AVIVA INDIA

An Internship Report

PERIN.F.SHOLAPURWALA

SSN: 888940849

In Partial fulfillment of the Master’s Program in Business Administration, Ohio University, Athens, USA

OHIO University, Christ College Academy for Management Education Christ College Campus Hosur Road, Bangalore 29

April 2007 EXECUTIVE SUMMARY

Aviva Life insurance is the oldest life insurance company in the world. It is the largest insurer in the UK and is the 28th largest company in the world. In India, the company is marketing life insurance products and unit linked investment plans. From my research at Aviva, I found that the company has a lot of competition from other private insurers like ICICI, HDFC, Birla Sun Life and Tata Aig. It also faces competition from LIC. To compete effectively Aviva could launch cheaper and more reasonable products with small premiums and short policy terms (the number of year’s premium is to be paid). The ideal premium would be between Rs. 5000 – Rs. 25000 and an ideal policy term would be 10 – 20 years.

Aviva must advertise regularly and create brand value for its products and services. Most of its competitors like HDFC, ICICI, Reliance and LIC use television advertisements to promote their products. The Indian consumer has a false perception about insurance – they feel that it would not benefit them if they do not live through the policy term. Nowadays however, most policies are unit linked plans where a customer is benefited even if their death does not occur during the policy term. This message should be conveyed to potential customers so that they readily invest in insurance.

Family responsibilities and high returns are the two main reasons people invest in insurance. Optimum returns of 16 – 20 % must be provided to consumers to keep them interested in purchasing insurance.

On the whole Aviva life insurance is a good place to work at. Every new recruit is provided with extensive training on unit linked funds, financial instruments and the products of Aviva. This training enables an advisor/ sales manager to market the policies better. Aviva was ranked 13 in the Best Places to Work survey. The company should try to create awareness about itself in India. In the global market it is already very popular. With an improvement in the sales techniques used, a fair bit of advertising and modifications to the existing product portfolio, Aviva would be all set to capture the insurance market in India as it has around the globe. TABLE OF CONTENTS

Introduction to Insurance……………………………………………………………………….1

Research Design……………………………………………………………………………………5

Company Profile…………………………………………………………………………………..10

Financial Analysis………………………………………………………………………………….34

Competitive analysis……………………………………………………………………………..36

Marketing problems………………………………………………………………………………40

Analysis and Interpretation……………………………………………………………………42

Future line of research………………………………………………………………………….58

Conclusion…………………………………………………………………………………………..59

References…………………………………………………………………………………………..60

Appendix……………………………………………………………………………………………..61 ACKNOWLEDGMENT

I would like to thank my project guide Ms. Rajeswari Ramsubramanian, Sales Manager Aviva Life Insurance for guiding me through my internship and research project. Her encouragement, time and effort are greatly appreciated.

I would like to thank Professor Dr. Amalendu and Mr. Girish for supporting me during this project and providing us an opportunity to learn outside the class room. It was a truly wonderful learning experience.

I would like to dedicate this project to my parents and brother. Without their help and constant support this project would not have been possible.

Lastly I would like to thank all the respondents who offered their opinions and suggestions through the survey that was conducted by me in Bangalore. CHAPTER I

INDIAN INSURANCE

INDUSTRY

“AN OVERVIEW” THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion (for the financial year 2004 – 2005). Together with banking services, it adds about 7% to the country’s Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and funds available with LIC for investments are 8% of the GDP.

Even so nearly 80% of the Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. A large part of our population is also subject to weak social security and pension systems with hardly any old age income security. This in itself is an indicator that growth potential for the insurance sector in India is immense.

A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain the economic growth of the country. (Source: www.indiacore.com)

HISTORICAL PERSPECTIVE

The history of life dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non- Indian lives.

The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development.

The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

KEY MILESTONES

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

INDUSTRY REFORMS

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations.

The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 36%, with premium income from new businesses at Rs. 253.43 billion during the fiscal year 2004-2005. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%.

The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent.

With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a company’s ownership.

Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 14 private life insurance companies have been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. Some of these products include investment plans with insurance and good returns (unit linked plans), multi – purpose insurance plans, pension plans, child plans and money back plans. (www.wikipedia.com) CHAPTER II

RESEARCH DESIGN