A STUDY OF INSURANCE AS A TOOL OF INVESTMENT.doc

7/30/2019 A STUDY OF INSURANCE AS A TOOL OF INVESTMENT.doc

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Project Report

On

A Study of Insurance as a Tool ofInvestment

Submitted in partial fulfillment for the degree of

Master of Business Administrationin

Finance

Submitted to: Submitted By:

Mrs. Shallu Gupta Vikram SinghHOD (Management) MBA 4th Sem.

Roll No-62458169

Co-ordinator

Mr. Manjeet Singh Chhabra

Deptt. Of MBA

Gujranwala Guru Nanak Institute of VocationalStudies, Civil Lines, Ludhiana


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Affiliated to PTU, Jalandhar

ACKNOWLEDGEMENT

I am privileged to have successfully undergone my training with the highly

acclaimed organization The ICICI PRUDENTIAL .

I would like to thank our Company Guide ,Mr. Paramdeep Singh for extending his

immense help while completing our project successfully and to our Faculty

Guide, Mr. Ramanjeet Singh who was always their to guide us.

I would like to take this opportunity to extend our heartfelt gratitude to Miss Vidhi

Jain (Distribution and channel Manager), ICICI PRUDENTIAL , for his immense

support and guidance throughout the project. He guided us and gave valuable

inputs and advises at every stage of our project.

I am also thankful to Mr. Anirudh Sharma, Area Manager, ICICI PRUDENTIAL

for providing us the deep insight into the of the Project, under whose guidance I

was able to take initial steps in the corporate world and also have the feel of the

market, giving us the opportunity to apply our theoretical knowledge into the

practical application we gained throughout of our one year studies we have done

in our Post Graduation Program in Management.

Pretty Bhalla


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PREFACE

MBA is a stepping-stone to the management carrier and to develop good

manager it is necessary that the theoretical must be supplemented with exposure

to the real environment.

Theoretical knowledge just provides the base and its not sufficient to

produce a good manager thats why practical knowledge is needed.

Therefore the research product is an essential requirement for the

student of MBA. This research project not only helps the student to utilize his

skills properly learn field realities but also provides a chance to the organization

to find out talent among the budding managers in the very beginning.

In accordance with the requirement of MBA course I have a project on the topic

INSURANCE AS A TOOL OF INVESTMENT. The main objective of the

research project was to know the investors behavior. This research project is

conducted in the area of Ludhiana.

For conducting the research project sample size of 100 investors

was selected. The information regarding the project research was collected

through the questionnaire filled by the investors & personal interview.

Now, I take this opportunity to present my project report and

sincerely hope that it would be useful for readers.


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Vikram Singh

------------------------


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CERTIF ICATE OF COMPLETION

This is certifying that Miss. Pretty Bhalla MBA (3) has successfully completed

his project titledA study on Insurance as a Tool of Investment in Chandigarh

under the guidance of respected Mr. Ramanjeet Singh. This project is in partial

fulfillment of his MBA curriculum (2005-07)

Dated: Mr. Ramanjeet Singh

(Project Guide)


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DECLARATION

I the undersigned hereby declare that the summer training report, which is

entitled A study on insurance as a tool of investment in Chandigarh, is

completed and submitted by me is my original work. The findings in the report

are based on the data collected by me while preparing this report. I have not

copied the data from any previous report. However, my project guide respected

Mr. Ramanjeet Singh helped me at various points while preparing this report.

DATE PRETTY BHALLA


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Chapter

Number

Content

1INTRODUCTION

1.1Introduction to Insurance

1.2 Classification of Insurance1.3 History of Life Insurance1.4

Insurance in India1.5 Insurance companies in India1.6 Legislative and Regulatory Matters1.7 Report Card of Life Insurance Companies

2 COMPANYS PROFILE

2.1 About TATA

2.2 TATA-AIG Life Insurance company

2.3 Products2.4

About the Promoters

2.5 About the Products

2.6 Vision

2.7 Achievements

2.8 Strategies2.10

Limitations

3RESEARCH METHODOLOGY

3.1 Process

3.2 Data collection

4Analysis

4.1SWOT Analysis

4.2 Challenges before Industry

5 RECOMMENDATIONS6

FINDINGS

7

CONCLUSION

8APPENDIX


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8.1Questionnaire

8.2 Forms


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EXECUTIVE SUMMARY

The Life Insurance market in India is an underdeveloped market that was

only tapped by the state owned LIC till the entry of the private insurers. The

penetration of the insurance products was 19 percent of the total 400 millions of

the total 400 millions of the insurable population. The state owned LIC sold

insurance s a tax instrument, not as a product giving protection. Most customers

were under insured with no flexibility or transparency in the products. With the

entry of the private insurers the rules of the game have changed.

I have completed my summer training in TATA-AIG . It is number one

private life insurance company in India. It is a joint venture between Tata Group

and American International Group. Tata-AIG was amongst the first to identify the

emerging opportunity in the pension segment and launched two pension

products. Tata-AIG the dominant life and pension player built on trust by the

world class people and services. Innovative products, smart marketing and

aggressive distribution. Thats the triple combination that has enabled fledgling

private insurance companies to sign up Indian customers faster than any one

ever expected. Indians, who have seen life insurance as a tax saving device, are

now suddenly turning to private sector and snapping up new innovative products

on offer.


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The growing popularity of the private insurers shows in the other ways.

They are coming money in new niches that they have introduced. The state

owned companies still dominate segments like endowment plans and money

back policies. But in the annuity or pension product business, the private insurers

have already wrested over 33 percent of the market. And in popular unit linked

insurance schemes they have virtual monopoly, with over 90 percent of the

customers.

The objective of this project was to assist TATA-AIG Life Insurance in

expanding their channel by recruiting financial Agents For the company. For the

company to successfully continue its operations, it needs to undergo change to

get some new customers and to get some new ideas. Moreover insurance is

such a growing sector that it has full potential to have new customers. So it very

essential to have new people in the system which can add new customers to the

company.


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Literature Review

The Katie School of Insurance and Financial Services provides the following

literature review (of refereed papers and magazines or newspapers articles)

pertaining to consolidation efforts between the financial and the insurance

markets.

Financial Convergence Issues- Article Summaries

Despite the adoption of the Gramm-Leach-Bliley Act (also called Financial

Services Modernization Act) in November 1999, there have been few strategic

attempts in consolidating financial and insurance businesses and some of them

(i.e. the Citigroup/Travelers or the General Electric/ Employers Re. mergers)

have failed. This, despite the fact that some of the research papers cited in the

attached literature review do identify diversifications gains from potential

consolidation of banking and insurance firms.

However, the inability of banks and insurance companies to merge effectively

has not stopped the convergence process from a product offering standpoint.


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The Insurance Information Institute routinely publishes a chart of financial and

insurance products available through major financial services companies from all

sectors (financials, securities, P/C insurance and life insurance). The chart

demonstrates that all major financial services companies offer a diversified range

of financial and insurance services. This suggests that, although some issues like

consumer privacy provisions, data consolidations and other technological

differences between both industries need to be ironed out, the convergence

process is on its way.

Literature Review of Recent Articles on the Convergence of Insurance and

Financial Markets and Services

Refereed Papers

Carrow Kenneth A. and Heron R. Capital market reactions to the passage

of the Financial Services Modernization Act of 1999. The authors investigate

how the passage of the Financial Services Modernization Act of 1999 (FMA)

affected stock prices of banks, thrifts, finance companies and insurance

companies. The study looks at stock excess returns across sectors and company

size. The idea is that the passage of the FMA opens doors for potential mergers

and consolidations across banking, financial and insurance sectors, translating

into abnormal positive returns for businesses that are the likely candidate for

mergers and consolidation. The results of the study suggest that the largest

returns to the FMA passage were realized by large investment banks and

insurance companies. The stock prices of banks, both small and large, seemed


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to be unaffected by the new legislation while thrifts, finance companies and

foreign banks lost value.

Carrow Kenneth A. Citicorp-Travelers Group merger: Challenging barriers

between banking and insuranceThis paper is conceptually similar to the one

cited above, in that the author investigate whether the announcement of a

merger between Citicorp and Travelers abnormally impacted stock prices of

financial and insurance companies. Analysis of abnormal returns surrounding the

merger show that life insurance companies and large banks experienced

significant stock price increases, while the returns of stocks of smaller banks,

health insurers and property/casualty insurers remain relatively unchanged.

Estrella, Arturo. Mixing and matching: Prospective financial sector

mergers and market valuation,

This paper analyses which types of mergers are likely to be most productive for

banks and other financial firms in the U.S. The author acknowledges that the

extent to which different business activities are fundamentally distinct induces a

tradeoff between diversification gains and loss of efficiency. The research

considers life insurance, property/casualty insurance, securities and commercial

firms as potential matches for firms and concludes that potential diversification

gains arise from almost all combinations involving banking and insurance. The

paper stands out because it shows, unlike other earlier research, that property

and casualty insurance companies offer larger diversification gains to banks than

life insurance companies.


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Johnston, Jarrod and Madura J. valuing the potential transformation of

banks into financial service conglomerates: Evidence from the Citigroup

merger

The authors first summarize previous literature that examined motives for

combining bank and other financial services. Diversification benefits and product

complementarities (i.e. mortgage and mortgage insurance, auto financing and

auto insurance) seem to be the prime motives. However, some earlier research

also suggests that there are few linkages between bank services ands

underwriting services in terms of customers, outlets or other characteristics that

generate efficiencies. Given the sources of potential gains, it appears that life

insurance companies with their limited underwriting risk and wide variety of other

products offered to individual customers would be more attractive targets for

banks than other types of insurance companies.

Industry Publications

Armstrong, Ed and Buse, Youve got the green light, whats it worth?

ABA Banking Journal,

The article projects that banks would add 5-10% to their after tax profits if they

aggressively pursue their insurance opportunity. The author develops a pro

forma statement for banks selling 12 different insurance items.

Boros, Joan E. (2002). Are Convergence Products Happening?


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The author states that convergence depends on its definition. She offers very

useful definitions for convergence:

Merger of banks and insurers, heretofore independent, into a financial

supermarket with endless cross-selling potential.

A combination of insurance and capital markets products moving into a union

and uniformity, or separate markets performing the same functions. This could

also be labeled as securitization of insurance risk and or insurancization of

financial risk.

Crystal, Mary (1997). That was then, this is tomorrow.

This panel discussion on bank marketing suggests more direct interaction with

customers by direct mail or personal contact. Doing it pro-actively and by

alternative methods: call centers, PC-banking, internet banking and supermarket

banking. Using branding and other retail marketing skills. Bankers have tried to

cut down on personal contact and may have alienated their customers.

Gjertsen, Lee Ann (2002). Insurance Agents Thrift Seeks OK to Widen

Reach..

Insurance agents of New Jersey, Connecticut and Massachusetts founded an

association as Independent Insurance Agents and Brokers and have applied for

a charter for an association savings bank. The bank products are to be sold by


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the independent insurance agents that own their own agencies. The bank is to be

named InsurBanc.

Gorski, Lorraine (2002a). The New Producers. The article describes how

insurers can use the banks customer base to reach new customers. Banks have

the trust of their customers and that would be a good distribution channel for life

insurance, especially in the midlevel or mass market. Banks could represent 3-4

different insurers therefore the insurance products need to be competitive (for the

customer and the representative) and specific for bank employee selling.

Furthermore, stable relationships are necessary and the product needs to be

branded and well advertised.

Gorski, Lorraine (2002b). Banking on Policy HoldersInsurers have founded

banks to offer banking products. 135 applications were made between Jan.1,

1997 and May 31, 2001. Insurance banks have an uphill battle to convince their

customers to establish a bank account because it is hard to determine when and

why an insurance customer needs a bank account. On the other hand, it is easier

for a bank that provides a loan to sense when insurance is necessary. Since

most people already have a bank account, customer as well as agents have to

be motivated to deal with another financial institution or to switch. In addition

these new institutions often have no brick and mortar establishment but rather

rely on Internet applications and Internet interactions.

Establishing banks enable insurers to get into the trust business and offer a

sophisticated retirement package and to be able to cross-sell insurance products


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to their customers and to earn fee income. Although this can be done through

partnerships some insurers want to do it alone and thus to avoid finding later on

unpleasant surprises. They count on their name recognitions and the availability

of their agents (State Farm, Allstate).

Increasing brand awareness, direct mailing, providing up-to-date interest rates

should help to lure customers. - Most insurance firms have hired experienced

bankers to create and manage these banks.

Hogan, John D (2001). Financial Services Reform: The Gramm-Leach-

Bliley Act and its implications for insurance, In this paper, the author

contends that the impact of the GLB Act on the insurance industry is unclear. It

had been widely assumed that the banking industry would quickly expand into

non-banking activities, as synergies could be expected from the large bank

customer information base and frequent contacts with customers. However, this

quick response has not taken place, partly because of perception of risk in the

insurance business.

The author also cites a research study by The Federal Reserve Bank of Atlanta

that suggests that bank holding companies will add insurance products to their

lines of business for sound reasons such as: 1) small increment costs involved,

2) the presence of existing customer relationships, 3) revenue diversification, 4)

absence of interest rate risk in insurance compared with loans and 5) banks

web-based marketing capability.


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McDaniel, David (1995): Agents worst nightmare: Banks are gaining the

edge to sell insurance in a big way The article explains that insurance agents

are afraid of banks cutting into their business as they have in Europe where

banks are far more efficient than agents. The article lays out how to make the

proposed legislation ineffective, by warning of unsubstantiated tie-ins and bank

coercion, proposing 10-day waiting periods, state legislation, and tough fire walls.

Milligan, John (1996). Banking like it used to be. First Long Island Bank

prospers because it serves a small niche of small privately owned companies

and upscale consumers that it coddles by being available both in person/ phone

and online.

Pasini, Roy (1997). Alliances Lawson cites three issues critical to future.

The author states that the insurance industry can defend itself against the

invasion by banks through better customer service and greater use of

technological efficiencies.

Weber, Irene (2002). No Sale.

Weber reports that, since the GLB Act of 1999, a few banks have acquired

insurance firms and then Citigroup split up again.

She provides the following reasons for non-convergence:

a. Regulation: financial and bank holding companies are federally regulated,

insurance firms are state regulated. GLB requires US jurisdiction to adopt


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uniform or reciprocal agent and broker licensing laws by November 2002.

Reciprocity has apparently been approved by most states. But new insurance

products need to have state approval before they are allowed to be marketed,

which is a slow process. Will there be federal chartering of insurance firms in the

future?

b. Technology: banks are able to offer interactive online services, while insurance

products apparently dont lend themselves to it. Also otherwise insurance are

slower to adopt new technology.

c. Financial reasons: Return on equity for insurers was for 2000 only 7.42% while

banks made 12.2%. Probably Citigroup spun off Travelers because it did not

make double digit growth, a norm for Citibank.

.

Newspaper Articles

Aquino, Norman P. and Junia C: Thrift Firms Join Foreign Firms Lobby

for Cross-Selling Venture.

This article describes a recent example of convergence in the Philippines. The

US embassy is lobbying for New York Life to sell its insurance through

Philippines banks. European insurance firms are also interested in it. Philippines

thrifts are accusing the Central bank of not including them. The Philippe Central


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bank is interested that banks show that the insurance products are not

guaranteed by the PDIC.

Bowman, Lisa. Bancassurance in the U.K. is not taking off as expected. Firms

are not making use of the data available and the products are not streamlined for

bank sales. Consumers apparently prefer professional advice from insurance

agents, while banks have a bad reputation for poor service. The author

recommends that banks should take on more rich clients. Instead they stay with

second tier customers, thus should employ second tier agents which would

provide off the shelve advice but that has not been created. This approach would

also be more cost efficient.

. Gibson Henry,

This journalist highly supported the Dresdner Allianz merger. The new

institution is called Allianz Group. The logic behind this giant merger is that the

German government is in favor of German citizens to pursue private and

company pensions which it will support with tax incentives and coercion. The

pension industry is supposed to grow by 15% annually. The article suggests that

that the familiarity and easy branch access of Dresdner would better service this

population.

Lipin, Steven and Frank, S. (1998). One stop shopping is the reason for

deal. The big umbrella: Travelers/Citigroup merger. The authors wonder

whether the merger will bring about the promised synergies, and whether


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consumers really want all their services from one provider. Can they cross-sell

their brands?

Walker, Marcus (2002). Germanys Commerzbank Is Still in No Mans

Land.

This article on the state of the Commerzbank mentions that tightly focused banks

with strong market shares, such as U.K. retail banks, have made money.

Diversified universal banks with no dominant market share such as

Commerzbank or Frankfurt rival Dresdner Bank AG have slipped to losses in

some quarters, raising doubts about their long term viability


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CHAPTER -1

INDUSTRY PROFILE

1.1 INTRODUCTION TO INSURANCE

Insurance may be defined as asocial device to reduce or eliminate the risk of loss

pf life and property. Under the plan of insurance a large number of people

associate themselves by sharing risk attached to individuals, the risk, which can

be insured against, including fire, perils of sea, death, accidents and burglary.

Any risk contingent upon this may be insured against a premium commensurate

with the risk involved. Thus we can say, collective bearing of risk is

insurance.

Insurance is a plan by themselves which number of people associate and

transfer to the shoulders of all, risk that attach to individuals .

..JOHN MAGEE

Insurance is a contract in which a sum of money is paid to be assured as

consideration of in surer incurring the risk of paying a large sum on a given

contingency.

.JUSTICE TINDALL


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Insurance is a protection against financial loss arising on the happening of an

unexpected event. Insurance companies collect premiums to provide for this

protection. A loss is paid out of the premiums collected from the insuring public

and the Insurance Companies act as trustees to the amount collected.

"Insurance is a contract between two parties whereby one party called insurer

undertakes in exchange for a fixed sum called premiums, to pay the other party

called insured a fixed amount of money on the happening of a certain event."

For Example, in a Life Policy, by paying a premium to the Insurer, the family of

the insured person receives a fixed compensation on the death of the insured.

Similarly, in car insurance, in the event of the car meeting with an accident, the

insured receives the compensation to the extent of damage.

Insurance is desired to safeguard oneself and one's family against possible

losses on account of risks and perils. It provides financial compensation for the

losses suffered due to the happening of any unforeseen events. By taking life

insurance a person can have peace of mind and need not worry about the

financial consequences in case of any untimely death.

Certain Insurance contracts are also made compulsory by legislation. For

example, Motor Vehicles Act 1988 stipulates that a person driving a vehicle in a

public place should hold a valid insurance policy covering Act" risks. Another

example of compulsory insurance pertains to the Environmental Protection Act,


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wherein a person using or carrying hazardous substances (as defined in the Act)

must hold a valid public liability (Act) policy. In India, prior to liberalization

Insurance protection was made available through Public sector Insurance

Companies, namely, Life Insurance Corporation of India (LIC) and the four

subsidiaries of General Insurance Corporation of India (GIC).By the passing of

the IRDA Bill, the Insurance sector has been opened up for private companies to

carry on Insurance business.

One alternative to Insurance is to provide self-Insurance i.e. the individual has to

create a fund to meet risk exigencies. Specified trusts have also tried to provide

insurance by a scheme of self-insurance. However, these are not very popular.

The postal department provides Insurance coverage to all working people. There

are many financial instruments which advocate savings and provide future

returns at specific intervals such as the provident fund and pension plans.

However, none of these provide for life coverage.

1.1a WHAT INSURANCE IS ?

Insurance is the method of spreading and transfer of risks.

Losses of unfortunate few are shared by and spread over to many

exposed to the same risk.

Assets created by the owner in expectation of future needs or benefits

have a value.


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Loss of assets for any reasons deprives the owner of the expected benefit.

Insurance in this context is a mechanism that helps to reduce the adverse

consequences due to loss of assets.

1.1bPURPOSE AND NEED FOR INSURANCE

Assets are likely to be destroyed or made non-functional due to perils like

fire, floods, breakdowns, lightning and earthquake.

Damage to assets caused by any peril is the risk that assets are exposed

to.

Insurance becomes relevant only if there are uncertainties of occurrence

of event leading to loss.

We can say that human life is an income generating assets which can be

lost on early death or disabilities caused by accidents.

Insurance does not protect the assets but only compensates the economic

or financial loss.

1.1cROLE OF INSURANCE IN ECONOMIC DEVELOPMENT

Investments are necessary for economic development.

Life insurance plays a major role in mobilization of public savings.


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Savings out of life insurance funds are utilized in investments for growth.

Looking to general insurance business, industry, trade would be seriously

handicapped in the absence of insurance cover relating to fire and

engineering risks.

1.2 CLASSIFICATION OF INSURANCE

Life is full of uncertainty. Trials and tribulations abound in each and every aspect

of life. No one can truly predict or even estimate what the future has in store for

him. Life offers no guarantees by itself, except the incidences of death and

taxation.

This lack of security present throughout life can be overcome partially through

insurance. Insurance can never replace or repair a loss. But the monetary value

offered by insurance helps in adjusting to the new circumstances.

Despite offering innumerable options and immense scope, insurance can be

classified into four main categories.

Insurance of Person

Insurance of Property

Insurance of Interest
http://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofPerson%23InsuranceofPersonhttp://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofProperty%23InsuranceofPropertyhttp://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofInterest%23InsuranceofInteresthttp://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofPerson%23InsuranceofPersonhttp://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofProperty%23InsuranceofPropertyhttp://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofInterest%23InsuranceofInterest


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Insurance of Liability

Insurance of Person

Under the purview of this class of insurance, the risks associated with human life

in general can be covered up to the limit specified. A person can insure his or her

life and his health against any unplanned contingencies.

In event of his death, his dependants will be reimbursed to the full amount that he

was insured for. Or if the insured person meets with an accident or suffers from

an illness that cripples him forever, he will be compensated with the complete

sum assured anyway since he may not be able to lead a normal life again.

In case, the accident is not that severe, he should be able to recover after

medical treatment and rehabilitation. If he has opted for medical cover, then his

medical expenses, treatment and medication will be paid for by his insurance

policy.

Insurance of Property

Everyone possesses material value in the form of tangible assets. Assets can be

in the form of a landed estate or a vehicle, share holdings or plain old paper

money.

Since tangible property has a physical shape and consistency, it is subject to

many risks ranging from fire, allied perils to theft and robbery. An individual's

lifetime of hard work can be wiped out in a blink of an eye.
http://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofLiability%23InsuranceofLiabilityhttp://www.insuremagic.com/Content/InsuranceBasics/General/classification.asp#InsuranceofLiability%23InsuranceofLiability


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But if a person judiciously invests in insurance for his property prior to any

unexpected contingency then he will be suitably compensated for his loss as

soon as the extent of damage is ascertained.

Insurance of Interest

Every individual has to discharge certain specific duties. Everyone is expected to

maintain a standard of conduct. But then, it is an intrinsic part of human nature to

err. No one is infallible and no one will ever be.

Owing to an occasional error or omission committed by us, our clients or

customers might suffer a loss. In turn we might have to pay those damages or

compensation out of our own personal resources.

However, if our chosen profession qualifies for insurance of interest, then our

insurance policy will more than suffice in arranging for the funds and court

formalities that might ensue in the aftermath of legal libel.

Insurance of Liability

Every person has to regulate his actions and behaviour so as not to cause injury

or damage to other people and their property. Everyone is personally responsible

and liable for his actions.

If due to lack of control over his actions or prejudiced behaviour, a person incurs

any liability then he has to provide compensation out of his personal resources.


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Liabilities: legal, civil or criminal can have severe repercussions on social

standing and prestige besides the financial status.

By investing in liability insurance, an individual can ward off any liabilities he

might incur due to his actions and behaviors. Besides, the premiums payable on

liability insurance are fairly minimal when compared to the damages that have to

be compensated in the long run.

----------


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1.3 HISTORY OF LIFE INSURANCE

The earliest type of life insurance was started by the Greeks and Romans. All

surviving members for the burial cost if the member made contributions. in case

of the death of a member the cost of the burial was made out of the contributed

fund.

In the 17th century, the Tontine Annuity system was introduced where

Associations of the individuals were formed without any reference to age,

and a fund was created by equal contributions from each member. The sum

collected was invested, and at the end of each year the Interest was

divided among the survivors,. The last remaining

Survivor received both the years interest and the entire sum

of the principal. The first organized Life Insurance Company

was founded in 1759 in Philadelphia, in north America. Subsequently, over the

past three centuries, numerous life insurance companies sprung up, making life

insurance a popular tool for protection coupled with investment.

The origin of insurance is very old. The time when when we were not born; man

sought some sort of protection from the unpredictable calamities of the nature.

The basic urge in man to secure himself against any form of risk and uncertainty

led to the origin of insurance.

The insurance came up in India from UK; with the establishment of the Oriental

Life Insurance Corporation in 1818. The Indian Life Insurance act 1912 was the

first statutory body that started to regulate the life insurance business in India.


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1.4 INSURANCE IN INDIA

The insurance sector in India has come a full circle from being an open

competitive market to nationalization and back to a liberalized market again.

Tracing the developments in the Indian insurance sector reveals the 360 degree

turn witnessed over a period of almost two centuries.

A brief history of the Insurance sector

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

year

1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are:

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

regulate the life insurance business.

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

collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with

the objective of protecting the interests of the insuring public.

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

central government and nationalized. LIC formed by an Act of Parliament, viz.

LIC Act,

1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to

theTriton Insurance Company Ltd., the first general insurance company

established in the year 1850 in Calcutta by the British.


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Some of the 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.

1968: The Insurance Act amended to regulate investments and set minimum

solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised

the general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the National

Insurance Company Ltd., the New India Assurance Company Ltd., the

Oriental Insurance Company Ltd. and the United India Insurance Company

Ltd. GIC incorporated as a company.


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1.5 INSURANCE COMPANIES IN INDIA

IRDA has so far granted registration to 12 private life insurance companies and 9

general insurance companies are also included, there are currently 13

insurances companies in life side and 13 companies in general insurance

business. General Insurance Corporation has been approved as the Indian

reinsures for underwriting only reinsurance business. Particulars of the

insurance companies are belows:

LIFE INSURANCE

Public Sector

Life Insurance Corporation of India

Private Sector

Allianz Bajaj Life Insurance Company Limited

Birla Sun-Life Insurance Co. ltd

HDFC Standard Life Insurance Co. Ltd

ICICI PRUDENTIAL Life Insurance Co. Ltd

ING Vysya Life Insurance Co. Ltd

Max New York Life Insurance Co. Ltd

MetLife Insurance Company Limited

Om Kotak Mahindra Life Insurance Co. ltd

SBI Life Insurance Company Ltd

TATA AIG Life Insurance Co. Ltd

AMP Sanmar Assurance Co. Ltd

Dabur CGU Life Insurance Co. Pvt. Ltd


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1.5a Market Share Of Different Insurance Companies

The private insurer, ICICI PRUDENTIAL is far ahead of others with a market share of

75%

Table : Showing Market Share of Various firms

COMPANIES MARKET SHARE

LIC 75%

ICICI PRUDENTIAL 7.24%

Bajaj Allianz 4.18%

HDFC Standard Life 3.20%

Max New York Life 1.33%

SBI Life 1.69%

Aviva 1.14%

Tata AIG 1.93%

Birla Sun life 1.84%


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MARKET SHARE LIC

ICICI Prudential

Bajaj Allianz

HDFC Standaed

Life

Max New York Life

SBI Life

Aviva

Tata AIG

Birla Sunlife

1.5b Opportunities For Insurance Industry

As shown in the pie chart only 25% of the insurable population is covered. They

yet have to cover 75% of the population.


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Percentage of Insured and Uninsured

People

25%

75%

Insured

Uninsured

1.6 LEGISLATIVE AND

REGULATORY MATTERS


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INSURANCE REGULATORY & DEVELOPMENT AUTHORITY (IRDA) ACT,

1999.

Under this Act an authority called IRDA has been set up.

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

out in the explanation to the title.

The Authority replaces Controller under Insurance Act 1938.

The first schedule amends Insurance Act 1938.

It states that if Authority is superceded by Central Government, the

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

reconstituted.

CONSTITUTION OF IRDA.

The Insurance Regulatory and Development Authority consists of the

following members:

1. Chairperson.

2. Less than five whole time members.

3. Less than four part time members.

Members should be persons of Ability, Integrity & Standing.

They should have experience in the fields of

1. Life Insurance

2. General Insurance

3. Actuarial Science


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4. Finance

5. Economics

6. Law

7. Accountancy

8. Administration

Chairperson, members, officers and other employees of Authority shall be

public servants.

FUNCTIONS OF IRDA

1. To issue certificate of registration, renew, withdraw, suspend or cancel

such registration.

2. To protect the interest of policyholders/insured in the matter of insurance

contract with the insurance company.

3. To specify requisite qualification, code of conduct and training for

insurance intermediaries and agents.

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

5. To promote efficiency in the conduct of insurance business.

6. To promote and regulate professional organizations connected with the

insurance and reinsurance business.

7. To undertake inspection, conduct enquiries and investigations including

audit of insurers and insurance intermediaries.


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

the insurer regarding general insurance business not so controlled by

Tariff Advisory Committee u/s 604 of Insurance Act, 1938.

9. To regulate investment of funds by the insurance companies.

10.To adjudicate dispute between insurers and intermediaries of insurance.

LIFE INSURANCE CORPORATION OF INDIA ACT, 1956

Life insurance business was nationalized in India with effect from 19th

January 1956.

The life insurance business of 154 Indian life offices constituted by 16

non-Indian insurers operation in India and 75 Provident Societies was

taken over by the Government of India.

LIC of India Act was passed by the Parliament on 18 th June 1956 and it

came into effect from 1st July 1956.

----------

1.7REPORT CARD OF LIFE INSURANCE SECTOR

REPORT CARD: THE CURRENT SCENARIO


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During the first half of the current financial year, the 16 life insurers have

underwritten first year premium of Rs.5, 43,595.87 lakhs towards 87, 38,024

policies. Of this individual business accounted for Rs.4, 41,760.09 lakhs for 87,

32,435 policies. The group business accounted for Rs.1, 01,835.78 lakhs for

5,589 policies.

Interestingly about 60% of the business done by the life insurers during

the current financial year has been in the second quarter. Correspondingly 63%

of the policies underwritten during the six month period have been accounted for

in July to September 2003.

Analysis of individual business statistics shows that LIC accounted 88% of

the business in the terms of premium. As against this the private insurers

captured 12% of the premium. In terms of group business LIC captured 93.63%

of the premium. The twelve private insurers captured only 6.37% of the premium

in the total group business.

A review of the performance of the private players further reveals of rapid

business expansion. The latest quarterly figures released by the Insurance

Regulatory Development Authority (IRDA) show that ICICI PRUDENTIAL Life

Insurance Company is continued to lead with a premium income of Rs.70.2

Crore in the first quarter of this year followed by HDFC Standard Life Insurance.

The maximum growth in the first quarter has come from unit-linked products

(ULIPs) which contributed over 60% of business, along with retirement

products, said Saugata Gupta, head of marketing at ICICI PRUDENTIAL Life


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Insurance. She added, In fact we have identified retirement solutions and child

plans as two growth areas and have decided to invest the

2005- 2006

Sr.

No.

Industry May Up To

May

No. Of

Policies

2004-05

Growth Mkt.

Share

1 L.I.C. 11,78,458 1,67,513 20,30,354 -8.02 86.25

2 ICICI Pru. 33,226 70,733 64,181 10.21 3.27

3 Bajaj Allianz 24,988 39,106 18,253 114.24 1.81

4 S.B.I. Life 18,911 21,458 10,639 101.69 0.99

5 Tata Aig 18,356 41,062 33,149 23.87 1.90

6 HDFC

Standard

15,757 28,238 17,019 65.92 1.30

7 Birla Sun

Life

9,426 16,741 14,416 16.13 0.77

8 Max New

York

18,954 38,314 14,059 172.52 1.77

9 Aviva 6,906 10,880 9,916 9.72 0.50

10 ING Vysya 4,979 5,697 8,710 -34.59 0.26


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CHAPTER -2

Companys Profile

2.1 ABOUT ICICI BANK

ICICI Bank is India's second-largest bank. The Bank has a network of about

573 branches and extension counters and over 2,000 ATMs. ICICI Bank was

originally promoted in 1994 by ICICI Limited, an Indian financial institution, and

was its wholly-owned Subsidiary.

ICICI was formed in 1955 at the initiative of the World Bank, the Government of

India and representatives of Indian industry. The objective was to create a

development financial institution for providing medium-term and long-term

project financing to Indian businesses.

In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services group

offering a wide variety of products and services, both directly and through a

number of subsidiaries and affiliates like ICICI Bank.

In 1999, ICICI become the first Indian company and the first bank or financial

institution from non-Japan Asia to be listed on the NYSE. In 2001, ICICI bank

acquired Bank of Madura limited.

ICICI Bank set up its international banking group in fiscal 2002 to cater to the


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cross border needs of clients and leverage on its domestic banking strengths to

offer products internationally. ICICI Bank currently has subsidiaries in the

United Kingdom, Canada and Russia, branches in Singapore and Bahrain and

representative offices in the United States, China, United Arab Emirates,

Bangladesh and South Africa.

Today, ICICI Bank offers a wide range of banking products and financial

services to corporate and retail customers through a variety of delivery

channels and through its specialized subsidiaries and affiliates in the areas of

investment banking, life and non-life insurance, venture capital and asset

management.

ICICI Bank Group


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ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89

bn (US$ 56.3 bn) at March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569

mn) for the year ended March 31, 2006 (Rs. 20.05 bn (US$ 449 mn) for the year

ended March 31, 2005). ICICI Bank has a network of about 614 branches and

extension counters and over 2,200 ATMs. ICICI Bank offers a wide range of

banking products and financial services to corporate and retail customers

through a variety of delivery channels and through its specialized subsidiaries

and affiliates in the areas of investment banking, life and non-life insurance,

venture capital and asset management. ICICI Bank set up its international

banking group in fiscal 2002 to cater to the cross border needs of clients and

leverage on its domestic banking strengths to offer products internationally. ICICI

Bank currently has subsidiaries in the United Kingdom, Russia and Canada,

branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International

Finance Centre and representative offices in the United States, United Arab

Emirates, China, South Africa and Bangladesh. Our UK subsidiary has

established a branch in Belgium. ICICI Bank is the most valuable bank in India in

terms of market capitalization.

ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange

and the National Stock Exchange of India Limited and its American Depositary

Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).


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HISTORY OF ICICI

Table 2.1

History of ICICI

1955 :

The Industrial Credit and Investment Corporation of India Limited (ICICI)incorporated at the initiative of the World Bank, the Government of India andrepresentatives of Indian industry, with the objective of creating a developmentfinancial institution for providing medium-term and long-term project financing to

Indian businesses. Mr.A.Ramaswami Mudaliar elected as the first Chairman of ICICILimited

: ICICI emerges as the major source of foreign currency loans to Indian industry.Besides funding from the World Bank and other multi-lateral agencies, ICICI alsoamong the first Indian companies to raise funds from International markets.

1956 : ICICI declared its first Dividend at 3.5%.

1958 : Mr.G.L.Mehta was appointed the 2nd Chairman of ICICI Ltd.

1960 : ICICI building at 163, Backbay Reclamation was inaugurated.

1961 : The first West German loan of DM 5 million from Kredianstalt was obtained by ICICI.

1967 : ICICI made its first debenture issue for Rs.6 crore, which was oversubscribed.

1969 : First two regional offices in Calcutta and Madras were opened.

1972 : Second entity in India to set-up merchant banking services.: Mr. H. T. Parekh appointed as the third Chairman of ICICI.

1977 : ICICI sponsors the formation of Housing Development Finance Corporation.Managed its first equity public issue

1978 : Mr. James Raj appointed as the fourth Chairman of ICICI.

1979 : Mr.Siddharth Mehta appointed as the fifth Chairman of ICICI.

1982 : Becomes the first ever Indian borrower to raise European Currency Units.

: ICICI commences leasing business.

1984 : Mr. S. Nadkarni appointed as the sixth Chairman of ICICI.

1985 : Mr.N.Vaghul appointed as the seventh Chairman and Managing Director of ICICI.

1986 : ICICI first Indian Institution to receive ADB Loans. First public issue by an Indianentity in the Swiss Capital Markets.

: ICICI along with UTI sets up Credit Rating Information Services of India Limited,(CRISIL) India's first professional credit rating agency.

: ICICI promotes Shipping Credit and Investment Company of India Limited. (SCICI)

: The Corporation made a public issue of Swiss Franc 75 million in Switzerland, thefirst public issue by any Indian equity in the Swiss Capital Market.

1987 : ICICI signed a loan agreement for Sterling Pound 10 million with Commonwealth


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Development Corporation (CDC), the first loan by CDC for financing projects in India.

1988 : ICICI promotes TDICI - India's first venture capital company.

1993 : ICICI sets-up ICICI Securities and Finance Company Limited in joint venture with J.P. Morgan.

: ICICI sets up ICICI Asset Management Company.

1994 : ICICI sets up ICICI Bank.1996 : ICICI becomes the first company in the Indian financial sector to raise GDR.

: ICICI announces merger with SCICI.

: Mr.K.V.Kamath appointed the Managing Director and CEO of ICICI Ltd

1997 : ICICI was the first intermediary to move away from single prime rate to three-tierprime rates structure and introduced yield-curve based pricing.

: The name "The Industrial Credit and Investment Corporation of India Limited " waschanged to "ICICI Limited".

: ICICI announces takeover of ITC Classic Finance.

1998 : Introduced the new logo symbolizing a common corporate identity for the ICICIGroup.

: ICICI announces takeover of Anagram Finance.

1999 : ICICI launches retail finance - car loans, house loans and loans for consumer durables.

: ICICI becomes the first Indian Company to list on the NYSE through an issue ofAmerican Depositary Shares.

2000 : ICICI Bank becomes the first commercial bank from India to list its stock on NYSE.

: ICICI Bank announces merger with Bank of Madura.

2001 : The Boards of ICICI Ltd and ICICI Bank approved the merger of ICICI with ICICIBank.

2002 : Moodys' assign higher than sovereign rating to ICICI.

: Merger of ICICI Limited, ICICI Capital Services Ltd and ICICI Personal FinancialServices Limited with ICICI Bank


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2.2 ICICI PRUDENTIAL LIFE INSURANCE CO.

ICICI PRUDENTIAL Life Insurance Company is a joint venture between ICICI, a

premier financial powerhouse and Prudential, a leading international financial services

group headquartered in the United Kingdom. ICICI PRUDENTIAL was amongst the

first private sector insurance companies to begin operations in December 2000 after

receiving approval from Insurance Regulatory Development Authority (IRDA).

ICICI PRUDENTIAL s equity base stands at Rs.1185 Crore with ICICI Bank and

Prudential holding 74% and 26% stake respectively. As of march 31, 2006, the

company had issued over 8,37,963 policies, with a sum assured exceeding

Rs.45,888 Crore and premium income of nearly Rs.2,412 Crore.The company

has a network of over 72,000 advisors; as well as 9 banc assurance partners and

200 corporate agent and broker tie-ups. Today the company is the #1 private life

insurer in the country. Strength rating of AAA (lnd) from filch ratings. The AAA

rating is the highest credit rating, and is a clear assurance of ICICI PRUDENTIAL

s ability to meet its obligations to customers at the time of maturity or claims.


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DISTRIBUTION

TATA-AIG has one of the largest distribution networks amongst private life

insurers in India, having commenced operations in over 86 cities and towns in

India. TATA-AIG Life Insurance Company offers and services its insurance and

pensions products in Mumbai, Chennai, Banglore, Kolkata, Chandigarh,

Hyedrabad, Delhi, Pune, Ahmedabad, Kochi, Jamshedpur, Guwahati, Jaipur,

Manglore and now in Ahmedabad. TATA-AIG has recruited and trained more

than 65,000 insurance advisors to interface with and advise customers. Further,

it leverages its state-of-the-art IT infrastructure to provide superior quality of

service to customers.

2.3 PRODUCTS

Insurance Solutions for Individuals

TATA AIG Life Insurance offers a range of innovative, customer-centric products

that meet the needs of customers at every life stage. Its 28 products can be

enhanced with up to 6 riders, to create a customized solution for each

policyholder.

Insurance Solution for Individuals:

(a) Assure One year/ Five Years/10 Years/ 15 Years / 20 Years / 25 Years

Lifeline Plans, and Term to age 60 known as Assure Lifeline to Age

60 : You get the luxury of high coverage but at an affordable cost. You

have the flexibility to choose the term of cover.


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(g) Invest Assure II: This highly flexible plan gives you full life cover AND

high returns AND the flexibility of deciding the length of your life cover

term, the amount of cover you receive & where the rest of your premium is

invested.

(h) InvestAssure Extra: This is a unique investment linked insurance plan for

protection and is specially designed for customers of premier banks. One

also gets an in-built payor benefit rider.

(i) InvestAssure Care: This is a non-participating unit linked insurance plan

with inbuilt Critical Illness benefit. The available policy terms are 15 years

and 20 years.

(j) InvestAssure Flexi This plan is a unit linked endowment investment plan

and provides you with ample flexibility to suite your needs and priorities

and to help you to achieve your financial goals.

(k) InvestAssure Gold: This a unique whole life plan that takes care of your

changing requirements throughout your life - additional protection for

additional future needs, flexibility to invest more money as per your

requirements, providing for emergency cash requirements or a steady

post-retirement income.


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(l) InvestAssure Plus: This is a unique, flexible insurance plan with a single-

premium paying term, which combines the security of a life insurance

policy with an opportunity of enjoying potentially higher returns on your

insurance premiums.

2.3.2 Protection Solutions

m) LIFE Plus

This plan lets you win no matter what happens. Get your premiums back if

you outlive the term. Get sum assured in case of death by natural causes.

Get DOUBLE the sum assured in case of death by accidental causes.

n) MahaLife Gold

This is the ideal planning vehicle for your retirement. It provides you a

steady income and insurance coverage for life! Premiums are payable

only for the first 15 years. You can even use this to cover future expenses

of your children.

o) Raksha 10/15/20/25

This plan offers you a large cover at a small premium with the flexibility to

choose the term of cover.

p) ShubhLife

This plan provides you 100% life insurance protection and high returns on

your investment but the premiums you pay are among the lowest of any

similar endowment policy.


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q) Tata AIG Health First

Quality healthcare is incredibly expensive. You need a policy that covers

all contingencies including prolonged hospitalization, major surgery,

critical illness, post hospitalization fees and even the unfortunate event of

your death. HealthFirst provides a lump sum irrespective of what your

medical bills are.

r) Tata AIG Life Health Protector - 5 Year Guaranteed Renewal Accident

and Health Plan

The average cost for a major surgery or treatment in hospital is between

three to five lakh. Health Protector is the first product of its kind in India

that offers you protection in case ANYONE in your family has an accident

or falls ill.

2.3.3 Child Solutions

SmartKid child plans provide guaranteed educational benefits to a child

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

The policy is designed to provide money at important milestones in the

childs life. SmartKid child planed are also available with in unit-linked form

- both single premium and regular premium.

2.3.4 Market-linked Solutions

- LifeLink is a single premium Market Linked Insurance Plan which

combines life insurance cover with the opportunity to stay invested in the

stock market.


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- LifeTime offers customers the flexibility and control to customize the

policy to meet the changing needs at different life stages. It offers 3

investment options - Growth Plan, Income Plan and Balanced Plan.

2.3.5 Retirement Solutions

- LifeTime Pension is a regular premium market-linked pension plan.

- LifeLink Pension is a single premium market-linked pension plan.

2.3.6 Group Insurance Solutions

TATA-AIG also offers Group Insurance Solutions for companies seeking

to enhance benefits to their employees.

1. Group Gratuity Plan:

TATA-AIG group gratuity plan helps employers fund their statutory gratuity

obligation in a scientific manner. The plan can also be customized to

structure schemes that can provide benefits beyond the statutory

obligations.

2. Group Superannuation Plan:

TATA-AIG offers a flexible defined contribution superannuation scheme to

provide a retirement kitty for each member of the group. Employees have

the option of choosing from various annuity options or opting for a partial

commutation of the annuity at the time of retirement.


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3. Group Term Plan:

TATA-AIG flexible group term solution helps provide affordable cover to

members of a group. The cover could be uniform or based on

designation/rank or a multiple of salary. The benefit under the policy is

paid to the beneficiary nominated by the member on his/her death.

2.3.7 Flexible Rider Options

TATA-AIG Life offers flexible riders, which can be added to the basic

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

customer.

1. Accident & Disability benefit: If death occurs as the result of an accident

during the term of the policy, the beneficiary receives an additional amount

equal to the sum assured under the policy. If the death occurs while

traveling in an authorized mass transport vehicle, the beneficiary will be

entitled to twice the sum assured as additional benefit.

2. Accident benefit: This rider option pays the sum assured under the rider

on death due to accident.

3. Critical Illness Benefit: protects the insured against financial loss in the

event of 9 specified critical illnesses. Benefits are payable to the insured

for medical expenses prior to death.


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4. Income Benefit: This rider pays the 10% of the sum assured to the

nominee every year, till maturity, in the event of the death of the life

assured. It is available on SmartKid, InvestAssure II and InvestAssure

Gold.

5. Waiver of Premium: In case of total and permanent disability due to an

accident, the premiums are waived till maturity. This rider is available with

InvestAssure II and InvestAssureGold.


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IN BRIEF

In TATA-AIG smart kid plan, the parent of the kid is insured and not the

kid. Incase some mishappening occurs and parent dies with in the term,

full sum assured is paid immediately and all future premium are waived.

And these death benefits are in addition to the benefit that child is likely to

get in normal course of policy, i.e. at important milestone of education,

irrespective of death of the life assured.

In TATA-AIG Save and Protect plan the additional free life cover for 5

years from date of maturity for 50% of original sum is assured.

In TATA-AIG lifeguard the premium paid are returned but without any

interest that is not there in LICs whole life plan.

In TATA-AIG Money Back plan we get 120% of the basic sum assured

plus guaranteed addition plus vested bonus.

In TATA-AIG pension plan i.e. Forever Life it gives you the option to

postpone the vesting age up to maximum of 65 years. Secondly the

policyholder is at an option to opt pension from any other insurance

company. Thirdly he has an option to terminate his policy after three years

premium are paid and a guaranteed surrender value is payable.

In its Investment plan ICICI gives us the option to shift from one option to

other four times a year.


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2.4 ABOUT THE PROMOTERS

The Tata Group is one of India's largest and most respected business

conglomerates, with revenues in 2006-07 of $28.8 billion (Rs.1,29,994 crore), the

equivalent of about 3.2 per cent of the country's GDP, and a market capitalisation

of $73.6 billion as on December 2007.

Tata companies together employ some 2,89,500 people. The Group's 27

publicly listed enterprises-among them stand out names such as Tata Steel, Tata

Consultancy Services, Tata Motors and Tata Tea - have a combined market

capitalisation that is the highest among Indian business houses in the private

sector, and a shareholder base of over 2.9 million. The Tata Group has

operations in more than 85 countries across six continents, and its companies

export products and services to 80 countries.

TATA AIG Life Insurance, the country's third-largest private insurance

player, is targeting a 45 per cent increase in premium income at over Rs 500

crore this fiscal. The company, which started operations in January 2001, is

expected to break even by 2005-06.

The Tata family of companies shares a set of five core values; integrity,

understanding excellence, unity and responsibility. These values, which has

been part of the Group's beliefs and convictions from its earliest days, continue to

guide and drive the business decisions of Tata companies. This is a legacy that


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has earned the Group the trust of many millions of stakeholders in a measure

few business houses anywhere in the world can match.

2.5 ABOUT THE PARTNERS

Tata Enterprises with 82 companies, spread over seven sectors and with

an annual turnover exceeding US $ 8.8 billion, employs more than 262,000

people. Tata Group has shown over years that it is a value driven company and

has pioneering contributions in various fields including insurance, aviation, iron

and steel. Tata companies have forged a number of global alliances with eminent

international partners in several fields. In terms of capital market performance as

many as 40 listed Tata companies account for nearly 5% of the total market

capitalization of all listed companies. The Group has had a long association with

India's insurance sector having been the largest insurance company in India prior

to the nationalisation of insurance.

AIG

American International Group, Inc is the leading U.S. based international

insurance and financial services organization and the largest underwriter of

commercial and industrial insurance in the United States. Its member companies

write a wide range of commercial and personal insurance products through a

variety of distribution channels in over 130 countries and jurisdictions throughout

the world.


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AIG's Life Insurance operations comprise of the most extensive worldwide

network of any life insurer. AIG's global businesses also include financial

services and asset management, including aircraft leasing, financial products,

trading and market making, consumer finance, institutional, retail and direct

investment fund asset management, real estate investment management, and

retirement savings products.

The Joint Venture

Tata AIG Life Insurance Co. Ltd. is capitalised at Rs. 185 crores of which

74 per cent has been brought in by Tata Sons and the American partner brings in

the balance 26 per cent. Mr. George Oommen has been named managing

director of Tata AIG Life.

Tata-AIG plans to provide broad array of life insurance plans to cover to

both individuals and groups.

The company is headquartered in Mumbai, with branch operations in

Delhi, Chennai, Hyderabad, Bangalore ,Calcutta, Pune and Chandigarh.

Channel Partners: HSBC, DBS, UBI, PNB Principal, Bajaj Capital,

Religare, Anand Rathi and many more. Sales force of approx. 33,650 advisors.


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2.6 VISION

To make TATA - AIG the dominant Life and Pensions player built on trust

by world-class people and service.

This we hope to achieve by:

Understanding the needs of customers and offering them superior

products and service.

Leveraging technology to service customers quickly, efficiently and

conveniently.

Developing and implementing superior risk management and investment

strategies to offer sustainable and stable returns to our policyholders.

Providing an enabling environment to foster growth and learning for our

employees.

And above all, building transparency in all our dealings.

The success of the company will be founded in its unflinching commitment to 5

core values Integrity, Customer First, Boundary less, Ownership and Passion.

Each of the values describe what the company stands for, the qualities of our

people and the way we work.


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2.8 Achievements

No 3 Pvt life insurance company.

Nominated in New York stock exchange.

Enlisted in fortune 500 lists.

Got AAA rating.

Largest premium income.

Biggest pension player.

Maximum number of policies sold, more than 1 million.

Highest capital base of 925 Rs.

Office in 221 locations & 86 branches.

Largest agency force i.e. above 56,300 well trained world class Leader:-

Leader in market share(Apr 05-March-06)

Highest share of a private player in the overall Insurance market: 7.3%

Highest share of the private insurance market: over 31.6%

Highest Share of the unit Linked Market: 49%(Sept 2004)

Dominant player in pensions overall market (31%) private market (70%)-

Sept 2004 figures.

16.5% of the group insurance market.

Largest AD business in value terms.

Approx. Rs. 30,000 crore Sum Assured.


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Over 1 million policies.

Rs 3,800 crore AUM.

2.9 Strategies:

One needs to sketch a perfect road map or adopt a strategy to the destination

and also need to follow the path strictly. The strategies applied to achieve the

above mentioned targets are as follows.

1. Direct Marketing.

2. Cold Calling.

3. Through friends, and the references given by the company.

4. Advertisements etc.

I am also applying some other strategies like

5. Time management

6. Punctuality

7. Preplanning

8. Never leave even single prospect.

9. Always be in touch from previous customers

10. The most important thing is always create the URGENCY because in the

market there are near about 14 insurance sectors with L.I.C. and all trying

to capture the market.


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2.10 LIMITATION:

Every research work does have some limitations and so this research

work is also having its limitations. The following are limitations of this

research study:

L.I.C. is a strong competitor for insurance companies.

Customers perception about private sector (TATA-AIG Service)

Due to lack of time, the research study was conducted in Ludhiana.

There may be a possibility of biasness on the part of some respondents,

but very much care has been taken to make this report unbiased.

Some respondents might not given the correct information due to their

lack of interest and shortage of time.

In order to keep their views secret, some of the respondents might have

provided to wrong information.


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Learning from the On The Job Training

1 Selling Skills

2 Communication Skills

3 Never ignore single prospect from market

4 Have more patience

5 Ability to work under pressure

6 Atmosphere of the corporate

7 Adjusting nature according to situation

8 Always focus on target with preplanning

9 Knowledge of share market

10 Never interfere in the office politics

High probability of successHigh probability of success

Tax/ financial consultants, C.A.s

Bond / mutual fund agents

Small business owner


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CHAPTER -3

Research methodology is a way to systematically solve the research problem. It

may be understood as a science of studying how research is done scientifically.

In it we study the various steps, the research process that are generally adopted

to study the research problem and basic logics behind them. The basic steps in

this research are shown in the chart below

OBJECTIVES:

To check the interest of the customers in buying the life insurance policy from the

private company

To check the perception of the customers of knowing that which factor affects

there policy purchase decision

To check the difference in perception b\w the young(20-35 yrs) and old(35-50)

generations towards private companies

To check the difference in perception b/w the businessman and serviceman

towards private companies


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3.1 The Research Process

The research consisted of two stages. In the first stage, a survey was conducted

to collect the data about the people. The second stage involved analysis of the

data collected in the first stage.

3.2 Data Collection

Define the research problem and its

ob ectives

Review concepts and theories

Collection of data survey

Research design including sample

design

Analysis of data

Interpretation and report writing


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`Data has been collected both from primary as well as secondary sources as

described below.

3.3 Sample size

The sample size for the survey was 100. In addition, data about ICICIs services

was collected through discussions with the ICICI employees.

3.4 Primary sources

The primary source of data was Questionnaire filled by people at places

in Ludhiana.

3.5 Field work

Since the task was to recruit some people for the company. So the first thing was

to look for the people in the field and various offices. Various CA, Lawyers and

other professionals were interviewed for the recruitment purpose.

3.6 Secondary sources


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The secondary sources of data were the various websites and

insurance manuals. This mainly provided information about the

insurance sector and the companys profile. These helped in

gaining knowledge about the industry. These sources are listed in

References.

3.7 Research design

The methodology consisted of Descriptive research. The problem was solved by

recruiting people into the system. The information was collected through

Questionnaire is as follows-

General Information

Time that can be devoted for this profession

To know the awareness about. TATA- AIG

To know about their interest in becoming advisors.

To fix an interview if interested.


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3.8. Sample composition:

The sample composition (Sex, age group, Income group and occupation) for the

survey has been shown below:

SEX

Male

80%

Female

20%

Male

Female

Fig 3.81 : Sample composition (Sex)

As it is clear from the figure males dominate the market share as compared to

females with about 80% males who have invested and only 20% females.


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15%

40%

25%20%

Less

than 25

25-34 35-44 Greater

than 44

Age in Years

AGE GROUP

Fig3.82: Sample composition (Age)

From the above graph it is evident that the people belonging to the age group

of 25 to 34 have invested the most in various insurance schemes (40 out of

100). And only 15 people below age of 25, and 25 people between age group of

35-44, and the aged people above 44 have only 20% share.

INCOME GROUP

25%

40%

20%

15%

Less than 1.5 Lakh

1.5 Lakh - 3 Lakh

3 Lakh - 4.5 Lakh

More than 4.5 Lakh

Percentage

Fig3.83 : Sample composition (Income)

From the total of 100 respondents, 40 respondents were from income group of

1.5 3 lakh, and 25 people belonged to group of income varying till 1.5 lakh per

year.


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OCCUPATION

45%

20%25%

7%3%

Service

Profession

Busin

ess

Retire

Others

Percen

ta

Fig3.84: Sample composition (occupation)

Sample mainly consisted of service class people with their percentage 45,

than were the business class people , next to them were the professionals like

teachers, doctors etc, only 7% were the retired people and 3% were the

housewifes and students.


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If yes, tick the product most preferred by you

Money back

Children plan

Retirement plans

Any other

Money back 48Children plan 20Retirement plans 22

Any other 10

fig 4.2

Money back plan is perceived as the best plan provided by the TATA-AIG. 48%

of the respondents has opted for it, retirement plan is the second most preferred

policy with good rating as compared to children plan with 10% and only 10%

people have gone for other policies.

4.3 Rank the Insurance Companies according to the perceived value.

1

Money back

children plan

lan

retirement plan

any other

0

10

20

30

40

50

PREFERENCE OF THE POLICIES PLAN

Money back

children plan

retirement plan

any other


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Frequency

LIC 68ICICI 11

HDFC 7MAX NEW YORK LIFE 10BIRLA LIFE INSURANCE 4

ANY OTHER ----

PERCEPTION OF PEOPLE TO RANK INSURANCE

COMPANIES

68%

11%

7%

10% 4%

LIC

ICICI

HDFC

MAX NEW YORK LIFE

BIRLA LIFE

INSURANCE

fig 4.3

Life insurance company is perceived as the best company.68 percent of

respondents has rated it the best insurance company. LIC is the oldest insurance

company of India. MAX NEW YORK LIFE and ICICI are other insurance

companies which has got good rating from respondents.

4.4 How much is your annual income?


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Fig 4.4

The interpretation of the graph is that 34% of the people lies between the income

group of 1,00,000 and 2,00,000. that is the highest proposition. Second highest

proposition is of 26% with income ranging between 2,00,000 3,00,000.

Less than 1,00,000 15

1,00,000 - 2,00,000 34

2,00,000 -3,00,000 26

3,00,000 -4,00,000 18

4,00,000 and above 7


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4.5 From which of the following companies would you like to buy insurance

policy? (You can tick more than one)

LIC

ICICI

HDFC

Max New York life

TATA-AIG

Any other, please specify ---------------

fig 4.5

PREFERENCE OF PEOPLE TO BUY

INSURANCE POLICY

68%

11%

7%

10%4%

LIC

TATA -AIG

HDFC

MAX NEW YORKLIFE

BIRLA LIFEINSURANCE


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The above data reveals that 68% of the respondents prefer to buy insurance

policy from LIC and only 11% respondents preferred TATA-AIG.

4.6 Rate the following reasons for taking policy from TATA-AIG?

Reasons Good Average BadMeanscore

Less premium/ Extra benefits 19 31 9

Money is safe 10 35 5 1.98

Good returns 11 36 3 1.9

Tax benefit 14 33 3 1.78

19

10 1114

3135 36 33

95 3 3

0

10

20

30

40

Less

premium/

Extra

Good

returns

Good

Average

Bad

fig 4.6

The above graph reveals that their was a mixed response , when the

respondents were asked the reasons for taking policy from TATA-AIG. The most


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of the respondents rated extra benefits, safe money, returns, and tax benefits on

an average margin.

4.7 Why do you own an insurance policy? (You can tick more than one).

For an investment purpose

Protection

Future expenses

Tax benefits

Any other

62%8%

9%

21%

For investmentpurpose

protection

future expenses

tax benefits

fig 4.7

When the respondents were asked as to what motivates or de-motivates them

when they think of TATA-AIG, they came up with this response. The customers


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own an insurance policy mostly for the investment purpose, nealy 62% people

had gone for investment bcoz of the investment purpose and nearly 21% people

to evade the taxes.

4.8 What importance do you assign to each of the following factors for

choosing the above mentioned company?

Mean Score

0

1

2

3

4

Mean Score 3.33 3.25 3.68 3.62 2.71

Company

name

Company

agentFamily Friends

Advertisem

ents

fig 4.8

VeryHigh High Indifferent Low

Verylow

MeanScore

Companyname 14 42 18 15 11 3.33Companyagent 12 38 22 19 9 3.25

Family 36 24 18 16 6 3.68

Friends 32 26 20 16 6 3.62

Advertisements 9 12 47 15 7 2.71


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From the response of the respondents we got that nearly 36% of the people are

highly dissatisfied with their insurance policy and nearly 20% people placed

themselves to be highly satisfied ones. Next, 19% dissatisfied and 14%satisfied

respondents comes the varying ranges

4.10. If you are given a chance to repurchase an insurance policy again

from the same company, would you?

Yes 32

No 68

0

10

20

30

40

50

60

70

80

Yes No

fig 4.10


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fig 4.11

People when asked that would they recommend their friends or family for the

policy they already had, response was mixed with only 12% people would

definitely yes, 12% with probably yes and even 32% people were not sure.

Moreover, nearly 24% people said that probably they wont refer any one giving

hints that they were not satisfied with the policy

4.12 What are the reasons for not taking the insurance cover?

No savings

No benefits

No interest

Non taxable income

No need

Any other reason-------------------

46%

16%

18%

13%7%

No savings

No benefits

No intreset

Non taxableincome

No need


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fig 4.12

The respondents, when questioned why they dont take any insurance policy,

nearly 46% replied that they have no savings to invest for further use. And 16

people said that they see no benefit in it. And nearly 135 people with non-taxable

income.

4.13. SATISFACTION WITH THE SERVICES PROVIDED BY THE

ORGANITION

12

Highly

s

atisfied

Satisfied

Indifferent

Different

Highly

indifferent

1419

11

36

20

0

5

10

15

20

25

30

35

40

Satisfaction with the product

Highly satisfied

Satisfied

Indifferent

Different

Highly indifferent

fig 4.13

A STUDY OF INSURANCE AS A TOOL OF INVESTMENT.doc

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