kshitija final project

8/7/2019 KSHITIJA FINAL PROJECT

1/26

A

PROJECT REPORT

ON

INSURANCE SECTOR

FOR

HDFC STANDARD LIFE INSURANCE COMPANY

SUBMITTED TO

UNIVERSITY OF PUNE

IN PARTIAL FULFILLMENT OF THE REQUIREMENT

OF

BACHELOR OF BUSINESS ADMINISTRATION (BBA)

SUBMITTED BY

KSHITIJA.AVINASH.LONDHAY

UNDER THE GUIDANCE OF:

Mrs.BHUSHNA.BHAGAT

RNC Arts, JDC Commerce & NSC Science College,

NASHIK ROAD. 422101.


2/26

STUDENTS DECLARATION

I undersigned hereby declare that, the project entitled, The Role of Financial

Planning in Portfolio Management is executed as per the course requirement of two

year full time MBA program of University of Pune. This report has not been submitted

by me or any other person to any other University or Institution for a degree course. This

is my own and original work.

Place: Nashik

Date: Snehal Ramnath Sangle


3/26

ACKNOWLEDGEMENT

It was a great opportunity for me to work with HDFC Standard Life Insurance

Company. I am extremely grateful to the entire team of HDFC Standard Life at Nashik,

who have shared their expertise and knowledge with me and without whom the

completion of this project would have been virtually impossible.

My sincere gratitude to Mr.Gopakumar Pillai senior channel manager forproviding me with an opportunity to work with HDFC Standard Life at Nashik as a

company project guide who has provided me with the necessary information and his

valuable suggestion and comments on bringing out this report in the best possible way.

I thank my project guide Prof.Mrs.Bhagat.Bhushna who provided valuable

insights and direction for presented Financial Planning Analysis.

Its my gratefully thanks to whole staff of HDFC Standard Life insurance

company for helping me and providing me adequate data to complete my project.

At last but not the least, I am greatly indebted to all Professors and staff at Bytco

College, Nasik Road, and my friends who contributed directly or indirectly for successful

completion of this project


4/26


5/26

RESEARCH METHODOLOGY

INTRODUCTION

INSURANCE:-

Insurance is a basic form of risk management, which provides protection against possible

loss to life or physical assets. A person who seeks protection against such loss is termed

as insured, and the company that promises to honor the claim, in case such loss is

actually incurred by the insured, is termed as Insurer. In order to get the insurance, the

insured is required to pay to the insurance company (i.e. the insurer) a certain amount,

termed as premium, on a periodical basis (say monthly, quarterly, annually, or even one-time). Insurance can be defined as assurance of uncertainty . Insurance is about

something going wrong . Its about things going ; One of the Wonders of human nature

that never believe anything can actually go wrong .

Concept of Insurance / How Insurance Works

The concept behind insurance is that a group of people exposed to similar risk cometogether and make contributions towards formation of a pool of funds. In case a person

actually suffers a loss on account of such risk, he is compensated out of the same pool of

funds. Contribution to the pool is made by a group of people sharing common risks and

collected by the insurance companies in the form of premiums.The insurance sector in

India has come a full circle from being an open competitive market to nationalization and

back to liberalized market again Tracking the development in Indian insurance sector

reveals 360 degree turn witnessed over a period of almost two centuries .


6/26

Insurance Covers

Depending on the circumstances, you may need insurance in the following areas:

y Life

y Health

y Home

y Motor

y Personal Liability

y Professional Liability

y Business

y Disability

y LIFE INSURANCE:

Life insurance is a risk sharing mechanism whereby a policy owner (the insured) agrees

to invest some money with an insurance company that obligates itself to pay money to a

beneficiary on the insureds death. It is a legal contract between an insurance company

and policy owner.

Life insurance needs analysis:

The first in determining what type of insurance to buy is a needs analyses. You need to

assess the financial impact on your family if the breadwinner should die. You can assess

the in different ways.

I. The Multiple Earning Method:

The amount of life cover you should buy should be 3 to 10 times of your gross annual

earnings. It completely ignores your financial resources and needs.


7/26

The Human Life Value Method:

This method values human life at the present value of all future earnings potential. The

steps for calculating the amount of cover under this method are as below:

y Deduct your personal expenses from your total income. This is the surplus

that you leave for your family and for your investments.

y Calculate the number of years left in your earning life

y Retirement age-Current age.

y Project family expenses up to retirement, allowing for increases due to

inflation and other factors.

y Subtract any pension benefits that they might get at your death.

y Add non-recurring expenses like childrens marriage.

y Calculate the shortfall in the total expenses and income.

y Calculate the present value of the shortfall.

The Needs Method:

This method tries to calculate the amount required by your family to maintain their

existing lifestyle and their financial goals. The amount of the life cover under this

Method is calculated by subtracting the total of your current financial resources from the

present value of your familys projected expenses.

II. Forms of life cover:

Life insurance covers are availably three forms. Each form exists for a different

objective. These are:


8/26

A.Term plan

In the event of death in the policy period, your nominees receive the amount of your

cover i.e. the sum assured. You get nothing if you survive beyond the policy period.

B.Pension plans

Pension plans are actually pure investment products. They provide with an alternate

income stream after your retirement.

C.Endowment plan

They also offer some returns on the premiums paid by you. So if you die during the

policy Term, your nominees get the sum assured plus some returns. Even if you survive

the term, you still get back the sum assures and the returns. However, the premium

charged for endowment plans is 5-6 times higher than the premium for term plan.

D.Money-back plans:

Money-back plans are a variant of endowment plans. In case of the endowment plans, the

survival benefits are disbursed at the end of the policy term, while in money-back plans

the payback is staggered through the policy period.

Money back policy is a policy opted by people who want periodical payments. A money

back policy is generally issued for a particular period, and the sum assured is paid

through periodical payments to the insured, spread over this time period. In case of death

of the insured within the term of the policy, full sum assured along with bonus accruing

on it is payable by the insurance company to the nominee of the deceased.

E.WHOLE-LIFE PLANS:


9/26

The term plan, endowment plans and money back plan provide cover only till a

specified age. Whole life plan provides cover till end of life. The insured has to pay

premium till a specified age. On reaching that age, the insured has the option to encash

the maturity benefits pr continue the cover for his entire lifetime.

F. Unit link insurance plans:

It can be considered as a combination of mutual funds and term plans. Part of the

premium paid is linked to the policy period and the sum assured and the rest is invested.

NON-LIFE INSURANCE

Types of non life insurance:

1. Personal-

a. Medical

b. Disability

2. Property-

a. Damage to property

b. Loss of incomec. Indirect losses

3. Liability-

a. Under statute


10/26

b Under common law

c Under contract

1. Cash Flow & Net worth Management

To have a significant cash flow surplus annually of around 15-18% of household gross

income in order to provide a funding source for all future wealth change your

accumulation targets. Any cash flow review should not significantly lifestyle.

2. Risk planning & Management

You want to have a complete familys personal insurance program. This includes

covering all debts and having lump sums for generating income for the surviving family

members.

3. Education of both the children.

You have 2 sons. Your goal is to give them the Best quality of Education in best colleges

in India. By, retirement, you expect both of them to be independent and do not need

financial support.

4. Retirement Planning

You have some personal savings. Your goal is to retire at age 60. At that time you want

maintain the standard of living same as before retirement for yourself and spouse.

Lowering the standard is unacceptable. You are however not aware whether the current

recourses are adequate to provide retirement needs.

5. Investment Planning


11/26

Asset portfolio should grow at a rate, which supports the realization of the wealth

accumulation goals for financial freedom (retirement) and education for children.

6. Estate Planning

To have wills written for both husband and wife and to have a trust set up for the child.

1. Tax Planning

To optimize tax savings under the Indian tax system. You are keen on using up all

personal tax relieves and rebates and to have good income reallocation planning.

Sub-Objectives

1. Good long term capital appreciation.

2. Returns from investment should be tax free or with minimum tax.

7. EDUCATION PLANNING

It seems that you have not specifically allocated funds for education funding of your one

son and one daughter..

8. RETIREMENT PLANNING

There is currently no clear plan on retirement. You have not really focused on this aspect.

It seems that your major focus is on your current profession and you have not given a

thought on Retirement Planning


12/26

ESTATE PLANNING

There is no arrangement of any nature including will and trust done, other than the

nominations done for Mutual funds and Insurance policies.

The other facts and data are collected in the Personal Financial Fact-Finder form as

attached in the Appendices.

Risk Management/Insurance

Personal Insurance

You are keen to upgrade your familys insurance program so as to meet the goal and

objectives.

Calculations for Shams sum assured:

y Death & Total and Permanent Disability

As you are the breadwinner of the Family, there are certain responsibilities that you have

to complete,

There are 2 types of liabilities, which we should consider while deciding the Sum

Assured.

1. Legal Liability

2. Moral Liability

1. Legal Liability

Head Amount

House Loan 1780000

Car Loan 456000

Other Loans 1356000


13/26

Total 3592000

Method of data collection:

A. Primary Data:

Data from primary source collected sitting with financial consultant and asked questions

(interview) to the client.

B. Secondary Data:

The main source secondary data for insurance, is the Name, Address of the Company

Customers for whom insurance the has to be made. This was available for the Company

System.

y Scope of the Study

The scope of my project was to study the Role of insurance sector of the HDFC

Standard Life Insurance. For that Company had assigned me their Financial

Consultant as a Trainee.

Limitations of studyTime period was limited for the project so it was not possible to learn whole things in the

financial planning.

y Clients interaction was not permitted all the time and on all the topics.

y Wrong information given by the client cannot be result in achieving the objective

of financial planning.


14/26

y Time period given by the expertise was very limited to cover the comprehensive.

Concept of financial planning

OBJECTIVES

I. PRIMARY OBJECTIVES :

.

To study the behavior of the investors whether they prefer mutual funds.

2 To study Financial Planning in individuals life.

.

II. SECONDARY OBJECTIVES :

1. To study about insurance .

2. To study the financial planning as effective tool in maintaining standard of

living in individuals life for achieving his financial goals.

3. To study various planning done by financial consultant for the customer


15/26

ORGANISATIONAL PROFILE

COMPANY PROFILE

HDFC STANDARD LIFE INSURANCE COMPANY LTD.

HDFC Incorporated in 1977 with a share capital of Rs 10 Cores , 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 cores .The gross

premium income for the year ending March 31, 2007.

HDFC operates through almost 450 locations throughout the country with its corporate

hea quarters in Mumbai, India .HDFC also has an international office in Dubai, UAE,

with services associates in Kuwait, Oman and Qatar.


16/26

HDFC is the largest housing Company in India for the last 27 years.

2000

Shri Yashwant Sinha, Union minister for finance, inaugurates the new

HDFC STANDARD LIFE Office in Mumbai


17/26

HISTORY:-

The business of life insurance in Indian in its existing form started in India in the year

1818 with the establishment Oriental Life Insurance in Calcutta..Some of the important milestone in life insurance business in India are.

KEY MILESTONES

1912 : The Indian Life Insurance Companies Act enacted as first statue to

Regulate the life insurance business.

1928: The Insurance Companies Act enacted to enable the government to

Collect statistical information about life and non-life insurance business.

1938: Earlier legislation consolidated and amended to by the insurance Act

With the objective of protecting the interests of the insuring public.

1965: 245 Indian and insurers and provident societies take over by the central

Government and nationalized. LIC formed by an act of parliament viz.

LIC. Act .1956, with capital contribution of Rs. 5 Crores from

Government of India

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 Ltd.) . He

joined HDFC Ltd. In a senior management position in 1978.He was inducted as whole-time director of HDFC Limited in 1985 and was appointed as

its Executive Chairman in 1993.


18/26

Mr. Deepak M Stalker 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.

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.

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 companys 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 productsinclude investment plans with insurance and good returns (unit linked plans), multi purpose

insurance plans, pension plans, child plans and money back plans.


19/26

OBJECTIVES OF HDFC SLIC

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.


20/26

DATA COLLECTION AND ANALYSIS

Source: HDFC Standard Life 2009-10 Annual ReportUnits: Rs 000s

FY ending 31 March 2009-10 2008-09

Sources of funds

Shareholders' funds

Share capital 19,680,000 17,958,180Reserve and surplus 552,892 552,892

Credit/(Debit) fair value

change account

184,435 (77,610)

Sub-total 20,417,327 18,433,462

Fixed assets 1,143,777

Borrowings -

Policyholders' funds: Cash and bank balances

Credit/(Debit) fair value

change account

205,087 (296,885)

Policy liabilities 37,666,908 29,092,419

Insurance reserves -

Provision for linked

liabilities

127,701,636 84,085,083

Add: Fair value change 27,516,164 (15,302,147)

Total provision for

linked liabilities

155,217,800 68,782,936

Sub-total 193,089,795

Net current assets (4,725,082)

Funds for future appropriations 1,490,013

Funds for future

appropriations -

provision for lapsed

policies

1,064,831 531,970

Surplus allocated to shareholders

Total 216,061,966 117,130,297

Application of funds


21/26

Investments

Shareholders' 6,304,757 4,291,597

Policyholders' 43,415,382 30,152,727

Assets held to cover

linked liabilities

155,217,800 68,782,936

Loans 40,366 30,248

1,143,777 1,451,346- Current assets

2,826,362 4,108,660

Advances and other

assets

4,917,758 5,428,699

Sub-total 7,744,120 9,537,359

- -

Current liabilities 12,281,585 8,820,225

Provisions 187,617 208,813

Sub-total 12,469,202 9,029,038

193,089,795 97,578,470

(4,725,082) 508,321

1,490,013 586,395

Debit balance in profit

and loss account

14,664,966 11,913,122

-

Total 216,061,966 117,130,297

1.Total premiums Total received premiums during the year including first year, single and

renewal premiums for individual and group business

2.First year premiums Regular premiums received during the year for all modes ofpayments

chosen by the customer which are stillin the first year. For e.g. for a monthly mode policy sold in

March 2009 the first installment would fall into first year premiums for 2008-09 and theremaining 11 installments in the first year would be first year premiums in 2009-10

3.New business received premium The sum of first year premium and single premium

4.Weighted received premium The sum of first year premium and 10 percent weighted single

premiums and single premium top-ups

5.Renewal premiums Regular recurring premiums received after the first year

6.Effective premium income (EPI) -10 percent weight-age for single premiums and annualized for

regular premiums e.g. monthly installment premium x 12

7.Commission ratio Ratio of total commissions paid out on first year, single and renewal

premiums to total premiums

8.Operating expense ratio Ratio of operating expenses excluding service tax to total premiums


22/26

9.Conservation ratio Ratio of current year renewal premiums to previous years renewal

premium and first year premium

10.Solvency ratio Ratio of required solvency margin to available solvency margin

11.Claims repudiation ratio Ratio of claims repudiated to total claims received during the period

A SURVEY ON THE LIFE INSURANCEINDUSTRY ININDIA

AGEGROUP OFSURVEYEDRESPONDENTS

TABLE1:

Age group No. of Respondents

18 - 25 years 127

26 - 35 years 67

36 - 49 years 46

50 - 60 years 24

More than 60 years 6

CHART 1:

47%

25%

17%

9%

2%

18 - 25 years

26 - 35 years

36 - 49 years

50 - 60 years

More than 60 years


23/26

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

39%

45%

6%

3%7%

Term Insurance Plans

Endowment Plans

Pension Plans

Child Plans

Tax Saving Plans


24/26

SUGGESTIONS

y Company should have to increase awareness in the customers.

y Create a new tools and techniques which will be easy to understand for clients.

y Company has to use effective Medias that can appeal to the masses.

y Make those ads, which can educate customers about financial planning.


25/26

CONCLUSION

y

Most of people are unaware about Financial Planning.

y Mainly businessman & salaried person are more interested to do Financial

Planning.

y Insurance advertisement not succeeds in creating awareness in the people.

People are more interested in investing in traditional Investment options like insurance

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., FD, post.

BIBILOGRAPHY


26/26

BOOKS

V.A. AVADHANI, Securities Analysis and Portfolio Management,

Himalaya Publishing House, 9th revised edition.

WEB

http:// www.hdfcsl.com

Insurance World

www.hdfcslic.com

kshitija final project

Documents