CHAPTER 1

INTRODUCTION

Overall, the life insurance and pension sector is set for rapid changes and growth in the years

ahead. Delivering service, building trust and being innovative are key areas in which any

company will have to excel in order to do well in the long road ahead. Different companies will

take different approaches and it would be myriad of solutions that will be found to delight the

Indian customer.

Market Research was done through various activities and tele-calling which are discussed further

in the report. Activities led to practical exposure and taught me the aspects of customer dealing.

Finally, interesting conclusions were drawn out of the data collected regarding the Awareness of

Financial Planning among the people in today’s environment.

FINANCIAL PLANNING

A comprehensive financial advisory service involving financial strategies, tax, corporate/trust

structures, estate planning, legal issues, family law, asset allocation, asset protection and

investment advice.

Financial Planning takes into account

Desired asset allocation, risk profile and return expectations.

Building cash flows correlating all expenses and income. Inflation and outflows due to loans

are considering in building the financial plan.

Future goals like retirement, housing and children's education / marriage or other needs.

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Why do you need Financial Planning?

You may have many dreams, needs and desires. For example, you could be dreaming of:

Owning a new car,

Buying a dream house,

Providing your children with the best education,

Planning a grand wedding for your children

Having a great time after your retirement

But in today's world of skyrocketing costs and increasing inflation, how many of these dreams

can you hope to turn into reality? By planning well, you can utilize your limited resources to the

fullest.

EXPERIENCE THE POWER 360º FINANCIAL PLANNING

The only thing permanent in life is change. Times change. People change. So does life. You

expect life to be much better tomorrow than it is today. Tomorrow, you hope to fulfill all your

dreams and aspirations. But what happens if things take an untoward turn? Or, if there is an

eventuality? Perhaps it's time for you to change the way you plan your investments...

                                                                  

How will 360° Financial

Planning help?

Instead of investing in an ad-hoc manner, 360°

Financial Planning helps you take a holistic, all-round

view. Briefly, 360° Financial Planning

comprises:

Investment Planning

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Cash Flow Planning

Tax Planning

Insurance Planning

Children’ Future Planning

Retirement Planning

INDUSTRY PROFILE

Overview

With 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.

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Together with banking services, it adds about 7 percent to the country’s GDP .In spite of all this

growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80 per

cent of Indian population is without life insurance cover while health insurance and non-life

insurance continues to be below international standards. And this part of the population is also

subject to weak social security and pension systems with hardly any old age income security.

This it-self is an indicator that growth potential for the insurance sector is immense.

Historical Perspective

The insurance came to India from UK; with the establishment of the Oriental Life insurance

Corporation in 1818.The Indian life insurance company act 1912 was the first statutory body that

started to regulate the life insurance business in India. By 1956 about 154 Indian, 16 foreign and

75 provident firms were been established in India. Then the central government took over these

companies and as a result the LIC was formed. Since then LIC has worked towards spreading

life insurance and building a wide network across the length and the breath of the country.

Important milestones in the life insurance business in India:

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

insurance business.

1956: 245 Indian and foreign insurers and provident societies were taken over by the central

government and nationalized. LIC formed by an Act of Parliament- LIC Act 1956- with a capital

contribution of Rs.5 cr. from the Government of India.

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Important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact all classes of

general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of

conduct for ensuring fair conduct and sound business practices.

1972: The general insurance business in India nationalized through The General Insurance

Business (Nationalization) Act, 1972 with effect from 1st January 1973. 107 insurers

amalgamated and grouped into four companies- the National Insurance Company Limited, the

New India Assurance Company Limited, the Oriental Insurance Company Ltd. and the United

India Insurance Company Ltd. GIC incorporated as a company.

INSURANCE SECTOR REFORMS

Prior to liberalization of Insurance industry, Life insurance was monopoly of

LIC.

In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N.

Malhotra- was formed to evaluate the Indian insurance industry and recommend its future

direction. The Malhotra committee was set up with the objective of complementing the reforms

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initiated in the financial sector. The reforms were aimed at creating a more efficient and

competitive financial system suitable for the requirements of the economy keeping in mind the

structural changes currently underway and recognizing that insurance is an important part of the

overall financial system where it was necessary to address the need for similar reforms. In 1994,

the committee submitted the report and some of the key recommendations included:

Structure

Government stake in the insurance Companies to be brought down to 50%. Government should

take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as

independent corporations.

Competition

Private Companies with a minimum paid up capital of Rs.1 billion should be allowed to enter

the sector. No Company should deal in both Life and General Insurance through a single entity.

Foreign companies may be allowed to enter the industry in collaboration with the domestic

companies.

Regulatory Body

The Insurance Act should be changed. An Insurance Regulatory body should be set up.

Controller of Insurance- a part of the Finance Ministry- should be made independent

Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to

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50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current

holdings to be brought down to this level over a period of time)

Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be

encouraged to set up unit linked pension plans. Computerization of operations and updating of

technology is to be carried out in the insurance industry.

STATISTICS (INDIAN & GLOBAL)

This section gives the users important and detailed statistics of the Indian as well as the Global

insurance industry. These statistics would give important insights of where the respective

markets are headed for.

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The global life insurance market stands at $1,521.2 billion while the non-life insurance

market is placed at $922.4 billion.

The United States itself accounts for about one-third of the $2443.6 billion global

insurance market and Japan stands next with a 20.62% share.

India takes the 23rd position with US $9.933 billion annual premium collections and a

meager 0.41% share.

Out of one billion people in India, only 35 million people are covered by insurance.

India's life insurance premium as a percentage of GDP is just 1.77 per cent.

The income derived by GIC and its subsidiary companies through investment was

Rs.2491.76 crore and the investable fund generated was Rs.2843 crore in 1999-2000.

Indian insurance market is set to touch $25 billion by 2010, on the assumption of a 7 per

cent real annual growth in GDP.

NATURE OF INDUSTRY

The insurance industry provides protection against financial losses resulting from a variety of

perils. By purchasing insurance policies, individuals and businesses can receive reimbursement

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for losses due to car accidents, theft of property, and fire and storm damage; medical expenses;

and loss of income due to disability or death.

The insurance industry consists mainly of insurance carriers (or insurers) and insurance

agencies and brokerages. In general, insurance carriers are large companies that provide

insurance and assume the risks covered by the policy. Insurance agencies and brokerages sell

insurance policies for the carriers.

Insurance companies assume the risk associated with annuities and insurance policies and assign

premiums to be paid for the policies. In the policy, the companies states the length and

conditions of the agreement, exactly which losses it will provide compensation for, and how

much will be awarded.

The premium charged for the policy is based primarily on the amount to be awarded in case of

loss, as well as the likelihood that the insurance carrier will actually have to pay. In order to be

able to compensate policyholders for their losses, insurance companies invest the money they

receive in premiums, building up a portfolio of financial assets and income-producing real estate

which can then be used to pay off any future claims that may be brought.

There are two basic types of insurance carriers:

Direct and Reinsurance.

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Direct carriers are responsible for the initial underwriting of insurance policies and annuities,

while Reinsurance carriers assume all or part of the risk associated with the existing

insurance policies originally underwritten by other insurance carriers.

Direct insurance carriers offer a variety of insurance policies.

Life insurance provides financial protection to beneficiaries—usually spouses and dependent

children—upon the death of the insured.

Disability insurance supplies a preset income to an insured person who is unable to work due

to injury or illness

Health insurance pays the expenses resulting from accidents and illness.

An Annuity(a contract or a group of contracts that furnishes a periodic income at regular

intervals for a specified period) provides a steady income during retirement for the remainder of

one’s life.

Property-casualty insurance protects against loss or damage to property resulting from

hazards such as fire, theft, and natural disasters.

Liability insurance shields policyholders from financial responsibility for injuries to others or

for damage to other people’s property. Most policies, such as automobile and homeowner’s

insurance, combine both property-casualty and liability coverage. Companies that underwrite this

kind of insurance are called property-casualty carriers.

What is Life Insurance?

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Human life is subject to risks of death and disability due to natural and accidental causes. When

human life is lost or a person is disabled permanently or temporarily, there is a loss of income to

the household. The family is put to hardship. Risks are unpredictable. Death/disability may occur

when one least expects it. There are a number of life insurance products which offer protection

and also coupled with savings.

A Term insurance product provides a fixed amount of money on death during the period of

contract.

A Whole Life insurance product provides a fixed amount of money on death.

An Endowment Assurance product provided a fixed amount of money either on death during

the period of contract or at the expiry of contract if life assured is alive.

A Money Back Assurance product provides not only fixed amounts which are payable on

specified dates during the period of contract, but also the full amount of money assured on death

during the period of contract.

An Annuity product provides a series of monthly payments on stipulated dates provided that the

life assured is alive on the stipulated dates.

A Linked product provides not only a fixed amount of money on death but also sums of money

which are linked with the underlying value of assets on the desired dates.

There are a variety of life insurance products to suit to the needs of various categories of people

—children, youth, women, middle-aged persons, old people; and also rural people, film actors

and unorganized laborers.

Life insurance products could be purchased from registered life insurers notified by the IRDA.

Insurers appoint insurance agents to sell their products.

As per regulations, insurers have to give the various features of the products at the point of sale.

The insured should also go through the various terms and conditions of the products and

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understand what they have bought and met their insurance needs. They ought to understand the

claim procedures so that they know what to do in the event of a loss.

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INDIAN INSURANCE SECTOR

REGULATORY BODY

Insurance is a federal subject in India. The primary legislation that deals with insurance business

in India is: Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999.

The Insurance Regulatory and Development

Authority (IRDA)

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.

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’s online service

for issue and renewal of licenses to agents. Since being set up as an independent statutory body

the IRDA has put in a framework of globally compatible regulations.

MISSION-IRDA

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

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

thereto.”

The following companies have the rest of the market share of the insurance industry.

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COMPANY NAME MARKET SHARE

LIC 79.30

ICICI PRUDENTIAL 5.63

BAJAJ ALLIANZ 3.27

HDFC STANDARD LIFE 3.11

BIRLA SUNLIFE 2.32

TATA AIG 1.45

SBI LIFE 1.24

MAX NEWYORK 0.90

AVIVA LIFE 0.82

ING VYSYA 0.66

OM KOTAK LIFE 0.54

AMP SANMAR 0.38

METLIFE 0.33

RELIANCE LIFE 0.05

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CURRENT SCENARIO OF THE INDUSTRYINSURANCE MARKET IN

INDIA

India with about 200 million middle class household shows a huge untapped potential for players

in the insurance industry. Saturation of markets in many developed economies has made the

Indian market even more attractive for global insurance majors. The insurance sector in India has

come to a position of very high potential and competitiveness in the market.

Innovative products and aggressive distribution have become the say of the day. Indians, have

always seen life insurance as a tax saving device, are now suddenly turning to the private sector

that are providing them new products and variety for their choice. Life insurance industry is

waiting for a big growth as many Indian and foreign companies are waiting in the line for the

green signal to start their operations. The Indian consumer should be ready now because the

market is going to give them an array of products, different in price, features and benefits. How

the customer is going to make his choice will determine the future of the industry.

CUSTOMER SERVICE

Consumers remain the most important centre of the insurance sector. After the entry of the

foreign players the industry is seeing a lot of competition and thus improvement of the customer

service in the industry. Computerization of operations and updating of technology has become

imperative in the current scenario. Foreign players are bringing in international best practices in

service through use of latest technologies. The one time monopoly of the LIC and its agents are

now going through a through revision and training programs to catch up with the other private

players. Though lot is being done for the increased customer service and adding technology to it

but there is a long way to go and various customer surveys indicate that the standards are still

below customer expectation levels.

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DISTRIBUTION CHANNELS

Till date insurance agents still remain the main source through which insurance products are

sold. The concept is very well established in the country like India but still the increasing use of

other sources is imperative. It therefore makes sense to look at well- balanced, alternative

channels of distribution.

LIC has already well established and have an extensive distribution channel and presence. New

players may find it expensive and time consuming to bring up a distribution network to such

standards. Therefore they are looking to the diverse areas of distribution channel to have an

advantage. At present the distribution channels that are available in the market are:

• Direct selling/Retail

• Corporate agents

• Group selling

• Brokers and cooperative societies

• Banc assurance

DIRECT SELLING/RETAIL

Direct selling or retail business is carried out by Agents of the company. This is the main

distribution channel due to the complexity of most insurance products (Endowment, Whole

of Life, Unit Linked). This tends to be the focus of most companies due to its past success as

well as its ability to deliver the right advice. However, this channel can be expensive and it is a

time consuming sales process. An agent is the public face of an Insurance company. Hence it is

important that this face is always smiling and presentable and the facts and figures at his/ her

command are updated and correct.

An agent should be a pleasing personality with complete knowledge about the various plans and

solutions which the company has to offer and must also understand the customer’s psychology

well to deal in an efficient manner.

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BANCASSURANCE

Banc assurance is the distribution of insurance products through the bank's distribution channel.

It is a phenomenon wherein insurance products are offered through the distribution channels of

the banking services along with a complete range of banking and investment products and

services. To put it simply, Banc assurance, tries to exploit synergies between both the insurance

companies and banks.

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WHAT DOES LIFE INSURANCE HAVE TO OFFER?

Life insurance is many different things to many different people. For some, it is a premium to be

paid on time. For others it offers liquidity since cash can be borrowed when needed. For the

investment-minded, it denotes a constantly growing capital account and numerous other

benefits. 

The contractual guarantee is the promise to pay, backed by one of the oldest and most stably

regulated financial industry operating in the Indian sub-continent today.

1) Insurance Buys Time and Money

People like to refer to life insurance as time insurance, the reason being that life insurance

proceeds are paid to the insured's beneficiaries in case of death. The money proffered by life

insurance helps buy time to adjust to the change of circumstances. Insurance provides large

amounts of cash that will keep the lifestyle for the survivors the way it was before the insured's

death.

2) Insurance Offers Peace of Mind

For the person who buys an insurance policy, it offers absolute and complete peace of mind. He

or she knows that the decision made by him will provide sound benefits in the future, whether or

not the individual may live to see it.

3) Multiple Applications

The future is uncertain for each and every one. No one knows how long he or she will live. The

investment benefit is paid to the insured's beneficiaries after his death or it can be used during the

life as well. Life insurance policy owners can turn to the cash value of the policy in case of a

financial emergency when all avenues are either blocked or denied.

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4) Enduring Elasticity

Since life insurance is flexible enough to serve several needs, the insured can keep several long-

term goals in mind once he or she invests in the insurance plan. The cash value of the policy can

be allocated towards augmenting the monthly income during the retirement years. Leisure years

should be turned into pleasure years. Permanent life insurance is designed on the concepts of

long-term flexibility.

5) Financial Security

The insurance policy offers contractual guarantees to people looking for peace of mind when

they buy life insurance. Life insurance offers complete financial security. The purchase of life

insurance demonstrates concern for a family's future financial well-being.

6) Regard for Family

The purchase of life insurance clearly displays care and concern for the people the policy owner

loves.

7) Insurance is Safer

No financial institution can do what life insurance does. No industry can back its products with

reserves and surplus as sound as those of the insurance industry.

The proof of strength and safety that insurance companies have ensured even under the most

adverse of conditions is a matter of pride for the entire insurance industry. For generation after

generation, life insurance has been acclaimed as the very benchmark of security against which

the other industries are measured.

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OPPORTUNITIES FOR INSURANCE COMPANIES

In the now open sector on insurance, the following is what I feel will determine the success of

the company in particular and the industry in general:

A change in the attitude of the population

Indians have always been wary of employing their hard-earned money in a venture that will pay

them on their death. Insurance has always been used as a Tax saving tool. No more, no less. It is

upon the insurers to educate the people to secure/insure their future against any unknown

calamity and make a shield around their families and businesses.  

An open and transparent environment created under the IRDA.

The reason for this being on the top of our understanding is that whenever we have seen any

sector open up in India there are always grey areas and unsure policies. These are not exactly

what any player, be it Indian or foreign, looks for. It creates an air of uncertainty in all the

decision making process. Insurance as a sector requires players who are strong financially and

are willing to wait for returns. Their confidence can be bolstered only if there is an open and a

transparent policy guidelines. This will also help the consumers feel safe that the regulatory is an

active one and cares to do everything possible to keep things under control and help the

insurance environment grow maturely.  

A well-established distribution network.

To cater to the largest democracy in the world is by no means a cakewalk. Insurance profits are

directly related to number of insured and this is in turn related to the reach.

Trained professionals to build and sell the product.

It is said that the insurance agent is the best salesman in the world. He makes you pay, regularly,

an amount promising to pay back only on your death. Thus the players will require an excellent

sales team to sell their products in the now competitive environment. 

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Encouragement of new and better products and letting the hackneyed ones die

out.

This will itself ensure the market grows. And that every class/society gets a

product that best suits them. 

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COMPANY’S PROFILE

INTRODUCTION

Helping Indians experience the joy of home ownership.

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. HDFC operates through 75 locations throughout

the country with its Corporate Headquarters in Mumbai, India.

OBJECTIVES AND BACKGROUND

Background

HDFC was incorporated in 1977 with the primary objective of meeting a social need – that of

promoting home ownership by providing long-term finance to households for their housing

needs. HDFC was promoted with an initial share capital of Rs. 100 million.

Business Objectives

The primary objective of HDFC is to enhance residential housing stock in the country through

the provision of housing finance in a systematic and professional manner, and to promote home

ownership. Another objective is to increase the flow of resources to the housing sector by

integrating the housing finance sector with the overall domestic financial markets..

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ORGANIZATION AND MANAGEMENT

HDFC is a professionally managed organization with a board of directors consisting of eminent

persons who represent various fields including finance, taxation, construction and urban policy &

development. The board primarily focuses on strategy formulation, policy and control, designed

to deliver increasing value to shareholders.

FOUNDER– Mr. Hasmukhbhai Parekh

BOARD OF DIRECTORS

Mr. D S Parekh – Chairman

Mr. Keshub Mahindra – Vice Chairman

Ms. Rene S. Karnad – Executive Director

Mr. K M Mistry – Managing Director

Mr. Shirish B. Patel

Mr. N M Munjee

Mr. B S Mehta

Mr. D M Sukthankar

Mr. D N Ghosh

Dr. S A Dave

Mr. S Venketaraman

Dr. Ram S. Tarneja

Mr. N M Munjee

Mr. D M Satwalekar

HDFC has a staff strength of 1029, which includes professionals from the fields of finance, law,

accountancy, engineering and marketing.

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SUBSIDIARY & ASSOCIATE COMPANIES

HDFC Bank

HDFC Mutual Fund

HDFC Standard Life

Intelenet Global Services Ltd.

HDFC Chubb General Insurance Company Ltd.

HDFC Reality

Other Companies Co-Promoted by HDFC

HDFC Trustee Company Ltd.

HDFC Developers Ltd.

HDFC Venture Capital Ltd.

HDFC Ventures Trustee Company Ltd.

HDFC Investments Ltd.

HDFC Holdings Ltd.

Home Loan Services India Pvt. Ltd.

Credit Information Bureau (India) Ltd

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HDFC STANDARD LIFE INSURANCE

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. Each 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 Poors. 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 14th August 2000. HDFC is

the majority stakeholder in the insurance JV with 81.4 % stake and Standard Life has a stake of

18.6%. Mr. Deepak Satwalekar is the MD and CEO of the venture.

THE PARTNERSHIP :

HDFC and Standard Life first came together for a possible joint venture, to enter the Life

Insurance market, in January 1995. It was clear from the outset that both companies shared

similar values and beliefs and a strong relationship quickly formed. In October 1995 the

companies signed a 3 year joint venture agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the

relationship.

In October 1998, the joint venture agreement was renewed and additional resource made

available. Around this time Standard Life purchased 2% of Infrastructure Development Finance

Company Ltd. (IDFC). Standard Life also started to use the services of the HDFC Treasury

department to advise them upon their investments in India.

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Towards the end of 1999, the opening of the market looked very promising and both companies

agreed the time was right to move the operation to the next level. Therefore, in January 2000 an

expert team from the UK joined a hand picked team from HDFC to form the core project team,

based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFC

Bank.

COMPANY’S MISSION:

To be the top life insurance company in the market.

This not only means being the largest or the most productive company in the market, but a

combination of several things like-

Customer service of the highest order

Value for money for customers

Professionalism in carrying out business

Innovative products to cater to different needs of different customers

Use of technology to improve service standards

Increasing market share

COMPANY’S VALUES:

SECURITY: Providing long term financial security to our policy holders will be our

constant endeavor. This is done by offering life insurance and pension products.

TRUST: Company appreciates the trust placed by our policy holders in us. Hence,

company will aim to manage their investments very carefully and live up to this trust.

INNOVATION: Recognizing the different needs of our customers, company will be

offering a range of innovative products to meet these needs.

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Company’s mission is to be the best new life insurance company in India and these are the

values that will guide us in this.

KEY MANAGEMENT PERSONNEL

Chairman

Mr. Deepak S. Parekh

Board Of Directors

Mr. K. M. Mistry

Ms. Renu S. Karnad

Mr. A. M. Crombie

Ms. Marcia D. Campbell

Mr. Norman Keith Skeoch

Mr. G. R. Divan

Mr. G. N. Bajpai

Mr. Ranjan Pant

Mr. Ravi Narain

Managing Director & CEO

Mr. D. M. Satwalekar

AuditCommitee

Haribhakti& Company

Chartered Accountants

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B.K. Khare& Co.

Chartered Accountants

Bankers

HDFC Bank Ltd.

Union Bank of India

Indian Bank

The Saraswat Co-operative Bank Ltd.

Federal Bank

LIFE STAGES

When Should One Go For Insurance?

Your insurance need will change as your life does, from starting to work to enjoying your golden

years and all the stages in between. Each one of these stages may pose a different insurance

need/cover for you. In this section, we have drawn up the basic life stages and help you analyze

various insurance needs accordingly.

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Stage 1 : Young and Single

This is an important stage where one lays down the foundation of a successful life ahead. Take

advantage of the time and power of compounding to ensure that you build up your dreams, so

start saving early.

Your needs:

oSave for a home and wedding

oTax Planning

oSave for Golden years

Stage 2 - Just Married

Marriage brings about a significant change. New dreams and new opportunities also bring in

additional responsibilities. While both of you look forward to a happy and secure life , it is

equally important to ensure that eventualities don’t come in the way of shaping your dreams.

Your needs:

o Planning for home / securing your home loan

liability

o Save for vacation

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o Save for your first child

Stage 3 - Proud Parents

Once you have children, your need for life insurance is even more. You need to protect your

family from an untoward incident. Ensure your protection umbrella takes into account the future

cost of securing your child’s dream. You will want life to go on for your loved ones, and having

enough life insurance is a way to help ensure that.

Your needs:

o Provide for children’s education

o Safeguarding family against loan liabilities

o Savings for post-retirement

Stage 4 - Planning for Retirement

While you are busy climbing the ladder of success today, it is important for you to take time and

plan for your life after retirement. Having an early start for retirement planning can make a

significant difference to your savings. Think about your golden years even before you have

reached them. The key is to think ahead and plan well using your time and money.

Your needs:

o Provide for regular income post retirement

o Immediate Tax benefits

o Lead a secure, independent and comfortable

life style after retirement

PRODUCT MIX

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At HDFC Standard Life, there is a bouquet of insurance solutions to meet every need. They cater

to both, individuals as well as to companies looking to provide benefits to their employees.

For individuals, they have a range of protection, investment, pension and savings plans that assist

and nurture dreams apart from providing protection. One can choose from a range of products to

suit one’s life-stage and needs.

For organizations they have customized solutions that range from Group Term Insurance,

Gratuity, Leave Encashment and Superannuation Products.

PRODUCTS FOR INDIVIDUALS

PROTECTION- You can protect your family against the loss of your income or the burden of a

loan in the event of your unfortunate demise, disability or sickness. These plans offer valuable

peace of mind at a small price.

Plans: Term Assurance Plan

Loan Cover Term Assurance Plan.

INVESTMENT- This includes a plan that is well suited to meet your long term investment

needs. We provide you with attractive long term returns through regular bonuses.

Plan : Single Premium Whole Of Life

PENSION - Our Pension Plans help you secure your financial independence even after

retirement and live a relaxed retired life.

Plans : Personal Pension Plan

Unit Linked Pension

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Unit Linked Pension Plus

SAVING-Our Savings Plans offer you flexible options to build savings for your future needs

such as buying a dream home or fulfilling your children’s immediate and future needs.

Plans : Endowment Assurance Plan,

Unit Linked Endowment,

Unit Linked Endowment Plus,

Money Back Plan,

Children’s Plan,

Unit Linked Youngstar,

Unit Linked Youngstar Plus .

GROUP PLANS

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.

They offer different products for different needs of employers ranging from term insurance plans

for pure protection to voluntary plans such as superannuation and leave encashment.

Plans: Group Term Insurance with Riders

Group Term Insurance with Profit-Share

Group Unit-Linked Plan

For Gratuity

For Defined Benefit Superannuation

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40.10%

4.10%8.80%

6.90%

6.60%

3.90%

10.80%

2.30%

7.60%

2.10%0.80%

1.60%4.60%

Food & Grocery

Home Textiles

Personal Care

Saving & Investment

Clothing

Consumer Durable

Vacation

Eating out

Footwear

Movies & Theater

Entertainment

Accessories

Books & Music

For Defined Contribution Superannuation

Group Leave Encashment Plan

RURAL CUSTOMER- According to research findings, there is keenness among rural

customers to invest in savings cum protection plan with a term of five years, especially, if the

premium amount is low and affordable. Keeping this in view, HDFC STD> LIFE has plans like:

Plans : Bima Bachat Yojana.

Super Bachat Yojana.

CONSUMPTION PATTERN

*Source-Business world magazine 2nd week April 2008

33

FIRST CONVERSATION

APPOINTMENT

FILLING THE PROPOSAL FORM

COLLECT THEREQUIRED DOCUMENTS AND THE FIRST PREMIUM

Follow Up

Follow Up

The consumption pattern is determined by the income so more would be the income more would

be the consumption. The consumption though can differ in terms of areas where the money is

actually spent. The above representation tells us the consumption pattern of the consumer in

India i.e. where do they actually invest their money and in what proportion do they spend in

various areas. The chart shows that people are spending 6.9% of their savings into savings and

investments.

SALES PROCEDURE :

STEP 1: FIRST CONVERSATION WITH A KNOWN OR

34

AN UNKNOWN CUSTOMER

This is the first time, when you interact with a person and try to get the information from him

about the industry or the company and understand the customer’s insight i.e. what actually does a

customer expects from the companies.

The objective was to know the awareness about Financial Planning among the customers and this

was done by getting a questionnaire filled by the people. The various activities performed were:

1) DELHI METRO : Here we interacted with the commuters &

Collected the data.

2) MARKETS : (Connaught Place & Karol Bagh) During this

activity, we interacted with the shopkeepers as well as the walking

people regarding their views about the industry.

3) CANOPY AT NOIDA : This activity was designed to target the people working in

BPOs and other IT companies.

4) TELE-CALLING: This was random calling from the data base provided by the

company and the aim was to collect information from them.

5) CORPORATE PRESENTATION: A presentation was arranged for the employees

of VED RAM AND SONS (Paras), to make them aware about the importance of

Financial Planning in today’s unpredictable environment.

STEP 2: APPOINTMENT

35

All the potential and interested customers of all the activities performed are then followed up and

an appointment is fixed for further details.

The motive is to explain the customer in detail, about the various plans offered by the company.

The customer is informed about the procedure and the options he can opt for like:

1) Choose the premium he wish to invest

2) Select the Premium Payment Option i.e. annual mode, half yearly

mode, quarterly mode, or monthly mode.

3) Choose the amount of protection i.e. the sum assured, he desires.

4) With Maturity Benefit, choose the additional benefits like:

a) Life option Death Benefit

b) Life & Health option Death Benefit + Accidental Death

Benefit

c) Extra Life & Health option Death Benefit + Critical Illness

Benefit + Accidental Death Benefit

5) Choose the Investment funds or funds one desires.

The various funds available are:

Liquid Fund

Secure Managed Fund

Defensive Managed Fund

Balanced Managed Fund

Equity Managed Fund

Growth Fun

STEP 3: FILLING THE PROPOSAL FORM

36

After the second step, the interested customers are required to fill the proposal form which

requires the following information:

a) Personal details of the policy holder,

b) Personal details of Beneficiary or Nominee

c) The Premium amount selected

d) The Term of the policy

e) The Fund choice for investment

STEP 4 : COLLECTING THE DOCUMENTS

Once the form is filled all the necessary documents are collected like :

a) Address proof,

b) DOB certificate etc.

And also the first premium amount in form of cheque or cash is collected.

Within 15 days, the policy documents reach the customers place, and the customer is required to

read the documents carefully.

CURRENT SALES-HDFC Standard Life

37

“HDFC STANDARD LIFE PACING AHEAD”

The Financial Express 15th May 2009

“HDFC Standard Life has recorded a strong year-on-year growth of 112% for the period April-

March 2009-10, in comparison to the same period 2008-09, with a new business first year

premium of Rs 1,029 crore.

In terms of effective premium income (EPI), which gives a 10% value to a Single Premium

policy and is an internationally-accepted indicator of an insurance company's performance, the

EPI grew by 103% to Rs 887 cr from Rs 436 crore.

HDFC Standard Life's growth in new business is a manifestation of the number of lives insured

as well as an increase in the average premium. For the individual business, volume measured by

the number of lives insured witnessed a 32% growth.

The average premium also grew by 62% to Rs 27,500 in 2009-10 from Rs 17,000 in 2008-09.

During the year the company issued over 3,97,000 policies and has covered more than 5,80,000

lives”

Table Showcasing Financial Results:

38

Parameters

April-March

2008-09

(Rs. Cr)

April-March

2009-10

(Rs. Cr)

Growth

(%)

Total received premium 668.40 1532.21 129.23

    i.  New Business 486.15 1028.94 111.65

    ii. Renewal 182.25 503.27 176.14

Effective Premium Income

(Total) 436.08 887.30 103.47

Group Business Premium

(EPI) 49.40 135.15 173.58

LITERATURE REVIEW

39

What is Financial Planning?

Financial Planning is the process of meeting your life goals through the proper management of

your finances. Life goals can include buying a house, saving for your child's higher education

or planning for retirement. The Financial Planning Process consists of six steps that help you

take a 'big picture' look at where you are currently. Using these six steps, you can work out

where you are now, what you may need in the future and what you must do to reach your goals.

The process involves gathering relevant financial information, setting life goals, examining

your current financial status and coming up with a strategy or plan for how you can meet your

goals given your current situation and future plans.

The Benefits of Financial Planning

Financial Planning provides direction and meaning to your financial decisions. It allows you to

understand how each financial decision you make affects other areas of your finances. For

example, buying a particular investment product might help you pay off your mortgage faster

or it might delay your retirement significantly. By viewing each financial decision as part of the

whole, you can consider its short and long-term effects on your life goals. You can also adapt

more easily to life changes and feel more secure that your goals are on track.

Who is a Financial Planner?

A Financial Planner is someone who uses the Financial Planning process to help you figure out

how to meet your life goals. The Planner can take a 'big picture' view of your financial situation

and make Financial Planning recommendations that are suitable for you. The Planner can look

at all your needs including budgeting and saving, taxes, investments, insurance and retirement

planning. Or, the Planner may work with you on a single financial issue but within the context

of your overall situation. This big picture approach to your financial goals sets the Planner

apart from other Financial Advisors, who may have been trained to focus on a particular area of

your financial life.

40

Can you do your own Financial Planning?

Some personal finance websites, magazines or self-help books can help you do your own

Financial Planning. However, you may decide to seek help from a professional Financial

Planner if:

you need expertise you don't possess in certain areas of your finances. For example, a

Planner can help you evaluate the level of risk in your investment portfolio or adjust your

retirement plan due to changing family circumstances.

you want to get a professional opinion about the Financial Plan you developed yourself.

you have an immediate need or unexpected life event such as a birth, inheritance or major

illness.

you feel that a professional Advisor could help you improve on how you are currently

managing your finances.

you know that you need to improve your current financial situation but don't know where

to start.

Be sure you're getting Financial Planning advice

The government does not regulate Financial Planners as Financial Planners; instead, it regulates

Planners by the services they provide. For example, a Planner who also provides insurance

transactions is regulated as an insurance agent. As a result, the term 'Financial Planner' may be

used inaccurately by some Financial Advisors. To add to confusion, many Financial Advisors

like accountants and investment Advisors can also offer Financial Planning services. To be sure

that you are getting Financial Planning advice, check if the Advisor follows the six step

process.

How to make Financial Planning work for you?

You are the focus of the Financial Planning process. As such, the results you get from working

with a Financial Planner are as much your responsibility as they are those of the Planner. To

achieve the best results from your Financial Planning engagement, you will need to be prepared

41

to avoid some of the common mistakes shown above by considering the following advice:

Set measurable goals

Set specific targets of what you want to achieve and when you want to achieve results. For

example, instead of saying you want to be 'comfortable' when you retire or that you want

your children to attend 'good' schools, you need to quantify what 'comfortable' and 'good'

mean so that you'll know when you've reached your goals.

Understand the effect of each financial decision

Each financial decision you make can affect several other areas of your life. For example,

an investment decision may have tax consequences that are harmful to your estate plans.

Or a decision about your child's education may affect when and how you meet your

retirement goals. Remember that all of your financial decisions are interrelated.

Re-evaluate your financial situation periodically

Financial Planning is a dynamic process. Your financial goals may change over the years

due to changes in your lifestyle or circumstances, such as an inheritance, marriage, birth,

house purchase or change of job status. Revisit and revise your Financial Plan as time goes

by to reflect these changes so that you stay on track with your long-term goals.

Start planning as soon as you can

Don't delay your Financial Planning. People, who save or invest small amounts of money

early, and often, tend to do better than those who wait until later in life. Similarly, by

developing good Financial Planning habits such as saving, budgeting, investing and

regularly reviewing your finances early in life, you will be better prepared to meet life

changes and handle emergencies.

Be realistic in your expectations

Financial Planning is a common sense disciplined approach to managing your finances to

reach life goals. It cannot change your situation overnight; it is a life long process.

42

Remember that events beyond your control such as inflation or changes in the stock

market or interest rates will affect your Financial Planning results.

Realize that you are in charge

If you're working with a Financial Planner, be sure you understand the Financial Planning

process and what the Planner should be doing. Provide the Planner with all of the relevant

information about financial status. Ask questions about the recommendations offered to

you and play an active role in decision-making.

Common Mistakes in Financial Planning Approach

The following are some of the common mistakes made by consumers in their approach towards

Financial Planning

Don't set measurable goals.

Make a financial decision without understanding its affect on other financial issues.

Confuse Financial Planning with investing.

Neglect to re-evaluate their Financial Plan periodically.

Think that Financial Planning is only for the wealthy.

Think that Financial Planning is for when they get older.

Think that Financial Planning is the same as retirement planning.

Wait until a money crisis to begin Financial Planning.

Expect unrealistic returns on investments.

Think that using a Financial Planner means losing control.

43

Believe that Financial Planning is primarily tax planning.

CHAPTER 2

RESEARCH OBJECTIVE

To study the awareness of Financial Planning among the people.

To study the importance of Insurance in today’s scenario.

Brand awareness of various private insurance companies.

Preference among different investment tools.

Purpose of buying insurance.

Preference in choosing channel for buying life insurance.

Quality of service provided by agents and clients satisfaction

level.

44

SCOPE OF THE STUDY

A big boom has been witnessed in Insurance Industry in recent times. A large number of new

players have entered the market and are vying to gain market share in this rapidly improving

market. The study deals with HDFC Standard Life in focus and the various segments that it

caters to. The study then goes on to evaluate and analyse the findings so as to present a clear

picture of trends in the Insurance sector.

RESEARCH METHODOLOGY

RESEARCH MEHODOLOGY

The study of awareness about Financial Planning among the people and particularly the

insurance sector covers data collection through observation, questionnaire and interview of

consumers.

STATEMENT OF THE PROBLEM

The statement of the problem is the public awareness of financial planning in the emerging

Indian market and it is the first step of research methodology.

Method of collection

45

Data collected for this research is secondary data.

SECONDARY DATA

The given data is collected by me from the various sources like internet, magazines, company

websites.

The secondary data can be obtained easily and it is not very expensive.

The secondary data further can be collected from reports, company literature and web search

portal etc.

Research Instrument:

Questionnaire

The questionnaire was formulated by keep in mind the following Points: -

Giving the respondents clear comprehension of the question.

Inducing the respondents to co-operate.

Giving instructions as to what is wanted.

Identifying the needs to be known.

Limitations:

The following were the limitations that were there during the course of the study:

46

1. Limited time period.

2. Less number of respondents.

3. Biasness of the respondents.

CHAPTER 3

DATA ANALYSIS AND FINDINGS

AGE DISTRIBUTION

47

Highest number of Respondents (41%) from Age group 31 to 45 yrs.35% respondents are of age below 30 yrs, small percentage of which is unemployed.

MARITAL STATUS

AGE DISTRIBUTION(yrs.)

35%

41%

24%Below 30

31 - 45

Above 45

48

MARITAL STATUS

19

4

16

37 24

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Below 30 31 - 45 Above 45

AGE(yrs)

SINGLE MARRIED

Total number of single respondents – 23

Total number of married respondents – 77

INCOME DISTRIBUTION

49

INCOME DISTRIBUTION(Annual in Rs.appx.)

16

13

5

1

7

12

12

10

0

6

12

6

<1.5 lacs

1.5 - 3 lacs

3 - 5 lacs

> 5 lacs

INC

OM

E

Below 30 31 - 45 Above 45

Highest, 16 respondents in income bracket below 1.5 lacs, which mainly comprises

of age group below 30 years.

Respondents of the age group 31-45 yrs, lie in all the income slabs.

Minimum, 6 respondents in income bracket of above 5 lacs, which are in age group

of above 45 years.

ARE YOU AWARE ABOUT FINANCIAL PLANNING ?

50

98%

2%

0

10

20

30

40

50

60

70

80

90

100

NO

OF

PE

OP

LE

DO YOU KNOW WHAT IS FINANCIAL PLANNING ?

YES

NO

98% of the respondents were aware about Financial Planning.

BRAND RECALL

51

BRAND RECALL

100

96

92

8286

72

64

75

71

6051

LIC

ICICI Prudential

HDFC Std Life

TATA AIG

BIRLA SUN LIFE

KOTAK MAHINDRA

SBI LIFE

AVIVA

MAX NEW YORK

METLIFE

INGVYSYA

100 % respondents mentioned first name to be LIC

Among private players, ICICI Prudential has the highest

Brand Recall i.e. 96%

HDFC Standard life has Brand Recall of 92%

INVESTMENT PREFERENCE

52

INVESTMENT PREFERENCE

11%18%

21%

9%

20%

21%

Banks & Postoffice

Share Market

Insurance

Bonds

Mutual Funds

Real Estate

21% respondents prefer banks and post office schemes as an investment tool

preference.

Respondents of age group below 30 years prefer Mutual Funds, as they provide higher

returns than banking investment tools.

Insurance ranks 2nd as an investment tool choice, which itself includes various

protection, saving and pension plans.

Govt. Bonds & securities are mostly preferred by people of higher age group rather

than young generation.

Property as an investment option is most lucrative choice. However it is important to

mention that majority of respondents are in age group of above 30 years and people

with high income bracket prefers to invest in Real Estate.

INSURED PERCENTAGE

53

ARE YOU INSURED?

87%

13%

YES

NO

87 % of respondents were insured on own life and on life of their family members.

So we had 13 % of potential customers to approach.

COMPANY PREFERENCE

54

COMPANY PREFERENCE(in %)

55% 30% 15%

0 20 40 60 80 100 120

1

ONLY LIC BOTH ONLY PVT. COs

55% of respondents have insurance cover provided by LIC only

15% of respondents have insurance cover provided by Private Cos. only

Whereas 30% have got insurance from both LIC and Private Companies.

Total number of LIC policies sums up to 85% and total number of Pvt. Companies

policies sold sums up to 45%.

Data provides that though LIC is still got a maximum market share but Private

Companies are making a fast move in the market.

TYPE OF PLAN BOUGHT

55

TYPE OF PLAN

26, 29%

20, 23%

24, 28%

17, 20% MONEY BACK

ENDOWMENT

PENSION PLAN

ULIPs

Money back Policies have been most popular and also the endowment plans.

As people today are more aware about financial planning, so people of the age 30 years

have planned for their Retirement now.

ULIPs are fast gaining popularity as they provide investment

benefit with Insurance.

PURPOSE OF BUYING INSURANCE

56

PURPOSE OF BUYING INSURANCE

52%

11%

23%

14%

0 10 20 30 40 50 60

Risk Cover

Investment

Tax Benefit

RetirementPlanning

Risk cover remains the most important purpose for buying insurance followed by

option as Tax saving tools.

Retirement Planning in a early period is also gaining the market share.

ULIPs are responsible for increasing popularity of insurance as an investment tool

DISTRIBUTION CHANNEL PREFERENCE

57

CHANNEL PREFERENCE

56 17 14 9 4

0 20 40 60 80 100 120

1

Known/Current Advisor Friends & Relatives

Group Insurance BanccassuranceTelesales/unknown Advisor

According to the data, known/current Advisors remains the 1st choice for buying

Insurance.

In retail also known Advisors are preferred over referrals.

Bancassurance is emerging as a popular option for buying life Insurance.

Group insurance is a channel which customers expect but it is not so popular because

only few employers have taken the initiative.

Buying insurance from a unknown person or getting a phone call is still not preferred

by most of the people

CHAPTER 4

58

SUGGESTIONS AND RECOMMENDATION

Positioning insurance as a means to fulfilling one’s duties during one’s lifetime.

Fears relating to thefts, ailments, death could be addressed through ‘sensitive’

communication

Fears relating to claims: Need to promote “trust”. Demonstrating claim testimonials,

positioning as “worry free”.

Low returns: Reposition insurance as a risk cover, security instrument rather than a financial

investment.

Lack of understanding: Training of Channels

To provide quality advice on products best suited

Lack of Knowledge: Ease of Process, simplifying the product and the procedure

Need to promote the quality of awareness

The benefits: Leverage on Risk Protection or Returns oriented or both

The product: catering to life stages

Need for Branding in Insurance: Branding is more relevant in the Insurance market which

not only faces the problem of securing and retaining customers in an increasingly

competitive marketplace but also experiences the need for heightened relevance of the brand

proposition in a world where brand has been termed the new religion.

In rural India, the LIC is especially synonymous with insurance. But in the

wake of competition insurance companies have to do a considerable brand

building exercise at least in urban India. Adequate time, investment and

longer-term management of the brand are essential, not only for success but also survival.

All brands need to be built around well-differentiated and

credible positioning that springs from the organization’s history. The brand

must not only be believed but lived by management and employees.

59

Focus on different segments to survive and thrive in a competitive environment. Each

company has to choose its own unique positioning based on its unique strengths. Below-

mentioned positioning alternatives can be worth considering.

VARIETY-BASED POSITIONING

This type of positioning is based on varieties in products and services rather than customer

segments. It is a sensible strategy for those companies who have distinctive advantages or

strengths in offering certain products and services. In the insurance industry too, it is possible

to achieve a unique position by focusing on certain category of products.

NEEDS-BASED POSITIONING

This is the most commonly understood positioning and is based on the differing needs of

different groups of consumers. This can be done successfully if a company has unique

strengths to service a group of customer needs better than others.

The insurance needs of customers vary significantly for different groups of customers. The

insurance needs of young family with small children will be quite different from that of a

family in which the income-earner is close

to retirement. However, in India most of the life insurance companies have a wide variety of

products tailored for different customer needs and there is no company focusing on a

particular customer need.

ACCESS-BASED POSITIONING

Positioning of customers can also be done by the way they are accessible. That is different

groups of customers may be accessible in different ways even though they may have similar

needs. Access is typically a function of customer geography or customer scale. There is

excellent opportunity in the insurance industry to employ access-based positioning by

targeting the rural insurance sector.

The rural market for life insurance is very different from the urban market in terms of needs,

income levels and distribution (seasonality, for example), penetration of media and so on.

60

Rural market can be a highly profitable position if one is able to carefully plan and tailor an

entire set of low-cost activities of advertising, distribution, and product design etc. to

successfully exploit the potential.

THE BARRIERS FACED DURING THE PROCESS:

The Attitudinal Barriers To Purchasing …..

• Death - a taboo topic for discussion

“It’s quite ashubh talking about death”

• The belief in karma … destiny

“Jo kismet me likha hai wohi hoga, hum kya kar sakte hai”

The Product/ Service Barriers ……

• Liquidity

“What if I need my money urgently for some medical illness?”

• Service quality of the Agent

“He disappears after he takes the first premium”

• Sanctity of the contract

“What if my dependents do not get the money once I die?”

Charges

“Its better to invest in Mutual Funds, the charges there are very less”

The Other Barriers….

Unsure about Pvt. Companies

Low rate of return

“Better to put my money in PPF, at least I get fixed returns”

Money gets tied up

High premiums

61

CHAPTER 5

CONCLUSION

The various conclusions drawn from the project are:

There has been a tremendous change in the insurance industry. And with it there has been

continuous growth in this sector both in Indian as well as world context.

The opening up of the insurance sector has changed the whole look of the industry. While the

LIC, in order to face the competition is coming up with new strategies. New private players are

leading the sector due to their strategic management and tailored made projects.

From the research, we also conclude that though the awareness and people opting for LIC plans

are more as compared to other private players’ but the latter are gaining momentum in the market

day by day.

The demand for insurance is likely to increase with rising per-capita income, rising literacy rates,

and growth of service sector. In-fact opening up of the insurance sector is an integral part of the

liberalization process being pursued by many developing countries.

Life insurance as a form of protection is the single-most important financial product any earning

member of a family must have. Having said this, a well-diversified portfolio is one of the first

rules of financial planning, and as such one should consider different instruments as the ability to

save increases.

Possible investment options range from bank deposits and government small saving schemes to

mutual funds, stocks and property.

Certainly ULIPs successfully combine the first and most important need of protection, with

savings, and hence are an excellent addition to your portfolio.

All financial products have a certain amount of risk and charges, be it a mutual fund, property, or

even a bank deposit. It would be unrealistic to assume that the features and benefits of a ULIP

come at no cost, though the charges are considerably lower than that of a traditional product.

62

In fact, the very reason the product is transparent is because the customer knows the charges and

risks.

There is no right or wrong in this. The success of marketing insurance depends on understanding

the social and cultural needs of the target population, and matching the market segment with the

suitable intermediary segment.

All intermediaries can’t sell all lines of business profitably in all markets. There should be clear

demarcation in the marketing strategies of the company from this perspective. Clients should

also receive price differentials for using different channels.

The intermediaries need to be empowered with the right learning, training and sales tools and

technology enablers. Coupled with the right product mix, this

will help the insurers to survive and flourish in this competitive market scenario.

So lets conduct this business with utmost economy with the spirit of trusteeship; thereby

making insurance widely popular.

63