hdfc final project1
TRANSCRIPT
INFORMATION ABOUT ORGANIZATION
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Information about organization
HDFC Standard 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 HDFC SLIC, I found that the company has a lot of competition from other
private insurers like ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition
from LIC. To compete effectively HDFC SLIC 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.
HDFC must advertise regularly and create brand value for its products and services.
Most of its competitors like Aviva, ICICI, Max, 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 HDFC standard 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
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products of HDFC. This training enables an advisor/sales manager to market the policies
better. HDFC 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, HDFC would be all set to capture the
insurance market in India as it has around the globe.
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SECTION-1
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BRIEF HISTORY OF ORGANIZATION
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Brief history of organization
INTRODUCTION
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has
since emerged as the largest residential mortgage finance institution in the
country. The corporation has had a series of share issues raising its capital to
Rs. 119 Crores. The gross premium income for the year ending March 31, 2007
stood at Rs. 2,856 Crores and new business premium income at Rs. 1,624
Crores. The company has covered over 8,77,000 lives year ending March 31,
2007.
HDFC operates through almost 450 locations throughout the country with its
corporate head quarters in Mumbai, India. HDFC also has an International Office
in Dubai, UAE with service associates in Kuwait, Oman and Qatar. HDFC is the
largest housing company in India for the last 27 years.
Royal HDFC is a joint venture between HDFC bank Ltd. and Royal & Sun
Alliance Plc. The Company was one of the first new companies to be granted a
license by the IRDA (Insurance Regulatory and Development Authority) to
transact business in the non-life insurance sector. The Company was
incorporated in April 2000, received its certificate to commence business on
October 25, 2000 and formally launched in March 2001.
The Values with which Royal Sundaram works are
- Truth
- Trust
- Teamwork
- People commitment
- Customer commitment
- Professionalism
Royal Sundaram inherits the undisputed reputation for trust, built by Sundaram
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Finance and Royal & Sun Alliance, who have stood for reliability and integrity for
years.
At Royal Sundaram the customer is at the center of everything we do. The
reason behind insuring with Royal Sundaram is that we are a professionally
managed customer focused company, toll-free lines for easy access by the
customer, appointing of assessors within 24 hours of the accident and claim
settlement within 5 working days.
Products / Services Offered
Private Motor
Health & Hospital Cash
Travel
Personal Accident
Home & Household - including personal property
The Company was incorporated in 1954, with the object of financing the
purchase of commercial vehicles and passenger cars.
The company was started with a paid-up capital of Rs.2.00 Lakhs and later went
public in 1972.
The Company's shares were listed in the Madras Stock Exchange in 1972 and in
the National Stock Exchange in January 1998.
Subsequently, the equity shares of the Company have been delisted from
Madras Stock Exchange Limited (MSE) with effect from January 27, 2004, in
accordance with SEBI (Delisting of Securities) Guidelines, 2003, for voluntary
delisting
Sundaram Finance Ltd incorporated in 1954 has grown today into one of the
most trusted financial services groups in India.
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Today, the activities of the group span savings products like Deposits and
Mutual Funds, Car and Commercial Vehicle Finance, Insurance, Home Loans,
Software Solutions, Business Process Outsourcing, Tire Finance, Fleet Cards
and In freight.
Royal Sundaram aims to offer customized non-life insurance products for the
individual and high standards of service in the areas of:
Private Motor
Health & Hospital Cash
Travel
Personal Accident
Home & Household - including personal property
SNAPSHOT-I
Incorporated in 1977 as the first specialized Mortgage Company in India.
Almost 90% of initial shareholding in the hands of domestic institutes and
retail investors. Current 77% of shares held by foreign institutional
investors.
Besides the core business of mortgage HDFC has evolved into a financial
conglomerate with holdings In:
HDFC Standard Life insurance Company- HDFC holds 78.07 %.
HDFC Asset Management Company – HDFC holds 50.1%
HDFC Bank- HDFC holds 22.25%.
Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.
HDFC Chubb General Insurance Company – HDFC holds 74%.
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SNAPSHOT-II
Loan Approvals Rs. 805 billion.
(up to Dec 2007) (US $ 18.30 bn.)
Loan Disbursements Rs.669 billion
(up to Dec. 2007) (US $ 15.20 bn)
Housing Units Financed 2.5 million.
Distribution
Offices 181
Outreach Programs 90
KEY PLAYERS
Mr. Deepak S Parekh is the Chairman of the Company. He is also the Executive
Chairman of Housing Development Finance Corporation Limited (HDFC Limited).
He joined HDFC Limited in a senior management position in 1978. He was
inducted as a whole-time director of HDFC Limited in 1985 and was appointed as
its Executive Chairman in 1993. He is the Chief Executive Officer of HDFC
Limited. Mr. Parekh is a Fellow of the Institute of Chartered Accountants
(England & Wales).
Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company
since November, 2000. Prior to this, he was the Managing Director of HDFC
Limited since 1993. Mr. Satwalekar obtained a Bachelors Degree in Technology
from the Indian Institute of Technology, Bombay and a Masters Degree in
Business Administration from The American University, Washington DC.
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GROUP COMPANIES
HDFC Bank: World Class Indian Bank- among the top private banks in India.
HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.
Intelenet Global: BPO services for international customers.
CIBIL: Credit Information Bureau India Limited.
HDFC Chubb: Upcoming Private companies in the field of General Insurance.
HDFC Mutual Fund
HDFC reality.com: Helps to search properties in all major cities in India
HDFC securities
STANDARD LIFEStandard Life is Europe’s largest mutual life assurance company. Standard Life,
which has been in the life insurance business for the past 175 years is a modern
company surviving quite a few changes since selling its first policy in 1825. The
company expanded in the 19th century from kits original Edinburgh premises,
opening offices in other towns and acquitting other similar businesses.
Standard Life Currently has assets exceeding over £ 70 billion under its
management and has the distinction of being accorded “AAA” rating
consequently for the six years by Standard and Poor.
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SNAPSHOT
Founded in 1875, company supporting generation for last 179 years.
Currently over 5 million Policy holders benefiting from the services offered.
Europe’s largest mutual life insurer.
JOINT VENTURE
HDFC Standard Life Insurance Company Limited was one of the first companies
to be granted license by the IRDA to operate in life insurance sector. Reach of
the JV player is highly rated and been conferred with many awards. HDFC is
rated ‘AAA ’ by both CRISIL and ICRA. Similarly, Standard Life is rated ‘AAA’
both by Moody’s and Standard and Poor’s. These reflect the efficiency with which
HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs.
600,000 Cr. respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14 th August
2000. HDFC is the majority stakeholder in the insurance JV with 81.4% staple
and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO
of the venture.
HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private
Life Insurance Companies, which offers a range of individual and group
insurance solutions. It is a joint venture between Housing Development Finance
Corporation Limited (HDFC Ltd.) India’s leading housing finance institution and
the Standard Life Assurance Company, a leading provider of financial services
from the United Kingdom. Both the promoters are will known for their ethical
dealings and financial strength and are thus committed to being a long-term
player in the life insurance industry- all important factors to consider when
choosing your insurer.
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BUSINESS GROWTH
Track Record so farThe gross premium income of HDFC, for the year ending March 31, 2007 stood
at Rs. 2,856 crores and new business premium income at Rs. 1,624 crores.
The company has covered over 8,77,000 lives year ending March 31, 2007.
Company also declared our 5th consecutive bonus in as many years for our ‘with
profit’ policyholders.
KEY STRENGTH
Financial ExpertiseAs a joint venture of leading financial services groups. HDFC standard Life has
the financial expertise required to manage long-term investments safely and
efficiently.
Range of SolutionsHDFC SLIC has a range of individual and group solutions, which can be easily
customized to specific needs. These group solutions have been designed to offer
complete flexibility combined with a low charging structure.
Strong Ethical Values: HDFC SLIC is an ethical and Cultural Organization. False selling or false
commitment with the customers is not allowed.
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Most respected Private Insurance Company HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World
Class Magazine Business World for Integrity, Innovation and Customer Care.
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 1560.41 billion (for the
financial year 2006 – 2007). 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 65% 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)
Life insurance, sometimes referred to as life assurance, provides for a payment
of a sum of money upon the death of the insured. In addition, life insurance can
be used as a means of investment or saving.
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An agreement that guarantees the payment of a stated amount of monetary
benefits upon the death of the insured
Insurance in which the risk insured against is the death of a particular person, the
insured, upon whose death while the policy is in force, the insurance company
agrees to pay a stated sum or income to the beneficiary.
Insurance paid to named beneficiaries when the insured person dies; "in England
they call life insurance life assurance”
Insurance policy that pays a death benefit to beneficiaries if the insured dies. In
return for this protection, the insured pays a premium, usually on an annual
basis. Term insurance pays off upon the insured's death but provides no buildup
of cash value in the policy. Term premiums are cheaper than premiums for cash
value policies such as whole life, variable life, and universal life, which pay death
benefits and also provide for the buildup of cash values in the policy. The cash
builds up tax-deferred in the policy and is invested in stocks, bonds, real estate,
and other investments. Policyholders can take out loans against their policies,
which reduce the death benefit if they are not repaid. Some life insurance
provides benefits to policyholders while they are still living, including income
payments. See also Single Premium Life Insurance.
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HISTORICAL PERSPECTIVE
The history of life insurance in India 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.
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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, New India Assurance 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.
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INDUSTRY REFORMS
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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 47.38%, with premium
income at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total
volume of LIC's business increased in the last fiscal year (2006-2007) compared
to the previous one, its market share came down from 85.75% to 81.91%.
The 17 private insurers increased their market share from about 15% to about
19% in a year's time. The figures for the first two months of the fiscal year 2007-
08 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.
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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 19 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)
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TYPES OF LIFE INSURANCE POLICIES
TERM INSURANCE
Term life insurance is the simplest and least expensive type, as it pays benefits
only upon the policy holder's death. With annual renewable term insurance, the
policy holder pays a low premium at first, which increases annually as he or she
gets older. With level term insurance, the premium amount is set for a certain
number of years, then increases at the end of each time period. Experts
recommend that people who select term insurance make sure that their policies
are convertible, so they can switch to a cash-value plan later if needed. They
also should purchase a guaranteed renewable policy, so that their coverage
cannot be terminated if they have health problems. Term insurance typically
works best for younger people with children and limited funds who are not
covered through an employer. This type of policy enables such a person's heirs
to cover mortgage and college costs, estate taxes, and funeral expenses upon
his or her death.
WHOLE LIFE INSURANCE
With whole life insurance, the policy holder pays a level premium on an annual
basis. The policy usually covers until the end of the person's life—age 90 or 100.
In most cases, the policy holder is overcharged for the premium, and the extra
amount goes into an interest-bearing dividend account known as a cash value
account. The individual can use the money in this account to pay future
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premiums, or can withdraw it or borrow against it to cover living expenses. With a
variable whole life policy, the individual controls the investments made with his or
her cash value account. Selecting certain types of investments, such as mutual
funds, may allow the policy holder to increase the balance in the account
significantly. Regardless of the performance of the investments, however, the
amount of the insurance benefit can never drop below its original value. When
choosing a whole life policy, experts note, it is important to analyze the fund's
past performance and inquire about commissions and hidden costs. Although
whole life insurance can provide added security upon retirement, it should not be
considered a replacement for retirement savings. In fact, Janecek revealed that,
on the average, whole life policy holders only yielded between 2 and 4.5 percent
on their investments over a twenty-year period.
UNIVERSAL LIFE INSURANCE
Universal life insurance was introduced in the 1980s as a higher-interest
alternative to whole life insurance. Universal life premiums are based not only on
the cost of the insurance, but also on the interest rate offered on investments.
Still, they are usually less expensive than whole life policies. Universal life
policies provide individuals with a wider array of investment choices and higher
projected interest rates. They are essentially similar to a term policy with a fixed
rate of interest guaranteed for a year at a time.
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CURRENT ASSUMPTION LIFE INSURANCE.
Current assumption life insurance features a fixed annual premium for the
duration of the plan. This type of policy pays a set interest rate on premiums
received, less the actual cost of the insurance. They can be useful as a tax-
deferred investment vehicle, since they usually pay 2 to 4 percent more than
banks. Policy holders may elect to overpay their premiums early in the plan
period to accumulate cash value. They can withdraw or borrow from the funds
later for any purpose, including retirement income, or can use the cash value to
pay the premiums for the remainder of the plan period.
RIDERS AND OPTIONS
Most types of life insurance policies give individuals the opportunity to add
optional coverage, or riders. One popular option is accelerated benefits (also
called living benefits),
which pays up to 25 percent of the policy value to the holder prior to their death if
they are struck by a serious illness. Another option, known as a waiver of
premium, allows an individual to continue coverage without paying premiums if
he or she becomes disabled. Many policies also provide an accidental death and
dismemberment option, which pays twice the amount of the policy if the insured
dies or loses the use of limbs as a result of an accident.
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HISTORY OF LIFE INSURANCE
Some of the important milestones in the life insurance business in India are:
1818: Oriental Life Insurance Company, the first life insurance company on
Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance
company started its business.
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 to by the Insurance Act with
the objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies are 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 crores from the Government of
India.
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THE KEY FEATURES OF LIFE INSURANCE INDUSTRY
Nomination:- When one makes a nomination, as the policyholder you continue
to be the owner of the policy and the nominee does not have any right under the
policy so long as you are alive. The nominee has only the right to receive the
policy monies in case of your death within the term of the policy.
Assignment :- If your intention is that your policy monies should go only to a
particular person, you need to assign the policy in favor of that person
Death Benefit :- The primary feature of a life insurance policy is the death
benefit it provides. Permanent policies provide a death benefit that is guaranteed
for the life of the insured, provided the premiums have been paid and the policy
has not been surrendered.
Cash Value :- The cash value of a permanent life insurance policy is
accumulated throughout the life of the policy. It equals the amount a policy owner
would receive, after any applicable surrender charges, if the policy were
surrendered before the insured's death.
Dividends :- Many life insurance companies issue life insurance policies that
entitle the policy owner to share in the company's divisible surplus.
Paid-Up Additions :- Dividends paid to a policy owner of a participating policy
can be used in numerous ways, one of which is toward the purchase of additional
coverage, called paid-up additions.
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Policy Loans :- Some life insurance policies allow a policy owner to apply for a
loan against the value of their policy. Either a fixed or variable rate of interest is
charged. This feature allows the policy owner an easily accessible loan in times
of need or opportunity.
Conversion from Term to Permanent :- When in need of temporary protection,
individuals often purchase term life insurance. If one owns a term policy,
sometimes a provision is available that will allow her to convert her policy to a
permanent one without providing additional proof of insurability.
Disability Waiver of Premium
Waiver of Premium is an option or benefit that can be attached to a life insurance
policy at an additional cost. It guarantees that coverage will stay in force and
continue to grow.
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THE BENEFITS OF LIFE INSURANCE
Risk cover :- Life Insurance contracts allow an individual to have a risk cover
against any unfortunate event of the future.
Tax Deduction :- Under section 80C of the Income Tax Act of 1961 one can get
tax deduction on premiums up to one lakh rupees. Life Insurance policies thus
decrease the total taxable income of an individual.
Loans :- An individual can easily access loans from different financial institutions
by pledging his insurance policies.
Retirement Planning :- What had provided protection against the financial
consequences of premature death may now be used to help them enjoy their
retirement years. Moreover the cash value can be used as an additional income
in the old age.
Educational Needs :- Similar to retirement planning the cash values that flow
from ones life insurance schemes can be utilized for educational needs of the
insurer or his children.
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ROLE OF LIFE INSURANCE IN THE GROWTH
OF THE ECONOMYThe Life Insurance Industry has an enviable track record among public sector
units. It has a Consistent profit and dividend paying record accompanied by a
steady growth in its financial resources. Through investments in the Government
sector and socially- oriented sectors the Industry has contributed immensely to
the nation's development. The industry is recognized as one of the largest
financial Institutions in the country. The ventures initiated by the industry in the
areas of Mutual Fund, Housing Finance has done exceedingly well in recent
years. To protect the country's foreign exchange reserves, the reinsurance
arrangement are so organized that maximum retention is made possible within
the country while at the same time protecting interests of the policy holders.
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INDIA AGAINST THE GLOBAL MARKETS
India is an under-insured market India’s insurance market is still at an early stage
of development. This is reflected in low penetration rates and low premiums per
capita.
Insurable population – only 10% of India’s population have life insurance
According to ING only 10% of the population is insured, which represents around
30% of the insurable population. This suggests more than 300m people, with the
potential to buy insurance, remain uninsured
Global perspective – India ranks 19th on the global stage
India represents only around 0.66% market share (ranked 19th) of global
insurance premiums. As of 2004 the largest markets in size are the US (50x
bigger than India), Japan and the UK. Out of the Asian countries (ex Japan),
South Korea is the largest insurance market, Comprising 2.12% of global
premiums, followed by China with 1.61%.
While insurance continues to reach out to the masses, India’s insurance
penetration (premiums as a percentage of GDP) still remains very low at 3.2%.
This can be split between life penetration of 2.6% and non-life of 0.6%. On the
world stage, penetration rates are significantly below developed markets such as
the US (9.4%), UK (12.6%) and Australia (8%). Compared with Asian markets,
India still falls well short of its nearest peers with countries such as Japan, South
Korea and Taiwan having some of the highest penetration rates in the world
(between 9% and 14%). Nevertheless, despite current low spend on insurance,
the trends in India remain positive. Since the opening up of the market to foreign
players in 2000, penetration has more than doubled from 1.5%. With foreigners
gaining momentum and building the insurance, coupled with India’s favorable
macro overlay, we expect penetration rates to continue to expand.
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FUTURE OF LIFE INAURANCE SCHEMES
The Indian Life insurance sector will register a high growth rate in the future
years to come says the report prepared by Fitch Ratings. This will be due to the
innovative products, better distribution network, better services coupled with
other never-before changes that have taken place in the insurance sector. The
report laid stress on branding, customer service and tailor made products that will
assume importance besides information technology that will become vital to bring
down costs in the future. Also data warehousing, ensuring effective cross selling
will grown in importance to exploit the largely unexploited market.
In Nov 2005 the Indian Life insurance industry saw a growth of 46 %. This rally is
expected to continue as people realize the importance of risk management. The
private sector players are expected to grow with their innovative and profitable
life insurance schemes
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THE MAJOR DISTRIBUTION CHANNELS
Retail Banks
While a lot of bank relationships with insurance companies have been
established, life insurance sales have been slower than one would expect he
primary bank insurance activities have been the distribution of annuities, credit
life, and direct marketing insurance. Banks are failing to incorporate successful
sales tactics used to sell other financial services like investments.
Full-Service Brokers
Brokerage firms have gained much of the institutional and personal trust
business lost by the banks. These firms have steadily captured assets, primarily
at the expense of the banks. The number of non-bank trust companies has
increased in recent years as independent trust companies have emerged and
more broker/dealers are integrated services. Insurance companies view full-
service brokers as a potentially new distribution channel as well.
Discount Brokers and Online Financial Services
Direct sales of life insurance are growing rapidly, but many of the traditional full-
serve players seem to be letting it go. Across all financial services, consumers
are expressing a willingness to deal with a variety of providers on the web. Web
sites are starting to pop up offering consumer insurance products especially
designed for distribution over the web.
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Independent Advisors
To gain a better understanding of the demand amongst independent advisors for
trust services and to gain a better feel for how independent advisors handle trust
services, a research was performed with independent advisors across several
broker/dealers and custodians. The interviews revealed that demand is greatest
for living trusts among independent advisors, followed by demand for corporate
trustee services.
Life Insurance Agents, CPAs, & Lawyers
Independent insurance agents represent a number of companies and can
research these companies’ products to find the right combination for their clients.
Independent agents & insurance producer groups are growing in prevalence.
Although producer groups are in their infancy, their emergence may potentially
be realignment in the distribution of financial services. Independent shops
realized that by pooling production and funding a central support office, they had
increased buying power.
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PRESENT SITUATION
A robust 36 percent increase in business by country's largest insurer LIC and
strong performance by most of the private players pushed the overall life
insurance growth to 46 per cent in April-November 2005. With competition
intensifying, the 14 life-insurers collected Rs 16,604 crores in new premium in the
first eight months of 2005-06 compared to Rs 11,337 crores in the year ago
period, according to data compiled by regulator IRDA. State-owned Life
Insurance Corporation gave a tough fight to private players, who were fast
increasing their market share, to collect Rs 12,271 crores in new premium by
selling over 1.3 crores policies.
LIC also improved its market share to 73.91 per cent from 73.82 per cent a
month ago as two private players - Birla Sunlife and SBI Life - continue to see fall
in business. As market continues to grow and more new players enter the space,
LIC has rolled out innovative products and doing aggressive marketing to attract
more business.
The 13 private players led by ICICI Prudential and Bajaj Allianz are leaving no
stones unturned to expand business by netting more policyholders to increase
their market share. Among private players, ICICI Prudential ranked at the top by
collecting about Rs 1,180 crores after logging 73 per cent growth, followed by
Bajaj Allianz, which increased business by 264 per cent to collect Rs 1,016
crores in premium. ICICI Prudential had a market share of 7.11 per cent while
Bajaj Allianz increased its market pie to 6.12 per cent.
HDFC Standard Life had a market share of 2.96 per cent, followed by Birla
Sunlife (1.84 per cent), Tata AIG (1.78 per cent), SBI Life (1.52 per cent), Max
New York Life (1.32 per cent) and Aviva (1.12 per cent). Other players -- Kotak
Mahindra Old Mutual, ING Vysya, AMP Sanmar, Met Life and Sahara Life -- each
had less than one per cent of the market.
32
HDFC Standard collected Rs 491 crores in premium income till November,
followed Birla Sunlife (Rs 305 crores), Tata AIG (Rs 296 crores), SBI Life (Rs
252 crores), Max New York Life (Rs 219 crores) and Aviva (Rs 186 crores).
In group insurance, LIC continued to dominate with a market share of about
81.32 per cent by covering 8.638 million lives till November this fiscal. Among the
private insurers, SBI Life was at the top with a market share of 5.27 per cent,
followed by Tata AIG (4.16 per cent), ICICI Prudential (2.34 per cent), Met Life
(1.9 per cent), Aviva (1.16 per cent) and Bajaj Allianz (1.14 per cent).
33
TOP TEN INSURERS (LIFE)
InsurerMarket Share (%)
LIC74.87
ICICI Prudential7.53
Bajaj Allianz4.18
HDFC Standard3.20
Tata AIG1.93
Birla Sun life1.84
SBI Life1.69
Max New York life1.44
Aviva1.14
Kotak Mahindra old mutual0.77
34
STRUCTURE, PERFORMANCE PRODUCTS/SERVICES
AND PROBLEM FACED
The right investment strategies won't just help plan for a more comfortable
tomorrow -- they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life
insurance plans are created keeping in mind the changing needs of family. Its life
insurance plans are designed to provide you with flexible options that meet both
protection and savings needs. It offers a full range of transparent, flexible and
value for money products. HDFC SLIC products are modern and contemporary
unitized products that offer unique customer benefits like flexibility to choose
cover levels, indexation and partial withdrawals. (Source: www.hdfcslic.com)
PLANS THAT ARE OFFERED BY HDFC STANDARDS LIFE INSURANCE
TERM PLAN-
Term Plan is a pure risk product that aims to cover your life at a nominal cost.
You may want to take this plan to cover your outstanding debts like a mortgage,
a home loan etc. Since this is a pure risk cover product, there is no maturity
benefits payable on survival. This is a non-participating plan.
Term life insurance is normally the most inexpensive form of life insurance. Term
life insurance provides protection for a specified period of time, or the term of the
policy. A benefit is paid only if the insured dies during the term of the policy. If the
insured is still living at the end of the term, the policy expires without value.
35
ENDOWMENT PLAN-
Form of Life Insurance where the face value is paid out to the insured or a
beneficiary after a specified contract period. For example, an endowment policy
that provides benefits for 20 years until the insured is 65, pays its face value after
20 years whether the insured lives or dies.
Endowment Plan is a protection plan that covers your life and at the same time
ensures that your money does not lie idle. It invests a portion of your premium in
financial instruments and ensures a considerable growth in savings.
ULIP PLAN-
ULIP is life insurance solution that provides for the benefits of protection and
flexibility in investment. The investment is denoted as units and is represented by
the value that it has attained called as Net Asset Value (NAV).
PROTECTION PLAN
Protection Plans help you shield your family from uncertainties in life due to
financial losses in terms of loss of income that may dawn upon them incase of
your untimely demise or critical illness. Securing the future of one’s family is one
of the most important goals of life. Protection Plans go a long way in ensuring
your family’s financial independence in the event of your unfortunate demise or
critical illness. They are all the more important if you are the chief wage earner in
your family. No matter how much you have saved or invested over the years,
sudden eventualities, such as death or critical illness, always tend to affect your
family financially apart from the huge emotional loss.
36
For instance, consider the example of Amit who is a healthy 25 year old guy with
a income of Rs. 1,00,000/- per annum. Let's assume his income increases at a
rate of 10% per annum, while the inflation rate is around 4%; this is how his
income chart will look like, until he retires at the age of 60 years. At 50 years of
age, Amit’s real income would have been around Rs. 10,00,000/- per annum.
However, in case of Amit’s unfortunate demise at an early age of 42 years, the
loss of income to his family would be nearly Rs. 5,00,000/- per annum.
RETIREMENT PLANS
Retirement Plans provide you with financial security so that when your
professional income starts to ebb, you can still live with pride without
compromising on your living standards. By providing you a tool to accumulate
and invest your savings, these plans give you a lump sum on retirement, which is
then used to get regular income through an annuity plan. Given the high cost of
living and rising inflation, employer pensions alone are not sufficient. Pension
planning has therefore become critical today.
India’s average life expectancy is slated to increase to over 75 years by 2050
from the present level of close to 65 years. Life spans have been increasing due
to better health and sanitation conditions in the country. However, the average
number of years of employment has not been rising commensurately. The result
is an increase in the number of post-retirement years. Accordingly, it has become
necessary to ensure regular income for life after retirement, so that you can live
with pride and enjoy your twilight years
37
HDFC Pension Supreme
Today, you are busy climbing the ladder of success and realizing your dreams.
Today, time is with you. Just take a moment and think. Will your income be the
same forever? Will you be able to live life on your own terms even after you
retire? The HDFC Pension Supreme is Unit Linked plan, designed to provide a
post-retirement income for life with the freedom to choose your retirement date.
This plan gives you with an outstanding investment opportunity to maximise your
savings by providing you a choice of thoroughly researched and selected
investments. This plan also gives Bumper Addition to the fund value at vesting
Why do I need Savings & Investment Plans?
You have always given your family the very best. And there is no reason why
they shouldn’t get the very best in the future too. As a judicious family man, your
priority is to secure the well-being of those who depend on you. Not just for
today, but also in the long term. More importantly, you have to ensure that your
family’s future expenses are taken care, even if something unfortunate were to
happen to you.
A big factor that you need to consider while building your wealth is inflation. It has
a dual impact on your hard-earned savings. Inflation not only erodes your current
purchasing power but also magnifies your monetary requirements for the future.
Sample this: An 35 Year individual needs to invest Rs. 36,000/- per year with 8%
returns to build a corpus of Rs. 10,00,000/- by the age of 50 Years.Types of
38
Savings & Investment Plans.
HDFC Endowment Super Suvidha
As a judicious family man, your priority is to secure the well-being of those who
depend on you. Not just for today, but also for the long term. With our HDFC
Endowment Super Suvidha, you can start building your savings today and
ensure that your family remains financially independent, even when you are not
around. It is a convenient plan, which saves you from the need of going for
Medicals. This Unit Linked Plan gives you with an outstanding investment
opportunity to maximise your savings by providing you a choice of thoroughly
researched
Advantages.
1. No need to go for medicals. Just filling a Short Medical Questionnaire will
do .
2. This plan gives you Bumper Addition to the fund value at Maturity.
3. Your fund value will be augmented by addition of Bumper Addition, which
is a percentage of your original annualised premium In the long term, the
key to building great maturity values is a low Fund Management Charge
(FMC). We have a low FMC of only 1.25% per annum (of the fund’s value)
You can choose to pay your premium as either Half Yearly or Annually.
4. You also have a range of convenient auto premium payment options
5. You can change your investment fund choices in two ways:
a. Switching: You can move your accumulated funds from one fund to
another anytime Premium Redirection:
b. You can pay your future premiums into a different selection of
funds, as per your need and selected investments. This plan also
gives Bumper Addition to the fund
39
HDFC Wealth Builder.
HDFC Wealth Builder is an exclusive plan crafted for elite achievers like you. An
investment cum insurance plan that will actively help in building your wealth and
give you twin advantage of exclusive funds (actively managed for you) along with
choice of limited premium payment term. This plan provides the financial
protection to your loved ones and builds up your wealth effortlessly. This plan
also gives Bumper Addition to the fund value at Maturity
Advantages1. This plan gives you Bumper Addition to the fund value at Maturity.
2. Your fund value will be augmented by addition of Bumper Addition, which
is a percentage of your average annualized premium.
3. This plan offers an excellent investment opportunity through choice of
exclusive funds In the long term, the key to building great maturity values
is a low Fund Management Charge (FMC).
4. We have a low FMC of only 1.35% per annum (of the fund’s value).
5. You can choose to pay your premium as either Half Yearly or Annually.
6. You also have a range of convenient auto premium payment options
40
LIMITED PREMIUM PAYMENT
HDFC Wealth Builder HDFC Endowment Super
You have always given your family the very best. And there is no reason why
they should not get the best in future too. With rising costs, ensuring the best got
your family will need some financial planning. With our HDFC Endowment Super,
you can start building your savings today and ensure that your family remains
financially independent, even when you are not around. This Unit Linked Plan
also gives you with an outstanding investment opportunity to maximise your
savings by providing you a choice of thoroughly researched and selected
investments.HDFC SimpliLife
You have always believed in living life on your own terms. So why let the
changing realities of everyday life overwhelm you and make your aspirations take
a back seat? With our HDFC SimpliLife Plan, you can plan now to maximize your
savings and secure your and your family’s future. It is a convenient plan, which
saves you from the need of going for Medicals. This Unit Linked Plan gives you
with an outstanding investment opportunity to maximize your savings by
providing you a choice of thoroughly researched and selected investments
CHILDREN’S PLANS
Children’s Plans helps you save so that you can fulfill your child’s dreams and
aspirations. These plans go a long way in securing your child’s future by
financing the key milestones in their lives even if you are no longer around to
oversee them. As a parent, you wish to provide your child with the very best that
life offers, the best possible education, marriage and life style.
41
Most of these goals have a price tag attached and unless you plan your finances
carefully, you may not be able to provide the required economic support to your
child when you need it the most. For example, with the high and rising costs of
education, if you are not financially prepared, your child may miss an opportunity
of a lifetime.
Today, a 2-year MBA course at a premiere management institute would cost you
nearly Rs. 3,00,000/- At a assumed 6% rate of inflation per annum, 20 years
later, you would need almost Rs. 9,07,680/- to finance your child's MBA degree.
42
Individual Products
Investment Plans
HDFC SLIC’s Single Premium Whole of Life plan is well suited to meet
long term investment needs. This provides attractive long term returns
through regular bonuses.
Pension Plans
Pension Plans help to secure financial independence even after retirement.
Pension range includes Personal Pension Plan, Unit Linked Pension, Unit
Linked Pension Plus.
Savings Plans
Savings Plans offer a flexible option to build savings for future needs such as
buying a dream home or fulfilling your children’s immediate and future needs.
Savings range includes Endowment Assurance Plan, Unit Linked
Endowment, Unit Linked Endowment Plus, Unit Linked Endowment
Plus II, Money Back,
Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked
Young Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus
43
II.
Group Products
One-stop shop for employee-benefit solutions
HDFC Standard Life has the most comprehensive list of products for
progressive employers who wish to provide the best and most innovative
employee benefit solutions to their employees. It offers different products for
different needs of employers ranging from term insurance plans for pure
protection to voluntary plans such as superannuation and leave encashment.
HDFC SLIC offers the following group products to esteemed corporate clients:
Group Term Insurance
Group Variable Term Insurance
Group Unit-Linked Plan
An investment solution that provides funding vehicle to manage corpuses
with Gratuity, Defined Benefit or Defined Contribution Superannuation or
Leave Encashment schemes of your company
Also suitable for other employee benefit schemes such as salary saving
schemes and wealth management schemes
44
Social Product
Development Insurance Plan
Development Insurance plan is an insurance plan which provides life cover to members
of a Development Agency for a term of one year. On the death of any member of the
group insured during the year of cover, a lump sum is paid to those member
beneficiaries to help meet some of the immediate financial needs following their loss.
Eligibility Members of the development agency and their spouses with:
- Minimum age at the start of the policy 18 years last birthday
- Maximum age at the start of policy 50 years last birthday
Employees of the Development Agency are not eligible to join the group. The
group to be covered is only eligible if it contains more than 500 members.
Premium Payments
The premium to be paid will be quoted per member in the group and will be
the same for all members of the group.
The premium can only be paid by the Development Agency as a single lump
sum that includes all premiums for the group to be covered. Cover will not
start until the premium and all the member information in our specified format
has been received.
Benefits On the death of each member covered by the policy during the year of cover
a lump sum equal to the sum assured will be paid to their beneficiaries or
legal heirs. Where the death is as a result of an accident, an additional lump
45
sum will be paid equal to half the sum assured. There are no benefits paid at
the end of the year of cover and there is no surrender value available at any
time.
The role of the Development Agency
Due to the nature of the groups covered, HDFC Standard Life will be passing
certain administrative tasks onto the Development Agency. By passing on
these tasks the premium charged can be lower. These tasks would include:
Submission of member data in a specified computer format
Collection of premiums from group members
Recording changes in the details of group members
Disbursement of claim payments and the mortality rebate (if any) to group
members
These tasks would be in addition to the usual duties of a policyholder such
as:
Payment of premiums
Reporting of claims
Keeping policy holder information up to date
Training and support will be available to give guidance on how to complete
the tasks appropriately. Since these additional tasks will impose a burden on
the Development Agency, the Development Agency may charge a Rs. 10
administration fee to their members.
Prohibition of rebates
Section 41 of the Insurance Act, 1938 states
No person shall allow or offer to allow, either directly or indirectly, as an
inducement to any person to take out or renew or continue an insurance in
respect of any kind of risk relating to lives or property in India, any rebate of
46
the whole or part of the commission payable or any rebate of the premium
shown on the policy, nor shall any person taking out or renewing or
continuing a policy accept any rebate, except such rebate as may be
allowed in accordance with the published prospectus or tables of the insurer
If any person fails to comply with sub regulation (previous point) above, he
shall be liable to payment of a fine which may extend to rupees five hundred
INTROUCTION TO UNIT LINKED FUNDS
Unit linked plans are based on the component of the premium or the
contribution of the customer towards the plan. This contribution can be in
different modes like yearly, half yearly, quarterly and monthly. Unit linked
plans have multiple benefits like life protection, rider protection, savings,
transparency, investment choices, liquidity and planning for taxes. These
plans work like mutual funds.
The premium is collected from the policy holder. He is allotted a certain
number of units based of his contribution. The Net Asset Value is the value
of each unit of the fund. It is found by subtracting the charges and current
liabilities from the current assets and investments and dividing this number
by the total number of outstanding units.
Let us take an example. There are 100 investors and each invests Rs. 10 in
a fund. The total value of the fund is Rs. 1000 and each person is allotted 1
unit of Rs 10. Now the money (Rs. 1000) is invested in the debt or equity
market. Suppose the fund value increased by 20%. As a result the Rs. 1000
invested became Rs. 1200. Hence the value of every investor is now Rs. 12
and not Rs. 10.
47
UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS
Parameters RBI Bonds Fixed Deposits
Mutual Funds Unit linked
Safety High High Medium High
Liquidity None High High High
Returns Low Low High High
Life Cover 1 time amount
1 time amount
1 time amount
10 times
Tax benefits Tax free Taxed Taxed Tax free
We find that life insurance unit linked plans is a good area to invest money
in as it provides liquidity, safety, high returns, life cover and tax benefits in a
single plan. HDFC SLIC offers the option of indexation to beat inflation. Risk
is reduced to a large extent as the company invests in a diversified portfolio
of stocks.
48
Tax Benefits
INCOME TAX
SECTION
GROSS ANNUAL
SALARY
HOW MUCH TAX
CAN YOU SAVE?
HDFC STANDARD
LIFE PLANS
Sec. 80C Across All income
Slabs
Upto Rs. 33,990
saved on
investment of
Rs. 1,00,000.
All the life insurance
plans.
Sec. 80 CCC Across all income
slabs.
Upto Rs. 33,990
saved on
Investment of
Rs.1,00,000.
All the pension plans.
Sec. 80 D Across all income
slabs
Upto Rs. 3,399
saved on
Investment of
Rs. 10,000.
All the health insurance
riders available with the
conventional plans.
49
TOTAL SAVINGS
POSSIBLE
Rs37,389
Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399 under Sec. 80 D, calculated for a male with gross annual income exceeding Rs. 10,00,000.
Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are completely tax-
free, subject to the conditions laid down therein.
SECTION -2
50
51
INTRODUCTION TO THE TOPIC
52
INTRODUCTION TO TOPIC
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 1560.41 billion (for the
financial year 2006 – 2007). 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 65% 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)
Life insurance, sometimes referred to as life assurance, provides for a payment
of a sum of money upon the death of the insured. In addition, life insurance can
be used as a means of investment or saving.
An agreement that guarantees the payment of a stated amount of monetary
benefits upon the death of the insured
Insurance in which the risk insured against is the death of a particular person, the
insured, upon whose death while the policy is in force, the insurance company
53
agrees to pay a stated sum or income to the beneficiary.
Insurance paid to named beneficiaries when the insured person dies; "in England
they call life insurance life assurance”
Insurance policy that pays a death benefit to beneficiaries if the insured dies. In
return for this protection, the insured pays a premium, usually on an annual
basis. Term insurance pays off upon the insured's death but provides no buildup
of cash value in the policy. Term premiums are cheaper than premiums for cash
value policies such as whole life, variable life, and universal life, which pay death
benefits and also provide for the buildup of cash values in the policy. The cash
builds up tax-deferred in the policy and is invested in stocks, bonds, real estate,
and other investments. Policyholders can take out loans against their policies,
which reduce the death benefit if they are not repaid. Some life insurance
provides benefits to policyholders while they are still living, including income
payments. See also Single Premium Life Insurance.
HISTORICAL PERSPECTIVE
The history of life insurance in India 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.
54
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, New India Assurance Company, Oriental Insurance
Company and United India Insurance Company. These were subsidiaries of the
General Insurance Company (GIC).
55
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.
56
METHODOLOGY
57
METHODOLOGY
TYPE OF DATA COLLECTED
There are two types of data used. They are primary and secondary data. Primary
data is defined as data that is collected from original sources for a specific
purpose. Secondary data is data collected from indirect sources. (Source:
Research Methodology, By C. R. Kothari)
PRIMARY SOURCES
These include the survey or questionnaire method, telephonic interview as well
as the personal interview methods of data collection.
SECONDARY SOURCES
These include books, the internet, company brochures, product brochures, the
company website, competitor’s websites etc, newspaper articles etc.
SAMPLING
Sampling refers to the method of selecting a sample from a given universe with a
view to draw conclusions about that universe. A sample is a representative of the
universe selected for study.
SAMPLE SIZEThe sample size for the survey conducted was 270 respondents. This sample
size was taken on 95% confidence level and 6 significant level. Data universe for
this sample is 10,00,000 which is approx population of Jodhpur excluding people
below age of 18 years.
58
SAMPLING TECHNIQUE
Random sampling technique was used in the survey conducted.
PLAN OF ANALYSIS
Tables were used for the analysis of the collected data. The data is also neatly
presented with the help of statistical tools such as graphs and pie charts.
Percentages and averages have also been used to represent data clearly and
effectively.
STUDY AREA
The samples referred to were residing in Jodhpur City. The areas covered were
Shastri Nagar, Sardarpura, Masuriya, Subhash Nagar, City Area and Kamla
Nehru Nagar.
59
OBJECTIVES
60
OBJECTIVES
To analysis the product details of HDFC Standard life Insurance
Company limited and Tata AIG life Insurance Company Limited.
To find ‘Points of Parity’ and ‘Points of Difference’ of HDFC Standard
Life Insurance Company Limited and Tata AIG Life Insurance
Company Limited.
To find out factors that influence customers to purchase insurance
policies and give suggestions for further improvement.
61
DATA ANALYSIS
&
INTERPRETATION
62
ANALYSIS & INTERPRETATION
“A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA”
AGE GROUP OF SURVEYED RESPONDENTSTABLE 1:
Age group No. of Respondents18 - 25 years 12726 - 35 years 6736 - 49 years 4650 - 60 years 24More than 60 years 6
CHART 1:
63
Analysis:From the chart above we find that 47% of the respondents fall in the age group of
18 – 25 years, 25% fall in the age group of 26 – 35 years and 17% fall in the age
group of 36 – 49 years.
Therefore most of the respondents are relatively young (below 26 years of age).
These individuals could be induced to purchase insurance plans on the basis of
its tax saving nature and as an investment opportunity with high returns.
Individuals at this age are trying to buy a house or a car. Insurance could help
them with this and this fact has to be conveyed to the consumer. As of now many
consumers have a false perception that insurance is only meant for people above
the age of 50. Contrary to popular belief the younger you are the more insurance
you need as your loss will mean a great financial loss to your family, spouse and
children (in case the individual is married) who are financially dependent on you.
64
GENDER CLASSIFICATION OF SURVEYED RESPONDENTS
TABLE 2:
Particulars No. of RespondentsMale 193
Female 77
CHART 2:
CUSTOMER PROFILE OF SURVEYED RESPONDENTS
TABLE 3:
Customer profile No. of respondentsStudent 62Housewife 5Working Professional 116Business 49Self Employed 24Government service employee 14
65
CHART 3:
Analysis:From the chart above it can clearly be seen that 43% of the respondents are
working professionals, 23% are students and 18% are into business. Therefore
the target market would be working individuals in the age group of 18 – 25 years
having surplus income, interested in good returns on their investment and saving
income tax.
NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE POLICY IN THEIR NAMETABLE 4:
Person who have life insurance policyYes 103No 167
66
CHART 4:
ANALYSIS : This graph shows that out of total 270 respondents only 103 or 38% respondents
have life insurance policy in their name. Rest all don’t have a single policy in their
name. So there is a very big scope for life insurance companies to cover these
people. So in future business of life insurace will gro further.
MARKET SHARE OF LIFE INSURANCE COMPANIESTABLE 5:
LIFE INSURER NUMBER OF POLICIESHDFC STANDARD LIFE 4BIRLA SUN LIFE 3AVIVA LIFE INSURANCE 6BAJAJ ALLIANZ 7LIC 55TATA AIG 6ICICI PRUDENTIAL 12ING VYSYA 6BHARTI AXA 2OTHERS 2
CHART 5:
67
Analysis:
In India, the largest life insurance company is Life Insurance Corporation of India.
It has been in existence in India since 1956 and is completely owned by the
Government of India. Today the organization has grown to 2048 offices serving
18 crore policies and has a corpus of over 340000 crore INR.
68
ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE
TABLE 6:
Premium paid (p.a.) No. of respondents
Rs. 5000 - Rs. 10000 40
Rs. 10001 - Rs. 15000 26
Rs. 15001 - Rs. 24900 18
Rs. 25000 - Rs. 50000 10
Rs. 50001 - Rs. 60000 4
Rs.60001 - Rs. 80000 2
Rs. 80001 - Rs. 100000 3
CHART 6:
ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE
69
Analysis:
From the chart above we find that, 39% of the respondents surveyed pay an
annual premium less than Rs. 10001 towards life insurance. 25% of the
respondents pay an annual premium less than Rs. 15001 and 17% pay an
annual premium less than Rs. 25000. Hence we can safely say that HDFC SLIC
would be able to capture the market better if it introduced products/plans where
the minimum premium starts at Rs. 5000 per annum.
Only 19% of the respondents pay more than Rs. 25000 as premium and most
products sold by HDFC SLIC have Rs.12000 as the minimum annual premium
amount. They should introduce more products like Easy Life Plus and Safe
Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a.
respectively. This would definitely increase their market share as more
individuals would be able to afford the policies/plans offered.
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POPULAR LIFE INSURANCE PLANS
TABLE 7:
Type of Plan No. of Respondents
Term Insurance Plans 105
Endowment Plans 122
Pension Plans 16
Child Plans 8
Tax Saving Plans 19
CHART 7:
POPULAR LIFE INSURANCE PLANS
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Analysis:
From the chart given above we can clearly see that 45% of the respondents hold
endowment plans and 39% of the respondents hold term insurance plans.
Endowment plans are very popular and serve two purposes – life cover and
savings.
If the policy holder dies during the policy term the nominee gets the death benefit
that is, sum assured and accumulated bonus. On survival the policy holder
receives the survival benefit with a bonus.
A term plan is a pure risk cover plan wherein the insured pays a lower premium
for a higher sum assured. Term insurance is the cheapest form of insurance and
helps the policy holder insure himself for a relatively low premium. For the returns
sensitive investor term plans do not find favor as they do not offer a return in
case the individual does not die during the policy term.
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AWARENESS OF UNIT LINKED INSURANCE PLANS
TABLE 8:
Awareness of Unit Linked Plans No. of RespondentsYes 154No 116
CHART 8:
AWARENESS OF UNIT LINKED INSURANCE PLANS
Analysis:
From the chart given above we find that 57% of the respondents are aware of
unit linked life insurance plans and 43% are not aware of such plans. These
plans should be promoted through advertising. The company can advertise
through television, radio, newspapers, bill boards and pamphlets. This would
increase awareness and arouse curiosity in the minds of the consumer which
would enable the company to market its products more effectively.
Unit – linked plans are those where the benefits are expressed in terms of
number of units and unit price. They can be viewed as a combination of
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insurance and mutual funds. The number of units a customer would get would
depend on the unit price when they pay the premium.
When the policy matures the individual gets his fund value. The value of his fund
is calculated by multiplying the net asset value and number of units held by them
on that day.
CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM
TABLE 9:
Willingness to spend on premium No. of respondents Percentage
Less than Rs. 6,000 41 15%
Rs. 6,001 - Rs. 10,000 73 27%
Rs. 10,001 - Rs. 25,000 110 41%
Rs. 25,001 - Rs. 50,000 41 15%
Rs. 50,001 - Rs. 1,00,000 5 2%
CHART 9:
CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM
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Analysis:
From the graph above, we can clearly see that 41% of the respondents would be
willing to spend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would
be willing to spend between Rs. 6001 – Rs. 10000 per annum. Only 15% would
be willing to spend more than Rs. 25000 per annum as life insurance premium.
We could say that the maximum premium payable by most consumers is less
than Rs. 25000 p.a. This is further reduced as most customers have already
invested with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.
HDFC SLIC is faced with a large amount of competition. There are 18 insurance
companies in India inclusive of LIC. Hence to capture a larger part of the market
the company could introduce more reasonable plans with lesser premium
payable per annum.
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CHART SHOWING IDEAL POLICY TERM
TABLE 10:
Ideal policy term No. of respondents3 - 5 years 516 - 9 years 4110 - 15 years 9516 - 20 years 3821 - 25 years 2426 - 30 years 5More than 30 years 3Whole life Policy 13
CHART 10:
CHART SHOWING IDEAL POLICY TERM
Analysis:
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From the chart given above it can be seen that 35% of the respondents prefer a
policy term of 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a
term of 6 – 9 years. This means that HDFC SLIC could introduce more plans
wherein the premium paying term is less than 15 years.
The outlook of insurance as a product should be changed from something which
you pay for your whole life (whole life policy) and do not receive any benefit (the
nominee only receives the benefit in case of your death) to an extremely useful
investment opportunity with the prospects of good returns on savings, tax saving
opportunities as well as providing for every milestone in your life like marriage,
education, children and retirement.
FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE
TABLE 11:
Parameter No. of RespondentsAdvertisements 35High returns 84Advice from friends 46Family responsibilities 89Others 16
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CHART 11:
Analysis:
From the chart above it can be seen that 33% of the respondents purchase life
insurance to secure their families, 33% take life insurance to get high returns,
17% purchase insurance on the advice of their friends and 13% purchase
insurance because of the influence of advertisements.
The main purpose of insurance is to cover the financial or economic loss that
occurs to the family in case of the uncertain death of the policy holder. But now a
days this trend is changing. Along with protection (life cover), a savings element
is being added to insurance.
With the introduction of the new unit linked plans in the market, policy holders get
the option to choose where their money will be invested. They can invest their
money in the equity market, debt market, money market or a combination of
these. The debt and money markets usually have low risk attached whereas the
equity market is a high risk investment option.
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PREFERRED COMPANY TYPE OF THE RESPONDENTS
TABLE 12:
Type of Company No. of Respondents Percentage
Government Owned Company 127 47%
Public Limited Company 62 23%
Private Company 49 18%
Foreign Company 32 12%
CHART 12:PREFERRED COMPANY TYPE OF THE RESPONDENTS
Analysis:
From the graph above we find that 60% of the respondents preferred to purchase
insurance from a government owned company, 29% of the respondents
preferred to purchase insurance from a public limited company and only 4% of
the respondents preferred a foreign based company. Heavy advertising through
television, newspapers, magazines and radio is required.
MINIMUM EXPECTED RETURN ON INVESTMENT
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TABLE 13:
Expected Returns No. of respondentsLess than 5% 55% - 10% 3911% - 15% 4616% - 20% 4921% - 25% 4626% - 30% 2731% - 40% 2241% - 50% 14More than 50% 22
CHART 13:
Analysis:
From the chart above it can clearly been seen that 18% of the respondents would
like 16 – 20% returns, 17% would like returns between 21 – 25% and 17% would
like returns of 11 – 15% on their investments. Therefore the average return on
investment should be at least 16 – 20 %.
Most consumers are willing to adapt to some amount of risk but still want some
guaranteed returns. Therefore the bulk of investment should be made in the
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balanced fund with 50% debt and 50% equity. The returns on the Secure Fund
are guaranteed as these involve investment is government securities and the
debt market. But the returns on these instruments are low (8 – 10%). If the
company invests in shares, returns are higher (39%) but correspondingly risk
borne by the policy holder is also higher. Therefore a good combination of the
two instruments is often a wise choice.
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PROJECT ANALYSIS
82
ANALYSIS OF THE PROJECT
I collected data from about 100 respondents and from the responses of different
peoples I found the following trend regarding life insurance policies.
Ques) you have any life insurance policy: ˆ YES ˆ NO
INFERENCE: From the following graph it is clearly understood that more than
70% of population are availing life insurance policy.
Ques) If yes, from which company.
INFERENCE: The following graph shows how many no of people have invested
in which company’s life insurance policy
Ques) What kind of plan have you invested in?
ˆ ULIP ˆ Endowment ˆ Term
INFERENCE: Following graph shows the customer preferences for the different
plans eg. Tem plan is most preferred plan and endowment is least preferred
Ques) Where do you invest your money other than life Insurance?
INFERENCE: Following graph shows the no. of people invested their money in
different areas other than life insurance
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Ques) Will you interested in any other life insurance policy?
INFERENCE: Following chart indicate the percentage of people interested in
taking other life insurance policy in future
Ques) within what time span want new policy?
INFERENCE: Following graph shows that most of the people who are interested
in any life insurance policy want it after 6 months.
Ques ) What is your main aim of having life insurance policy?
ˆ Risk Cover ˆ Investment ˆ Tax Saving
INFERENCE: Following chart indicates the motive of the customers behind
taking any life insurance policy. Risk cover seems to be primary motive of most
of the customers.
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CONCLUSION
85
CONCLUSION
HDFC standard life insurance is first life insurance company in India. It has
businesses spread out across the globe. It was registered on 23 rd December
2000. It currently ranks number 4 amongst the insurers in India (Source: annual
premium provided by the company)
The company faces a large amount of competition. To sustain itself it must
promote its products through advertising and improve its selling techniques.
Consumers must be aware of the new plans available at HDFC SLIC. The
medium of advertising used could be television since most of its competitors use
this tool to promote their products. The company must be promoted as an Indian
company since consumers seem to have more trust in investing in Indian firms.
The unit linked concept must be specifically promoted. The general perception of
life insurance has to change in India before progress is made in this field. People
should not be afraid to invest money in insurance and must use it as an effective
tool for tax planning and long term savings.
HDFC SLIC could tap the rural markets with cheaper products and smaller policy terms. There are individuals who are willing to pay small amounts as premium but the plans do not accept premiums below a certain amount. It was usually found that a large number of males were insured compared to females. Individuals below the age of 30 (mostly male) were interested in investment plans. This was a general conclusion drawn during prospecting clients.
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LIMITATIONS
87
LIMITATIONS
Few problems were faced in meeting customers.
Few of the customers did not help me in giving the correct information.
Restricted time acted as a barrier for me while moving different cutomers.
Some customers were reluctant to give adequate information.
Due to short duration of the study, primary data could only be collected from100
customers.
PROBLEM ENVIRONMENT Sales Maximization
(Company was not getting the expected sale from the city due to lack of
availability and mismanagement of the workers working under distributors.)
Market Penetration
(Company wanted to grab largest market share and also wanted to tap not only
their new potential customers but it wanted to get its competitors share also.)
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As the distribution channel of the National Companies is not up to the mark, they
are facing tough competition from other companies, which are providing prompt
services. Due to the aspects like less margins and service Problems Company
faced problems in Market Penetration and sales Maximization.
The old and out dated technique of tele marketing is used to prospect customers.
More modern techniques must be adopted. The company must sponsor shows
and give presentations in corporate houses. The financial health check must be
performed for every prospect to assess his/her true financial position and needs.
Some of the advisors skip this vital step and the prospect ends up with a plan
they do not appreciate and soon surrender or discontinue.
Some of the main problems in marketing the policies are:
Large amount of competition (18 players in the market)
Other brands are well advertised and have higher recall value
LIC is considered a safer option
Face competition from banks and mutual funds
High premium policies are difficult to market
Incorrect perception about insurance
Interested prospects might have a lack of time and postpone investments
Customers get defensive if you cold call
Short term plans are available only at large premium
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Customers do not have risk appetite to invest in shares
Some prospects have already invested and are not interested in further
investments
Consumers don’t want to undertake medical examinations
Large amount of documentation
Customers do not like their money locked up for many years
Lack of awareness about the unit linked funds in the market
No money back plan present in the product portfolio
SUGGESTIONS FOR IMPROVEMENT
Advertise about the company and its products – it motivates individuals to
purchase insurance
Create a positive perception about insurance
Speak about the good features a plan offers like high returns, life cover,
tax benefits, indexation, accident cover while prospecting customers
Try to sell the product/plan which the consumer requires and not the plan
where the advisors benefit is higher
Improve the efficiency in operations
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Bring out policies with small premiums payable for short periods of time –
Rs. 5000 – Rs. 10000 per annum for 10 years
Attract the youth of India with higher returns on investment as returns are
the motivating factor which influence purchase of insurance
Promote insurance in colleges and corporate houses
Promote HDFC SLIC as an Indian Company to build trust
HDFC SLIC could have a brand ambassador or a mascot to promote its
services
Should have partial withdrawals from the first year onwards
Tap the rural market where there is large potential
Diversify product portfolio
Make products more straight forward – reduce complexities
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RECOMENDATION
92
RECOMENDATION
After conducting the survey I would like to give few suggestions as follows-
Services should be streamlined to increase the sales because due to improper
Services Company is not getting what it could get.
Although company has good market share in Noida city due to it’s brand name
But it could increase its share significantly through massive direct marketing
because company still has not touched some areas. ..
Recently significant numbers of life insurance sellers have increased which
shows a phenomenal change and development of insurance business.
Company should also increase its visibility in the city.
Lack of awareness about product offered by SBI should also be removed
through advertisement.
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FINDINGS
94
FINDINGS
After studying the responses of about 100 respondents on life insurance trend. I
found variety of responses from different respondents. The survey has been
conducted basically on employed peoples who include doctors, engineer,
lecturers etc.
It is found from the survey that about 70% of the peoples are availing any of the
life insurance policy and in which LIFE INSURANCE CORPORATION OF
INDIA’S policy holders are on the top followed by ICICI PRUDENTIAL, KOTAK
MAHINDRA & other life insurance companies.
It is also concluded from the survey that most of policy holders are preferring
TERM PLAN(>40%) followed by ULIP(>30 %) & ENDOWMENT(>20%) plan.
It can also be concluded that very few of population are interested in continuing
with new policy & in interested people most of the people want to start another
policy after the gap of at least 6 months or more
It can also be concluded that most of the people are availing life insurance policy
for the sake of covering risk. Tax saving & investment are other objectives.
It is also seen that people are also investing money in other areas like saving bank account ,mutual fund ,fixed deposit & other government securities etc.
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QUESTIONNAIRE
96
QUESTIONNAIRESurvey for Life Insurance
I am the student of B.B.A. SRGC Muzaffarnagar doing summer training at HDFC,
Muzaffarnagar. My project is Market Research on Life Insurance Product and
want your cooperation.
1) Name:______________________________________________________
2) Address:_____________________________________________________
_____________________________________________________
3) Age: _______________________________________________________
4) Phone No:___________________________________________________
5) Do you have any life insurance policy: ˆ YES ˆ NO
6) If yes, from which company:
___________________________________________
___________________________________________
___________________________________________
7) What kind of plan have you invested in :
ˆ ULIP ˆ Endowment ˆ Term
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8) What is your main aim of having life insurance policy :
ˆ Risk Cover ˆ Investment ˆ Tax Saving
9) Where do you invest your money other than life Insurance .
_________________________________________________
10) What is total annual premium you pay per year for your life insurance .
________________________________________________________
11) Will you interested in any other life insurance policy:
ˆ YES ˆ NO
12) If yes, then within what time span
ˆ 0-1 month ˆ 2-3 month ˆ 3-6 month ˆ more than 6 month
13) What is the value of your life (in monetary terms)
_________________________________________________________
14) What is your objective for taking other life insurance policy & in which
plan would you like to invest:
________________________________________________________________
____________________________________________________________
15) What is your annual Income
ˆ 1-2 lac ˆ 2-3 lac ˆ 3-5 lac ˆ more than 5 lac
Signature
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BIBLIOGRAPHY & REFERENCES
99
BIBLIOGRAPHY & REFERENCES
www.hdfcslic.com
www.tata-aig-life.com
www.irdaindia.com
www.lic.com
www.money control.com
www.bajajallianz.com
www.icici.prulife.com
Magazine –
Insurance World
The Outlook Money
Secrets of Successful Insurance Sales by Mr. Jack Kinder
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