investments, significant expansion of

the capital market, enhanced infrastructure financing and increased foreign capital

inflow and employment.

The opening up of the Indian insurance sector has been hailed as a groundbreaking

move towards further liberalization of the Indian economy. The size of the existing

insurance market is growing at a rate of ten per cent per year. The estimated potential

of the Indian insurance market in terms of premium was around 9s


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establishes an authority called the Insurance 9egulatory 2evelopment &uthority,

designed to regulate the insurance sector.

T+E INSURANCE IN*USTR- 2 7IT+ A NE7 LOOK

"ompetition has well and truly set in the fastgrowing insurance sector, barely a year

after the doors were opened for the reentry of private players.

The new face of the Indian insurance industry is craving for attention. #oardings and

billboards of the new Goint venture private companies gaze at you from everywhere.

&dvertisements in newspapers and on television, insurance agents and direct mailers

form part of the campaign vehicle. The dozenodd life and nonlife companies in the

private sector are fighting a 8uiet but intense battle to make their presence felt to the

Indian consumer.

/ot to be undone, the public sector companies are trying to match the moves of the

private companies. They are shedding their old ways and donning a sprightlier and

marketfriendly exterior to make sure that they do not lose the advantage of a head

start.

@ife insurance is a form of insurance that pays monetary proceeds upon the death of

the insured covered in the policy. 'ssentially, a life insurance policy is a contract

between the named insured and the insurance company wherein the insurance

company agrees to pay an agreed upon sum of money to the insuredHs named

beneficiary so long as the insuredHs premiums are current.

ith a large population and the untapped market area of this population insurance

happens to be a very big opportunity in India. Today it stands as a business growing at

the rate of 1*4+6 annually. Together with banking services, it adds about - percent

to the countries )2P. In spite of all this growth statistics of the penetration of the

insurance in the country is very poor. /early C+6 of Indian populations are without

life insurance cover and the health insurance. This is an indicator that growth potential

for the insurance sector is immense in India.

It was due to this immense growth that the regulations were introduced in the

insurance sector and in continuation KAalhotra "ommitteeL was constituted by thegovernment in 133< to examine the various aspects of the industry. The key element


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of the reform process was participation of overseas insurance companies with 46

capital. "reating a more competitive financial system suitable for the re8uirements of

the economy was the main idea behind this reform.

(ince then the insurance industry has gone through many changes. The liberalization

of the industry the insurance industry has never looked back and today stand as one of

the most competitive and exploring industry in India. The entry of the private players

and the increased use of the new distribution are in the limelight today. The use of

new distribution techni8ues and the IT tools has increased the scope of the industry in

the longer run.

Insurance is the business of providing protection against financial aspects of risk, such

as those to property, life health and legal liability. It is one method of a greater

concept known as risk management Fwhich is the need to mange uncertainty on

account of exposure to loss, inGury, disadvantage or destruction.

Insurance is the method of spreading and transfer of risk. The fortunate many who are

exposed to some or similar risk shares loss of the unfortunate. Insurance does not

protect the assets but only compensates the economic or financial loss.

In insurance the insured makes payment called KpremiumsL to an insurer, and in

return is able to claim a payment from the insurer if the insured suffers a defined type

of loss. This relationship is usually drawn up in a formal legal contract.

Insurance companies also earn investment profits, because they have the use of the

premium money from the time they receive it until the time they need it to pay claims.

This money is called the float. hen the investments of float are successful they may

earn large profits, even if the insurance company pays out in claims every penny

received as premiums. In fact, most insurance companies pay out more money than

they receive in premiums. The excess amount that they pay to policyholders is the

cost of float. &n insurance company will profit if they invest the money at a greater

return than their cost of float.

&n insurance contract or policy will set out in detail the exact circumstances under

which a benefit payment will be made and the amount of the premiums.


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"lassification of insurance

The insurance industry in India can broadly classified in two parts. They are.

1$ @ife insurance.

4$ /onlife !general$ insurance.

1) Li!e in'uran&e,

@ife insurance can be defined as Klife insurance provides a sum of money if the

person who is insured dies while the policy is in effectL.

In 1C1C 7ritish introduced to India, with the establishment of the oriental lifeinsurance company in "alcutta. The first Indian owned @ife Insurance "ompany% the

7ombay mutual life assurance society was set up in 1C-+.the life insurance act, 1314

was the first statuary measure to regulate the life insurance business in India. In 13C


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>undamental principles of life insurance contract%

1) Prin&i;e "! am"'t :""d !ait#,

K& positive duty to voluntary disclose, accurately and fully, all facts, material to therisk being proposed whether re8uested or notL.

6) Prin&i;e "! in'urabe intere't,

K9elationships with the subGect matter !a person$ which is recognized in law and gives

legal right to insure that personL.

6) N"n2i!e (:enera) In'uran&e,

Triton insurance co. ltd was the first general insurance company to be established in

India in 1C*+, whose shares were mainly held by the 7ritish. The first general

insurance company to be set up by an Indian was Indian mercantile insurance co. @td.,

which was stabilized in 13+- there emerged many a player on the Indian scene

thereafter.

The general insurance business was nationalized after the promulgation of )eneral

Insurance "orporation !)I"$ => India undertook the postnationalization general

insurance business.

T+E CONSUMER A*OPTION PROCESS

The consumer adoption process is the process by which customers learn about new

products, try them, and adopt or reGect them. Today many marketers are targeting

heavy users and early adopters of new products recognizing that specific media can

reach both groups and tend to be opinion leaders. The consumer adoption process is

influenced by many factors beyond the marketer?s control, including consumers and

organizations willingness to try new products, personal influences and the

characteristics of the new products or innovations

STAGES OF A*OPTION PROCESS

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&n innovation refers to any good, service, or idea. That is perceived by someone as

new. The idea may have long history, but it is an innovation to the person who sees it

as new. Innovation takes time to spread through the special system. The consumer

adoption process focuses on the mental process through which an individual passes

from first hearing about an innovation to final adoption. &dopters of new products

have moved through the following five stages.

1. A7ARENESS, The consumer becomes aware of the innovation but lacks

information about it.

2. INTEREST, The consumer is stimulated to see the information about the

innovation.

3. EVALUATION,The "onsumer considers whether to try the innovation or not.

4. TRIAL,The consumer tries the innovation to improve his estimate of its value.

5. A*OPTION, The consumer decides to make full and regular use of the

innovation.

RANGE OF PRO*UCT AN* SERVICES

End"Hment'

'ndowments are policies in which the cash value built up inside the policy, e8uals the

death benefit !face amount$ at a certain age. The age this commences is known as the

endowment age. 'ndowments are considerably more expensive !in terms of annual

premiums$ than either whole life or universal life because the premium paying period

is shortened and the endowment date is earlier.

In the :nited (tates, the Technical "orrections &ct of 13CC tightened the rules on tax

shelters !creating modified endowments$. These follow tax rules as annuities and

I9&s do. 'ndowment Insurance is paid out whether the insured lives or dies, after a

specific period !e.g. 1* years$ or a specific age !e.g. *$.

A&&identa deat#

&ccidental death is a limited life insurance that is designed to cover the insured when

they pass away due to an accident. &ccidents include anything from an inGury, but do

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not typically cover any deaths resulting from health problems or suicide. 7ecause they

only cover accidents, these policies are much less expensive than other life

insurances.

It is also very commonly offered as accidental death and dismemberment insurance,

also known as an &2N2 policy. In an &2N2 policy, benefits are available not only

for accidental death, but also for loss of limbs or bodily functions such as sight and

hearing, etc.

&ccidental death and &2N2 policies very rarely pay a benefit% either the cause of

death is not covered, or the coverage is not maintained after the accident until death

occurs. To be aware of what coverage they have, an insured should always review

their policy for what it covers and what it excludes. =ften, it does not cover an insured

who puts themselves at risk in activities such as parachuting, flying an airplane,

professional sports, or involvement in a war !military or not$. &lso, some insurers will

exclude death and inGury caused by proximate causes due to !but not limited to$ racing

on wheels and mountaineering. &ccidental death benefits can also be added to a

standard life insurance policy as a rider. If this rider is purchased, the policy will

generally pay double the face amount if the insured dies due to an accident. This used

to be commonly referred to as a double indemnity coverage. In some cases, some

companies may even offer a triple indemnity cover.

Reated i!e in'uran&e ;r"du&t'

9iders are modifications to the insurance policy added at the same time the policy is

issued. These riders change the basic policy to provide some feature desired by the

policy owner. & common rider is accidental death, which used to be commonly

referred to as double indemnity, which pays twice the amount of the policy face

value if death results from accidental causes, as if both a full coverage policy and an

accidental death policy were in effect on the insured. &nother common rider is

premium waiver, which waives future premiums if the insured becomes disabled.

J"int i!e in'uran&e is either a term or permanent policy insuring two or more

lives with the proceeds payable on the first death.

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SurBiB"r'#i; i!e or secondtodie life is a whole life policy insuring two lives

with the proceeds payable on the second !later$ death.

Sin:e ;remiumwhole life is a policy with only one premium which is payable at

the time the policy is issued.

M"di!ied H#"e life is a whole life policy that charges smaller premiums for a

specified period of time after which the premiums increase for the remainder of the

policy.

Gr"u; i!e in'uran&e is term insurance covering a group of people, usually

employees of a company or members of a union or association. Individual proof of

insurability is not normally a consideration in the underwriting. 9ather, the

underwriter considers the size and turnover of the group, and the financial strength of

the group. "ontract provisions will attempt to exclude the possibility of adverse

selection. )roup life insurance often has a provision that a member exiting the group

has the right to buy individual insurance coverage.

Seni"r and ;reneed ;r"du&t'

Insurance companies have in recent years developed products to offer to niche

markets, most notably targeting the senior market to address needs of an aging

population. Aany companies offer policies tailored to the needs of senior applicants.

These are often low to moderate face value whole life insurance policies, to allow a

senior citizen purchasing insurance at an older issue age an opportunity to buy

affordable insurance. This may also be marketed as final expense insurance, and an

agent or company may suggest !but not re8uire$ that the policy proceeds could be

used for endoflife expenses.

Preneed !or prepaid$ insurance policies are whole life policies that, although available

at any age, are usually offered to older applicants as well. This type of insurance is

designed specifically to cover funeral expenses when the insured person dies. In many

cases, the applicant signs a prefunded funeral arrangement with a funeral home at the

time the policy is applied for. The death proceeds are then guaranteed to be directed

first to the funeral services provider for payment of services rendered. Aost contracts

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dictate that any excess proceeds will go either to the insuredHs estate or a designated

beneficiary.

These products are sometimes assigned into a trust at the time of issue, or shortly after

issue. The policies are irrevocably assigned to the trust, and the trust becomes the

owner. (ince a whole life policy has a cash value component, and a loan provision, it

may be considered an asset% assigning the policy to a trust means that it can no longer

be considered an asset for that individual. This can impact an individualHs ability to

8ualify for Aedicare or Aedicaid.

InBe'tment ;"i&ie' 7it#2;r"!it' ;"i&ie'

(ome policies allow the policyholder to participate in the profits of the insurance

company these are withprofits policies. =ther policies have no rights to participate in

the profits of the company, these are nonprofit policies.

ithprofits policies are used as a form of collective investment to achieve capital

growth. =ther policies offer a guaranteed return not dependent on the companyHs

underlying investment performance% these are often referred to as withoutprofit

policies which may be construed as a misnomer.

Pen'i"n'

Pensions are a form of life assurance. #owever, whilst basic life assurance, permanent

health insurance and nonpensions annuity business includes an amount of mortality

or morbidity risk for the insurer, for pensions there is a longevity risk.

& pension fund will be built up throughout a personHs working life. hen the person

retires, the pension will become in payment, and at some stage the pensioner will buyan annuity contract, which will guarantee a certain payout each month until death.

Annuitie'

&n annuity is a contract with an insurance company whereby the purchaser pays an

initial premium or premiums into a taxdeferred account, which pays out a sum at pre

determined intervals. There are two periods the accumulation !when payments are

paid into the account$ and the annuitization !when the insurance company pays out$.

>or example, a policy holder may pay O1+,+++, and in return receive O1*+ each month

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until he dies% or O1,+++ for each of 15 years or death benefits if he dies before the full

term of the annuity has elapsed. Tax penalties and insurance company surrender

charges may apply to premature withdrawals !if indeed these are allowed% in most

markets outside the :.(. the policy owner has no right to end the contract

prematurely$.

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Ta and i!e in'uran&e Taati"n "! i!e in'uran&e in t#e India

Premiums paid by the policy owner are normally not deductible for federal and state

income tax purposes.

Proceeds paid by the insurer upon death of the insured are not included in gross

income for federal and state income tax purposes% however, if the proceeds are

included in the estate of the deceased, it is likely they will be subGect to federal and

state estate and inheritance tax.

"ash value increases within the policy are not subGect to income taxes unless certain

events occur. >or this reason, insurance policies can be a legal and legitimate tax

shelter wherein savings can increase without taxation until the owner withdraws the

money from the policy. =n flexiblepremium policies, large deposits of premium

could cause the contract to be considered a Aodified 'ndowment "ontract by the

Internal 9evenue (ervice !I9($, which negates many of the tax advantages associated

with life insurance. The insurance company, in most cases, will inform the policy

owner of this danger before applying their premium.

Tax deferred benefit from a life insurance policy may be offset by its low return or

high cost in some cases. This depends upon the insuring company, type of policy and

other variables !mortality, market return, etc.$. &lso, other income tax saving vehicles

!i.e. Individual 9etirement &ccount !I9&$, 5+1B or 9oth I9&$ appear to be better

alternatives for value accumulation, at least for more sophisticated investors who can

keep track of multiple financial vehicles. The combination of lowcost term life

insurance and higher return taxefficient retirement accounts can achieve better

performance, assuming that the insurance itself is only needed for a limited amount of

time.

The tax ramifications of life insurance are complex. The policy owner would be well

advised to carefully consider them. &s always, the :nited (tates "ongress or the state

legislatures can change the tax laws at any time.

RULES AN* REGULATIONS

The Insurance 9egulatory and 2evelopment &uthority !I92&$Q1R is a national agencyof the )overnment of India, based in #yderabad. It was formed by an act of Indian

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Parliament known as I92& &ct 1333, which was amended in 4++4 to incorporate

some emerging re8uirements. Aission of I92& as stated in the act is to protect the

interests of the policyholders, to regulate, promote and ensure orderly growth of the

insurance industry and for matters connected therewith or incidental thereto.

E;e&tati"n'

The law of India ha followin! e"#e$%a%ion f&o' IR(A

1. To protect the interest of and secure fair treatment to policyholders%

4. To bring about speedy and orderly growth of the insurance industry !including

annuity and superannuation payments$, for the benefit of the common man, and toprovide long term funds for accelerating growth of the economy%


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*utie' P"Her' and Fun&ti"n' "! IR*A

Se&ti"n 1@ "! IR*A A&t 1=== a


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controlled and regulated by the Tariff &dvisory "ommittee under section 5:

of the Insurance &ct, 13


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0iswanathan etc. >ull force and utility of various institutions like &dvisory

"ommittee and selfregulatory organizations are not yet realized as the regulator

seems to be in a long learning mode. 2ue to over delegations, Individual incumbents

decide the pace and extent of utilization of prudential and statutory bodies. 9esearch

is limited to opinion seeking through legacy channels. Aarket waits for revision of

insurance act and establishment meaningfully functioning regulatory organs devoid of

excess delegation and subGective localization of development agencies.

I92& Journal is available as soft copy in its website. :nlike other Indian

administrative 9egulatory &gencies I92& is perceived as a silent regulator with

activities confined to its local existence.

NeH IR*A C#airman

)overnment of India has circulated to broadbase I92& chairman selection process. It

is felt in the market that placing of retired civil servants as I92& "hairman has served

the purpose of administrative fiefdom of the regulator. Aostly, the regulator has

become passive to market realities and most of the original public policy intentions

have been systematically replaced by personal preferences. There seems to be no

oversight of public policy erosions. Taking advantage of the completion of term ofcurrent incumbent, there seem to be an attempt to correct the future course but people

do not perceive any outcome to result as the market does not seem to throw up

candidates of the stature of #oward 2avies for Indian market. 7ut a right leadership is

the solution to the re8uirement of this booming market.

In'uran&e %u'ine'' In'uran&e bu'ine'' i' diBided int" !"ur &a''e',

1$ @ife Insurance 4$ >ire Insurance


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Insurance &ct, 13


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C+APTER3

ANAL-SIS OF T+E PRO%LEM UN*ER

STU*-

*


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3.1 ANAL-SIS OF T+E PRO%LEM UN*ER STU*-

*ATA ANAL-SIS

3.6 FACTS AN* FIN*INGS

1. *"


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9s. *+++1 F 9s. ++++ 1C

9s. +++1 F 9s. C++++ 11

9s. C+++1 F 9s. 1+++++ 14

Aore than 9s. 1+++++ +

@. 7#at 9ind "! in'uran&e ;"i&< H"ud 'uit


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. 7#i a&&"rdin: t" oreign based company

o )overnment owned company *

o Public @imited "ompany 14

o Private "ompany 15

o >oreign based company 1C

*


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14. T


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Per'"na *etai',

)ender

o Aale

o >emale

Aale *+

>emale *+

A:e :r"u;,

o 1C F 4* years

o 4 F


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(tudent 1C

#ousewife 13

orking Professional 1

market segmentation of aviva life insurance

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