sip - awareness of financial planning in emerging indian market on hdfc life
TRANSCRIPT
Summer Internship Project Report
On
“AWARENESS OF FINANCIAL PLANNING IN
EMERGING INDIAN MARKET ON HDFC LIFE"
Submitted in Partial Fulfillment of the Requirements for Award of
the Master’s Degree in Business Administration
SUBMITTED BY:
NAMEBATCH: 2011-2013
UNDER THE GUIDANCE OF:
MRS. SHILPA PURI
INTERNATIONAL MANAGEMENT CENTRE, NEW
DELHI
1
DECLARATION
I, Name have completed the project title “Awareness Of Financial Planning
In Emerging Indian Market on HDFC Life” in HDFC Life Insurance under
the guidance of Mrs Shilpa Puri (Faculty Guide) in the partial fulfillment of the
requirement for the award of Post Graduate Diploma in Management of
International Management Centre, New Delhi. This is an original piece of work
& I have neither copied and nor submitted it earlier elsewhere.
Signature
2
CERTIFICATE OF ORIGINALITY
This is to certify that the project titled “Awareness Of Financial Planning In
Emerging Indian Market on HDFC Life” is an academic work done by
Shweta Singh submitted in partial fulfillment for the award of the Diploma in
PGDM from “International Management Centre, New Delhi” under my
guidance and direction. To the best of my knowledge and belief the data &
information presented by her in the project has not been submitted earlier.
Shilpa Tandon
3
ACKNOWLEDGEMENT
On the successful completion of this project I would like to express my
gratitude to all the people who have helped me throughout the project.
At first, I owe my debt of thanks to HDFC Life, which gave me an opportunity
to do this project work.
I wish to extend my deep and sincere gratitude to Mr. Mukesh Srivastava
(SDM) and Mrs. Shweta Dhanuka (SDM) who provided me with their
guidance from day one and also helped me whole heartedly to achieve the
ultimate goal of the project.
I am also indebted to the Institute, International Management Centre, and its
staff members for providing me with this learning opportunity.
Name
4
TABLE OF CONTENTS
S.NO TOPIC PAGES NO
1. CHAPTER-1
INTRODUCTION
6
2. CHAPTER 2
RESEARCH METHODLOGY
39
3. CHAPTER-3
CONCEPTUAL DISCUSSION
42
4. CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
51
5. CHAPTER-5
CONCLUSION & SUGGESTIONS
63
6. APPENDICES 68
7. BIBLIOGRAPHY 73
5
CHAPTER 1
INTRODUCTION
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.
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.
6
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.
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 initiated in the financial sector. The
reforms were aimed at creating a more efficient and competitive financial
7
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 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.
8
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.
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 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
9
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.
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.
10
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?
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.
11
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 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.
INDIAN INSURANCE SECTOR
12
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.”
IMPACT OF LIBERALISATION
13
The introduction of private players in the industry has added to the colors in the
dull industry. The initiatives taken by the private players are very competitive
and have given immense competition to the on time monopoly of the market
LIC. Since the advent of the private players in the market the industry has seen
new and innovative steps taken by the players in this sector.
The new players have improved the service quality of the insurance. As a result
LIC down the years have seen the declining phase in its career. The market
share was distributed among the private players. Though LIC still holds the
79% of the insurance sector but the upcoming natures of these private players
are enough to give more competition to LIC in the near future. LIC market
share has decreased from 95% (2002-03) to 81 %( 2004-05).
LIC has the current market share of 79%.
Among the private players ICICI Prudential has the maximum of appx 5.60%
Followed by Bajaj Allianz (3.27 %) and HDFC Standard Life of about 3.11%.
Below is the table that shows the market share of various players of the
industry.
The following companies have the rest of the market share of the insurance
industry.
14
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
The liberalization of the Indian insurance sector has opened new doors to
private competition and the new and improved insurance sector today promises
several new job opportunities. With private players now in the field, there will
be innovative products, better packaging, improved customer service, and, most
importantly, greater employment opportunities.
There are a number of options to choose from for a career in Insurance. Ideally
an insurance company will have openings in the following fields:
Actuaries
Underwriter
Surveyor
Investment
Marketing & Distribution
15
Actuaries
Evaluates the risk for companies to be used for strategic management
decisions.
Actuaries use their analytical skills to predict the risk of writing
insurance policies through the use of mathematical, statistical and
economic models.
An actuary not only fixes the premium rates for new products, but also
revises both products and prices. They calculate costs to assume risk
Underwriters
Insurance underwriters review insurance applications and decide
whether they should be accepted or rejected based on the degree of
risks involved in insuring the people or objects of concern.
In the life insurance business, an underwriter is expected to filter the
"bad or substandard lives". Whereas, in the general insurance segment,
he takes care of risk management.
Agents/Brokers:
Insurance agents may work for one insurance company or as
independent agents selling for several companies.
Insurance agents and brokers can find openings in the health insurance
sector, financial planning services, retirement planning counseling or
even provide other services, for e.g. sell mutual funds, annuities etc.
Surveyor/Loss Assessor:
Surveyors are professionals who assess the loss or damage and serve as
a link between the insurer and the insured.
16
They usually function only in non life business.
Their job is to assess the actual loss and avoid false claims.
Sales/Marketing:
And who can forget the guys who make and break a brand. They would be
required in a large number in order to promote the number of products that
will be launched by numerous companies in the insurance sector.
17
CURRENT SCENARIO OF THE INDUSTRY
INSURANCE 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.
18
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
• Bancassurance
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.
19
BANCASSURANCE
Bancassurance 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,
Bancassurance, tries to exploit synergies between both the insurance companies
and banks.
Advantages to banks
Productivity of the employees increases.
By providing customers with both the services under one roof, they can
improve overall customer satisfaction resulting in higher customer retention
levels.
Increase in return on assets by building fee income through the sale of
insurance products.
Can leverage on face-to-face contacts and awareness about the financial
conditions of customers to sell insurance products.
Banks can cross sell insurance products e.g.: Term insurance products with
loans.
Advantages to insurers
Insurers can exploit the banks' wide network of branches for distribution
of products. The penetration of banks' branches into the rural areas can
be utilized to sell products in those areas.
Customer database like customers' financial standing, spending habits,
investment and purchase capability can be used to customize products
and sell accordingly.
Since banks have already established relationship with customers,
conversion ratio of leads to sales is likely to be high. Further service
aspect can also be tackled easily.
20
Advantages to consumers
Comprehensive financial advisory services under one roof. i.e.,
insurance services along with other financial services such as banking,
mutual funds, personal loans etc.
Enhanced convenience on the part of the insured
Easy accesses for claims, as banks are a regular go.
Innovative and better product ranges
21
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.
22
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.
23
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 when ever 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
24
the players will require an excellent sales team to sell their products in the now
competitive environment.
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.
SPECIAL PROVISIONS
The Income Tax Act and Life Insurance policies
Under Section 10(10D), any sum received under a Life Insurance policy
(not being a Key Man policy) is also exempt from taxation. But it is wise to
remember that Pensions received from Annuity plans are not exempted
from Income Tax.
Section 80C provides a deduction up to Rs.1,00,000/- to an individual
assessee for any amount paid as a premium.
POLICYHOLDERS GRIEVANCES
Policyholders may have complaints against insurers either in respect of their
policies or their claims. As per Regulations for Protection of policyholders’
interests, 2002, every insurer should have in place, a grievance redressal system
to address the complaints of policyholders. The IRDA has a Grievance
Redressal Cell which plays a facilitative role by taking up complaints against
insurers with the respective companies for speedy resolution. The IRDA
however does not adjudicate on complaints.
25
SWOT ANALYSIS OF INSURANCE INDUSTRY
STRENGTH
1. Best returns with the added advantage of 100% life insurance coverage.
2. Good option for new investors into the market as all the money is invested
by best fund managers so with less knowledge also they can earn good
returns.
3. Best commission charges paid to the agents which vary from 12% to 35%
which is much higher as compared to mutual funds i.e. , only 2-2.5%.
WEAKNESS
1. HDFC SLIC could not able to match LIC in remote areas services.
2. Misleading facts given by life advisors about the returns of ULIPs.
3. Hidden charges taken by the companies.
4. Less Promotional Campaigns.
OPPORTUNITY
1. 80 percent of Indian population is still under insured. So
there is a big opportunity for insurance companies.
2. As the stock market can be under the mark any time so it can bring loss to
the investors but as in ULIPs there is proper mixture of debt securities and
equity so the loss is incurred during dark trading days also.
3. Unit-linked products are exempted from tax and they provide life insurance.
4. Increasing consumer awareness about Insurance and its use.
THREAT
1. Cannibalism within the industry by providing misleading figures to the
investors.
26
2. Govt.’s instability has a long term repercussions affecting company’s
policies and its growth.
27
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..
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
28
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. 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.
29
SUBSIDIARY & ASSOCIATE COMPANIES
HDFC Bank
HDFC Mutual Fund
HDFC 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
30
HDFC LIFE INSURANCE
HDFC 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 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.
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
31
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.
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
32
Managing Director & CEO
Mr. D. M. Satwalekar
AUDIT COMMITTEE
Haribhakti & Company
Chartered Accountants
B.K. Khare & Co.
Chartered Accountants
Bankers
HDFC Bank Ltd.
Union Bank of India
Indian Bank
The Saraswat Co-operative Bank Ltd.
Federal Bank
33
KNOWLEDGE MANAGEMENT
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.
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:
34
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
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
35
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
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
36
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
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,
37
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
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
DISTRIBUTION OFFICES
In addition to the corporate office at Mumbai, your Company had 169 offices in
over 135 cities/towns in the country. It has a widespread network of Financial
38
Consultants, Corporate Agents and Brokers servicing customers in these cities
and towns.
FINANCIAL CONSULTANTS
The number of licensed Financial Consultants appointed by your Company
increased from over 23,000 in the previous year to over 33,000 in the current
year. During the year, the Company continued its
39
CHAPTER 2
RESEARCH METHODOLOGY
OBJECTIVES
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.
Customer’s perception of improvements brought in by entry of
Private Insurance Companies.
To generate leads for Unit Linked Insurance and the Unit Linked
Pension Plans, by interacting with walking and existing customers of the
company.
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.
Type of research:
EXPLORATORY :
Type of research carried out was EXPLORATORY in nature; the objective of
such research is to determine the approximate area where the drawback of the
40
company lies and also to identify the course of action to solve it. For this
purpose the information proved useful for giving right suggestion to the
company.
Data Collection:
Primary data
Secondary data
Data used for the research work was primary in nature.
Sample unit: -
The research process was done by interacting with number of customers during
the activities performed, which included, markets, cold calling, canopies, etc.
Sample Design consists of Random Sampling.
Sample size: - 100 people
Method of collection: -
Field procedure for gathering primary data included observation and interview
schedule in which the questionnaires were filed by the interviewer.
Personal interviews through self administered survey was done to collect the
data, market research was undertaken, that was accomplished by performing
various activities designed.
Research Instrument:
Questionnaire
The questionnaire was formulated by keep in mind the following Points: -
Giving the respondents clear comprehension of the question.
41
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:
1. Limited time period.
2. Less number of respondents.
3. Biasness of the respondents.
42
CHAPTER 3
CONCEPTUAL DISCUSSION
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.
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.
43
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
Cash Flow Planning
Tax Planning
Insurance Planning
Children’ Future Planning
Retirement Planning
INVESTMENT PLANNING: To make your wealth grow
44
Everyone needs to save for a rainy day. Once you have saved enough to take
care of emergencies, you should start thinking about investing and to make your
money grow.
Investment Planning Service includes:
Risk Profiling
Asset Allocation and Portfolio Construction
Creation and Accumulation of Wealth through Systematic Investment
Plans (SIP)
Regular review of progress and Portfolio Rebalancing
CASH FLOW PLANNING: To provide for assets and meet the periodic cash
requirements
In simple terms, cash flow refers to the inflow and outflow of money. It is a
record of your income and expenses.
Cash flow planning refers to the process of identifying the major expenditures
in future (both short-term and long-term) and making planned investments so
that the required amount is accumulated within the required time frame.
TAX PLANNING: To save on taxes and increase your income
Proper tax planning is a basic duty of every person which should be carried
out religiously.
According to the Income Tax Act, 1961, One will be eligible for Tax Benefits
under Section 80C and Section 10(10D) of the act.
One has to compare the advantages of several tax saving schemes and
depending upon your age, social liabilities, tax slabs and personal preferences,
decide upon a right mix of investments, which shall reduce your tax liability to
zero or the minimum possible.
INSURANCE PLANNING: To protect yourself, your family and your Assets.
45
"Insurance is not for the person who passes away, it for those who
survive," goes a popular saying that explains the importance of Insurance
Planning.
It is extremely important that every person, especially the breadwinner, covers
the risks to his life, so that his family's quality of life does not undergo any
drastic change in case of an unfortunate eventuality. Insurance Planning is
concerned with ensuring adequate coverage against insurable risks.
CHILDREN'S FUTURE PLANNING: To give your children a financially
secure future
Like every parent, you too must be overjoyed to watch your child grow. All
parents want to give the best possible upbringing to their children. This includes
good education and security, in case of any eventuality. Soon, your little bundle
of joy will grow up, and it will be time to provide for his or her higher
education and wedding.
The purpose of Children's Future Planning is to create a corpus for foreseeable
expenditures such as those on higher education and wedding, and to provide for
an adequate security cover during their growing years.
RETIREMENT PLANNING: Because retirement is a time to relax, not to get
worried
Some like it. Some don’t. But retirement is a reality for every working person.
Most young people today think of retirement as a distant reality.
However, it is important to plan for your post-retirement life if you wish to
retain your financial independence and maintain a comfortable standard of
living even when you are no longer earning. This is extremely important,
because, unlike developed nations, India does not have a social security net.
46
CONSUMPTION PATTERN
*Source-Business world magazine 2nd week April 2006
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.
47
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
FIRST CONVERSATION
APPOINTMENT
FILLING THE PROPOSAL FORM
COLLECT THE REQUIRED DOCUMENTS AND THE FIRST PREMIUM
Follow Up
Follow Up
OBJECTIVE: To generate leads for various Unit Linked Plans offered by the
company, by interacting with walking and existing customers and to know the
awareness level of Financial Planning among them.
SALES PROCEDURE :
48
STEP 1: FIRST CONVERSATION WITH A KNOWN OR 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 : (Cannaught 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.
49
STEP 2: APPOINTMENT
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
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 Fund
5) Other information like:
a) Tax Benefit
b) Various Charges
50
c) Switching option
d) Surrendering
e) Terms & Conditions etc.
STEP 3: FILLING THE PROPOSAL FORM
After the second step, the interested customers are required to fill the proposal
form which requires the following information:
b) Personal details of the policy holder,
c) Personal details of Beneficiary or Nominee
d) The Premium amount selected
e) The Term of the policy
f) 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.
51
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
AGE DISTRIBUTION
AGE DISTRIBUTION(yrs.)
35%
41%
24%Below 30
31 - 45
Above 45
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.
52
MARITAL STATUS
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
53
INCOME DISTRIBUTION
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.
54
ARE YOU AWARE ABOUT FINANCIAL PLANNING ?
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.
55
BRAND RECALL
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%
56
INVESTMENT PREFERENCE
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.
57
INSURED PERCENTAGE
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.
58
COMPANY PREFERENCE
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.
59
TYPE OF PLAN BOUGHT
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.
60
PURPOSE OF BUYING INSURANCE
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
61
DISTRIBUTION CHANNEL PREFERENCE
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
62
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
63
CHAPTER 5
CONCLUSION & SUGGESTIONS
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 persued 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.
64
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.
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.
65
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.
66
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.
67
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. 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.
68
APPENDICES
QUESTIONNAIRE
“Awareness of Financial Planning and Consumer’s Perception about
Insurance Industry”
Name:________________________
Age:______
Gender: M F F
Marital Status: Married Single
Occupation : ___________________
Contact No : __________________
Annual Income (appx. in Rs.)
Upto 1.50 lacs 1.50 lacs-3 lacs
3 lacs-5 lacs Above 5 lacs
Q1) Are you aware about ‘what is financial planning’?
YES NO
Q2) Mention the names of Life insurance companies you have heard of:
1) ________________ 4) ________________
2) ________________ 5) ________________
69
3) ________________ 6) ________________
Q3) How much do you save approximately of your annual income?
Q4) Where do you invest/would like to invest your savings?
(Rank in order of preference, 1 being most preferable)
Banks Share Market
Insurance Bonds & Securities
Mutual Funds Real Estate/Property
Q5) Have you taken any life insurance policy on your own life or on life of any
of your family member?
YES NO
(If no, switch to Q 9 )
Q6) Which company(s) policy(s) you have?
LIC ICICI PRUDENTIAL
70
BIRLA SUNLIFE ING VYSYA
BAJAJ ALLIANZ SBI LIFE
HDFC STD. LIFE TATA AIG
MAX NEW YORK LIFE AVIVA
RELIANCE KOTAK MAHINDRA
MET LIFE OTHER ____________ (specify)
Q7) Which type of plan did you buy?
Money Back Plan
Endowment Plan
Pension Plan
ULIP
Q8) What was your purpose/will be your likely purpose of taking insurance?
RANK THEM (1 being most ideal)
a) PROTECTION
OF FAMILY
b) TAX BENEFIT
c) INVESTMENT
71
d) RETIREMENT
PLANNING
Q9) Have you ever been approached for Life insurance by any of the following
(please √ ), also Rank according to your preference from whom you are
most
likely to buy insurance?
(√ here)
(Rank)
1) Known/Current Advisor
2) Advisors referred by friends/family
3) Telesales and subsequent visit by unknown Advisor
4) Schemes offered by your bank (Bancassurance)
5) Group Insurance Policies offered by your employer
Q10) Do you feel opening up of the sector has created more insurance
awareness
among the public?
YES NO
Q11) How many dependents do you have?
<2 2-4 4-6 >6
72
Q12) Do you really think insurance cover in todays scenario is not
essential?
_____________________________________________________
_____________________________________________________
THANK YOU FOR YOUR CONTRIBUTION
73
BIBLIOGRAPHY
Websites
www.rbi.org.in
www.irdaindia.org
www.banknetindia.com
www.hdfcinsurance.com
www.businessworldonline.com
www.google.com (search engine)
Other References:
Brochures of various plans
74