A STUDY OF
“PREFERENCE FOR INSURANCE DRIVEN BY AGE AND OCCUPATION”
WITH SPECIAL REFERENCE TO
SUBMITTED IN PARTIAL FULFILLMENT OF “MASTER OF BUSINESS ADMINISTRATION” (2006-2008)
SUBMITTED TO: - SUBMITTED BY:- MISS SANMAMPREET KAUR NEHA VATS (FACULTY) Enrollment No. 0871483906 Semester: 3rd
Maharaja Agrasen Institute of Management Studies Sector -22, Rohini, Delhi-110085 TABLE OF CONTENTS
CERTIFICATE ACKNOWLEDGEMENT EXECUTIVE SUMMARY CONTENTS PAGE
CHAPTER-1 • INTRODUCTION………………….
• 1.1-OBJECTIVES………………….. • 1.2-RESEARCH METHODOLOGY……
Research Design………………..
Descriptive Research…………...
Type of the Universe……………
Population……………………….
Sampling Unit…………………...
Sample Size……………………...
Data Collection……………………….
CHAPTER-2 COMPANY PROFILE………………………… • HISTORY………………………………. • ORGANIZATION STRUCTURE……… • BUSINESS……………………………… • PRODUCT MIX………………………… • MARKET POSITION…………………... • DIRECT COMPETITORS……………… CHAPTER-3 DATA ANALYSIS…………………………………...
CHAPTER-4 FINDINGS………………………………… …………..
CHAPTER-5 CONCLUSIONS AND RECOMMENDATIONS……..
CHAPTER-6 LIMITATIONS………………………………….
CHAPTER-7 BIBLIOGRAPHY
CHAPTER-8 ANNEXURE • COPY OF QUESTIONNAIRE ACKNOWLEDGEMENT
I express my deep sense of gratitude to Mr. NAVEEN KUMAR JHA, for giving me opportunity to Work for ICICI Prudential. I am grateful to him for his sagacious guidance which enabled me to accomplish this project. The support provided by staff of ICICI Prudential made an otherwise seemingly difficult task easy.
I owe my thanks to Dr. N.K.Kakkar (Director of MAIMS) for his ineffable help that proved to be of great insights during the study.
I also thank my project guide Ms. SANAMPREET KAUR (FACULTY) for her valuable guidance.
I conclude by thanking all the respondents who have helped me collect data, for their honest participation in the survey and my family and friends for their constant support throughout the project.
Neha Vats MBA 3rd Semester Enrollment No:-0871483906
EXECUTIVE SUMMARY
Insurance is a contract where by, in return for the payment of premium by the insured. The insurer pays the financial losses suffered by the insured as a result of the occurrence of unforeseen events.
Insurance has always been a politically sensitive subject in India. With less than 10 years of independence, the Indian govt. nationalized private insurance companies in 1956 to bring this vital sector under govt. control to raise much needed development funds. Prior to the Indian sector had become 246 companies in the insurance sector. Then, Life Insurance Corporation of India was formed and all other life insurance companies gave their business to the corporation. The basic intention was to pay the concept of life insurance to the gross root level of the Indian society.
In 1999, the insurance Regulatory and Development and was formed and from July 1, 2000, private players entered the insurance market.
India has an enormous middle – class that can afford to buy life, health and disability and pension plan products. The low level of penetration of insurance in India compared to other developed nations can be judged by a comparison of per capita life premium.
At present, there are life insurance companies in India-ICICI Prudential, Max New York Life, TATA AIG, HDFC Standard Life, SBI Life, Allianz Bajaj, Birla Sun, ING Vyasa, Om Kotak Mahindra and the public.
Insurance needs to have social objectives and new covers will not have that commitment. But now with the opening of the insurance sector to private participants insurance is fast emerging as a much better alternative tax planning in terms of returns as well as security.
The current budget has been a wake up call for Indian investors. The era of fixed return instruments is over. This budget makes a point very clear one should be investing according to his financial goals and not with the only objective to save tax. Investors should save and invest more for his protection and meeting his future needs. His saving should not be dependent upon governmental sops.
Regardless of the tax compulsion, one can never undermine the importance of insurance in one’s financial plan insurance as it is rightly said cannot be taken as a simple investment; rather it is a hedge against uncertainty. And an uncertainty needs to be planned for simply because it is uncertain. Moreover it’s an obligation that one has towards to the family to ensure that the members are financially well off in any eventually.
“INTRODUCTION” CHAPTER-1 PREFERENCE FOR INSURANCE DRIVEN BY AGE AND OCCUPATION
In this fast changing economic scenario, Privatization of insurance sector plays a vital role. The private sector companies will have to make a difference in order to compete with the age old player Life Insurance Corporation which had monopoly in the market till now. I have selected this topic to have an insight on the efforts that have been made by this new companies- • To find the difference made by the new private insurers terms of varied and specialized products. • To study the new techniques adopted by these companies so as to penetrate the market. • To study the general savings trend existing in the market and find priorities of people while making investments in different saving schemes and their reasons for the same.
5.1 Scope of the study
For the purpose of the project, I have undertaken new private sector insurance companies along with the sole existing player LIC.
The Insurance Companies are: 1.ICICI Prudential 2.HDFC Standard Life 3.Max New York 4.Birla Sun Life 5.Om Kotak Mahindra 6.VyasaING 7.TATA AIG Insurance
OBJECTIVES 1.To study the scope of as an investment opportunity and to know the priority of people while selecting different Savings Schemes.
2.To carry out a market survey in order to find the preferences of different professionals who belong to various income groups for their investment in to Life Insurance or in Small Savings.
3.To carry out a market survey in order to find the preferences of different professionals who belong to different age groups for the willingness to opt for the new insurers 4.This survey would help in finding the general awareness in the market about the products offering by the different private insurers in the market.
5.To know about the future plans of people for buying an insurance policy. “RESEARCH METHODOLOGY” RESEARCH METHODOLOGY
Research Design:-
It is conceptual structure within which the research is conducted. Its function is to provide for the collection of relevant evidence with minimal expenditure of effort, time and money. But, how this can be achieved depends on the research purpose. In my study the research purpose is as follow: Preference for Insurance driven by age and occupation
Descriptive Research:-
Research Study i.e. to portray accurately the characteristics of a particular situation or a group.
Type of the Universe:-
It is the first step in developing any sample design; it is to clearly define the set of objects, technically called Universe.
Population: -
It includes all the residents having Insurance Policy from any company in Delhi.
Sampling Unit:-
It is the unit, which would be considered for the purpose of study .To conduct an analysis; the unit would be the individuals who are having the policy for any insurance company.
Sample Size:-
This refers to the number of the items to be selected from the universe to constitute the sample. To commence the study sample size is taken because these are persons who have the life insurance policy from any insurance company. Data Collection:- In order to obtain the required information following data is collected
To do an analysis of the policies of various insurance companies secondary data is required. To collect secondary data brochures, newspapers, websites are used.
In order to carry the research to know the effect of age and occupation on purchase of insurance policy primary data is required. From primary data questionnaires are used as a method of data collection. “COMPANY PROFILE”
CHAPTER-2 OVERVIEW OF THE INDUSTTRY
Under an insurance contract, one party, called insurer, undertakes to indemnify the losses suffered by the other party, called insured, for some specified causes in consideration for a fixed premium. The document that contains terms of insurance contract is called Insurance Policy. An insurance company makes profit if the claims and expenses of insurance company are less than the premium collected by it; if the claims and expenses are more than the premium, it sustains losses. But insurance companies generally make profit, since the ratio the claims of policyholders to the total premium collected from them tends to be low. In this unit, we shall discuss various types of insurance business and different types of insurance policies as an introduction before taking up the accounting issue. Also we shall discuss relevant provisions of the Insurance Act, 1938 and Insurance Regulatory and Development Authority Act, 1999.
Insurance during the 21 st century:-
A financial planner once said this about life insurance buying habits of Indians: they don’t buy life insurance; it’s sold to them. Unfortunate, but true. Individual awareness and understanding of life insurance products is extremely low, and many among the insured don’t even know whether the life insurance policy they own meets their insurance needs, and in a larger context, their personal finance needs. In most cases, chances are, they could be doing better.
The first---and the most important---step towards ‘doing better’ involves being financially literate, and having, at the least, an elementary understanding of what life insurance is all about. This means being aware of the various types of insurance products on offer in the market, as well as having the ability to understand one’s life insurance needs and find appropriate fits.
Life insurance is chiefly a risk management tool, meant to offer financial protection to your dependants in the unfortunate event of your death. If you are adequately insured, your life insurance should enable to your dependants (spouse, children, parents) to maintain their current life style and pursue their goals---till such time as they are in a position to set up an alternative income stream by themselves. That’s the basic purpose of life insurance. But in India, as the most other developing markets, life insurance has come to represent more than just risk cover. The best-selling insurance products in the market double as investment options and offer attractive tax breaks. In fact, it’s because of this two-in-one profile that they appeal to the average individual who seeks convenience in personal finance matters. But is insurance really good investment? Or, is there a way to get the same benefit for a lower cost? How does one make that call?
DEFINITION:-
General Definition: In the words of John Merge,” Insurance is a plan by themselves which large number of people associate and transfer to the shoulders of all, risk that attach to individuals.”
Fundamental Definition: In the words of D.S.Hansell,” Insuance accumulated contributions of all parties participating in the scheme.”
OBJECTIVES OF INSURANCE
1. Develop a risk management plan using insurance:- The four general risk management are risk avoidance, risk reduction, risk assumption, and risk shifting. In planning a personal insurance program, set your goals, make a plan to reach your goals, put your plan in to action, and review your results.
2. Discuss the importance of property and liability insurance :- Owners of homes and automobiles face the risks of (1) property damage or loss, and (2) legal actions by others for the costs of injuries or property damage. Property and liability insurance, offer protection from financial losses that may arise from a wide variety of situations faced by owners and users of automobiles.
3. Explain the insurance coverage’s and policy types available to homeowners and renters:- Home owner’s insurance includes protection for the building and other structures, additional living expenses, personal property, and personal liability. Renter’s insurance includes the same coverage’s excluding protection for the building owner. The main types of home insurance policies are the basic, broad, special, tenant’s, comprehensive, condominium, country home, and modified coverage forms. These policies differ in the risks and property they cover.
4. Analyze factors that influence the amount of coverage and cost of home insurance:- The amount of home insurance coverage is determined by the replacement cost of your dwelling and personal belongings. The cost of home insurance is influenced by the location of the home, the type of structure, the coverage amount, the policy type, discounts, and insurance company differences.
HISTORY OF INSURANCE
As with so many things in so many facets of our lives. Insurance too was born out of a primal need and shaped by socio-economic realities of the time. The story goes back to around 2100 BC, to the ancient civilization of Babylon and a business practice called ‘Bottomry’. For all practical purposes a form of marine insurance, bottomry enabled ship owners to borrow money against their ships to pay for the trip. With piracy rampant on high seas, traders and seafarers were reluctant to sail to other lands for fear of their lives and goods. Bottomry gave them some semblance of security. The arrangement was that only if their ship returned did traders have to repay the loan, along with interest, which was pegged at an above-market rate for the risk covered. So, if their ship failed to make it back, they did not have to repay the loan, thereby recovering some or all of the loss.
Milestones: • By the middle of the 14th century marine insurance was practically universal among the maritime nation of Europe. • In London, Lloyd’s Coffee House (1688) was a place where merchants, ship owners, and underwriters met to transact business. • By the end of the 18th century Lloyd’s had progressed in to one of the first modern insurance companies. • In 1693 the astronomer Edmond Halley constructed the first mortality table, based on the statistical laws of mortality and compound interest. • The table, corrected (1756) by Joseph Dodson, made it possible to scale the premium rate to age; previously the rate had been the same for all ages. • The first stock company to engage in insurance were chartered in England in 1720, and in 1735, the first insurance company in the American colonies was founded at Charleston, S.C. • Fire Insurance corporations were formed in New York city (1787) and in Philadelphia (1794).
Insurance developed rapidly with the growth of the British commerce in the 13th & 14th century. The oldest and earliest records of insurance come in form of marine insurance where ships and cargo were insured against perils such as pirates, storms, mutiny and wars. There is evidence that marine insurance of such nature was followed in India some 3000 years ago.
A Roadmap for Insurance
AGE LIFE INSURANCE NON-LIFE INSURANCE
Young 20s adult 20s But only if you have Buy accident and health dependent insurance, requisite asset cover
Young 30s family 30s Subtract existing assets Extend health insurance from future expenses, to family; continue and cover the difference accident and asset covers
Mature 40s family 40s Maintain cover to Same as above balance the shortfall in existing assets
Empty 50s nesters 50s Maintain cover till you Top up health cover for are earning for self and spouse, continue asset cover
Retired 60s No life cover needed, Continue health insurance unless you have for self and spouse; dependants continue asset cover
CHARACTERSTICS 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 • The success of insurance business depends upon the large number of people insured against similar risks • Insurance is a plan, which spreads the risks and losses of few people among a large number of people • The insurance is a plan in which the insured transfer his risk on the insurer • Insurance is legal contract, which is based upon certain principles of insurance, which includes, utmost good faith, insurable interest, contribution, indemnity, causes proxima, 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 determine the probably volume of risk by evaluation various factor that give rise to risk. 4. Provide Certainty:- Insurance is a device, which helps to change from uncertainty to certainty.
Secondary Functions
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 large industries.
EMERGENCE IN INDIA
In India the first company known as Sun Insurance Office Ltd. was set up in Calcutta in year 1710. During the early years of 19th century, a large number of life insurance companies were formed in India. Some of these companies preferred to amalgamate their business with other companies and a good number failed to function effectively. In order to stabilize and strengthen the insurance business, Life Insurance Act 1923 was passed and later emended in 1946, 1958, and 1967. Post 1947, India had a great challenge of coming out of the dark into an era where many countries were happily progressing on the way of advancement. Besides the infrastructure required developing the nation industrially, the young nation also had to build security at all levels among the citizens of the nations, who had recently witnessed the painful partition. The best way then was socialist pattern of government was adopted thus government nationalized a no of operation that were important for the development of the economy and the social health of the nation. Insurance was one such industry that saw industrialization in year 1956. Prior to this the Indian sector had some 246 companies in the insurance sector. Then Life Insurance Corporation Of India was formed and all the other life insurance companies gave their business to the corporation. The basic intention was to take the concept of insurance to the grass root level of the Indian society.
1710 The first company Sun Assurance Office Ltd was set up in Calcutta
1818 British introduce life insurance to India, with the establishment of the Oriental life Insurance Company in Calcutta
1850 Non-life insurance debuts, with Triton Insurance Company
1870 Bombay Mutual Life Assurance society is the first Indian-owned life insurer
1907 Indian Merchantile Insurance is the first Indian non-life insurer.
1912 The Indian life Assurance Companies Act enacted to regulate the life insurance business. 1938 Insurance Act, which forms the basis for most current insurance laws, replaces earlier act
1956 Life Insurance nationalized; government takes over 245 Indian and foreign insurers and provident societies.
1956 Governments sets up LIC
1972 Non-life insurance nationalized; GIC set up
1993 Malhotra Committee, headed by former RBI governor R.N. Malhotra, set up to draw up a blue-print for insurance sector reforms
1994 Malhotra Committee recommends re-entry of private players, autonomy to PSU insurers
1997 Insurance regulator IRDA (Insurance Regulatory and Development Authority) set up
2000 IRDA starts giving licenses to private insurers; ICICI Prudential and HDFC Standard Life first private life insurers to sell a policy.
2001 Royal Sundaram Alliance first non-life insurer to sell a policy
2002 Banks allowed to sell insurance plans; as TPAs enter the scene, insurers start setting non-life claims in the cashless mode
Table 1.1 (List of Insurance Companies) Life Non-Life Reliance Life Insurance Reliance General Insurance Kotak Mahindra-Old Mutual ICICI-Lombard Insurance Max India-New York Life Wadia-Commercial Union Prudential-ICICI Cholamandalam-Axa HDFC-Standard M A Chidambaram-Merlife Aditya Birla-Sun Life Insurance Sanmar Group-GIO C K Birla-Zurich Insurance Tata-AIG Hindustan Times-Commercial Union 20th Century Finance-Guardian Group Centurion Bank-Canada Life Punjab National Bank, Vijaya Bank, Allahabad Bank and Bank of India-Yasuda Fire and Marine Vyasa Bank-ING IFFCO-Tokyo Fire & Marine Apollo Hospitals-Aetna Sundaram Finance-Royal & Sun Alliance Bank of Baroda & Punjab National Bank- Foreign partner
In the developed nations of USA and UK, bank account for 20% and 19% of all insurance products sold. This figure is 50% for finance. This shows the extent of scope that Bank assurance (a model where banks all insurance products) as model has the RBI regulations come in light of the fact that most banks are looking at their NBFC outfits for foraying into insurance sector. The central bank had laid out a set of five parameters that had to be met as of March 31, 2000:
• A minimum net worth of Rs. 5 bn: • A minimum capital requirement of Rs 1 bn. (this is mandatory for any players in the sector, including banks) • A minimum capital adequacy ratio of 10 percent • Entry through a joint venture
UNTAPPED OPPORTUNITIES
There is no doubt that the market for the buyers of insurance is significant in India and offers a great scope of growth.
First: While estimating the potential of India Insurance Market we often attempt to look at it from the perspective of macro-economic variables such as the ratio of premium to GDP, which is indeed comparatively low in India. For example, India’s life insurance premium as a percentage of GDP is 1.3% against 5.2% in the US, 6.5% in UK or 8% in South Korea. But the fact is that the large part of the India’s (number of potential buyers of insurance) is certainly attractive. However, this ignores the difficulties of approaching this population. New entrants in other mass industries such as consumer products or retail banking have discovered this after burning their fingers. Much of the demand may not be accessible because of poor distribution, large distances or high costs relative to returns.
Secondly: Most new entrants have a tendency to target the business of existing companies rather than expanding the market, this is myopic. This not only leads to intense competition for the new players and their much of their efforts is spent on trying to capture existing customers by offering better service or rather advantages. Yet, the benefits of this strategy are likely to be limited. For example, 50% of the current demand for general insurances comes from the corporate segment. The corporate are likely to shop around for the best rates, products and services. Nevertheless, the corporate segment, as a whole will not be a big growth area for new entrants. This is because penetration is already good, companies receive good service because of their size and rates are tariff-governed in both volumes and profitability therefore, the scope for expansion is modest. A better approach may be to examine specific niches where demand can be met or stimulated.
BENEFITS OF LIFE INSURANCE
1. Superior To Any Other Savings Plan: Unlike any other saving plan, a life insurance policy affords full protection against risk of death. In the event of death of a policyholder, the insurance company makes available the full sum assured to the policyholder’s near and dear ones. In comparison, any other saving plan would amount to the total saving accumulated till date. If the death occurs prematurely, such savings can be much lesser than the sum assured. Evidently, the potential financial loss to the family of the policyholder is sizable.
2. Encourages And Forces Thrift: A savings deposit can be easily withdrawn. The payment of life insurance premiums, however, is considered sacrosanct and is viewed with the same seriousness as the payment of interest on a mortgage. Thus, a life insurance policy in effect brings about compulsory savings. 3.Easy Settlement And Protection Against Creditors: A life insurance policy is the only financial instrument the proceeds of which can be protected against the claims of a creditor of the assured by effecting a valid assignment of the policy.
4. Ready Marketability And Suitability For Quick Borrowing: A life insurance policy can, after a certain time period (generally three years), be surrender for a cash value. The policy is also acceptable as a security for a commercial loan, for example, a student loan. It is particularly advisable for housing loans when an acceptable LIC policy may also cause the lending institution to give loan at lower interest rates.
6. Disability Benefits: Death is only the hazard that is insured; many policies also include disability benefits. Typically, these provide for waiver of future premiums and payments of monthly installments spread over certain time period.
6. Accidental Death Benefits: Many policies can also provide for an extra sum to be paid (typically equal to the sum assured) if death occurs as a result of accident.
ROLE AND IMPORTANCE OF INSURANCE
The role and importance of insurance, has been discussed in three phases:
1. USES TO AN INDIVIDUAL
(i) Insurance provides Security and Safety: The insurance provides safety and security against the loss on a particular event. In case of life insurance payment is made when death occurs or the term of insurance is expired. The loss to the family at a premature death and payment in old age are adequately provided by insurance. In other words, security against premature death and old age sufferings are provided by life insurance.
(ii) Insurance affords Peace of Mind: The security wish is the prime motivating factor. This is the wish which tends to stimulate to more work, if this wish is unsatisfied, it will create a tension which manifests itself to the individual in the form of an unpleasant reaction causing reduction in work. By means of insurance, however, much of the uncertainty that centers about the wish for security and its attainment may be eliminated.
(iii)Insurance protects Mortgaged Property: At the death of the owner of the mortgaged property, the property is taken over by the lender of money and the family will be deprived of the uses of the property. On the other hand, the mortgage wishes to get the property insured because at the damage or the destruction or the property he will lose his right to get the loan repayed. The insurance will provide adequate amount to the dependents at the early death of the property-owner to pay off the unpaid loans. Similarly, the mortgage gets adequate amount at the destruction of the property.
(iv)Insurance eliminates dependency: At the end of the husband or father, the destruction of family needs no elaboration. Similarly, at destruction of property and goods, the family would suffer a lot. It brings reduced standards of living and the suffering may go to any extent of begging from the relative, neighbour and friends. The economic independence of the family is reduced or, sometimes lost totally.
(v) Life Insurance provides Profitable Investment: Individuals unwilling or unable to handle their own funds has been pleased to find and outlet for their investment in life insurance policies. Endowment policies, multipurpose policies, deferred annuities are certain better form investment. The elements of investments i.e. regular saving, capital formation, and return of the capital along with certain edition return are perfectly observed in life insurance. In India the insurance policies carry a special exemption from income-tax, wealth-tax, gift tax and estate duty
USES TO BUSINESS
1. Uncertainty of business losses is reduced: in word of business, commerce and industry a huge number of properties are employed. With a slight slackness or negligence, the property may be turned in to ashs. The accident may be fatal not only to the individual or property due to the third party also. New construction and new establishment are possible with the help of insurance. In the absence of it, uncertainty will be to the maximum level and nobody would like huge amount in the business or industry.
2. Business efficiency is increased with insurance: When the owner of the business is free from the botheration of losses, he will certainly devote much time to the business. The carefree owner can work better from the maximization of the profit. The new as well as old businessmen are granted payment of certain amount with the insurance policies at the death of the person; at the damage, destruction or disappearance of the property or goods.
3. Enhancement of credit: The business can obtain loan by pledging the policy as collateral for the loan. The insured persons are getting more loans due to certainty of payment at their deaths. The amounts of loan that can be obtained with such pledging of policy, with interest thereon will not exceed the cash value of the policy. In the case of death, this cash value can be utilized for setting of the loan along with the interest. If the borrower is unwilling to repay the loan and interest, the lender can surrender the policy and get the amount of loan and interest thereon repaid.
4. Business Continuation: In any business particularly partnership business may discontinue at the death if any partner although the surviving partners can restart the business, but in both the cases the business and the partners will suffer economically. The insurance policies provide adequate funds at the time of death. Each partner may be insured for the amount of his interest in the partnership and his dependents may get that amount at the death of the partner. With the help of property insurance, the property of the business is protected against disasters and the chance of disclosure of the business due to the tremendous waste or loss.
POLICIES
Based on their objective, basic plans offered by insurers can be classified under three broad categories: pure insurance products (term plan), pure investment products (pension plan) and investment-cum-insurance products (endowment, money-back, whole-life and unit-linked insurance plans). Increasingly, insurers are launching hybrid variants of these plain-vanilla plans. The working of the six basic plans follows. Although the illustrations are based on existing policies, it’s purely from the objective of giving a broad idea of the cost-benefit equation for each of these plans; in reality, terms and conditions, as well as premiums, will vary from insurer to insurer.
TERM PLAN
Term plans are the purest form of insurance. These are no-frills policies that cover only the risk of your dying. In the event of your death during the policy term, your nominees receive the cove amount----in insurance parlance, the ‘sum assured’;you get no benefits if you survive the policy term. Since the entire premium paid by you-----the cost of buying insurance cover------on term policies goes towards covering the risk of your life, insurers offer you this cover at the least cost.
ENDOWMENT PLANS
While term plans covers just the risk of death, endowment plans also offer some return on the premiums paid by you. So, if you die during the policy term, your nominee gets the sum assured plus some returns; id you survive the policy term, you still get back the sum assured and returns. As much as this “money if you die, money if you live” philosophy is an enticing proposition, it comes at a price: high premiums, which drag down the returns from endowment plans, to barely 4-6 per cent a year. In an endowment plan, you pay premiums for a pre-defined tenure and sum assured. The premium will depend upon your age, the sum assured, the plan tenure and the nature of returns. A portion of the premium paid by you is invested by the insurers on your behalf. Another portion goes towards your cover and a third towards meeting the insurer’s administrative expenses, which lowers the effective yield on your investment in endowment plans. There are two types of endowment plan, with the differences arising from whether they offer the policyholder a share in the insurer’s profits or not. MONEY BACK PLAN
Money-back plans are variant of endowment plans, with one basic difference: unlike endowment plans, where the survival benefits are disbursed at the end of a policy term, the pay back in money-back plans is staggered through the policy term. Typically, a part of the sum assured is returned to you at periodic intervals through the policy tenure. For example, in the illustration below, Rs 3 lakh is paid back in three installments, at five-year intervals (in years 5,10, and 15). The balance sum assured, along with guaranteed additions or bonus (as the case might be), is returned at the end of the tenure, however, this early return, compared to conventional endowment plans, doesn’t reduce the sum assured of money-back plans. In case of a death claim. The full sum assured will be paid, without deducting any survival benefit that may have already been paid as money-back components. In our illustration, for example, if the policyholder passes away in year 6 of the term, his nominees will get the sum assured (Rs 5 lakh) -----with no deduction for the Rs 1 lakh money-back installment paid to the policyholder in year 5-plus bonuses accrued till year 5. Similarly, the bonus is calculated through the term on the full sum assured (Rs 5 lakh, in our example), not the balance. Because of this staggered payback, the premium on money-back plans is higher than on endowment plan.
WHOLE-LIFE PLAN
The three categories of insurance plans mentioned above provide you life cover for a defined period, up to a certain age (generally, 70 years), Whole-life plan, on other hand, provide you cover through your lifetime------the only class of insurance polices to do so. Typically, Whole- life plan are structured such that the policyholder has the option to pay premium up to a certain age(referred to as the ‘maturity age’ which is generally 80-100 years) or for a specified period. On reaching maturity age, the insurer gives you the option to either continue with the cover through the lifetime (for which no further premiums will have to be paid) or encash the maturity benefits(sum assured plus bonuses). Some insurers do give the option to encash the bonus during the term itself, which can serve as a useful income stream during your later years, if you so desire.
Bonus do you really need life cover through your life-time? Typically, your life insurance needs start to taper off after the age of 50. Your children are earning and probably in need of life cover themselves; you yourself would have accumulated, or are well on your way to accumulating, a sizeable nest-egg to see you through your retirement years. Only if you have financial dependants or have an income stream to protect during your post-retirement years does it make sense to buy a whole life-policy.
UNIT-LINKED INSURANCE PLANS
In insurance-cum-investment plans of the kind listed above, you have little say in where your money is invested. Your insurer too is governed by certain investment restrictions: it can invest just 10 percent of the premium paid by you in equities; the greater chunk of 90 percent has to be invested in debt paper. While such restrictions are intended to ensure safety of your investment, they also lead to rigidity in investment are rein in your returns to low single digits. Unit-linked insurance plans get around such restrictions, by giving you greater control over where your premium is invested.
Think of them as insurance plans that double as mutual funds. The annual premium you pay on unit-linked plans is linked to the sum assured and the policy tenure. In the illustration given below, for example, for the sum assure d of Rs1 lakh on a 20 year plan, the premium payable is Rs 6,000 a year, in the first year, typically, around 20 percent of the premium is deducted by the insurer towards your risk cover and to meet its own administrative expenses (this figure drops gradually through the plan term, tapering off at around 5 percent). The balance 80 percent in the first year (more in the subsequent years) is invested in an investment plan of your choice, and you are allocated units, based on the prevailing net asset value (NAV) of the plan you have to opted for. Just like in a mutual fund.The investment plans on offer cover the risk- reward spectrum. You can choose from income plans (high on debt, low on equity), growth plans (high on equity, low on debt) and balanced plans (roughly equal distribution between debt and equity). Insurers, based on the historical performance of their plans and their return expectations, tend to project a range of returns for each plan. Take note that these are just guesstimates----what you end up with could be higher or lower, depending on your plan’s performance. You can switch from one plan to another free of cost once a year (a nominal amount is charged for additional switches). So, if you think stocks are going cheap, you can move to the growth plan; or, if you think stocks are overvalued, you can move your money to the income plan. Thus, unlike endowment plans, you can control your investment in unit-linked insurance plans.Unit-linked insurance plans also enable you periodically monitor the performance of your investment, insurers declare the NAV of the various plans periodically-----generally, once in three months, existing these plans is also easier and it doesn’t invite prohibitive penalties. After a lock-in period (generally, one year), you can withdraw your units anytime, in part or in full, at the then-prevailing NAV; your life cover will be reduced accordingly. You can also make incremental investments any time, and add a corresponding amount to your life cover.
By their very nature, Unit-linked insurance plans are meant for individuals who understand investing and the stock market but prefer to leave it to the experts to do active money management; they are prepaid to forfeit assurances on returns for a chance to take home more than what a convenience endowment plan would offer. The case to prefer Unit-linked insurance plans conventional endowment plans is compelling. Insurance plans are long-term plans, with tenures stretching to 10,15,20 years-----durations that give a good chance to reap the true returns potential of equities, in endowment plans, though your money stays locked foe similar length of periods. At least 90 percent of it I invested in low-yielding debt instruments, as a result of which returns from them are pedestrian. In other words, endowment plans don’t maximize returns, especially for knowledgeable investors. Unit-linked insurance plans offer that possibility.
PENSION PLAN
Pension plan differ from the five types of the insurance plan mentioned above in the fundamental way; not all of them of life over. So, why we are talking about them here? Because pension plan feature among the bevy of products offered by insurers and are pitched as retirement planning schemes, similar to other investment-based insurance plans. Pension plans are investment options that let you set up an income stream in your post-retirement years by routing your savings through an insurer, who invests it on your behalf for a free. The precise returns you will get depend upon several factors: your age begin when you investing, the contribution you make, your investment preferences based on your risk profile, the age at which you want the money to start coming back to you, and the number of years for which you want the returns.
Immediate or deferred? The payback from pensions plan generally takes the form of an annuity----- you are paid a certain swum every year. There are two types of annuities, depending on when the insurer begins the annuity paybacks, with an immediate annuity; the payments start the year you but the contract. You hand over a lumpsum (say, your superannuation benefits) to your insurer and choose the periodicity of payments and the number of years for which you want a pension, based on your assessment of your life expectancy and the needs of your financial dependents. Typically, this option would appeal to those who have retired or are about to retire, are looking to set up an immediate, regular income or stream, and feel ill-equipped to handle their investments on their own. The other type of annuity is a deferred annuity, wherein the annuity payments are deferred for later years (at a predefined age of vesting, as it is called). During the accumulation phase, your investment earn a return, and grow without being taxed----until you receive your annuity payments. Consequently, investments are well-managed annuity plans have the potential to grow substantially over a long period. However, you are liable to tax (at appropriate slab rates) on your annuity withdrawals, which are make financial sense if you are likely to move to a lower tax bracket after your retirement. Deferred annuity schemes enforce a savings discipline: unlike with self-managed investments, you are committed to making periodic payments. Additionally, since these are conceived of as long-term investment vehicles, premature withdrawals invite prohibitive penalties, so it is important to stick with them; only then will you also benefit from the power of compounding. Increasingly, insurers are packing in a few options that provide greater flexibility to your pension plan.
RIDERS
Life insurance offers some degree of financial protection to your dependants in the event of your death. But it doesn’t cover you for some extreme contingencies. For instance, visualize a situation where you require hospitalization and surgery for a critical illness. Your life insurance policy cannot be invoked to recover your medical expenses. A separate medical insurance policy would enable you to claim the expenses, but the cover would enable you to claim the expenses. But the cover would have come at an additional cost. In other words, you would need two policies---one to cover your life and another to cover your medical expenses. That was the case till mid-2001, when ‘riders’ came in to the picture, on the back of entry of private players. Riders are options that allow you to enhance your life cover, qualitatively and quantitatively. In fast-food parlance, they are the toppings you add to your pizza of choice in order to improve its taste to your liking. And as with toppings, riders are optional and available in a variety of ‘flavours’, to be picked and chosen, mixed and matched, based on one’s preferences. And each comes for a small additional cost.
CRITICAL ILLNESSES
The Critical Illness Insurance Rider provides additional cover in the event of a critical illness. Typically, the extra cover is equal to the sum assured on the base policy, and is paid on diagnosis of a critical illness. The illnesses covered and the premiums vary across insurers. Most insures cover cancer, coronary artery bypass, heart attack, kidney/renal failure, major organ transplant and paralytic stroke. Before you sign on, check the list of illnesses covered or non-covered. Some insurers exclude critical illnesses that may have been caused by the existence of pre-existing ailments. Also, a few insurers terminate the base policy once a claim is made on the rider. That’s why a plan that continues to give you life cover after a rider has been activated, even if it means a marginally higher premium on the rider, is preferable. Typically, this rider gets terminated if a critical illness is diagnosed to be terminal in nature. In such cases, the policyholder is paid 50 percent of the total sum assured (for base policy plus rider) and the balance in installments over the next six months. A critical illness rider can be bought for Rs 250450 (the band is on account of varying cost and coverage) per Rs 1lakh sum assured. The premium paid qualifies for a tax deduction up to Rs 10,000 under section 80D (for senior citizens, Rs 15,000).
MEDICAL EXPENSES
Riders under this category cover risk towards ailments, other than critical illnesses, that may require medical treatment and hospitalization. Hospital Cash Benefit Rider. This rider is invoked on hospitalization, subject to conditions and exclusions. Your insurer will compensate you for the duration of your stay in the hospital. Typically, there are two components to this rider: sum assured and the daily compensation. Say, you have a taken a sum assured of Rs 50,000 and a per-day hospital cash benefit of Rs 5,000. so, if you are hospitalized for three days, your insurer will pay you Rs 15,000 as compensation; the maximum you will get in this case is Rs 50,000 (because the claim amount under this rider is capped at the sum assured), which means you are covered for hospitalization of 10 days. Unlike the critical illness rider, the hospital cash benefit rider is neither terminated when a claim is made nor is there any draw-down in the claim limit. The premium payable depends on two factors: the sum assured and the age of the policyholder (unlike most other riders, where age doesn’t influence the premium). Insurers charge around Rs 200 per Rs 1 lakh sum assured for this riders. Check for exclusions. Typically, such riders don’t cover hospital admittance for routine check-ups, specify a minimum hospitalization of 48 hours and stipulate a ceiling on the daily compensation amount.
Major Surgical Assistance Rider. This rider provides a policyholder financial support in the event of surgery. When this rider is invoked, the policyholder is paid a part of the sum assured (only for the rider)---- depending on the nature of surgery; the amount varies between 20 percent and 50 percent of the sum assured. In other words, for each surgery, you are entitled to a maximum of 50 percent of the sum assured. Each claim reduces the sum assured for the remainder of the year by the corresponding amount. It is the insurer’s prerogative to renew the rider cover the year following a claim year----it might not do so if the nature of the surgery indicates further medical complications. Before you sign on, check the list of surgical procedures covered and exclusions. Most insurers exclude claims arising from pre-existing injuries or illness, as well as surgeries done in hospital that are not registered with the municipal body concerned. There is also a cap on the sum assured, which differs across insurers. Typically, under the surgical assistance rider, you can get a cover of up to 50 percent of the base sum assured. The premium payable for this rider varies between Rs 290 and Rs 600 per Rs 1lakh sum assured, and it qualifies for a tax deduction under section 80D. The premium is in a range because only a few insurers allow the base policy to continue once a claim is made on the rider.
DISABILITY BENEFITS
Riders under this category address contingencies that arise in the event of a disability.
Disability/Discrimination Benefit Rider. This rider provides for an additional cove, equal to the sum assured in the base policy, in case of a disability due to an accident. Generally, the claim amount due to an accident. Generally, the claim amount is staggered, so as to give the policyholder a stream of income to fall back on. Some insurers even waive future premiums payable on the base life policy. This rider is available for Rs 80-120 for a sum assured of Rs 1 lakh; the premium amount can be claimed as a tax rebate under section 88. Waiver of Premium Rider. The rider gets activated in the event of a policyholder becoming ‘completely disabled’, or becoming unemployed due to injury or sickness. The premiums due on the base policy and riders are waived till the person is able-bodied and employed again. In other words, this rider provides ‘disability insurance’ against your life insurance policy. The merits of opting for this rider are evident., particularly in cases where the premium on the base policy is high. Precisely hoe the term ‘completely disabled’ is defined varies from insurer to insurer. Broadly, it includes anyone who is disabled to the point where he is unable to perform the regular and normal duties of his job. The premiums payable to buy this rider depends on, among other factors, the premium you are paying on your base policy, your age and other riders you might have taken. The higher the premium on the base policy, the older you are and the more the riders you add, the higher will be the premium you pay on this rider. MISCELLANEOUS RIDERS
Here are a few other riders on offer and an indication of what to look out for when you buy them. Accident Death Benefit Rider. This rider is activated in case of a policyholder dies due to an accident during the term of the policy. If the death occurs while traveling with a ticket in an authorized public mass transport system, namely bus or train, insurers give the policyholders twice the accident cover stated under this rider. The premium payable is Rs 80-200 per Rs 1 lakh insured, and qualifies for a tax rebate under Section 88.
Level Term Rider. This rider gives you the option to increase your risk cover in non-term plans, up to a maximum of the sum assured on your base policy. The rider offers death benefit alone, and addresses a need for extra protection for a specified time period, such as a time when you are carrying large debt and wish to insulate your dependants from financial liability in the event of your death. The level term rider costs around Rs 250-300 for a sum assured of Rs 1 lakh, and the premium payments quality for the section 88 rebate.
LEGAL FRAMEWORK
The primary legislations which deals with the insurance business in India are the Insurance Act, 1938 and the IRDA Act, 1999. Various aspects relating to accounts and audit are dealt with by the following statutes and rules/regulations made thereunder; 1. The Insurance Act, 1938 (including Insurance Rules, 1939) 2. The Insurance Regulatory and Development Authority Act, 1999; 3. The Insurance Regulatory and Development Authority Regulations; 4. The Companies Act, 1956; and 5. The General Insurance Business (Nationalization) Act, 1972 (including Rules framed there under).
Section 11 of the Insurance Act, 1938 prescribes the manner in which the accounts of the insurance company has to be maintained. With the opening of the insurance sector for private players, IRDA Act, 1999 was passed to provide for the establishment of an authority to protect the interests of the holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and form matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the life Insurance Corporation Act, 1956 and the General Insurance Business (nationalization) Act, 1972. Section 114A of the IRDA Act, 1999 empowers IRDA to make regulations consistant with the Act, to carry out the purposes of this Act for various matters specified in said Section 114A.
bonds and Rs, 70,000 in other Section 88 instruments.
PENSION PLANS Not all pension plans have an insurance component built in to them. But since they are oriented towards retirement planning and are offered by insurers, they too get some preferential tax treatment, though not of the order offered under conventional life insurance plans.
VARIOUS INDIAN COMPANIES AND THEIR FORIGN PARTNERS ARE:
Life Insurance Indian partner Foreign partner HDFC Standard Life (UK) 20th Century Finance Canada Life (Canada) ITC Eaglestar (UK) Tata Group AIG (US) Godrej Group J Rothschild (UK) ICICI Prudential (UK) Ranbaxy CIGNA (US) Dabur Liberty Mutual (UK) DCM Shriram Consolidated Royal and Sun Alliance (UK) Bombay Burmah Trading General Accident (Scotland, UK) Kotak Mahindra Chubb Insurance (US) Alpic Finance Allianz Holding (Germany) C.K. Birla Zurich Insurance (Switzerland) Hindustan Times Commercial Union (UK) Peerless Guardian Royal Insurance (UK) Sundaram Finance Winterthur Ins (Switzerland) M.A. Chidambaram Group Metlife (UK) S.K. Modi Bank ING Bank (Netherlands) Vyasa Bank ING Bank (Netherlands)
CHAPTER II
COMPANY PROFILE
HISTORY
ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD. The World Bank, the Government of India and the Indian Industry, to promote industrial development of India by providing project and corporate finance to Indian industry, established ICICI LTD. in 1955. Since inception, ICICI has grown from a development bank to a financial conglomerate and has become one of the largest public financial institutions in India. ICICI has financed all major sectors of the economy. Prudential plea was founded in 1848. It has a presence in over 15 countries. It manages assets of over US$259 billion as of December 31, 1999. Prudential plea. Has had its presence in Asia for the past 75 years catering to over I million customers across 11 Asian countries.
ICICI Prudential Life Insurance Company Limited was incorporated on July20, 2000. The authorized capital of the company is Rs.2300 million and the paid up capital is Rs. 1500 million. The company is a joint venture of ICICI (74%) and Prudential plea UK (26%).
ICICI PRUDENTIAL LIFE INSURANCE COMPANY
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential's equity base stands at Rs. 6.75 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the year ended March 31, 2004, the company had issued over 430,000 policies, for a total sum assured of over Rs 8,000 crore and premium income in excess of Rs. 980 crore. The company has a network of about 30,000 advisors; as well as 12 banc assurance tie-ups. Today the company is the no.1 private life insurer in the country.
COMPANY HISTORY
Partners
ICICI and Prudential came together in 1993 to form Prudential ICICI Asset Management Company, which has today emerged as one of the leading mutual funds in India. The two companies bring together two of the strongest financial service brands in Asia, known for their professionalism, excellent quality of service and long term commitment to YOU. Riding on the success of this relationship, the two companies joined hands once more in 2000, to form ICICI Prudential Life Insurance, with a commitment to provide leading-edge life insurance solutions. ICICI Bank has 74% stake in the company, and Prudential plc has 26%.
ICICI BANK
ICICI Bank is India''s 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 centre and Internet banking 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.
PRUDENTIAL PLC
Established in 1848, Prudential plc is a leading international financial services company in the UK, with around 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. ORGANIZATION STRUCTURE BRANCH SALES MANAGER
SALES MANAGER
UNIT MANAGER
ADVISORS
PRODUCT MIX INSURANCE PLANS
1.PROTECTION PLANS: LIFE GUARD
2.SAVING PLANS: SAVE N PROTECT, CASH BACK
3.CHILD PLANS: SMART KID
4.INVESTMENT PLANS: INVESTSHIELD LIFE, LIFETIME SUPER, LIFELINK SUPER, PREMIERLIFE GOLD, LIFETIME PLUS
5.RETIREMENT PLANS: LIFETIME SUPER PENSION, FOREVER LIFE
6.GROUP PLANS: GROUP TERM INSURANCE, GROUP GRAUITY PLAN, GROUP SUPERANNUATION PLAN
7.RURAL PLANS: ICICI PRU MITR, ICICI PRU SURAKSHA
8.PLANS FOR NRIs
9.KEYMAN PLANS
10.HEALTH PLANS: CANCER CARE,HEALTH ASSURE,HEALTH ASSURE PLUS
11.RIDERS: CRITICAL ILLNESS RIDER,ACCIDENT AND DISABILITY BENEFIT RIDER,INCOME BENEFIT RIDER,WAIVER OF PREMIUM RIDER VARIOUS POLICIES PROVIDED BY ICICI PRUDENTIAL
LifeGuard is a protection plan, which offers life cover at very low cost. It is available in 3 options - level term assurance, level term assurance with return of premium and single premium
- Save n Protect is a traditional endowment savings plan that offers life protection along with adequate returns.
- 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
-SmartKid child plans provide guaranteed educational benefits to a child along with life isurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the child''s life. SmartKid child pland are also available with in unit-linked form - both single premium and regular premium.
- ForeverLife is a retirement product targeted at individuals in their thirties
-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.
-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.
-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.
RIDERS:
1.Waiver of Premium: In case of total and permanent disability due to an accident, the premiums are waived till maturity. This rider is available with SecurePlus and CashPlus.
2.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.
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. Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on SmartKid, Secure Plus and Cash Plus. BUSINESS
ICICI PRUDENTIAL LIFE INSURANCE
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank and Prudential plc. It was one of the first players to commence operations when the insurance industry was opened to the private sector in 2000. For the 11 months ended February 28, 2007, the company garnered Rs 3,745 crore of weighted retail + group new business premiums and wrote over 1.5 million policies. The company has a network of over 540 offices, over 200,000 advisors; as well as 22 bank partners. It is also the only life insurer in India to be assigned AAA (Ind) credit rating from Fitch Ratings. For the past six years, ICICI Prudential has retained its position as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life.
PERFORMANCE ICICI Prudential Life Insurance is a joint venture of the bank with Prudential Group, one of the largest insurance and fund management companies in Europe. It is the largest private sector life insurer in the country with a network of 450 branches and 1.5 lakh agents across the country.
The life insurance venture has been making losses since inception because of high set up costs, actuarial provisioning and marketing expenses. This is true for all private sector life insurance businesses floated in recent years. ICICI Bank measures the performance of its life insurance businesses on the basis of new business achieved profit (NBAP), which is the present value of all future potential profits, which may accrue to shareholders from insurance policies written during a particular period.
The NBAP of ICICI Prudential Life increased from Rs312 crore during 2004-05 to Rs528 crore in 2005-06. For the third quarter of 2006-07, NBAP of the life insurance business was reported at Rs193 crore as compared to Rs142 crore for the same quarter of previous financial year. the huge growth potential in the domestic market would ensure very high valuations for these businesses. Various investment banks and brokerage houses have put the combined value of the holdings to be transferred to ICICI Holdings at between Rs16,000 crore and Rs21,500 crore. That translates to a value of between Rs170 and Rs240 per share of ICICI Bank. ICICI Prudential Life contributes between 60 and 65 per cent of the total value while ICICI Lombard and Prudential ICICI AMC contribute the rest.
ICICI PRUDENTIAL LIFE INSURANCE INCREASE CAPITAL BY Rs. 245 CRORE
ICICI Prudential Life Insurance Company, India's No. 1 private life insurer, has increased its capital by Rs. 245 crore, taking the total capital investment to Rs. 2060 crore. This is the fourth equity hike during the financial year 2006-07, taking the capital infusion during the year to Rs 875 crore. The two promoters, ICICI Bank and Prudential plc, contributed to the capital in their existing proportions of 74:26 respectively.
With Rs 2060 crore of capital, ICICI Prudential continues to have the largest capital base amongst all life insurers in the country. For consumers, this large capital base is one of the most important indicators of the solvency of the company and its ability to meet all its policyholder commitments.
"Both ICICI Bank and Prudential plc have recognized the promise of the life insurance industry in India, and have regularly committed the resources required for ICICI Prudential to grow and maintain its clear leadership in the category"
The additional capital will be used to fund the high up-front expenses required by a life insurance business and meet the solvency norms as stipulated by the regulator. It will also enable ICICI Prudential to continue driving its expansion strategy over the next year, which includes opening new branches and offices across the country as well as scaling up operations to meet the expansion.
Last month, the company also crossed the 4 million policies mark, within just five months after crossing the 3 million policy milestone. In the period April 2006-February 2007, the company grew 100% over the same period in the previous year, to notch up retail weighted + group new business premium of Rs 3,745 crore. Its weighted premium market share amongst private life insurers stood at 30.3% for the period, thus retaining its No. 1 position amongst private life insurers in the country. ICICI PRUDENTIAL LIFE INSURANCE POSTS 97% GROWTH IN APRIL- DEC 2006
ICICI Prudential Life Insurance, India's No. 1 private life insurer, has earned new business weighted premium of Rs 2,722 crore over the nine months April-December 2006, growing 97% over the corresponding period in the previous year
ICICI Prudential Life Insurance, India’s No. 1 private life insurer, has earned new business weighted premium of Rs 2,722 crore over the nine months April-December 2006, growing 97% over the corresponding period in the previous year. During this period, the company has written over 1.1 million new policies. Assets held as of December 31, 2006 stood at over Rs 13,459 crore, making ICICI Prudential’s asset base the largest amongst private life insurers and also making it one of the largest managers of retail funds in the country. ICICI Prudential also continues to retain its position as the leading private life insurer with a retail market share of 9% of total and 29% of the private market.
To fuel its continuing growth, ICICI Prudential has expanded its distribution footprint, and has grown both location and branch network by adding around 300 branches over the past nine months. The company’s distribution ramp-up has been matched with an increase in its staff base, which now stands in excess of 15,000 employees across more than 360 locations. In addition, the company has over 175,000 advisors as well as several partners both for distribution and operations.
ICICI PRUDENTIAL IN STRAEGIC TIE-UP WIYH HARYALI KISSAN BAZAAR:-
ICICI Prudential Life Insurance, the largest private life insurer in India , has announced a strategic distribution tie-up with Hariyali Kisaan Bazaar, the rural business arm of DCM Shriram Consolidated Ltd (DSCL).
ICICI Prudential Life Insurance, the largest private life insurer in India , has announced a strategic distribution tie-up with Hariyali Kisaan Bazaar, the rural business arm of DCM Shriram Consolidated Ltd (DSCL). As a partner, Hariyali Kisaan Bazaar can now distribute ICICI Prudential's protection, wealth creation, retirement solutions and health insurance products to customers across the its growing number of rural business hubs in the country. Over the past five years, Hariyali Kisaan Bazaar has established itself as a trusted, long-term partner for farmers across Punjab, Uttar Pradesh, Haryana, Rajasthan and Uttaranchal with over 50 outlets catering to their agriculture related needs. Through this new relationship, ICICI Prudential and Hariyali Kisaan Bazaar can now also reach out to customers in rural areas to increase awareness of life insurance, health and pension products that meet their financial needs at different life stages Under the agreement, ICICI Prudential will deploy financial services consultants at Hariyali's hubs to advise rural customers on financial planning and saving towards their long-term needs.
"Our tie-up with DCM Shriram's Hariyali Kisaan Bazaar is in line with our strategy of partnering with organizations that have strong brands and loyal customer bases in their markets. With their increased prosperity, farmers are now looking for a trustworthy financial provider with whom they can save their hard-earned monies, and we are delighted to partner with Hariyali to meet this need.
ICICI Prudential has a multi-channel distribution strategy to reach customers. In addition to the advisor channel, the company has distribution arrangements with established banks and large retail finance distributors, which contribute about 40% of the company's business. The company's distribution partnerships have been highly successful in both sourcing new business and also driving awareness and increasing reach and penetration across the country.
ICICI PRUDENTIAL LIFE INSURANCE STRENGHTENS POSITION IN THE GULF REGION:-
Becomes first Indian private life insurer to open office in Dubai
ICICI Prudential Life Insurance, India’s leading private life insurance company, today opened its representative office in Dubai, becoming the first private life insurer from India to open an office in the Emirate. This is ICICI Prudential’s second overseas office, after its first overseas office in the Kingdom of Bahrain, and marks a move to further strengthen the company’s ability to cater to the vast non-resident Indian (NRI) population in the Gulf.
ICICI Prudential’s office in Dubai will be able to service the 1.4 million discerning NRIs in UAE. The office will promote and service the life insurance needs of the NRIs through ICICI Prudential’s wide range of products, which include wealth creation, education insurance, retirement solutions and health solutions.
ICICI PRUDENTIAL LIFE EXPANDS HEALTH INSURANCE PRODUCT RANGE:-
Launches Hospital Care to offer guaranteed long-term health insurance
ICICI Prudential Life Insurance, India’s No. 1 private life insurer, has further expanded its health insurance portfolio, this time to cover over 1,000 surgical procedures and hospitalisation. With the launch of the new product, Hospital Care, the company moves into the realm of offering products that go beyond covering critical illnesses, and further strengthens its position as a significant player in the health insurance space.
Hospital Care is structured to ensure customers receive a pre-determined insurance amount for each procedure or hospitalization, even if they spend less. Further, its long-term design of a term between 10-20 years, assures policyholders the guaranteed cushion of insurance cover even if they make a claim during the term. Available for individuals between the ages of 1-60 years, this is one of the first products that will cover people up to the age of 80 years.
“Our research revealed that many customers believe that existing health insurance policies would not cover all the expenses related to hospitalisation or surgical procedure, leaving them with a considerable financial burden. This is compounded by the concern that these policies are not long-term and that once a claim is made, it might not be renewed or will attract a higher premium”
We launched Hospital Care to fill this gap in health insurance and also offer customers control over their health spends,”
Hospital Care is structured to enable customers to provide for all expenses associated with hospitalisation, ranging from room charges, doctor and surgery fees, to other incidental expenses. The insurance benefit includes:
Daily hospitalization cash benefit: customer is paid a daily fixed benefit amount for every day he/she is in hospital Daily ICU cash benefit: additional 50% of the daily hospitalisation benefit is paid in case the policyholder is in the intensive care unit
Surgery benefit: Lumpsum payment for a surgery, with more than 1,000 procedures covered graded as per type and severity
Recuperating benefit : to take care of post-hospitalisation expenses
Policyholders also enjoy a double claim benefit that will enable them to get the benefit amount under Hospital Care in addition to that claimed under any other health insurance plan. The policy offers a cashless claim benefit at 3,000 network hospitals across the country. Any insurance amounts over and above those incurred towards hospitalization are paid directly to the policyholder.
ICICI Prudential’s other health insurance products include Health Assure, Health Assure Plus, Cancer Care, Cancer Care Plus, Diabetes Care and Diabetes Care Plus.
MARKET POSITION As the vision states, ICICI Prudential has maintained a dominant position in the Private Insurance Market, 5 years in a row.
Leadership position with a 32% market share among Private Life Insurance Companies (Quarter 1,finantial year 2006-2007) 11% of the overall Life insurance Market share. Over 2.7million lives insured. Highest Capitalized Company in the private insurance market: The equity base stands at Rs. 1085 crores. No. 1 in Asset Management of 10,000 crores as of August 2006. Wide range of innovative products to suit the needs of customers at every step in life. Over the past five years we have paid out over 2100claims amounting to more than 26 crores and takes several steps to assured customers of a quick and smooth claims process. Record of settling 92% of claims received within eight working days from the date of receiving the last requirement.
AWARDS & ACCOLADES
Most trusted Private Life Insurer, Economic Times AC Nielson Survey,2003 Outlook Money Award Best Life Insurer (2003-04) 2004 Prudence Award for Customer Centricity Avaya Global Connect Customer Responsiveness Award ICICI Prudential is the first in India to receive a National Financial strength rating of AAA (Ind) by Fitch ratings.
DIRECT COMPETITORS:- 1. HDFC STANDARD LIFE 2. MAX NEW YORK 3. BIRLA SUN LIFE 4. OM KOTAK MAHINDRA 5. VYASA ING 6. TATA AIG INSURANCE 7. BAJAJ ALLIANCE 8. AVIVA LIFE INSURANCE 9. LIFE INSURANCE “DATA ANALYSIS”
CHAPTER III DATA ANALYSIS :-
Q1) GROUPS:-
Age Distribution of the Respondents
20% 12%
38% 30%
15-25 25-35 35-45 45 & ABOVE
The above graph indicates that out of 125 people who have the policy from any of the companies, mostly belong to the age group of 25-35. The respondents who are considered to be major policyholder are those who are office goers. As the results from the Que3. The policyholders are mainly serviceman. It indicates that at this stage people start thinking of their future i.e. safely needs. On the other hand as few as 12% respondents come into the category of 15-25. This age group is not self-dependent and policy is usually taken on their behalf in order to secure their future. They are dependents on the elders Q2) OCCUPATION GROUPS:-
Occupation of the Respondents
11% 4%
26% 59%
Service Business Professional Others
From the above figure indicates that out of 125 people who have the policy from any of the companies, mostly 59% belong to the service class. Q3) WHICH OF THE FOLLOWING DO YOU OWN?
Ownership of by various facilities by the Respondents
140 122 120 100 80 60 60 45 40 30 20 0 Two Car Credit Card Air Wheeler Conditioner
This graph shows that out of policy owners, a big chunk of respondents have two-wheelers, which is followed by car. Q4) HAVE YOU HEARD PRIVATISATION IN INSURANCE SECTOR?
Awareness about Privatisation in Insurance Sector
13%
87%
Yes No
This has clearly out that 87% of the people have heard about privatization in Insurance Sector. This high degree of awareness may be because of heavy and aggressive advertisement by some of the new Insurance companies. Q5) WHICH COMPANY ARE YOU AWARE OF IN THE INSURANCE SECTOR?
Degree Of Awareness About Various Life Insurance Companies
120% 100%
s 100% s e n
e 80% 72% 72% r a w A
60% f O 40% e
g 32%
a 40%
t 28% n e c
r 20% e P 0% l z j C d O I w a a n r i C j L e t I a k G a a e . F i r n f I l N d C i l .
I B D o e n x L A A d C Y H a
I a t u a t r S M a P T Life Insurance Companies
LIC is in existence from so many years. It was the only company operating in this field. Therefore, everybody knows about LIC. ICICI Prudential is advertising very heavily. Besides ICICI Prudential has become a brand in the sector of Financial services. Therefore, awareness about ICICI Prudential is also high. Same is the case with HDFC Standard Life Insurance. Although TATA is one of the biggest names in the corporate India, but it is not associated with financial services, therefore people are not very much aware about it. Max New York Life and Allianz Bajaj also have moderate level of awareness, being new in the market. Q6) FROM WHERE DID YOU COME TO KNOW ABOUT ICICI PRUDENTIAL LIFE INSURANCE?
Source of Information
60% 53% 50%
40%
30% 21% 20% 12% 13% 10%
0% Electronic Print Media Through Others Media Agents
This graph shows that most of the people (i.e 53%) came to know about ICICI PRUDENTIAL LIFE Insurance through print media, while only 12% through Electronic media. The reason may be that they are not advertising heavily through electronic-media. If they are advertising, then people may be avoiding the ads on electronic-media because of heavy clutter of ads. They switch on to another channel whenever an ad appears on the TV.
But just 21% people came to know through agents which shows that their agents are not very much aggressive. Q 7) DO YOU THUINK THAT SERVICE PROVIDED BY PRIVTATE SECTOR WILL BE BETTER THAN PUBLIC SECTOR IN INSURANCE?
Percentage of people regarding private viz- a-viz Public sector
16%
10%
74%
Yes Can't Say No
This shows that ¾ people believes that private companies will provide better services than public sector i.e. LIC. This shows the increasing faith of faith of people in private sector. Private sector is gaining such a faith because of their prompt and customer friendly services. They are making the things easy unlike the public sector. Q 8) WHAT ACCORDING TO YOU ARE THE MOTIVES OF BUYING LIFE INSURANCE?
Motives of Buying Life Insurance Policy
70% 61% s t 60% n e
d 50% n
o 38% p 35%
s 40% e 28% R
30% f o
e 20% g a 10% % 0% Tax Savings Protection Secure Helps in Investment Savings Motives
Primary motive of buying life insurance policy is to save tax, while protection or savings are the secondary motives. People buy Life Insurance policy for the reasons other than what it is meant for. Q9) WITH WHICH COMPANY DO YOU HAVE INSURANCE POLICY?
Market Share On The Basis Of Owner Ship
100% 91% 90% 80% e r
a 70% h S
60% f O
e 50% g a t 40% n e
c 30% r e
P 20% 10% 2% 3% 1% 2% 1% 0% l z j C d O I w a a n r i C j L e t I G a k a a e . i F r n f I l d N C i l .
I B D o e n x L A A d Y C H a
I a t u a t r S M a P T Life Insurance Companies
91% amongst the insured people have the policies from LIC. This is because of being the single company, in insurance sector, for so many years. It has very high brand image. Even today, people like to get insured from LIC. As private companies are new in the market, they have to establish themselves yet. People do not believe in them easily. That is the only reason they are having very low share in this sector. Q10) DO YOU HAVE ANY PLAN TO BUY INSURANCE POLICY NEAR FUTURE?
Future Plan to buy Insurance Policy
30%
64% 6% Yes Can't Say No
This shows that 30% want to but life insurance policy in future, which shows that demand is continues. It is because people use it as a tax saving weapon. Moreover, this can also be interpreted that with the increase in population demand is also growing. Q 11) IF YOU HAVE ANY PLAN TO BUY AN INSURANCE POLICY ,WHICH POLICY WOULD YOU PREFER?
Preference of plans
35% 29% 29%
e 30% l
p 24% 24%
o 25% e p 20% f o 15% e g
a 10%
% 5% 0% Protection Investment Pension Savings Insurance Plans
This graph shows that people don’t have any specific choice in buying a life insurance plan. Most of the time their objective is to save tax, so plan does not matter much. “FINDINGS”
CHAPTER-IV FINDINGS
1. Age has negligible while the occupation has an impact on buying of a Life Insurance Policy. LIC has become a generic now. People believe in LIC only and therefore, every body wants to go in for a policy with LIC. It will take a lot of time, to private companies to win the confidence of the people.
2. Further the findings reveal that the age group 25-35 has the maximum number of the people who have the policy with LIC as well as with the private sector insurance companies.
3. As far as future decision making about the policy is concerned most of the people would go in for protection plan.
4. It is the service class, which has maximum number of LIC and private sector policies. As far as future decision-making is concerned most of the service class prefer to protection plan.
5. Since of, LIC is the oldest player in the Insurance sector, so people are more awareness of it a compared to the new players.
6. This clearly comes out the survey conducted that most of the people come to know about ICICI Prudential Life Insurance Company through print media.
7. It has clearly come out that most of the people like to go in for a policy, which gives them tax benefits, that is why most of the people prefer Pension Plan.
8. The survey also reveals that people have strong faith in the services and capabilities of private sector.
9. It has clearly come out that as most of the businessmen have surplus money at their disposal, so they prefer to go in for the investment plan. “CONCLUSIONS & RECOMMENDATION S” CHAPTER V CONCLUSIONS AND RECOMMENDATIONS
1. To introduce innovative products offering a right mix of flexibility/risk/return depending, which will suite the requirement of the customers and should target specific niches which are poorly served or are not served at all.
2. People give a high priority to security of their investment, therefore the promotion schemes should concentrate on educating the customers that Private sector players have a strong financial backing like that of LIC.
3. It is seen that till today a large portion of population is unaware of various insurance plans, these include educated professionals also. Therefore, the Private sector insurance companies should focus on improving awareness and increase the understanding about insurance plans thus increasing their scope of sale.
4. ICICI Prudential Life Insurance Company should lay more stress on advertisements, both in print as well as in other media.
5. People of ICICI Prudential Life Insurance Company should approach people who belong to age group of 25-35 & 35-45 also the people who belong to service-class as these are the only once who are interested in purchase a life insurance policy in future. “LIMITATIONS” CHAPTER-VI LIMITATIONS OF THE STUDY
It is said that “ Nothing is perfect” and if the quote is true I am sure that there would be few shortcomings in this project also. Sincere efforts have been made to eliminate Discrepancies as far as possible but few would have been remained due to limitations of the study. These are:
1. Nature of the study: The survey concentrated on personal information about income, savings and investment. All these issues are highly sensitive and of secretive nature therefore there could have been untrue answers to some of the questions. 2. Limited Scope: The survey was conducted in Delhi thus the respondents belonged to only this region of the country. This could have brought bias into the study. 3. Unrepresentative sample size: The sample size taken for the purpose of the study does not very significantly represent the whole society and their Savings Investment patterns may not clearly bring out the average trends existing in the market. 4. Ambiguous replies or omission of replies: Some of the respondents gave ambiguous replies for certain questions or omitted the responses to some of them. The interpretation of such responses becomes difficult and could generate wrong results. 5. Assumptions for the purpose of Analysis: Some assumptions were made while doing the analysis and interpretations, there could be few limitations in regard to these. “BIBLIOGRAPHY”
CHAPTER –7 BIBLIOGRAPHY
BOOKS:-
Indian Financial System by Varshney and Mittal.
WEBSITES:- www.Google.com www.IndiaBulls.com www.Wikipedia.org www.shareinfoline.com www.chittorgarh.com www.moneycontrol.com www.nseindia.com
“ANNEXURE”
CHAPTER -8 COPY OF QUESTIONNAIRE 1. NAME: ______
2. AGE ______
3. ADDRESS: ______
4. TELEPHONE NO. ______
5. OCCUPATION
(a) Service (b) Business (c) Professional (d) Others
6. Which of the following do you own?
(a) Two Wheeler (b) Car (c) Credit Card(d) Air Conditioner
7. Have you heard about Privatization in Insurance Sector?
(a) Yes (b) No
8. Which Companies are you aware of in life Insurance sector? a b (a) HDFC Standard Life Insurance (b) ICICI Prudential c d (c) Allianz Bajaj (d) Max New York Life e f (e) LIC (f) Tata AIG g 9. From where did you come to know about ICICI PRUDENTIAL LIFE INSURANCE
(a) Electronic Media (b) Print Media
(c) Through Agents (d) Others h 10. Do you think that service provided by Private Sector will be better than i j Public Sector? k (a) Yes (b) No l m 11.What According to you are the motives of buying Life Insurance Policy? n (a) Tax saving and risk cover (b) Protection against loss of income o p (c) Secure investment (d) Helps in savings
12. Do you have Insurance Policy? q (a) Yes (b) No r 13.With which company do you have Insurance Policy? ______
14. Do you have any plan to buy Insurance policy in near future? s (a) Yes (b) No t 15. If you have any plan to buy an insurance policy, which policy would u You prefer. v (a) Protection (b) Investment (c) Pension (d) Saving
THANK YOU