a project report on the study of solvency margin in icici prudential life insurance

Study of Solvency Margin in ICICI Prudential life insurance

.

Contents

SL.NO. TITLES PAGE

NO.

1 EXECUTIVE SUMMERY 1-4

2 INSURANCE INDUSTRY 5-10

3 COMPANY PROFILE 11-36

4 RESEARCH METHODOLOGY 37-45

5 DATA ANALYSIS 46-55

6 LIMITATIONS OF THE SOLVENCY

MARGIN

56

7 FINDINGS 57

8 SUGGESTIONS 58

9 CONCLUSION 59

10 BIBLIOGRAPHY 60

11 ANNEXURY 61

EXECUTIVE SUMMERY

Babasabpatilfreepptmba.com 1


The In-plant Training was introduced to have an exposure to organization concepts.

In-plant training was for 2 months (8 weeks). It is been done with intention of correlating

the organization’s practical exposure with reference to the theory which I learnt in the

college.

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank,

a premier financial powerhouse, and prudential plc, a leading international financial

service group headquartered in United Kingdom. ICICI Prudential joint venture

consisting of ICICI holding 74% of the equity and the balance 26% held by Prudential

group of UK. 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). It is now one of the leading private Life

Insurance companies of India since its inception.

Topic of the study:

“The study of Solvency margin in ICICI Prudential life insurance.”

Research objectives:

1) To understand the meaning and importance of solvency margin

2) To know the procedure of calculation of solvency margin

3) To know why some companies fails in maintaining the adequate solvency

margin and some measures to over come from those problems

4) To calculate the solvency margin for the past 5 financial years, of ICICI

Prudential life insurance company

5) To know the limitations of solvency margin

Need for the study:



Solvency margin is one of the major concepts in insurance. IRDA regulates the

limits of solvency margin. Solvency margin helps the company in case of any adverse

claim situation. And it gives the confidence to the customers about the safety of the

company.

Scope of the study:

Solvency margin has large scope for its study. Solvency margin calculation is the

work of the actuary of the company, which is to be calculated as per the norms of the

IRDA. Solvency margin is fully internal to any of the insurance company and the

transactions are fully confidential. So the solvency margin has lots of scope for its study.

Findings

Solvency margin helps the company in case of any adverse claim situations.

Solvency margin gives the confidence to investors to invest in the company

Solvency margin is one of the major sources of fund for the government.

As on 31st march 2005 ICICI Prudential Company has Rs2354040838.50 as the

solvency margin. As on 31st march 2006 ICICI Prudential company has

Rs5268490105.50 as the solvency margin As on 31st march 2007 ICICI Prudential

company has Rs9444863631.00 as the solvency margin As on 31st march 2008

ICICI Prudential company has Rs16788443704.50 as the solvency margin As on

31st march 2009 ICICI Prudential Company has Rs19512898935.50 as the

solvency margin which shows the financial strength and back up for the company

Suggestions:

IRDA can increase the minimum limits of the solvency margin. Even though the

company feels it bit difficult in the initial stage in the long run the company will

be benefited.

IRDA can take the steps to publish the accounts for solvency margin along with

the annual reports. It reveals the transferences of the company..

IRDA can mention solvency margin as one of the topic for the study in case of pre

license IRDA compulsory training.

Limitations of the study:



The study is limited to 8 weeks

Non availability sufficient data

The study is restricted to last 5 years financial data.



INTRODUCTION

In common sense, Insurance is a provision made against possible loss due to

anticipated contingencies and uncertainties in human life. It is a safe guard against

accepted risks and hazards. Insurance does not avoid the possibility of risk or danger. but

it spreads the loss of misfortune of a person over many persons who are exposed to

similar risk and compensates the loss suffered by one of them.

Insurance and be defined as “A contract between parties whereby one party under

takes to pay an agreed sum on happening of a certain event or to make good the loss

arising from an accepted event, which may or may not occur, in return for a consideration

called premium”.

Conceptually a general term “insurance” includes two concepts where as

1) Assurance

2) Insurance

Assurance: Assurance is an agreement of guarantee to pay a specified amount to the

other on happening of an event sure to occur such as death or attainment of certain age by

a person. It refers to Life Insurance.

Insurance : Insurance is an agreement to indemnify (compensate)loss suffered by a

person on happening of an event which is un certain to occur such as accident, fire,

collision, robbery, etc, example general insurance, namely, fire, marine and other forms

of insurance.



LIFE INSURANCE

Life Insurance offers a way to replace the loss of income that occurs when someone dies.

It is a contract between the insured person and the company that is providing the

Insurance. If the insured dies while the contract is in force, the insurance company Pays a

specified sum of money to the person or persons you name as beneficiaries.

Life insurance ensures that your family will receive financial support in your absence.

Put simply, life insurance provides your family with a sum of money should something

happen to you. It protects your family from financial crises.

In addition to serving as a protective cover, life insurance acts as a flexible

money-saving scheme, which empowers you to accumulate wealth-to buy a new car, get

your children married and even retire comfortably.



History of insurance

The root of insurance might be traced to Babylonia, where tracers were

encouraged to assume the risk of the caravan trade through loans that were repaid

(with interest) only after the goods add arrived safety a practices resembling

bottomward and given legal force in the code of Hammurabi (C.2100 BC). The

Phoenicians and the Greek applied a similar system to their seaborne commerce.

The Romans used burial clubs as a form of life insurance, providing funeral

expenses for members and later payments to the survivors. Security and constant

search for security have been the unending endeavors of human race since the

beginning of the civilization. Right from the stone-age man to the modern IT

personality, this search for security has brought out innovative ideas. Unlike other

financial products, insurance is a complex product and one, which plays a key role

in the long-term financial well being of a customer. Before the agents can advise

their clients on which insurance solution is most appropriate for them, they will

have to understand the financial standing of their customer, his risk profile, etc.

it is for this very reason that, as per IRDA, all agents need to undergo some

mandatory training before being allowed to sell a life insurance product.



Life insurance in India

In India, insurance started with life insurance. It was in the early 19th century when

the Britishers on their postings in India felt the need of life insurance cover. It stated with

English companies like, “The European and the Albert”. The first Indian insurance

company was the Bombay Mutual Assurance Society Ltd., formed in 1870.

In the wake of the Swadeshi Movement in India in the early 1900s, quite a good

number of Indian companies were formed in various parts of the country to transact

insurance business. To name a few: ‘Hindustan Co-operative’ and ‘National Insurance’

in Kolkata; ‘United India’ in Chennai; ‘Bombay Life’, ‘New India’ and ‘Jupiter’ in

Mumbai and ‘Lakshmi Insurance’ in New Delhi.

Nationalization of life insurance in India

In 1956, life insurance business was nationalized and LIC of India came into

being on 1.9.1956. The government took over the business of 245 companies (including

75 provident fund societies) who were transacting life insurance business at that time.

Thereafter, LIC got the exclusive privilege to life insurance business in India.

Relevant laws were amended in 1999 and LIC’s monopoly right to transact life

insurance business in India came to end. At the close of financial year ending 31.3.2004,

twelve new companies were registered with the Insurance Regulatory & Development

Authority (IRDA) to transact life insurance business in India



INSURANCE REGULATORY & DEVELOPMENT AUTHORITY

ACT, 1999.

Insurance regulatory and development authority is a constituted boby which is created

to regulate the insurance business in India.

Mission

“To protect the interests of the policyholders, to regulate, promote and ensure orderly

growth of the insurance industry and for matters connected therewith or incidental

thereto”.

Insurance regularity and development Authority (IRDA)

This is a corporate body established for the purpose and objects as set out in

the explanation to the title.

The Authority replaces ‘Controller” under Insurance Act 1938.

The first schedule amends insurance act 1938

It states that if the ‘Authority’ is superseded by central Government, the

‘Controller of Insurance’ may be appointed till such time as the ‘Authority’ is

reconstituted.

Membership of IRDA

a) A chairperson

b) Not more thae five whole time members

c) Not more than four part time members appointed by the central government.



Functions of IRDA

To issue the certificate of registration,renew,withdraw,suspend or cancel such

registration.

To appoint the interests of the policy holders/insured in the matter of insurance

contact with the insurance company.

To specify the requisite qualification code of conduct and training for insurance

intermediaries and agents.

To specify the code of conduct for surveyors/loss assessors.

To promote the efficiency in the conduct of insurance business.

To promote and regulate professional organizations connected with the insurance

and reinsurance business.

To undertake inspection conduct enquiries and investigations including the audit

of insurers and insurance intermediaries.

To control and regulate the rates, terms and conditions to be offered by the insurer

regarding general insurance business not so controlled by tariff advisory

committee.

To mention the form and manner for maintenance of books of accounts and the

statements of accounts.

To regulate investment of funds by the insurance companies.

To adjudicate disputes between insurers and intermediaries of insurance.

To supervise the functioning of tariff advisory committee.

To specify the percentage of life insurance business and general insurance

business to be undertaken in the rural or social sector.



Scope of IRDA

To permit private companies to enter the insurance market, Government has

enacted Insurance Regulatory & Development Authority Act, 1999.

The act was passed by the Parliament in December 1999.

The Act provides for the establishment of the Authority

1. To protect the interest of holders of insurance policies.

2. To regulate, promote and ensure orderly growth of insurance industry.

3. For matters connected there with or incidental thereto.

The Act also sought to amend the following Acts-

1. The Insurance Act, 1938.

2. The Life Insurance Corporation, 1956.

3. The General insurance Business (Nationalization) Act, 1972.

The Act applies to the whole of India including J & K State.



ICICIPRUDENTIAL LIFE INSURANCE COMPANY LIMITED

The company profile

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank -

one of India's foremost financial services companies-and prudential plc - a leading

international financial services group headquartered in the United Kingdom. Total capital

infusion stands at Rs. 47.80 billion, with ICICI Bank holding a stake of 74% and

Prudential plc holding 26%.

ICICI Prudential has started its operations in December 2000 after receiving

approval from Insurance Regulatory Development Authority (IRDA). Today, company’s

nation-wide team comprises of 2099 branches (inclusive of 1,116 micro-offices), over

276,000 advisors; and 18 bancassurance partners.

ICICI Prudential is the first life insurer in India to receive a National Insurer

Financial Strength rating of AAA (Ind) from Fitch ratings. For three years in a row, ICICI

Prudential has been voted as India's Most Trusted Private Life Insurer, by The Economic

Times - AC Nielsen ORG Marg survey of 'Most Trusted Brands'. As the company grow

its distribution, product range and customer base, company\ continue to tiredlessly uphold

its commitment to deliver world-class financial solutions to customers all over India.



Promoters

ICICI Bank ICICI Bank Limited (NYSE:IBN) It is India ‘s largest private sector bank

and the second largest bank in the country with consolidated total assets of about US$ 95

billion’s of march 31,2009. The ICICI Bank subsidiaries include India’s leading private

sector insurance companies and among its largest securities brokerage firm, mutual funds

and private equity firm. The ICICI currently operation 19 countries including India.

Prudential plc It is established in London in 1848, prudential plc is a leading internal

retail financial services group with significant operation is Asia and UK. Prudential has

been writing prote3ction and savings insurance for over the 160 years, and today has

more than 21million customers worldwide and over 249billion assets under management

as of December 31, 2008. In Asia, Prudential is leading Europe-based life insurance with

operations in China, Hong Kong, India, Indonesia, Japan,, Korea, Malaysia, Philippines,

Singapore, Taiwan, Thailand and Vietnam, prudential is largest asset management. And

operation in ten market including China, Hong Kong, India, Japan, Korea,Singpore,

Taiwan,Vietnam,and United Arab Emirates.



Vision

To be the dominant Life and Pension player built on trust by world class people and

service.

This the company hope to achieve by:

Understanding the needs of customers and offering them superior products and

service

Leveraging technology service customers quickly, efficiently and conveniently

Developing and implementing super risk management and investment strategies to

offer sustainable and stable returns to their policyholders

Providing an enabling environment to foster growth and learning for their

employees

And above all, building transparency in all their dealings.

Mission

In the ICICI prudential Life Insurance Company is continues process, movement and

direction to enable every individuals as a member of ICICI company community, to

realize and active his potential so as to contribute to the achievement of the insurance

goal and derive satisfaction there from

Objectives

Excellence in customer service.

Profit orientation.

Belongings and commitment to the organization.

Fairness in all dealings and relations.

Risk taking and innovation.

Team playing.

Learning and renewal

Integrity.

Transparency and discipline. In policies and system



BOARD OF DIRECTORS

The ICICI prudential Life Insurance Company Limited Board Comprises reputed people

from the finance industry both from India and abroad.

Mr.Chanda D.Kochhar, Chairperson

Mr. N. S. Kannan, Director

Mr. K.Ramkumar, Director

Mr. Barry Stowe, Director

Mr. Adrisan O’Connor, Director

Mr. Keki Dadiseth, Independent Director

Prof. Marti G. Subranhmanyam, Independent Director

Ms. Rama Bijapurkar, Independent Director

Mr. Vinod Kumar Dhall, Independent Director

Mr. V. Vaidyanathan, Managing Director andCEO

Management team

Mr. V. Vaidyanathan Managing Director & CEO

Ms. Anita Pai Executive Vice President – Customer Service, Technology & Marketing

Dr. Avijit Chatteriee Appointed Actuary

Mr. punit Nanda Executive Vice President



Assets held in the company as on 31st July 2009

Equity 63% 289724 millions

Debt 37% 168554 millions

Total 100% 458278 millions

Assets held by :

Linked policy holders 90.3% 413836 millions

Other policy holders 09.7% 44442 millions

Total 100% 458278 millions



STUDY OF DEPARTMENTS IN THE ICICI PRUDENTIAL

Finance

Finance function in ICICI Prudential is committed to create an infrastructure that

is aligned to shareholder expectations. Finance basically comprises of four functions. .

Corporate Planning and MIS provide feedback on business strategies. This includes

driving the budgeting process, providing strategic inputs for decision-making and

management reporting and analysis. The Accounts function includes preparation and

maintenance of financial records, funds management, and expense processing and

treasury operations. Compliance ensures that every action is within the regulatory

framework. This includes reviewing compliance requirements and supporting the ethical

framework of ICICI Prudential life. Internal audit provides assurance to the management

over the organizations' control framework and includes process risk management,

information security assessment and business continuity assessment.

Marketing

The Marketing function at ICICI Prudential life insurance covers an array of

activities - brand and media management, channel support, direct marketing and

corporate communications. The Brand and Communications team is in charge of

advertising, consumer research, media planning & buying and Public Relations; that helps

develop and nurture ICICI Prudential's corporate identity while effectively

communicating its varied product offerings to the customer. Channel marketing provides

support to the sales force by streamlining the design and development of collaterals and

sales tools across distribution channels. The Direct marketing team was set up to generate

high quality leads for profitable business. The team achieves this through target database

acquisition and communicating customized product information through e-mailers,

telemarketing and innovative direct mailers.



Tied Agency

Tied Agency is the largest distribution channel of ICICI Prudential, comprising a

large advisor force that targets various customer segments. The strength of tied agency

lies in an aggressive strategy of expanding and procuring quality business. With focus on

sales & people development, tied agency has emerged as a robust, predictable and

sustainable business model.

Rewards and recognition: ICICI prudential has its own rewards and recognition

programs like, club membership, career growth opportunity, foreign tours, additional pay

outs, various training programs for high achievers etc., which boost the performance and

morale of the employees.

Bancassurance and Alliances

ICICI Prudential was a pioneer in offering life insurance solutions through banks and

alliances. Within a short span of two years, and with nearly a large number of partners,

B & A has emerged as a vital component of the company’s sales and distribution strategy,

contributing to approximately one third of company’s total business.

The business philosophy at B&A is to leverage distribution synergies with our

partners and add value to its customers as well as the partners. Flexibility, adaptation and

experimenting with new ideas are the hallmarks of this channel.

Customer Service

The Operations department oils the work processes between the customer and the

company to ensure consistent and quality service to the customer. To streamline the

operations, the Operations department interfaces between the clients and the agents, the

branches and the underwriters, and manages work processes.

The Vision at Customer Service is to deliver ‘World Class Service’ at every

opportunity. Units such as the 9 to 9 contact centre, Outbound Call Centre, Customer

Care and Query Resolution Unit are all committed to providing effective solutions to over

lakhs of customers across the country.



Operations:

This department works in the company in case of processing of the policies at the

initial stage, primary underwriting, department of cash, etc.

Human Resource

The people strategy of ICICI Prudential is “To build a committed team with a

culture of innovation, learning and growth. The Human Resource Function at ICICI

Prudential drives the people strategy of the business. With its initial focus on operational

excellence to deliver benefits and services to staff members, HR is now committed to

building capability through state of the art processes. A robust performance management

system, compensation system and a segmented training architecture enable it to deliver

value to the organization.

Information Technology

The Information Technology function at ICICI Prudential is committed to enable

business through the use of technology. It is segmented into 4 groups to enable highest

levels of delivery to the customers: Life Asia Solutions Group that provides flexibility in

designing better product offerings to end-users, the Solutions Group- Web that provides

real-time information to customers and is responsible for customer relationship

management, IT Architecture & Corporate Solutions Group is in charge of developing

and maintaining a blueprint for the IT architecture for the enterprise as a whole. This team

works as an in house R&D Solution Group, exploring new technological initiatives and

also caters to information needs of corporate functions in the organization. IT

Infrastructure group is responsible for providing hardware, software, network services to

the whole organization. This group runs the 'Digital Nervous System' of the Enterprise at

the highest levels of efficiency and provide robust, scalable and highly available platform

for deployment of business application.



Training:

The department of training always aims at educating its employees of the

organization. In the company the training will be given to each level of employees.

Training may be conducted because of the requirement from the employees or it may be

as the initiation from the company. Training will be conducted in the different occasions

like promotion of an employee, the launch of the new product, etc.



ICICI PRUDENTIAL LIFE INSURANCE PRODUCTS/ PLANS

Insurance Solutions for Individuals:

ICICI Prudential Life Insurance offers a range of innovative, customer-centric

products that meet the needs of customers at every life stage. Its products can be

enhanced with up to 5 riders, to create a customized solution for each policyholder.

Protection Solutions

Life Guard: 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.

Home Assure: Is a mortgage reducing term assurance plan designed specifically

to help customers cover their home loans in a simple and cost-effective manner.

Child Plans

Smart Kid: Is Education plans provide guaranteed educational benefits to a child

along with life insurance cover for the parent who purchases the policy. The

policy is designed to provide money at important milestones in the child’s life.

Smart Kid plans are also available in unit-linked form both single premium and

regular premium.

Retirement Solutions

Forever Life is a retirement product targeted at individuals in their thirties.

Secure Plus Pension: Is a flexible pension plan that allows one to select between

3 levels of cover.



Market-linked products

Lifetime Pension: is a regular premium market-linked pension plan

Life Link Pension II is a single premium market-linked pension plan.

Invest Shield Pension is a regular premium pension plan with a capital guarantee

on the investible premium and declared bonuses.

Golden Years: is a limited premium paying retirement solution that offers tax

benefits. up to Rs 100,000 u/s 80C, with flexibility in both the accumulation and

payout stages. ICICI Prudential also launched “Salaam Zindagi”, a social sector

group insurance policy targeted at the economically underprivileged sections of

the society.

Life Time Super: A market-linked insurance products that adapts itself to

changing protection and investment need. The benefits are potentional to earn

high returns, Death benefit, partial withdrawals, Tax benefits.

Life Link Super: It is the unique, single premium united linked investment-cum-

insurance solution. It offers attractive premium allocation along with flexible

investment options to opportunity to enjoy potentially high returns on your

investments, without compromising on the protection of your family.

Life Time Plus: It is one –stop solution for investors who are looking for a plan

offers for the benefits of the insurance cover along with flexible investment

options. The payment will be three different modes like Monthly, half yearly,

Year.

Premier Life Gold: The Premier Life Gold High net worth segment is looking for

plan which gives potional high returns, liquated and a flexibility option to design

there own plan. And wealth along with insurance protection.



Savings Solutions

Secure Plus: Is a transparent and feature-packed savings plan that offers 3 levels

of protection.

Cash Plus: Is a transparent, feature-packed savings plan that offers 3 levels of

protection as well as liquidity options.

Save’n’ Protect: Is a traditional endowment savings plan that offers life

protection along with adequate returns.

Cash Back :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.

Life Time Gold: Is offer customers the flexibility and control to customize the

policy to meet the changing needs at different life stages. Each offer 4 fund

options ? Preserver, Protector, Balancer and Maximiser.

Life Link II: Is a single premium Market Linked Insurance Plan which combines

life insurance cover with the opportunity to stay invested in the stock market.

Premier Life: Is a limited premium paying plan that offers customers life

insurance cover till the age of 75.

Invest Shield Life: Is a Market Linked plan that provides capital guarantee on the

invested premiums and declared bonus interest.

Invest Shield Cash: Is a Market Linked plan that provides capital guarantee on

the invested premiums and declared bonus interest along with flexible liquidity

options.



Invest Shield Gold: Is a Market Linked plan that provides capital guarantee on

the invested premiums and declared bonus interest along with limited premium

payment terms.

Health Solution

Health Assure: Is a regular premium plan which provides l ong term cover

against 6 critical illnesses by providing policyholder with financial assistance,

irrespective of the actual medical expenses.

Health Assure Plus: Is a regular premium plan which provides long term cover

against 6 critical illnesses by providing financial assistance, irrespective of actual

medical expenses, as well as an equivalent life insurance cover



Flexible Rider Options

ICICI Prudential Life offers flexible riders, which can be added to the basic

policy at a marginal cost, depending on the specific needs of the customer.

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

rider 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.

Accident Benefit: This rider option pays the sum assured under the rider on death

due to accident.

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.

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

Smar Kid, Secure Plus and Cash Plus

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 Secure Plus and

Cash Plus.



Competitors for the ICICI Prudential life insurance company in the Indian life insurance industry 1 --------------- -------------- Life insurance corporation of India.

2 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.

3 104 15.11.2000 Max New York Life Insurance Co. Ltd.

4 107 10.01.2001 Kotak Mahindra Old Mutual Life Insurance Limited

5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.

6 110 12.02.2001 Tata AIG Life Insurance Company Ltd.

7 111 30.03.2001 SBI Life Insurance Company Limited.

8 114 02.08.2001 ING Vysya Life Insurance Company Private Limited

9 116 03.08.2001 Bajaj Allianz Life Insurance Company Limited

10 117 06.08.2001 Metlife India Insurance Company Ltd.

11 121 13.01.2002 Reliance life insurance company limited

12 122 14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.

13 127 06.02.2004 Sahara India Insurance Company Ltd.

14 128 17.11.2005 Shriram Life Insurance Company Ltd.

15 130 14.07.2006 Bharti AXA Life Insurance Company Ltd.

16 133 04.09.2007 Future Generali India Life Insurance Company

Limited

17 135 19.12.2007 IDBI Fortis Life Insurance Company Ltd.

18 136 08.05.2008 Canara HSBC Oriental Bank of Commerce Life

Insurance Company Ltd.

19 138 27.06.2008 Aegon Religare Life Insurance Company Ltd.

20 140 27.06.2008 DLF Pramerica Life Insurance Company Ltd.



SWOT ANALYSIS

Strengths:

Vast untapped market

In a country of 1 billion people there is a huge potential market for life insurance

products. In India the penetration of the insurance sector in the rural and semi-urban areas

is low. There is a market of 900 million for life insurance and 200 million for

householder’s insurance policy. In addition to this the affluent section can be tapped for

Overseas Medi claim and Travel Insurance policies.

Huge pool of skilled professionals

At ICICI Prudential Life Insurance company there is no dearth of skilled

professionals to carry out a successful Life Insurance venture.

Weakness:

Lack of networking among branches

In spite of growing emphasis on total branch mechanization (TBM) and full

computerization of branches, the rural and semi-urban branches have still to see

information technology as an enabler. Complete integration of branch network involves

huge investments for creating IT and communication infrastructure.

Low savings rate

Though we have a huge market for insurance policies, the middle class who

constitutes the bulk of this market is today burdened under inflationary pressures. The

secret lies in inculcating savings habit but considering the amount of surplus funds

available with the middle class for investing in future security, the ability to save is very

nominal



Opportunities:

Data mining

Banks have a huge customer database which has to be properly leveraged. Target

segments should be identified and tapped.

A wide distribution network of banks provides a great opportunity to sell

insurance products through banks.

Another potential area of growth of Bancassurance is exploiting the corporate

customers and tying up for insurance of the employees of corporate clients

Threats:

Human Resource Challenges

Success in Bancassurance venture requires a change in mindset. Though we have

a large talent pool, the inability to sell complex insurance products on the part of bank

professionals and their reluctance to learn can be severe setback. There has to be a change

in the thinking, approach and work culture.



Segmentation of the insurance products in ICICI Prudential

segmentation Purpose of the segment Suitable plans

Young & Single Asset creation Wealth creation plans

Young & Just married Asset creation & protection Wealth creation and mortgage protection plans

Married with kids Children's education, Asset creation and protection

Education insurance, mortgage protection & wealth creation plans

Middle aged with grown up kids

Planning for retirement & asset protection

Retirement solutions & mortgage protection

Across all life-stages Health plans Health Insurance


http://www.iciciprulife.com/public/Retirement-Plans/Retirement-Plans-Need.htm

http://www.iciciprulife.com/public/Life-plans/Education-Insurance-Plans.htm

http://www.iciciprulife.com/public/Life-plans/Wealth-Creation-Plans.htm

http://www.iciciprulife.com/public/Life-plans/Wealth-Creation-Plans.htm


AWARDS

ICICI Pru Life ranked as the Most Trusted Pvt Life Insurance brand in the Brand

Equity "Most Trusted Brands 2009" survey

ICICI Prudential Life won a Gold award for About ULIPS.com and Health Saver

campaign, innovation award for www.taxguru 08-09.com and a silver award for its

Insurance yoga campaign at the ICICI Group Marketing Excellence award.

Confederation of Indian Industry (CII) - Western Region recently awarded ICICI

Prudential Life a 'Commendation for Strong Commitment to HR Excellence 2008' at the

CII HR Summit 2008.



ICICI Prudential Life Insurance was awarded with the coveted 'ICAI Award for

Excellence in Financial Reporting' by the Institute of Chartered Accountants of India

(ICAI) for the financial year ended March 31, 2008.

ICICI Prudential Life was awarded the Life Insurance Company of the Year at

the12th Asia Insurance Industry Awards 2008.

ICICI Prudential Life won the Award for Brand Excellence in the Banking and

ICICI Prudential life insurance



ICICI Prudential Life was awarded with two Bronze Effie's in the sevices

catgeory for its Corporate campaign and Retirement Number campaign

ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runner

up at the Outlook Money & NDTV Profit Awards 2008

ICICI Prudential Life was awarded the SAP ACE 2008 Best Business Objects

Award for its IT practices

ICICI Prudential Life Insurance won the award for the Best Life Insurer-Runner

up at the Outlook Money & NDTV Profit Awards 2007

ICICI Prudential Life’s, retirement solutions campaign for the year 2006-07 was

awarded the Bronze Effy trophy in the services category.It also won the Brand Equity

Bravery Award 2007, instituted by Ad club.



Innovation Award for launching Diabetes Care – Prudence Award 2006. People

Award for excellence in training and people development - Prudence Award 2006 .

Best Life Insurer 2003. Outlook Money Awards 2003 & 2004 IMM Award for

Excellence. Institute of Marketing & Management

India's Most Customer Responsive Insurance Company. Avaya Global Connect

Economic Times. Customer Responsiveness Awards Organisation with Innovative HR

Practices Indira Group of Institutes



Superbrand 2003-04

Silver Effie for Effectiveness of the ‘Retire from Work not life’ advertising

campaign Effies 2003

Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance Co. Ltd. was

adjudged the Businesswoman of the year at The Economic Times Awards for Corporate

Excellence, 2007-08.



ICICI Prudential Life won the UK Trade & Investment India Business Awards

2008 in the Business Partnership Award-Large Company category

Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was adjudged

the Entrepreneur of the Year-Manager at the Ernst and Young Entrepreneur Awards

2007.

Ms. Shikha Sharma, MD & CEO, ICICI Prudential Life Insurance was awarded

the Outstanding Businesswoman of the Year at CNBC TV18's India Business Leader

Awards 2007



Prudence Customer Centricity Award 2004 & 2005. Prudential Corporation Asia



RECOGNISATION

ICICI Prudential Life was recognized as the most trusted brand amongst private

life insurers in the Economic Times-Most Trusted Brand survey 2008.

IMM Award for Excellence. Institute of Marketing & Management Organization

with Innovative HR Practices. India Group of Institutes Organization with Innovative HR

Practices. Asia-Pacific H R Congress Awards for HR Excellence



Topic of the study:

“The study of Solvency margin in ICICI Prudential life insurance.”

Research objectives:

1) To understand the meaning and importance of solvency margin

2) To know the procedure of calculation of solvency margin

3) To know why some companies fails in maintaining the adequate solvency

margin and some measures to over come from those problems

4) To calculate the solvency margin for the past 5 financial years, of ICICI

Prudential life insurance company

5) To know the limitations of solvency margin



Need for the study:

Solvency margin is one of the major concepts in insurance. IRDA regulates the

limits of solvency margin. Solvency margin helps the company in case of any adverse

claim situation. And it gives the confidence to the customers about the safety of the

company.

Scope of the study:

Solvency margin has large scope for its study. Solvency margin calculation is the

work of the actuary of the company, which is to be calculated as per the norms of the

IRDA. Solvency margin is fully internal to any of the insurance company and the

transactions are fully confidential. So the solvency margin has lots of scope for its study.



SOLVENCY MARGIN

Solvency margin is the amount by which the assets of an insurer exceed its

liabilities, and will form part of the insurer’s shareholder’s funds. Methods of valuations

of assets and liabilities of an insurer are prescribed in the insurance regulations, Rules for

estimating the liabilities will obviously be different for long-term and general insurance

business. The regulations stipulated the minimum solvency margin, which an insurer

must maintain.

Why is the solvency margin needed?

All insurance companies have to pay claims to policy holders. These could be

current or future claims of policy holders. Insurers are expected to put aside a certain sum

to cover these liabilities. These are also referred to as technical provisions. Insurance,

however, is risky business and unforeseen events might occur sometimes, resulting in

higher claims not anticipated earlier. For instance, calamities like the Mumbai floods,

J&K earthquake, fire, accidents of a large magnitude, etc may impose an unbearable

burden on the insurer.

In such circumstances, technical provisions though initially prudent, may prove

insufficient for taking care of liabilities. If the liability is large, there is a possibility of the

insurance company becoming insolvent. This would create an awkward situation for the

insurance sector, regulator and also the government. The solvency margin is thus aimed at

averting such a crisis. The purpose of the extra capital all insurers are required to keep as

per the regulatory norms is to protect policy holders against unforeseen events.

This also helps the company to settle the emergency claims and gives the

confidence to the public to invest in the respected company.



Why some companies failing to maintain the solvency margin……..?

There are certain factors which affects the working of the solvency margin some of those

factors are:

• Poor mortality experience

• Poor expense experience

• Expense inflation

• Inadequate investment returns

• Poor lapse and surrender experience

• Asset default and depreciation

• Mismatched investments

• Guaranteed surrender values/investments returns

• Liquidity

• Options

• Change in business mix

• Inadequate reinsurance

• Operational risks



How to handle threats to maintain appropriate solvency margin……..?

• Management actions

• Role of the Appointed Actuary

• Regulations

• Timely intervention by regulator

• Conservative asset and liability valuations

• Risk based capital/solvency margin

• Holistic and integrated approach to risk management

• Incentives to encourage prudent risk management



How much solvency margin required…………………….?

The calculation of Solvency margin depends on the factors like total reserve for

the conventional products total fund that the management of any insurance company

intended to invest and also the total sum assured that the any insurance company writes.

According to the guidelines of the IRDA total solvency margin required is 4% of

reserve for conventional products +1%of all unit linked insurance funds without any

guarantee + 2% of all unit linked insurance funds with some guarantee+0.3% of (sum

assured –(reserves for conventional product + unit linked insurance fund with some

guarantee+ unit linked insurance product without any guarantee))

The first two factors ensure that the insurance company is protected against

moments and interest rates or investment income and 0.3% of (sum assured – policy

holder’s fund) ensures that the company is protected against the adverse claim

situations….

As an additional safety measure IRDA mandates that an insurance company must

maintain 150% of solvency margin as the solvency margin or Rs50 crores as a solvency

margin whichever is higher. This can be explained much better with the following

example.

Suppose the company has Rs200 million as a reserve for conventional product,

Rs500 million units fund without guarantee, Rs50 million unit funds with some

guarantee. So the total fund is 750 million.

Then the company calculates the solvency margin as, for the conventional policy

holders fund (200 million *0.4), for the unit fund without any guarantee (500 million

*0.1), for the unit funs with some guarantee (50 million *0.2) here if the insurance

company has sum assured of 5000 million then, 5000million-750million (sum of above 3

types of fund) that comes 4250 million which should be multiplied by 0.3 % then,



4% of 200million is Rs8 million

1% of 500 million is Rs5 million

2% of 50 million is Rs1 million

0.3% of 4250 million is Rs12.75 million

Then the total becomes 26.75 million (total of all the above)

Now IRDA wants any insurance company to maintain 150% of the above calculated fund

i.e. 26.75*150% is equal to Rs40.12 million.



CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR..

PARTICULARS AMOUNT (IN MILLIONS)

RESERVE FOR CONVENTIONAL PRODUCTS 200

POLICY HOLDERS UNIT FUND WITH SOME 50GUARANTEE

POLICY HOLDERS UNIT FUND WITHOUT ANY 500GURENTEE

TOTAL AMOUNT OF POLICY HOLDERS 750FUND SUMASSURED WRITTEN BY THE COMPANY 5000



CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR........

PERTICULERS AMOUNT PERCENTAGE %AMOUNT

(MILLIONS) (MILLIONS)

RESERVE FOR CONVENTIONAL 200 4% 8.00PRODUCTS

POLICY HOLDERS UNIT FUND 50 2% 1.00WITH SOME GUARANTEE

POLICY HOLDERS UNIT FUND 500 1% 5.00WITHOUT ANY GURENTEE

TOTAL AMOUNT OF POLICY 750 14.00HOLDERS FUND

(SUMASSURED WRITTEN BY 4250 0.3% 12.75 THE COMPANY – TOTAL AMOUNT OF POLICY HOLDERS FUND)

TOTAL 26.75

CALCULATION OF SOLVANCY MARGEN OF THE COMPANY ACCORDING TO THE IRDA SPECIFICATIONS FOR THE YEAR= ABOVE TOTAL*150%

= 26.75 * 150%

= 40.12 MILLION RS



Calculation of solvency margine for the past 5 years of the ICICI

prudential life insurance company.

CHART SHOWING TOTAL OF POLICY HOLDERS FUND AND SUMASSURED FOR THE YEAR 2005

PARTICULARS AMOUNT(in 000,s)

RESERVE FOR CONVENTIONAL PRODUCTS 8252789.00

POLICY HOLDERS UNIT FUND WITH SOME 2674799.20GUARANTEE

POLICY HOLDERS UNIT FUND WITHOUT ANY 24073192.80GURENTEE

TOTAL AMOUNT OF POLICY HOLDERSFUND 35000781.00 SUMASSURED WRITTEN BY THE COMPANY 350007810.00



CHART SHOWING CALCULATION OF SOLVENCY MARGIN FOR THE YEAR 2005

PERTICULERS AMOUNT PERCENTAGE % AMOUNT

(IN 000’S) (IN 000’S)

RESERVE FOR CONVENTIONAL 8252789.00 4% 33011.5600PRODUCTS

POLICY HOLDERS UNIT FUND 2674799.20 2% 53495.9840WITH SOME GUARANTEE

POLICY HOLDERS UNIT FUND WITHOUT ANY GURENTEE 24073192.80 1% 240731.9280

TOTAL AMOUNT OF POLICY 327239.5600HOLDERS FUND

(SUMASSURED WRITTEN BY THE COMPANY – TOTAL 315007029.oo 0.3% 945021.8070

AMOUNT OF POLICY HOLDERS FUND)

TOTAL 1569360.5590


= 1569360.559 * 150%

= 2354040.8385




PARTICULARS AMOUNT(in 000,s)

RESERVE FOR CONVENTIONAL PRODUCTS 11567031.OO

POLICY HOLDERS UNIT FUND WITH SOME 7203515.OO GUARANTEE

POLICY HOLDERS UNIT FUND WITHOUT ANY 64831635.OOGURENTEE

TOTAL AMOUNT OF POLICY HOLDERS FUND 83602181.OO SUMASSURED WRITTEN BY THE COMPANY 836021810.00




PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)


POLICY HOLDERS UNIT FUND 7203513 2% 144070.2600WITH SOME GUARANTEE


TOTAL AMOUNT OF POLICY HOLDERS FUND 1075067.8500

(SUMASSURED WRITTEN BY 752419629 0.3% 2257258.8870THE COMPANY – TOTAL AMOUNT OF POLICY HOLDERS FUND)

TOTAL 3512326.7370


= 3512326.737 * 150%

= 5268410.1055




PARTICULARS AMOUNT (in 000’s)




TOTAL AMOUNT OF POLICY HOLDERS 151928744.00FUND SUMASSURED WRITTEN BY THE COMPANY 1519287440.00





(IN 000’S) (IN 000’S)



POLICY HOLDERS UNIT FUND 120496037.4 1% 1204960.3740WITHOUT ANY GURENTEE

TOTAL AMOUNT OF POLICY 2194499.6660HOLDERS FUND

(SUMASSURED WRITTEN BY THE COMPANY – TOTAL 1367358696.0 0.3% 4102076.0880AMOUNT OF POLICY HOLDERS FUND)

TOTAL 6296575.7540


= 6296575.754 * 150%

= 9444863.631




PARTICULARS AMOUNT (in 000’s)








PERTICULERS AMOUNT PERCENTAGE % AMOUNT (IN 000’S) (IN 000’S)


POLICY HOLDERS UNIT FUND 25075304 2% 501506.0800 WITH SOME GUARANTEE


TOTAL AMOUNT OF POLICY 3300175.4000

(SUMASSURED WRITTEN BY 2480256801 0.3% 7440770.4030THE COMPANY – TOTAL AMOUNT OF POLICY HOLDERS FUND)

TOTAL 11192295.8030


= 11192295.803 * 150%

= 16788443.7045




PARTICULARS AMOUNT (IN 000’S)









(IN 000’S) (IN 000’S)



POLICY HOLDERS UNIT FUND 258002097.30 1% 2580020.9730

WITHOUT ANY GURENTEE

TOTAL AMOUNT OF POLICY 28666899.70 HOLDERS FUND 4416151.4470

(SUMASSURED WRITTEN BY 2864149281.00 0.3% 8592447.8430 THE COMPANY – TOTAL AMOUNT OF POLICY HOLDERS FUND)

TOTAL 13008599.2900


= 13008599.29 * 150%= 19512898.935



Limitations of the solvency margin

Solvency margin is very internal for any insurance company.

It is not fixed for the specific period it becomes bit difficult to calculate on regular

basis because it is the work of higher authorities if the company.

It becomes a very heavy amount to those companies who have just entered the

industry.

Even though it is one of the major reserve that the company keeps it cannot be

published in the final reports of the insurance company.



Findings

Solvency margin helps the company in case of any adverse claim situations.

Solvency margin gives the confidence to investors to invest in the company

Solvency margin is one of the major sources of fund for the government.

As on 31st march 2005 ICICI Prudential Company has Rs2354040838.50 as the

solvency margin. As on 31st march 2006 ICICI Prudential company has

Rs5268490105.50 as the solvency margin As on 31st march 2007 ICICI Prudential

company has Rs9444863631.00 as the solvency margin As on 31st march 2008

ICICI Prudential company has Rs16788443704.50 as the solvency margin As on

31st march 2009 ICICI Prudential Company has Rs19512898935.50 as the

solvency margin which shows the financial strength and back up for the company.

Solvency margin of ICICI Prudential is increasing in the rate of its growth in

business.



Suggestions:

It can be suggested that “the persons in the organizations can be made aware of

the solvency margin. by conducting the training sessions for both the employees

and advisors” It gives them more confidence to sell the insurance products.

IRDA can increase the minimum limits of the solvency margin. Even though the

company feels it bit difficult in the initial stage in the long run the company will

be benefited.

IRDA can take the steps to publish the accounts for solvency margin along with

the annual reports. It reveals the transferences of the company..

IRDA can mention solvency margin as one of the topic for the study in case of pre

license IRDA compulsory training.

IRDA can also simplify the investment norms so that the money can be better

utilized and income from the solvency margin amount can be increased

(Rs1951289893.50 is not the small amount).



Conclusion:

Every study and project needs to be concluded. Hence, the study conducted in ICICI

Prudential helped me to know some thing about its product, working environment of the

company, rules and regulations to be followed in the company, how to handle the work

pressure. I got the maximum exposure because personally I met the customer and I have

also sold some of the insurance products this gave us the confidence to how to work and

helped us to apply the theoretical knowledge to the practical job, because practical

exposure differs significantly From text book knowledge.

ICICI Prudential is performing fantastically well in the Indian insurance industry

and is the No. 1 private player among the 19 other private life insurance players.

Topic: solvency margin is one of the important terminologies in the insurance sector.

Every insurance company has to maintain the solvency margin according to the

guidelines issued by the IRDA. Solvency is beneficial to IRDA because it reduces the

burden, helpful for the company because it helps the company to manage the adverse the

claim situation, and also helps the customers because it gives them the since of security

for their investments.



Bibliography:

Books:

Marketing research by A Parashuraman, Dhurv Grewal, R Krishnan.

IRDA Pre-licencing training exam book(IRDA syllabus).

ICICI Prudetial product training materials.

Magazines:

Insurance word

Web sites:

www.iciciprulife.com

www.iciciprupartner.com

www.irdaindia.org

icici prudential intranet.


http://www.irdaindia.org/

http://www.iciciprupartner.com/

http://www.iciciprulife.com/


Annexture:

Five years balance sheet of ICICI Prudential life insurance.


a project report on the study of solvency margin in icici prudential life insurance

Economy & Finance

company solvency margin

study of solvency margin

solvency margin calculation

findings solvency margin

importance of solvency

thelimits of solvency

icici prudential company

solvency margin56