my project-dipayan dey (pgdbm ii)
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A PROJECT REPORT ON
AN ANALYSIS OF INDIAN INSURANCE INDUSTRY WITH SPECIAL REFERENCE
TO
ICICI PRUDENTIAL
SUBMITTED TO
UNIVERSITY OF PUNE
BY
DIPAYAN DEY
STUDENT OF
POST GRADUATE DIPLOMA IN BUSINESS MANAGEMENT (PGDBM-II)
UNDER THE GUIDANCE OF
PROF. RUMA AGWEKAR
INDIAN INSTITUTE OF COST & MANAGEMENT STUDIES & RESEARCH, PUNE
411004.
(2009-2010)
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CERTIFICATE
TO WHOMSOEVER THIS MAY CONCERN
This is to certify that the project report tiled An analysis of Indian insurance
industry with special reference to ICICI PRUDENTIAL is prepared by DIPAYAN
DEY , student of Post Graduate Diploma in Business Management (PGDBM-II),
(academic year 2009-10) has satisfactorily & successfully carried out the project
work.
The project is submitted in partial fulfilment of PGDBM-II course in the academic year
2009-10 as per the rules of the University of Pune.
DIRECTOR PROJECT GUIDE
DR. ASHOK JOSHI (PROF. RUMA AGWEKAR)
Place : Pune
Date : 10/03/2010
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CERTIFICATE
TO WHOMSOEVER THIS MAY CONCERN
This is to certify that DIPAYAN DEY , a student of Post Graduate Diploma in
Business Management (PGDBM-II), at IndSearch, Pune, has visited our Company to
carry out the project work titled An analysis of Indian insurance industry with
special reference to ICICI PRUDENTIAL.
The student has taken sincere efforts to collect the information and prepare the
report on the subject.
FOR , ICICI Prudential Life Insurance Co. Ltd.
Pankaj KapoorAsst. Regional Manager
Place : Pune
Date : 10/03/2010
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Acknowledgement
The successful completion of this project is the result of the efforts put in by manyothers and this project would be incomplete without giving due credit to them.
I am glad indebted to Mr. Nitin Trivedi , Asst. Regional Manager ( ICICI PrudentialLife Insurance Co. Ltd.) for providing me inexplicable assistance in completion of theproject.
I express my sincere thanks to my guide Mrs. Ruma Agwekar for giving me anoppournity to work on the project An Analysis of Indian Insurance Industry with
Special reference to ICICI Prudential which has proof to be a great learningexperience for me. Under her esteem guidance I have learned a lot which I willcherish throughout my life.
Finally I would express my hearty thanks and gratitude to my Director ,facultymembers for their unceasing efforts, encouragement, help and valuable guidance oneach stage, which has contributed for the success of the project.
TABLE OF CONTENTS
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Chapter 1: Introduction 06-45
1.1 Overview of the Industry 16
1.2 Profile of the Organization 24
1.3 Problems of the Organization 42
1.4 S.W.O.T. Analysis of the Organization 42
1.5 Competition Information 44
Chapter 2: Objective & Methodology 46-47
2.1 Significance of the study 46
2.2 Managerial usefulness of the study 46
2.3 Objectives of the study 46
2.4 Scope of the Study 47
2.5 Methodology 47
Chapter 3: Conceptual Discussion 48-59
Chapter 4: Data Analysis 60-62
Chapter 5: Findings & Recommendations 63-64
Annexure 65-67
Bibliography 68
Chapter 1
INTRODUCTION
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The entire effort of human life is to proceed from uncertainty to certainty. The
rigmarole of life proceeds with first acquiring the wherewithal to earn a living and then
striving for its betterment and ensuring that the comfort and pleasure derived from a
physical commodity or a human being continues. It is at the latter stage that the
mechanism of Insurance comes in play.
The concept of insurance is in essence related to the protection of the economic
value of assets. Every asset whether physical or in form of a human being has a
value. The asset is built up in the expectation that, either through the income
generated there from or some other output, some needs of the individual would be
met. For example, in the case of an industry its production is sold and income
generated. In the case of a vehicle, it provides comfort and convenience in
transportation.
1ST Insurance in India started from 1817.Basically it is divided into two types such as
General insurance & Life insurance. After freedom there are 245 companies in India
who provide life insurance. In 1956 finance minister C.D.Deshmukh seize all those
companies. There is only one life insurance company from1956-2000 that is LIC of
India. In 1993 the finance secretary R.N.Malhotra introduce IRDA(Insurance
Regulatory Development Authority) act. After that private life insurance companies
came into existence. HDFC is the 1st private insurance company in India. After that
ICICI prudential Life insurance corporation started its operation. From 2001-2008
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ICICI place the 1st position among all private insurance company. Now days there are
12 private life insurance companies.
As compare to past now a days insurance companies provides not only life cover
plan but also provides investment plan. In recent trend there are two type of plan
provided by the Life insurance company such as:
- Traditional Plan
ULIP (Unit Linked Insurance Plan)
Traditional Plan consisting of a long maturity period where as ULIP consists of both
insurance and investment having shorter maturity period.
Fundamental definition:
In the words of D.S. Hansell, Insurance accumulated contributions of all parties
participating in the scheme.
Contractual definition:
In the words of Justice Tindall, Insurance is a contract in which a sum of money is
paid to the assured as consideration of insurers incurring the risk of paying a large
sum upon a given contingency.
Characteristics of insurance:
Sharing of risks
Cooperative device
Evaluation of risk
Payment on happening of a special event
The amount of payment depends on the nature of losses incurred.
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The success of insurance business depends on the large number of
people insured against similar risk.
Insurance is a plan, which spreads the risk and losses of few people
among a large number of people.
The insurance is a plan in which the insured transfers his risk on the insurer.
Insurance is a legal contract which is based upon certain principles of insurance
which includes utmost good faith, insurable interest, contribution, indemnity, causes
proximal, subrogation, etc.
The scope of insurance is much wider and extensive.
Functions of insurance:
Primary functions:
1. Provide protection: - Insurance cannot check the happening of the risk, but can
provide for the losses of risk.
2. Collective bearing of risk: - Insurance is a device to share the financial losses of
few among many others.
3. Assessment of risk: - Insurance determines the probable volume of risk by
evaluating various factors that give rise to risk.
4. Provide certainty: - Insurance is a device, which helps to change from uncertainty
to certainty.
Secondary functions:
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1. Prevention of losses: - Insurance cautions businessman and individuals to adopt
suitable device to prevent unfortunate consequences of risk by observing safety
instructions.
2. Small capital to cover large risks: - Insurance relives the businessman from
security investment, by paying small amount of insurance against larger risks and
uncertainty.
3. Contributes towards development of larger industries.
Other Function:
Means of savings and investment:
Insurance companies are business houses. The product they sell is financial
protection. To succeed and survive, they must cover their costs, which include
payments to cover the losses of policyholders, as well as sales and administrative
expenses, taxes and dividends.
Insurance companies have two sources of income for covering these costs:
Premiumsand Investmentincome. The premiums are collected on a regular basis
and invested in Government Bonds, Gilt, stocks, mutual funds, real estates and other
conservative avenues. However, investment income depends on market conditions,
interest rates, economy etc. and varies from year to year. Because of the uncertainty
associated with the investment income, insurance companies must generate enough
income from premiums to cover the bulk of their expenses.
The risk becomes insurable if the following requirements are complied with:
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The insured must suffer financial loss if the risk operates.
The loss must be measurable in money,
The object of the insurance contract must be legal.
The insurer should have sufficient knowledge about the risks he accepts.
Fundamentals of Insurance
The fundamental Principles of the Insurance are as follows:
Insurable Interest: Insurable interest means the legal right to insure. Insurable
Interest is a must and only then the insurance contract is enforceable at law. This
principle differentiates a Contract of insurance from wager. Lack of insurable interest
renders the contract null and void. For Insurable Interest to exist there must be
Property, Rights, Interest, Life or Liability; this must be insured and the Insured
should have a legally recognizable relationship thereto. The Insured should be
benefited by the safety of the property or is prejudiced by its loss. Insurable Interest
may arise in the following manner:
1. Ownership: Absolute ownership entitles the owner to insure the property. This is
the commonest method whereby Insurable Interest arises.
2. Partial Interest is also insurable e.g. a mortgagee. A creditor can also insure the
life of his debtor but only to the extent of his loan.
3. Administrators and executors i.e. officials appointed by a court of law to take
care of a property may also insure the property.
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4. Relationship does not automatically constitute insurable interest. The only
relationship recognized by law for this purpose is the one between a husband and
wife.
5. An employercan insure his employee under a Personal Accident Policy as he has
insurable interest in them.
Proximate cause: Generally, the claims are payable under insurance policies if
they arise out of events which are proximately caused by the insured perils. In other
words, the proximate cause of the event has to be peril covered by the policy, so as
to constitute a valid claim.
Contribution: An insured may have several insurance on the same subject matter.
If he recovers his loss under all these insurance, he will obviously make a profit out of
loss. This will be an infringement of the principle of indemnity. Common Law has,
therefore, evolved the doctrine of contribution whereby the insured is prevented from
recovering more than his loss, despite his having several insurance on the subject
matter.
Subrogation: The principle of indemnity seeks to prevent the insured from making
profit out of loss. However, it may so happen that that the insured may recover his
loss under his policy and he may also have rights against third parties. If, after the
insurance claim is settled, the insured is allowed to enforce his rights against third
parties and to retain whatever damages he receives from them, he will certainly make
a profit and the principle of indemnity will be infringed.
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Common Law has therefore, evolved the doctrine of subrogation as corollary to the
principle of indemnity. Subrogation may be defined as the transfer of rights and
remedies of the insured to the insurers who have indemnified the insured in respect
of the loss. The Common Law right of subrogation is implied an all contracts on
indemnity, as it arises only after payment of loss.
Utmost Good Faith: In all General Insurance contracts we know that a property or
interest or liability or life is offered for insurance and the insured has to take decisions
on the acceptance of the proposal. If he decides to accept the proposal a premium
commensurate with the risk has to be charged. To enable him to take necessary
decision in this regard, the insurer must have certain facts about the risk offered.
These facts influence the judgment of the insurer in deciding about the acceptance or
otherwise of the risk and the rate of premium to be charged, if accepted. Such facts
are known as material facts.
Nature of Insurance Contracts
When the insured pays the premium and the insurers accept the risks, the contract of
insurance is concluded. The policy issued by the insurers is the evidence of the
contract. The contract of insurance, like any other contract, for example a contract for
the sale of goods, is subject to the general law of contract as embodied in the
Indian Contract Act, 1872.
According to this Act, a contract must have certain essential features in order to
make it legally valid and enforceable. The following are the essential elements:
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a) Offer and acceptance: Usually, the offer is made by the proposer, and acceptance
made by the insurer.
b) Consideration: This means that the contract must involve some mutual benefit to
the parties. The premium is the consideration from the insured and the promise to
indemnity is the consideration from the insurers.
c) Agreement between the parties: Both the parties should agree to the same thing in
the same sense.
d) Capacity of the parties: Both the parties to the contract must legally competent to
enter into the contract. For example, minors cannot enter into insurance contracts.
e) Legality: The object of the contract must be legal and the contract should not
violate any legal requirements. E.g. no insurance can be had for smuggled goods.
Risk
Reasonable or not, risks are inescapable in business. Every business venture is
something of a gamble, because the possibility of loss is as real as the prospects for
profits. And even though managers do everything possible to ensure that their
business succeed, they cannot guard against every conceivable form of risk.
Pure Risk versus Speculative Risk
Pure Risk: Events representing the kind of risk that no business can predict or
escape, known as Pure Risk, it is the threat of a loss without the possibility of gain. In
other words, a disaster such as avalanche or fire is costly for the business it strikes,
but the fact that no disaster occurs contributes nothing to a firm's profit.
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Speculative Risk: It is the type of risk that offers the prospect of making profit - and
prompts people to go into business in the first place. Every business accepts the
possibility of losing money in order to make money.
Approaches to Risk Management
Risk Management is the process of reducing the threat of loss due to uncontrollable
events. Steps in selecting a risk management approach:
To identify all the things those can possibly go wrong.
To consider the probability that an event will occur.
Techniques of Risk Management are:
1. Avoiding the Risk: When a company avoids risk, it eliminates the possibility that
a particular event will occur. To avoid the possibility of a suit, for example, not to
produce any products -which would, of course, eliminate both the threats of a lawsuit
and the opportunity to profit. With rare exceptions, avoiding risk entirely is extremely
difficult.
2. Reducing Risk: A more practical approach is to reduce the risk by taking
precautions. Risk reduction is an important element in most companies' approach to
risk management. Typical precautions include putting safety locks on doors to
prevent robberies, installing overhead sprinklers to minimize fire damage, and
periodic checking motor vehicles to prevent accidents.
3. Assuming risk: Many companies draw on current revenues or set aside a
"Contingency Fund" to cover unexpected losses. Setting aside money on regular
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basis could be cheaper than purchasing insurance. Moreover, the company can earn
interest on the reserved cash. Such assumption of risk is also called self-insurance or
risk retention.
4. Transferring the risk: Most companies still rely on outside insurance firms for
financial protection against catastrophic losses. In buying insurance, companies
transfer the risk of loss to an insurance firm, which agrees to pay for certain types of
losses. In exchange, the insurance firm collects a fee known as a premium.
Insurable and Uninsurable Risks:
Insurable risks: An insurable risk - one that an insurable company will cover -
Generally meets the following requirements. The peril insured against must not be
under the control of the Insured. This means, of course that insurer do not pay for
losses that are intentionally caused by an insured, caused at the Insured's direction,
or caused with the insured's collusion. For example, a fire insurance policy excludes
loss caused by the Insureds own arson. It does, however, include loss caused by an
employee's arson. Losses must be calculable, and the cost of insuring must be
economically feasible. To operate profitably, insurance companies must have data on
the frequency of losses caused by a given peril. If this information covers a long
period of time and is based on a large number of cases, Insurance companies can
usually predict quite accurately how many losses will occur in the future. For
example, the insurance companies to fix up the rate of premium of Personal Accident
Insurance may use the information of the number of people who will die each year in
India in accidents. The peril must be unlikely to affect all insured simultaneously.
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Unless an insurance company spreads its coverage over large geographic areas or a
broad population base or different classes of Insurance, a single disaster might force
it to pay out all its policies at once. The possible loss must be financially serious to
the Insured. An Insurance company could not afford the paperwork involved in
handling numerous small claims of a few Rupees each. As a result, many policies
have a clause specifying that the insurance company will pay only that part of a loss
greater than an amount - the deductible or excess - stated in the policy. The excess
represents small losses that the Insured has to absorb.
1.1 OVERVIEW OF THE INDUSTRY
Origin of life insurance
Life Assurance was born in England when the first policy providing temporary cover
for a period of 12 months was issued as easy as 1583 A.D. The Amicable Society
started granting fluctuating sum on death since 1705 and a fix sum since 1757, with
the development of mortality tables, the life Assurance acquired a scientific character.
The Equitable Society founded in 1762 was the first Society established on scientific
basis.
Origin of life assurance in India
In India, after failure of two British companies, the European and the Albert in 1870,
which attempted writing business on Indian lives, first Indian Life Assurance Society
was formed in the same year called Bombay Mutual Assurance Society Ltd. It was
followed by the Oriental Life Assurance Company Limited in 1874, Bharat in 1896
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and Empire of India in 1897. The Idea of insurance was born out of a desire of the
people to share loss of an individual by many.
Originally it restricted to forms other than life assurance. It started with Marine
Insurance, where the losses on account of perils of sea were shared by all who were
engaged in trade. Reference to some forms of insurance, is found in the codes of
Hammurabi, Manu (Manav Dharma Shastra). The word `Yogakshema is used in the
Rig Veda suggesting that some form of community insurance was practiced by the
Aryans in India over 3000 years ago. In India during Buddhist period burial societies
existed which were mutual in their character and used to help a family by building a
house, protecting the widow, marrying the girls.
The Swadeshi Movement of 1905 provided impetus to the formation of several
companies such as the `Hindustan Cooperative, the `United India, the `Bombay
Life, the `National. Further in the wake of freedom movement number of companies
such as the `New India, the `Jupiter the `Lakshmi emerged.
The Government began to exercise a certain measure of control on Insurance
business by passing the `Insurance Act in 1912. For controlling investment of funds,
expenditure and management, a comprehensive Act was passed known as `The
Insurance Act 1938. For controlling the affairs, the office of Controller of Insurance
was established. The act was extensively amended in 1950.
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In the year 1955, approximately 170 Insurance Offices and 80 Provident Fund
Societies had been registered for transacting Life Assurance business in India. There
were, however, no full guarantees to the policyholders. The concept of trusteeship
was lacking. Many insurance companies went into liquidation. There were
malpractices in insurance business. For achieving the following purposes it was felt
necessary to nationalize the insurance business in India.
(i) To provide security to the policyholders.
(ii) To utilize the funds for nation-building activities.
(iii) To avoid cut throat competition.
(iv) To abolish mal-practices.
(v) To spread the insurance message to the rural areas.
The first step in this direction was taken by the Government of India by issuing the
Life Insurance (the Emergency provisions) Ordinance, 1956 on 19th January, 1956.
The then Finance Minister, Shri C. D. Deshmukh mentioned the purpose of
nationalisation as reaching the goal of socialistic pattern of society, rendering
genuine service to the people in the rural area. The Life Insurance Corporation Act
(Act XXXI of 1956) was passed by the Parliament in June 1956 which came in force
on 1st July 1956. The Life Insurance Corporation of India came into existence on 1st
September 1956.
Insurance Sector Reforms
Having looked at the insurance sector, let us look at the efforts made by the
government to make the industry more dynamic and customer friendly. To begin with,
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the Malhotra committee was set up with the objective of suggesting changes that
would achieve the much required dynamism.
The Malhotra Committee Report
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI
Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and
recommend its future direction. In 1994, the committee submitted the report and gave
the following recommendations:
Structure:
Government stake in the insurance Companies to be brought down to 50%.
Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent-corporations.
All the insurance companies should be given greater freedom to operate.
Market Regulations
Private Companies with a minimum paid up capital of Rs.1bn should be allowed to
enter the industry.
No Company should deal in both Life and General Insurance through a single entity.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only one State Level Life Insurance Company should be allowed to operate in each
state.
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Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be made
independent.
Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced
from 75% to 50%.
GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time).
Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension plans.
Computerization of operations and updating of technology to be carried out in the
insurance industry.
Overall, the committee strongly felt that in order to improve the customer services
and increase the coverage of the insurance industry should be opened up to
competition. But at the same time, the committee felt the need to exercise caution as
any failure on the part of new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by stipulating the
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minimum capital requirement of Rs.1 bn. This amount is not very high for foreign
firms, as it translates to only about US$25 million. Further, to date it is unclear
whether equity should be payable in one go or should be brought in as instalments.
Also, the foreign equity participation was to be restricted to only 40%.The committee
felt the need to provide greater autonomy to insurance companies in order to improve
their performance and enable them to act as independent companies with economic
motives. For this purpose, it had proposed setting up an independent regulatory
body.
The industry and analysts find that there is lack of clarity in the following areas:-
Though coverage of rural areas was to be made compulsory, it raises the question
as to who would subsidies the rural policies as they would be difficult to service and
hence costs will go up.
There is some confusion with respect to investments. Where the funds should be
invested? Currently 70% of the funds with LIC & GIC are invested in Government
securities. Would new entrants be allowed to invest in GOI securities?
The report also does not enumerate exit options available to the new entrants. In
the event of failure, there should be an arrangement made whereby the other
Companies pool in to bail the customers, who in all probability would be middle class
individuals.
Potentiality of Insurance in Indian Market
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Marketing inefficiency of general insurers has kept society in dark even when so
many personal as well as commercial lines of insurance covers are available for
them. Insurers have failed to identify the need of the individual risk factors and
thereafter selecting proper market segments and developing demand of these needs
by adopting proper marketing mix. There is great scope of commercial line of
insurance as we are developing at a very fast rate but the potentiality and scope of
personal lines of insurance is vast as this area is still under-tapped. Product
designing and pricing is also simple and growth of this portfolio is guaranteed in this
country which has a base of over 100 crore population, where there are about 25
crore dwellings, 20 crore schools, colleges and educational institutions and about 5
crore small and big shops. But despite this the Indian insurers share in personal line
of business is very low or negligible.
There are enormous growth opportunities to Indian as well as foreign insurers
because of such a huge base of population there is ample scope to introduce the
new line of covers as per the changing needs and to increase the per capita share of
the insurance.
By encouraging risk transfer by investing small portion of the savings of the
individuals.By opening up the sector far more opportunities has came up in insurance
and reinsurance market. After privatization of this sector presence of the foreign
players has also increased. Therefore the insurers, in time to come, will have to
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change their attitude from selling of the product to marketing of the protection needs
of the insured and for this is required is:
Effective product planning
Suitable pricing
Efficient promotion and physical distribution.
Proper physical evidence.
Good and well trained sales force.
1.2 PROFILE OF THE ORGANISATION:
ICICI Prudential Life Insurance
ICICI Prudential Life Insurance is a joint venture between the ICICI Group and
Prudential PLC, of the UK. ICICI started off its operations in 1955 with providing
finance for industrial development, and since then it has diversified into housing
finance, consumer finance, mutual funds to being a Virtual Universal Bank and its
latest venture Life Insurance.
Foreign Partner:
Established in 1848, Prudential PLC. of U.K. has grown to be the largest life
insurance and mutual fund company in U.K. Prudential PLC. has had its presence in
Asia for the past 75 years catering to over 1 million customers across 11 Asian
countries. Prudential is the largest life insurance company in the United Kingdom
(Source: S&P's UK Life Financial Digest, 1998). ICICI and Prudential came together
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in 1993 to provide mutual fund products in India and today are the largest private
sector mutual fund company in India.
Their latest venture ICICI Prudential Life plans to take care of the insurance needs at
various stages of life.
ICICI Prudential Life Insurance was established in 2000 with a commitment to
expand and reshape the life insurance industry in India. The company was amongst
the first private sector insurance companies to begin operations after receiving
approval from Insurance Regulatory Development Authority (IRDA), and in the time
since, has taken several steps towards its realizing its goal.
The company's wide range of products, distribution strengths and powerful brand has
driven its growth across a cross-section of people and cities. As on March 31, 2003,
the company had issued nearly 350,000 policies, with a total premium income of over
INR 5 billion and a total sum assured in excess of INR 87 billion. Today, the company
has established itself as the No. 1 private life insurer in the country.
ICICI Prudential Life Insurance Company is a joint venture between ICICI, a premier
financial powerhouse and Prudential PLC, a leading international financial services
group headquartered in the United Kingdom. ICICI Prudential was amongst the first
private sector insurance companies to begin operations in December 2000 after
receiving approval from Insurance Regulatory Development Authority (IRDA).
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ICICI Prudentials equity base stands at Rs. 4.25 billion with ICICI Bank and
Prudential plc holding 74% and 26% stake respectively. As of March 31, 2003, the
company had issued nearly 350,000 policies with a sum assured in excess of Rs
8,700 crore and total premium income of over Rs. 500 crore. Today the company is
the #1 private life insurers in the country.
Company Vision
To make ICICI Prudential the dominant Life and Pensions player built on trust by
world-class people and service.
This is what ICICI Prudential hope to achieve by:
Understanding the needs of customers and offering them superior products and
service
Leveraging technology to service customers quickly, efficiently and conveniently
Developing and implementing superior risk management and investment strategies
to offer sustainable and stable returns to our policyholders
Providing an enabling environment to faster growth and learning for ICICI Prudential
employees
And above all, building transparency in all ICICI Prudential dealings.
The success of the company will be founded in its unflinching commitment to 5 core
values -- Integrity, Customer First, Boundary less, Ownership and Passion. Each of
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the values describes what the company stands for, the qualities of our people and
the way we work.
We do believe that we are on the threshold of an exciting new opportunity, where we
can play a significant role in redefining and reshaping the sector. Given the quality of
our parentage and the commitment of our team, there are no limits to ICICI
Prudential growth.
Board of Directors
The ICICI Prudential Life Insurance Company Limited Board comprises reputed
people from the finance industry both from India and abroad.
Ms. Chanda D. Kochhar, Chairperson
Mr. N. S. Kannan, Director
Mr. K. Ramkumar, Director
Mr. Barry Stowe, Director
Mr. Adrian OConnor, Director
Mr. Keki Dadiseth, Independent Director
Prof. Marti G. Subrahmanyam, Independent Director
Ms. Rama Bijapurkar, Independent Director
Mr. Vinod Kumar Dhall, Independent Direct
Mr. V. Vaidyanathan, Managing Director & CEO
Management Team
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The ICICI Prudential Life Insurance Company Limited Management team comprises
reputed people from the finance industry both from India and abroad.
Mr.V.Vaidyanathan, Managing Director & CEO
Ms. Anita Pai,Executive Vice President - Customer Service, Technology &
Marketing
Dr. Avijit Chatterjee, Appointed Actuary
Mr. Puneet Nanda, Executive Vice President
Products Insurance Solutions for Individuals:
ICICI Prudential Life Insurance offers a range of innovative, customer-centric
products that meet the needs of customers at every life stage. Its 13 products can be
enhanced with up to 4 riders, to create a customized solution for each policyholder.
Savings Solutions:
ICICI Pru Save n Protect is a traditional endowment savings plan that offers life
protection along with adequate returns.
ICICI Pru CashBak is an anticipated endowment policy ideal for meeting milestone
expenses like a child's marriage, expenses for a child's higher education or purchase
of an asset.
Protection Solutions:
ICICI Pru LifeGuard is a protection plan, which offers life covers at very low cost. It
is available in 3 options - level term assurance, level term assurance with return of
premium and single premium.
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http://www.iciciprulife.com/public/About-us/ProfileTeam-Vaidyanathan.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-AnitaPai.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-Dr.%20Avijit%20Chatterjee.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-PuneetNanda.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-AnitaPai.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-Dr.%20Avijit%20Chatterjee.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-PuneetNanda.htmhttp://www.iciciprulife.com/public/About-us/ProfileTeam-Vaidyanathan.htm -
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Child Solutions:
ICICI Pru SmartKid provides guaranteed educational benefits to a child along with
life insurance cover for the parent who purchases the policy. The policy is designed
to provide money at important milestones in the child's life.
Market-linked Solutions:
ICICI Pru. Life Time Maxima offers customers the flexibility and control to customize
the policy to meet the changing needs at different life stages. It offers 3 investment
options - Growth Plan, Income Plan and Balanced Plan.
Retirement Solutions:
Life Time Elite Pension is a regular premium market-linked pension plan
ICICI Prudential also launched ''Salaam Zindagi'',a social sector group insurance
policy targeted at the economically underprivileged sections of the society.
Group Insurance Solutions:
ICICI Prudential also offers Group Insurance Solutions for companies seeking to
enhance benefits to their employees.
ICICI Pru Group Gratuity Plan:
ICICI Pru's group gratuity plan helps employers fund their statutory gratuity obligation
in a scientific manner. The plan can also be customized to structure schemes that
can provide benefits beyond the statutory obligations.
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ICICI Pru Group Superannuation Plan:
ICICI Pru offers a flexible defined contribution superannuation scheme to provide a
retirement kitty for each member of the group. Employees have the option of
choosing from various annuity options or opting for a partial commutation of the
annuity at the time of retirement.
ICICI Pru Group Term Plan:
ICICI Pru''s flexible group term solution helps provide affordable cover to members of
a group. The cover could be uniform or based on designation/rank or a multiple of
salary. The benefit under the policy is paid to the beneficiary nominated by the
member on his/her death.
Flexible Rider Options:
ICICI Pru Life offers flexible riders, which can be added to the basic policy at a
marginal cost, depending on the specific needs of the customer.
1.Accident & disability benefit: If death occurs as the result of an accident during
the term of the policy, the beneficiary receives an additional amount equal to the sum
assured under the policy. If the death occurs while traveling in an authorized mass
transport vehicle, the beneficiary will be entitled to twice the sum assured as
additional benefit.
2. Accident benefit: This rider option pays the sum assured under the rider on death
due to accident.
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3.Critical Illness Benefit: protects the insured against financial loss in the event of 9
specified critical illnesses. Benefits are payable to the insured for medical expenses
prior to death.
4.Major Surgical Assistance Benefit: provides financial support in the event of
medical emergencies, ensuring that benefits are payable to the life assured for
medical expenses incurred for surgical procedures. Cover is offered against 43
different surgical procedures.
About The Partners
ICICI Bank (NYSE:IBN) is Indias second largest bank with an asset base of Rs.
106812 crore. ICICI Bank provides a broad spectrum of financial services to
individuals and companies. This includes mortgages, car and personal loans, credit
and debit cards, corporate and agricultural finance. The Bank services a growing
customer base of more than 7 million customer accounts and 5 million bondholders
accounts through a multi-channel access network. This includes about 450 branches
and extension counters, 1675 ATMs, call centres and Internet banking
(www.icicibank.com). ICICI Bank posted a net profit of Rs.1, 206 crore for the year
ended March 31, 2003. ICICI Bank is the only Indian company to be rated above the
country rating by the international rating agency Moody''s and the only Indian
company to be awarded an investment grade international credit rating. The Bank
enjoys the highest AAA (or equivalent) rating from all leading Indian rating agencies.
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Established in 1848, Prudential plc is a leading international financial services
company in the UK, with some US$250 billion funds under management and more
than 16 million customers worldwide. Prudential has brought to market an integrated
range of financial services products that now includes life assurance, pensions,
mutual funds, banking, investment management and general insurance. In Asia,
Prudential is UK''s largest life insurance company with a vast network of 22 life and
mutual fund operations in twelve countries - China, Hong Kong, India, Indonesia,
Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.
Since 1923, Prudential has championed customer-centric products and services,
supported by over 60,000 staff and agents across the region.
Insurance Plans
Savings Plans:
Most endowment policies are a good way of saving for the future. A policy can be
designed to make your savings grow and have them available to you at the end of a
fixed number of years. Or, a policy could provide you with an income every three or
four years.
You can browse through these policies to find one that best suits your needs:
Smart Kid - a superior way to guarantee your childs future no matter what the
uncertainty.
Life Time - a complete market-linked insurance plan that adapts itself to your
changing protection and investment needs, throughout a lifetime.
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Save 'n' Protect - a traditional endowment savings plan that offers both high returns
and protection.
Depending on your particular needs, Savings Plans could allow you to do one
or more of the following:
Plan For Tangibles: buy that fashionable car, that huge refrigerator, etc.
Plan For A Cosy Nest: by facilitating the purchase of that home you have always
dreamt of.
Plan For Milestones: ensure a good education for your children, children's
wedding, etc.
Save on Deferred Taxes: because the interest income and maturity benefits of the
Policy are tax exempt.
Lifestyle Planning: maintain your lifestyle - even if your income was to reduce in
the future.
Legacy Creation: buy property; invest in shares, bonds, etc. for your children or
grandchildren.
Attain Greater Heights: ensure that your children's education continues
undisrupted.
Protection Plans
We all hope to live a full life till a ripe old age... to ensure our children's sustenance
and healthy growth. But what if a sudden disability or illness strikes? Besides the
grief and the pain, such an event also completely disrupts life for all the people who
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are financially dependent on us. Our life insurance policies offer a comprehensive
range of protection benefits:
Lifeguard - A low cost-high protection plan that offers protection over a specified
period.
Riders - Additional benefits that one can add on to the policy. The rider can be opted
for at the time of taking the basic policy. Additional premium is charged for each rider.
An insurance policy can be tailor made to provide protection to you and your loved
ones. If something were to happen to you, it can help:
Safeguard Your Better Half: ensure life's continuity for your loved one.
Dear and Near Ones: ensure continuity of lifestyle for your dependents.
Attain Greater Heights: ensure your children's education continues undisrupted.
Unforeseen circumstances: bear the cost of fighting an illness, disability, etc.
Retirement Plans
Most of you picture yourselves enjoying the fruits of labour after retirement, going on
your dream vacation, or helping your children's career take wing. But do you realize
that financing all this will most likely depend partly on your personal savings?
Because personal savings and investments represent a significant source of
retirement income for many people, you can never save too much.
Currently, you are at a stage where you are juggling many roles, as nurturing
parents, dutiful caregivers to elders, supportive life partners, while trying to maintain a
career. It is too easy to get carried away handling and solving the day-to-day
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problems to not look into your retirement needs. It may also seem too far away to be
of concern. But a look at the issues below will make the need for some strategic
planning at this stage amply clear.
Today, thanks to a healthier lifestyle and advances in medicine, the average Indian
lives longer. This makes the challenge of accumulating enough money for retirement
even more difficult, since it may have to last longer. Also, with the falling interest rate
scenario and the rising costs of medical expenses retirement means monetary
uncertainty for most of us. More so, because there is also the ever-persistent evil of
inflation, which erodes your purchasing power. The graph below illustrates how much
Rupees will 10,000/- amount to after some years:
Inflation erodes your purchasing power
Therefore, the message is simple - no matter whether you are 30 or 50, you should
start planning early to have a healthy retirement kitty. (See graph below for an
illustration)
Start early, Gain more
As can be seen the cost of delaying is high. Situation A is when you are saving Rs
10000 annually from the age of 25 to 34 years and Situation B is when you save the
same annual amount from the age of 35 to 59 years. As can be seen in the example,
even after investing your money for a 2.5 times longer duration, the maturity value in
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the second case is much lesser (the figures are based on a hypothetical interest rate
of 10%). The longer your money is allowed to grow at a compounded rate, the more
dramatic will the difference be eventually.
Therefore, the message is simple - Put Time on Your Side and Start Early.
ICICI Prudential Life Insurance believes in the philosophy of providing meaningful
and comprehensive insurance solutions to plan your retirement. Our insurance
solutions are the most optimal tools to plan your retirement because they give you
Safety, Liquidity, Tax benefits, Health cover and Life protection and thus ensure that
you are comprehensively covered.
ICICI Prudential offers flexible products for planning your retirement:
ForeverLife - A deferred annuity plan that helps you save for retirement while
providing you life insurance protection.
LifeLink Pension-A single premium plan which allows you to park a lump sum
amount for a secure future.
LifeTime Pension - A plan which gives you the twin benefit of market-linked
annuity and life insurance cover.
ReAssure - A plan that helps you invest your money prudently and safely and
offers you the benefit of a regular income while providing you life insurance
protection.
Depending on your particular needs, our Retirement Solutions could allow you to do
one or more of the following:
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Maintaining the Same Living Standard Post-retirement:
Get your retirement monies to earn you the benefit of a regular income while
providing life insurance protection. So now you can really enjoy even your post-
retirement days.
Provide for a Lifetime of Pension:
Annuities can play a valuable role in retirement saving. A deferred annuity allows
you to accumulate money for retirement on a tax-deferred basis. You are also in
control of when you want to begin receiving payments. An annuity gives you a fixed
income for life.
Protect Your Better Half:
If you are married, it is preferable that your retirement plan includes your spouse. The
"Joint Life Last Survivor" annuity option in ICICI ForeverLife pays benefits as long as
either one of you is living.
Investment Plans:
Often you may have some investible funds lying idle - a bonus or maybe a windfall.
You can either secure your family through insurance or invest it for growth. The need
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for insurance is crucial but you also want to see your money grow through market
investments. But in volatile market conditions how do you secure both?
Relax, because now you can hedge your investments with safer investment vehicles
that provide you with a diversified portfolio.
ICICI Prudential Life Insurance presents a package of Investment Solutions, which
provide you high returns, while guaranteeing complete peace of mind.
This follows from our understanding that life has many facets and they are
manifested through its various needs. Therefore our philosophy is to provide you with
comprehensive insurance solutions that cater to your dual needs of earning
potentially high returns as well as stay insured for life. Thus we offer you a unique
package of Investment Solutions that combine the best of insurance and
investment.
Depending on your particular needs, Investment Plans could allow you to do
one or more of the following:
Plan for Tangibles: buy that fashionable car, that huge refrigerator, etc.
Earn Market-linked Returns: earn market-related returns while your family remains
protected, even in volatile market conditions.
Save on Deferred Taxes: because the interest income and maturity benefits of the
Policy are tax exempt.
Lifestyle Planning: maintain your lifestyle - even if your income was to reduce in
the future.
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Legacy Creation: buy property; invest in shares, bonds, etc. for your children or
grandchildren
Group Insurance Solutions
Employee care - the defining edge
In this new age of rapid developments and just-in-time methodologies, one big
challenge that organizations face is to establish and maintain a competitive edge
over others. Today's cutting-edge product or service becomes tomorrow's
undifferentiated commodity. In an era of competitive parity, the only asset that makes
a decisive difference between corporate success and failure is the quality of human
capital.
Investment in ones employees is an investment in the future :
Employees are a companys human capital. Not only do companies care for them,
but also provide an environment that fosters a deep and lasting sense of belonging.
Employees determine the present and decide the future of a company.
Employee benefits have proven to be an excellent tool to optimize the retention of
talent and improve an organizations bottom line. The quality of an organizations
employee benefits establishes and maintains a company's image as a caring
employer. Optimum care of employees is a long-term investment that results in a
sustained competitive advantage for an organization in the times to come.
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ICICI Pru Group Insurance Solutions Advantage
An integrated basket of flexible group insurance solutions that offer incomparable
flexible benefits.
Sound investment management that focuses on safety, stability and profitability of
the portfolio.
Personalized financial planning for your employee that takes care of his/her
changing financial needs at every stage of life.
Quality service initiatives and transparency across all operations, promising
superlative operational efficiency.
Group Gratuity Plan:
A plan that helps employers funds their statutory gratuity obligation in a scientific
manner.
Group Term Assurance: A plan that helps provides affordable cover to members of
a group.
Group Superannuation Plan: A flexible Defined Contribution Superannuation
scheme that provides for a retirement kitty for each member of the group.
Contact Information
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ICICI Prudential Life Insurance Company Limited
Registered Office :
1089, ICICI Prudential Towers,
Appasaheb Marg,
PrabhaDevi,Mumbai - 400 051.
1.3 PROBLEMS OF THE ORGANISATION:
Multiple players in the life insurance so, ICICI Prudential faces very tough competition
from other leaders in the industry. The ICICI Prudential needs to work hard in order to
stay competitive insurance market. Further, the ICICI Prudential should appoint
professional agent who should be able to provide customer with a comparison of
multiple schemes and also explain them in simple terms, so that customer able to
make an informed decision.
1.4 S.W.O.T. ANALYSIS
Strengths
The biggest strength of this organization is the:
Money power, which makes them ignorant about the gestation period.
Brand image, Business experience, and Innovative products
The agents are very selectively chosen have excellent communication skills.
Service quality, which is the crux of their mission.
Large network branches which is helped to customer for the payment
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Weaknesses
High targets for financial advisors and for the sales departments.
Many competitors in the market offer same product by the little difference in
the premium and offerings.
Sustainable to risk associated with investments in money market.
Try to catch middle-lower level people also.
Opportunity
Huge market is literally untapped; out of estimated 320 millions insurable
markets only 20% of the population is insured.
Health insurance and pension schemes, an estimated market potential of
approximately $15 billion.
ICICI Prudential should give the insurance coverage both to the parent and
child so that their life could be covered in both cases. The customer doesnt
mind paying some extra premium for that.
Threats
Players like Bajaj and Birla Sun life with low premium for the similar plans.
Entry of many other private companies with equally strong experience and financial
strength of foreign partners making the competition difficult and saturating the urban
markets.
Current Govt. policies do not encourage gross domestic savings. If the tax
liability of the service class rises, the customer will have little money to invest.
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LIC has woken up from sleep and is following competitive strategies. Its huge
surplus in Life Fund gives a capability to lodge Price war.
1.5 COMPETITION INFORMATION:
Bajaj Allianz General Insurance: Bajaj Allianz General Insurance Company
Limited is a joint venture between Bajaj Auto Limited and Allianz AG of Germany.
Both enjoy a reputation of expertise, stability and strength.
Birla Sun Life Insurance: The Aditya Birla Group contributes its knowledge of the
Indian market while Sun Life Financial contributes global expertise in the areas of
protection and wealth management.
HDFC Standard Life Insurance: HDFC and Standard Life have a long and close
relationship built upon shared values and trust. Providing long term financial security
to policy holders will be the constant endeavour
.
ING Vysya Life Insurance: ING, the worlds second largest life insurance company
together with Vysya Bank, one of Indias leading private sector banks, forms ING
Vysya Life Insurance.
Life Insurance Corporation (LIC): Life Insurance Corporation (LIC) has been one
of the pioneering organizations in India who introduced use of Information
Technology in their business.
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MetLife India: The Metropolitan Life Insurance Company is the number one insurer
in the U.S. It is helping build financial independence for its customers.
Royal Sundaram Alliance Insurance: Royal Sundaram marks the coming together
of Sundaram Finance; one of Indias most respected and trusted finance companies,
and Royal and Sun Alliance, one of the largest insurance groups in the world.
Tata AIG Insurance: Life insurance & general insurance for individuals & corporate
by Tata AIG. This site will guide you on how to capitalize on opportunities and protect
against uncertainties.
Chapter 2
OBJECTIVE & METHODOLOGY
2.1SIGNIFICANCE OF THE STUDY
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A study of the products and services of the ICICI Prudential Life Insurance will help
me understand the difference between its products and that of competitors. Also I will
get to know the consumer perception about the various life insurance products
available in India
2.2 MANAGERIAL USEFULNESS OF THE STUDY
ICICI Prudential Life Insurance has a place in the Insurance sector. The study of its
marketing strategies and consumer perception of life insurance product will give me a
crucial idea behind the success of the company and the facets of marketing that
made the success possible.
2.3 OBJECTIVES OF THE STUDY
1. To Study the marketing strategies of ICICI Prudential Life Insurance
2. To study the consumer perception about the various life insurance products
available in India.
3. To analyze the life insurance products of ICICI Prudential Life Insurance Company
and compare them with other players in Life Insurance segment.
2.4 SCOPE OF THE STUDY
The study is for the products of ICICI Prudential Life Insurance and Consumer
Perception of life insurance product will be limited to the New Delhi and NCR only.
The information will be based on the companys website, literature provided by the
company and questionnaire analysis.
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2.5 METHODOLOGY
Primary Sources:
Data collected from Insurance companies through verbal Questionnaire
Secondary Sources:
IRDA act, 1999
Handbook of Insurance agents of different Life Insurance companies
Internet websites of IRDA and various Life Insurance companies & various websites.
The primary study will be targeted towards the marketers. The study will also include
semi-structured interview with marketing managers of various Insurance companies
who are successfully selling Life Insurance Policies to Indian Consumers.
The Secondary Sources will help in tracing the historical framework of Insurance
companies of post independent India as well as the pre-privatization and post-
privatization Insurance environment in India. This secondary study will help in serving
the theoretical groundwork for the study.
Chapter 3
CONCEPTUAL DISCUSSION
MARKETING CONCEPT IN FINANCIAL SERVICES MARKETS
Financial Services Marketing
According to Philip Kotler:
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Marketing is a social and managerial process by which
individuals and groups obtain what they need want through
creating, offering and exchanging products of value with others.
This definition of marketing rests on the following core
concepts: needs, wants, and demands; products (good, services
and ideas); values, cost and satisfaction; exchanger and
transactions; relationships and networks; markets; and
marketers and prospects".
The concept of financial Services Markets is a combination of two different words,
Finance and Marketing. In a true sense, it is application of marketing principles in the
financial services or conceptualization of marketing in the decision-making process of
financial organization.
It is a right to say that financial marketing is related to the product, promotion, place,
and pricing and people decisions of the financial organizations, which simplify the
taste of restructuring of revamping their decisions in tune with the changing business
environment. In addition, the financial marketing also includes in its the activities
related to the behavioral profile of the customers and the marketing information
system so that the marketing decision involve more dynamism in its to meet the
financial and more the customers and market. The right from the making of services
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product, promotion, place, pricing and people decisions to the study of financial
organisations and customers, market conditions and environment become an integral
part of financial marketing. Further it also includes in its purview the auditing of
marketing strategies so as to make the marketing decisions creative and innovative.
In an age of electronic financial services the concept of financial marketing is
required to be reviewed. The emerging trends in the word economy indicate
recession, the mounting intensity of competition, and the increasing domination of
information technologies.
Thus we find financial marketing helping an optimal blending of the core and
peripheral services. The elimination and inclusion processes it the service mix are
done effectively and this simplified the task of formulating and innovating the product
mix in tune with the changing expectations of customers.
DISTINCTION BETWEEN SERVICES MARKETING AND PRODUCT MARKETING
Nature and Role of Goods Marketing
In manufacturing, the marketing function plays an important role in the identification
of customers need. Here customer needs are identified before production.
Customers assess the brands promised benefits during consumption, strengthening
or weakening brand preference accordingly. In figure below the sequence of the four
functional phases are show. It also gives the contributions of post-production
marketing, consumption and word of mouth communications.
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Nature of Role of Goods Marketing
Strong Influence Weak Influence
Nature and Role of Services Marketing
Although both services marketing and goods marketing start with the critical need
identification and product design functions, goods generally are produced before it is
sold and services generally are sold before it is produced. Moreover, services
marketing has more limited influence an customers before the purchase than goods
marketing. Figure given below shows the nature and roles of marketing for services.
48
Pre-production
Marketing
Production
Create
Post-production
World of
Mouth
Induce Trial
Build Brand
Preference
Demonstrate
Benifits
Consumption
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In services, both post sale marketing and word-of-mouth communication has
prominent effect in winning customers loyalty. Thus, services marketers can create
brand awareness, and include trial before the sale, but they demonstrate benefits
and build brand awareness most effectively after the sale.
Nature and role of Service Marketing
Strong Influence Weak Influence
MEANING OF INSURANCE
The business of insurance is related to the protection of the economic value of
assets. Every asset has a value. The asset would have been created through the
efforts of the owner, in the expectation that, either through the income generated
there from or some other output, some of his needs would be met. In the case of a
49
Pre production
marketing
Post-production
Marketing,
Consumption &
Marketing
Create
Awareness
Build Brand
Preference
Induce Trial
Word of Mouth
Communication
Demonstrate
Benefits
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motorcar, it provides comfort and convenience in transportation. There is no direct
income. There is a normally expected lifetime for the asset during which time, it is
expected to perform. The owner, aware of this, can so manage his affairs that by the
end of that life time, a substitute is made available to ensure that the value or income
is not lost. However, if the asset gets lost earlier, being destroyed or made non-
functional, through an accident or other unfortunate event, the owner and those
deriving benefits there from suffer. Insurance is a mechanism that helps to reduce
such adverse consequences.
Life Assurance
It is the business of effecting contracts of insurance upon human life, including any
contract whereby the payment of money is assured (except death by accident only)
or the happening of specified any contingencies dependent on human life, like death
a specified age. The contract would be subject to the payment of premiums for a
term.
Non-Life Insurance or General Insurance
Even though conventional classification of General Insurance has been in three
branches-
1.Fire Insurance
2.Marine Insurance
3.Miscellaneous (Accident) Insurance,
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In modern times, it is classified as follows:
a)Insurance of Person
b)Insurance of Property
c)Insurance of Interest
d)Insurance of Liability
WHY INSURANCE?
However there is a normally expected life cycle for every asset during which time it is
expected to perform its assigned role. So, a prudent individual can manage his affairs
so that by the end of that life cycle, a substitute is in place to ensure continued
benefit/comfort. However, if due to an accident or other unfortunate event, the asset
gets destroyed or made non- functional, the person deriving benefits there, from
suffer. Insurance is the mechanism that helps to soften the impact of such adverse
consequences by providing for some monetary substitution to face such unforeseen
circumstances.
The need of insurance arises from the chances of an accidental occurrence
destroying or making an asset non-functional. Such loss producing eventualities are
called perils e.g. Fire, floods, breakdowns, lightning, earthquakes, etc However, it has
to be remembered that what is being talked about is only a probability of a loss. The
protection of Insurance is against a contingency that may or may not happen.
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A business man always keeps some reserve to meet the future unexpected loss. In
our day to day life we also plan for secured future. Similarly to face and to overcome
the unexpected risk of life one must have to insure his/her life.
THE INSURANCE BUSINESS
The business of insurance done by insurance companies (called insurers), is to
bring together persons with common insurable interests (sharing the same risks)
collecting the share or contribution (called premium) from all of them, and paying out
compensations (called claims) to those who suffer. The premium is determined as
indicated above with some addition for the expenses of administration.
The insurer acts as a trustee for managing the common fund for and on behalf of the
community. He has to ensure that nobody is allowed to take undue advantage of the
arrangement. In other words the management of the business requires care to
prevent entry into the group of people whose risks are not of the same kind, as well
as not paying claims on losses which are not accidental. The decision to allow entry
is the process of underwriting of risk. Both underwriting and claim settlement have to
done with great care.
INSURANCE AS A SOCIAL SECURITY TOOL
On the eve of the promulgation of the Life Insurance (Emergency Provision)
Ordinance the then Finance Minister C.D. Deshmukh said in his broadcast to the
nation. "The nationalisation of Life Insurance will be another milestone. In the
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implementation of the Second Five Year Plan, it is bound to give material assistance.
Into the lives of millions in the rural areas, it will introduce a new sense of awareness
of building for the future in the spirit of calm confidence which insurance alone can
give. It is a measure conceived in a genuine spirit of service to the people. It will be
for the people to respond, confound the doubters and make it a resounding success.
With this as the guiding light the corporate objectives of the Life Insurance
Corporation inter alia sought to achieve the following:
Spread Life Insurance much more widely and in particular to the rural areas and to
the socially and economically backward classes with a view to reach all insurable
persons in the country and providing them adequate financial cover against death at
a reasonable cost.
Maximize mobilization of people's savings by making insurance-linked savings
adequately attractive.
Bear in mind, in the investment of funds, the primary obligation to its policyholders,
whose money it holds in trust, without losing sight of the interest of the community as
a whole; the funds to be deployed to the best advantage of the investors as well as
the community as a whole, keeping in view national priorities and obligations of
attractive return.
Conduct business with utmost economy and with the full realization that the
moneys belong to the policyholders.
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Act as trustee of the insured public in their individual and collective capacities.
The need for these objectives is obvious in the eyes of a family which may have lost
its sole bread winner. With his death the family's income dies. The economic
condition of the family is affected, unless other arrangements come into being to
restore the situation. Life insurance provides such an alternate arrangement. If there
was no life insurance the social cost would be reflected in a impoverished family
becoming a burden on the Government or taking to anti social means to make both
ends meet. Therefore, the life insurance business is complimentary to the state's
efforts in social management.
Conceptually under a socialistic system it is the responsibility of the State to find
resources for providing social security, where as in a capitalistic society, providing for
security is largely left to the individuals. The society provides instruments like
insurance, which can be used in securing this aim. However the distinction between
these systems have got blurred over a period of time, with Socialists leaving
individuals to fend for themselves and Capitalist taking the first steps to social
security.
In India, Article 41 of our Constitution requires the State, within the limits of its
economic capacity and development, to make effective provision for securing the
right to work, to education and to provide public assistance in case of unemployment,
old age, sickness and disablement and in other cases of undeserved want. Part of
the State's obligations to the poorer sections, are met through the mechanism of life
insurance.
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In keeping with its social responsibility as an instrument of the Government and as a
good business organization LIC has made payments to policyholders amounting to
Rs.11,170 crores in 1999-2000 (as against Rs.9,106 crores in the previous year).
During the same period, LIC settled 66.42 lacs claims for an amount of Rs. 9211
crores.
ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT
Insurance benefits society by way of
a)Providing relief to the insured from any mishappening.
b) Reducing burden of Government in providing relief to the senior citizens.
c) Providing funds to Govt. for nation building activities.
Direct investments made by LIC serve a twofold purpose. It acts as a major
instrument for the mobilization of savings of people, particularly from the middle and
lower income groups. These savings are channelled into investments for economic
growth thereby creating employment. These savings in turn go into the task of nation
building.
As on 31.3.2000, the total investments of the LIC exceeded Rs 1,47,000 crores, of
which more than Rs. 84, 000 crores were directly in Government (both State and
Centre) related securities, nearly Rs.12,000 crores in the securities State Electricity
Boards, Rs.16,000 crores in housing loans and Rs.3,000 crores in water supply and
sewerage systems: Other investments included road transport, setting up of industrial
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estates and direct financing of industry. Investments in the corporate sector (shares,
debentures and term loans) exceeded Rs. 28,000 crores.
LEGISLATIVE AND REGULATORY MATTERS
Market consists of buyers, sellers, intermediaries and regulators. There is hardly any
market which is not regulated. As between markets, the only difference in the matter
of regulation could be in the degree of regulation which is exercised in different
markets but every market is regulated without exception.
For regulating any market, laws are required to be passed by the appropriate
legislature. The market economy has to function within the legal framework. The legal
frame work in turn has to undergo changes to take care of the market aspirations and
the advancement in technology.
Some of the important legislative measures taken up in the insurance sector of the
Indian economy are considered herein.
LIFE INSURANCE CORPORATION ACT, 1956
Life Insurance business in India was nationalised with effect from 1st September
1956. From this date, the life insurance business transacted by 154 Indian life
insurers, the Indian business of 16 foreign insurers and 75 provident societies was
taken over by Government of India. Earlier, LIC of India Act had been passed by the
Parliament on 18th June 1956 which came into effect from 1st. July 1956. Some of
the important provisions of this Act (as amended by IRDA Act 1999) are stated
hereafter.
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Life Insurance Corporation (LIC) was established w.e.f. 19 May 1956, as a body
corporate having perpetual succession and a common seal with power to acquire,
hold and dispose of property and may by its name sue and be sued in its name. It
consists of not more than 16 members appointed by the Government, one of whom
shall be appointed as its Chairman.
Under Section 30 of the LIC of India Act, from the appointed date i.e. 1 Sept 1956,
the corporation shall have the exclusive privilege of carrying on life insurance
business in India and that certificate of registration granted to any insurer under the
Insurance Act, 1938 shall cease to have effect from the said date. Now the above
provisions of Section 30 have been altered by insertion of Section 30A consequent to
the enactment of the IRDA Act, 1999. As a result, the exclusive privilege given to the
LIC has been withdrawn.
Chapter 4
DATA ANALYSIS
Data gives preference of respondents of insurance company.
Companys Name No.Of Respondent Share(%)
LIC 78 78
SBI Life Insurance 7 7
ICICI Prudential 10 10
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OM Kotak Mahindra 3 3
HDFC 2 2
Total 100 100
Interpretation
78% of the people have LIC policy and is ranked number one by that percent of
respondent.
Data gives benefits of insurance cover perceived by respondents.
Benefits No. Of Respondent Share(%)
Cover future Uncertainity 55 55
Tax Deduction 20 20
Future Investment 25 25
Total 100 100
Interpretation
55% of the respondents believe that covering future uncertainty is the biggest benefit
of insurance policy20% & 25% of them believe that other benefits are tax deduction &
future investment
20% & 25% of them believe that other benefits are tax deduction & future investment
Data provides features of insurance policy attracted the respondents.
Feature No. Of Respondent Share (%)
Money Back Guarantee 15 15
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Larger Risk Coverage 37 37
Easy Access to Agent 7 7
Low Premium 30 30
Reputation Of Company 11 11
Total 100 100
Interpretation
Majority of the respondent found larger risk coverage as the most attracted feature of
their policy.
Data provides number of insurance policy type respondents.
Policy Type No. Of. Respondents Share (%)
Life Policy 75 75
Non- Life Policy 25 25
Both 45 45
Nature of Policy
Interpretation
75% of the respondents have life insurance policy while 45% have both.
Chapter 5
FINDINGS AND RECOMMENDATIONS
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5.1 FINDINGS
The project study report has the following findings:
1. Almost 80% of respondents have an insurance policy.
2. People have more number of life insurance policies as compared to non life
insurance.
3. Majority of the respondent preferred/have L.I.C. policy since it was the only option
due to complete government control in insurance sector.
4. Majority of the respondents believe that covering future uncertainty is the most
important benefit of an insurance policy.
5. Majority of the respondent believed that larger risk coverage of their policy was the
main feature of their policy that attracted them to buy that policy though low premium
was the next important feature.
6. Due to the increasing concern of people towards their health/life the life insurance
business has good prospects.
7. Due to increased in consumerism new product is launched everyday. Thus non-
life/general insurance business is also going to have boom period.
8. ICICI Prudential is the largest private player in the insurance industry in India. It
has sold over one lakh fifty thousand policies till date. Besides LIC, ICICI Prudential
is facing stiff competition from other private insurance players.
9. Out of total population of 1 billion of country, only 22% have insurance cover. So
we can say that there is still large potential for both the public and private companies.
Private companies have to give varied customized product to compete with the LIC
which is holding about 97% of the total market.
5.2 RECOMMENDATIONS
The insurance companies should now try to identify the gap between current level of
customer service and customer expectations. Some of the strategies being
recommended are as follows:
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Product Differentiation: Offering a product that is distinctly different from
other products available in the market. Innovativeness: Identifying means of a delightful customer experience.
Riders: These are additional offerings along with the main product.
Flexibility: The companies should make their products flexible for the
convenience of their customer.
Hassle Free Service: All bureaucracy in customer interactions should be
eliminated.
Proper Policy Documentation: Wrong interpretations/ non-awareness of
policy document by the customer may have serious implications in the long
term and the possibility of the same should be alleviated by the insurance
companies.
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ANNEXURES
QUESTIONNAIRE
1. Are You Employed?
Yes [ ]
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No [ ]
2. Do you have any insurance policy?
Yes [ ]No [ ]
If Answer of Q.2 is Yes, then proceed else answer Q.8
3. Which insurance policy do you have?
Life [ ]
Non-Life [ ]
Both [ ]
4. Which Companys Insurance Policy you prefer the most?
(Rank them)
a) LIC [ ]
b) ICICI Prudential [ ]
c) SBI Life Insurance [ ]
d) ING Vysya Life [ ]
e) Om Kotak Mahindra [ ]
f) TATA AIG Life [ ]
g) Any Other (please specify)________________________
5. For how many years do you have insurance policy? (Please tick)
a)
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7. Which feature of your policy attracted you to buy it? (Rank Them)
a) Low Premium
b) Larger Risk Coverage
c) Money Back Guarantee
d) Reputation of Company
e) Easy Access to Agents
f) Any Other (please specify)_____________________________
8. YOUR MONTHLY HOUSEHOLD INCOME?
a)
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NIS Sparta Ltd. (New Delhi)
Insurance Watch and other Magazines.
Economic Times
Library of College
www.google.com
www.icicipru.com
www.bimaonline.com
www.moneycontrol.com
www.licindia.com