A Project Study Report on KOTAK LIFE INSURANCE COMPANY
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A Project Study Report On KOTAK LIFE INSURANCE COMPANY TITLED Submitted in partial fulfillment for the Award of degree of Master of Business Administration Submitted By:- Submitted To:- 2009-2011 Acknowledgment I express my sincere thanks to my projects gudie,«««««««««, Designation,«««««««., Deptt«««., for guiding me right form the inception till the successful completion of the project. I sincerely acknowledge him for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he/she/they had provided to me with all stages of this projects I would also like to thank the supporting staff «««««««««««««««.. Department, for their help and cooperation throughout our project , (Singnature of Student) Name of the Student PREFACE Executive Summary TABLE OF CONTENTS 1. INTRODUCTION TO THE INDUSTRY 2. INTRODUCTION TO THE ORGANISATION 3. RESEARCH METHODOLOGY y TITLE OF THE STUDY y DURATION OF THE STUDY y OBJECTIVE OF THE STUDY y TYPE OF STUDY y SCOPE OF STUDY y SAMPLE SIZE & METHOD OF SELECTING SAMPLE y DATA COLLECTION y LIMITATION OF THE STUDY 4. DATA ANALYSIS AND INTREPRETATION 5. FACTS AND FINDINGS 6. CONCLUSION 7. RECOMMENDATIONS AND SUGGESTIONS 8. ANNEXURE: QUESTIONNAIRE 9. BIBLIOGRAPHY Chapter-1 INTRODUCTION TO THE INDUSTRY INTRODUCTION Life Insurance Life insurance is the only tool to secure our life in future. It also provides a safe guard to the uncertainty of our life. Life insurance is the cheapest investment tool in which we can earn more in a short period of time. In the words of D S Hansell ³Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulated contributions of all the parties participating in the scheme´ The function of insurance is to protect you against losses you can¶t afford. Insurance reduces anxiety over a possible loss and absorbs the financial brunt of its consequences. India has traditionally been a high savings oriented country being on par with the thrifty Japan. Insurance sector in the United States of America is as big in size as the banking industry there. This gives us an idea of how important the sector is. Insurance sector canalizes the savings of the people to long- term investments. In India where infrastructure is said to be of critical importance, this sector will bring the nations own money for the nation The global life insurance market stands at $1,521.2 billion while the non-life insurance market is placed at $922.4 billion. India takes the 23rd position with US $9.933 billion annual premium collections and a meager 0.41% share. Out of one billion people in India, only 25 million people are covered by insurance. Indian insurance market is set to touch $25 billion by 2010, on the assumption of a 7 per cent real annual growth in GDP. In 3 years time we would expect the 10% of the population to be under some sort of an insurance cover. This assuming a premium of Rs. 5000 on an average, amounts to 100 million x Rs. 5000= Rs. 500 bn. This has made the sector the hottest one in India after IT. With social security and security to the public at large being the agenda for opening the sector, the role of the regulator becomes all the more serious and one that would be carefully watched at every step. History of Insurance Historians believe that insurance first developed in Summer & Babylonia. The merchants & traders of these societies transferred & pooled their money to protect themselves from pirates. In the 18th century BC, Babylonian king, hammurabi developed a code of law known as the code of specific rules governing the practices of early risk-sharing activities. Insurance developed during the 1700¶s in the North American colonies. In 1730, Benjamin Frank contributed for the Insurance of Houses from Loss by Fire. The company collected contributions& this money went into an investment fund. Interest on this fund went towards paying claims dividends to those who contributed money. The Industrial Revolution in the US, in the early & mid 1800¶s prompted dramatic group. During this time, many companies were establishes to sell life insurance policies & annuities. Several shared profits among policyholders, also developed. In addition, some life insurance companies charged premiums according to age of people & health. Life insurance, in its present form, came to India from the United Kingdom with the establishment of a British firm came to India from the United Kingdom with the establishment of a British firm, Oriental Life Insurance company in Calcutta in 1818, followed by Bombay Life Insurance Assurance Company in 1823, the Madras Equitable Life Insurance Society in 1829, & the Oriental Government Security Life Assurance Company in 1874. Prior to 1871, Indian lives were treated as sub-standard & charged extra premium of 15% to 20%. Bombay Mutual Life Assurance Society, an Indian insurer which came into existence in 1871, was the first to cover Indian lives at normal rates. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life insurance business. Later in 1928, the Indian Insurance Companies Act was enacted, to enable the govt. To collect statistical information about both life & non-life insurance business transacted in India by Indian & foreign insurers, including the provident insurance society. Comprehensive arrangements were, however, brought into effect with the enactment of the Insurance Act, 1938. Efforts in this direction continued progressively & the Act was amended in 1950, making far reaching changes, such as requirement of equity capital for companies carrying on life insurance business, stricter controls on investment of life insurance companies, ceiling on the expenses of management & agency commission etc. By 1956, 154 insurers, 16 non-Indian insurers & 75 provident societies were carrying on life insurance business in India. On 19th January 1956, the management of the entire life insurance business of 229 Indian insurers & provident insurance societies & the Indian life insurance business of 16 non-Indian life insurance companies then operating in India, was taken over by the central govt. & then nationalized on 1st September 1956 when Life Insurance Corporation came into existence. An ordinance was passed in 1968 to amend the Insurance Act to regulate/control non-life. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: y 1912 - The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. y 1928 - The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. y 1938 - Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. y 1956 - 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: y 1907 - The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. y 1957 - General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. y 1968 - The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972 - The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United Insurance resulting in set up of GIC India Insurance Company Ltd. GIC incorporated as a company. in 1973. Malhotra committee submitted its report in 1994 & recommended means to reintroduce an element of competition by withdrawing the exclusivity of LIC & GIC. In 1997, Insurance Regulatory Authority (IRA) was established which was later re-styled as IRDA in 1999. Malhotra Committee In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial System where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included: i) Structure Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. ii) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the sector.