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SUMMER TRAINING PROJECT

REPORT

ON“Studying the Awareness of Life Insurance with

special reference to HDFCSLIC”

(A case of Allahabad City)

For the partial fulfillment of Master of Business Administration

(2012-2014)

Under the Guidance of Submitted by Dr. Archana Chandra Ajit Kumar Associate Professor 12MBA023 (MBA 3rd Sem.)

Submitted to:

SAM HIGGIN BOTTOM INSTTITUTE OF AGRICULTURE TECHNOLOGY AND SCIENCESDEEMED TO BE UNIVERSITY

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DECLARATION

I Ajit Kumar, here declare that the summer training project “studying the Awareness of Life Insurance with special reference to HDFCSLIC” has been undertaken by me and it is my original work. The conclusion in this Report is based on research conducted during summer training. Sam Higginbottom Institute of Agriculture Technology & Science

Ajit Kumar 12MBA023

MBA(2012-2014)

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CERTIFICATE OF ORIGINAL WORK

Certified that the Project Report titled “Studying the Awareness of Life Insurance with special reference to HDFCSLIC” submitted to the Joseph School of Business Studies, Higginbottom Institute of Agriculture, Technology & Sciences, Allahabad in partial fulfillment of the requirement for the degree of Master of Business Administration is a bonafied record of research carried out by Mr. Mohd Asif under my supervision and guidance. The Project Report is recommended for acceptance.

Dr. Archana Chandra Associate Professor

Advisor

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CERTIFICATE OF THE EVALUATION COMITTEE

This summer project titled “studying the Awareness of Life Insurance with special reference to HDFCSLIC” has been prepared and submitted by Ajit Kumar in partial fulfillment of the requirement for the award studies, Sam Higginbotom Institute of Agriculture TechnologyAndSciences, Allahabad, U.P.

Name/Department Evaluation Signature

Dr. Archana Chandra Satisfactory / ------------------- Associate Professor Unsatisfactory Advisor

Dr. Shabana Mazhar Satisfactory / Assistant Professor Unsatisfactory ------------------- Member

Dr. (Mrs) Richa Sinha Satisfactory / Assistant Professor Unsatisfactory ------------------- Member The Project has been examined by the above evaluation committee and found acceptable.

Date:- Prof.(Dr.) Masood NaseerPlace:- Allahabad Dean

(JSBS-SHIATS)

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ACKNOWLEDGEMENT

I am thankful to our Training and Placement Officer Mr. Sandeep Wasley who

arrange my summer training in HDFCSLIC Allahabad.

I am also thankful to Mr. Mohd Asif (Sales Development Manager) HDFCSLIC

Allahabad who guides me in the period of training and prepare for industry. I am also

thankful to all the staff of HDFCSLIC Allahabad who helps me at each and every level.

I am also thankful to my institution J.S.B.S., Allahabad to help me in attaining the

opportunity to learn the practical aspects of my curriculum through this Industrial-

Training Program.

I am also sincerely thankful to our faculty members who contributed in my

development through their diligent efforts and make me capable and confident enough to

understand the industrial environment and especially Dr. Archana Chandra who guide

me to preparing my training report.

At last I am also thankful to people of Allahabad who are directly or indirectly

helps me at every stage during the training.

Ajit Kumar 12MBA023

(MBA 3rd Sem.)

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PREFACE

This research report is conduct to know the awareness of life insurance in

Allahabad city. This report is also give the brief knowledge about insurance &life

insurance. In this report main knowledge about HDFCSLIC.

Includes company profile. That is about the HDFC group, Standard Life and brief

information about the HDEFCSLIC. In HDFCSLIC, I have told about the company

portfolio, and products of the company.

Includes the main part of research study. In this part all the data are collected from the

survey. With the help of survey, I want to solve the research problem.

This report is help for all the employees and people who are related to the

HDFCSLIC. This report is also help for the research scholar to understand the life

insurance characteristics in Allahabad city.

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TABLE & CONTENTS

1- Introduction 8-36

About Insurance

About Life Insurance

2- Company Profile 37-45

About HDFC SLIC

3- Objective 47

4- Research Methodology 47

5- Finding 48

6- Limitation 48

7- Analysis & Interpretation 49-58

8- Conclusion & Suggestion 59

9- Questionnaire 60-61

Bibliography

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INSURANCE8

Insurance is as old as civilization. It was present in the form of mutual help. Joint stock companies and corporations are the recent form of insurance. The yogakshema has been the oldest term used in Rig-Veda for some kind of insurance. Manu has emphasized that a special charge be made on goods carried from one town to another to insure their safe carriage Manu smriti says:- “The traders must be made to pay taxes or duties taking into account the price of purchase, price of sale the length of journey, incidental expenses and yogakshema that is risk & safety” Ancient India was the prominent maritime power today the nationalization and globalization that is privatization of life insurance & general insurance is expected to contribute maximum to the well being & safety of people by providing insurance services in every walk of life. The principle & practice of insurance has been changing from time to time. The code of hamburabi and Manu has recognized the advisability of province for sharing the future losses. If we look at insurance type then we find that marine insurance is the oldest form of insurance & first of the insurance has been framed in 1310 by count of Flanders as a “charter of assurance” by which merchant could insure their goods exposed to the risk of sea this law then spread to other areas of Europe as Spain, France, Portugal, Holland, & England. One of the famous marine insurance companies of oldest time, currently working is Lloyd it was fire insurance which was developed after marine insurance. It was observed in Anglo section guild form for the first time where the victims of fire hazards where given personal assistance by providing necessities for life. It was originated in Germany in 16th century the fire insurance got momentum in England after the great fire in1666 where the fire losses were tremendous almost 85% of the houses were burnt to ashes & property of nearly 10crores sterling was burnt off the first. The first fire insurance office opened in England in1681. It was opened in the name of sun life insurance. Life insurance made its first appearance in England in 16 th century. The 1st

recorded evidence in England being policy on the life of William gibbon on 18 June 1653. However before it the annuities were the common feature in England. The first registered life insurance office was Hand in Hand Society established in1696. Life insurance did not flourish in United States during 18 th century because of serious fluctuations in death rates but in 19th century it greatly flourished. In India, the first life insurance company was opened in 1818 under the name of Oriental Life Assurance Company by some of the Europeans. The year 1870 was a landmark in the history of Indian insurance separating the early period of pinioning attempt at life insurance from the subsequent period of steady development at the establishment of Indian life insurance office that is Bombay Mutual Life assurance Society in 1871. The miscellaneous insurance took its shape in 19 th century with the industrial revolution in England. Now various categories of insurance such as crop insurance, cattle insurance, etc. are taking place. The scope of general insurance is increasing with the advancement of the society.

INSURANCE9

Insurance is defined as cooperative device to spread the loss caused by a particular risk over a number of persons who are exposed to it and who agree to ensure themselves against that risk.Insurance is also defined as a social device to accumulate funds to meet the uncertain losses arising through a certain risk to persons insured against the risk.

Functions of Insurance

1. Primary functions Provide certainty Provides protections Risk sharing

2. Secondary functions Prevention of loss Provides capital. Improves efficiency. Helps in economic progress.

Nature of Insurance

1. Risk bearing.2. Act as a cooperative device.3. Valuation of risk.4. Payment at contingency.5. Valuation of amount of payment.6. Large number of insured person.7. Insurance is not a gambling.8. Insurance is not a charity.

Principle of insurance

1. Principle of cooperation.2. Theory of probability.

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Role and Importance of Insurance

A. To an individual1. Security and safety2. Affords peace of mind3. Protects mortgaged property4. Eliminates dependencies5. Encourages saving6. Provides profitable instrument7. Fulfill various need of a person

B. To business1. Reduced uncertainty2. Increased efficiency3. Key man indemnification4. Enhancement of credit5. Business continuation6. Welfare to employees

C. To society1. Protection of wealth of society2. Economic growth of country3. Reduced inflation

Insurance contract:-Insurance can be defined as a contract between two parties where by one party called insurer undertakes in exchange for affixed sum called premium, to pay to other party called insured a fixed amount of money on the happening of a certain event. Insurance involve

A. Element of a general contract andB. Element of special contract relating to insurance.

The special contract of insurance involves principles:

A. General contract:-The valid contract, according to sec.10 of Indian contract act

1872, must have following essentialities:-1. Agreement2. Legal consideration3. Free consent4. Competency5. legal objective

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B .Special contracts:-

1. Insurable interest2. Utmost good faith 3. Indemnity4. Subrogation 5. Warranties6. Proximate cause7. Assignment 8. Nomination and 9. Return of premium

i. Insurable Interest : - For a valid insurance contract, the insured must have an insurable interest in the subject matter of insurance. The insurable interest in one where by policy holders is benefited by the subject matter existence and is prejudiced by the death or the damage of the subject matter. The essentials of insurance contract are:-

There must be subject matter to be insured. The policy holder should have monetary relationship with the subject matter. The relationship between the policy holder and the subject matter should be

recognized by law. In other words there should not be any illegal relationship between policy holder and the subject matter to be insured.

The financial relationship b/w the policy holder and the subject matter are such that the policy is economically benefited by the existence of the subject matter and /or will suffer the economic loss at the death or the existence of subject matter.

The subject matter is life in life insurance, property and goods in property insurance, liability and insurance in general insurance. Insurable interest is essentially a pecuniary interest i.e. the loss caused by the happening of insured risk must be capable of financial valuation no. emotional or sentimental loss. As an expectation or anxiety should be the ground be one that if it happens, the party suffers financially and if it does not happen, the party is benefited by the existence. But a mere hope or expectation which may be frustrated by the happening of some extent is not an insurable interest.

ii. Utmost good faith :-The doctrine of disclosing all material fact is embodied in the important

principle of “utmost good faith” which applies to all form of insurance. Both parties of insurance contract must be of the same mind at the time of contract. There should not be any misrepresentation, non –disclosure or fraud concerning the material fact .In case of insurance contract the legal maxim ‘Caveat emptor’ (let the buyer beware) does not prevail, where it is regarded the duty of the buyer to satisfy himself of the genuine of the subject matter and the seller is under no obligation to supply information about it. But in insurance contract the seller i.e. insurer will also have to disclose all the material fact.

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Material fact:- A material fact is one which affects the judgment or decision of both the party in

entering the contract. Facts which count materially are those which knowledge influences a party in deciding the weather or not to offer or to accept such risk and if the risk is acceptable, on what terms and conditions the risk should be accepted. These facts have a direct bearing on the degree of risk in relation to the subject of the insurance. In case of life insurance, the material fact or factors affecting the risk will be age, residence, occupation health, income etc. and in case of property insurance, it would be use, design, owner and situation of the property.

Full and true disclosure:- The utmost good faith says that all the material facts

should be disclosed in true and full form. It means that the fact should be disclosed in that form in which they really exist. There should be no concealment, misrepresentation, mistakes or fraud about the facts. There should be no false statement and no half truth or any silence or material fact.

Duty of both parties:- The duty to disclose material fact lies on the both the parties but in practice , the assured has to be more particular about the observance of this principle because he is usually in the full knowledge of the facts relating to the subject matter which, despite all effective inspections of the insurer would not disclosed.Facts need not to be disclosed by insured:- The following facts however, are need not to be disclosed by the insurer.

1. Facts which tends to reduce / lessen the risk2. Fact of public knowledge 3. Fact which could be inferred from the information disclosed 4. Fact waived by the insurer5. Facts governed by the condition of policy.

iii. Principle of indemnity:-

As a rule all insurance contract except personal insurance are contract of indemnity. According to this principle, the insurer undertakes to put the insured in the event of loss, in the same position that he occupied immediately before the happening of the event insured against. In certain form of insurance, the principle of insurance is modified to apply in true sense of indemnity. The insured is not entitled to make a profit of his loss.

Use

1. To discourse over insurance :- indemnity is an essential feature of an insurance contract , in absence of which , the industry would have the hue of gambling and the insured would tend to effect over insurance and then intentionally cause a loss to occur so that a financial gain could be achieved . So to avoid this intentional loss only the actual loss become payable and not the assured sum. (Which is higher in over insurance) .if the property in under insured i.e. Insured amount is less than actual value of the property insured, the insured is generally regarded his own insurer for the amount and in case of loss, he shall share the loss himself.

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2. To avoid an anti social act :- if the assured is allowed to gain more than the actual loss which is against the principle of indemnity, he will be tempted to gain by destruction of his own property after getting it insured against a risk . He will be inconstant temptation to destroy the property. Thus the whole society will be doing only anti social act i.e. the person world be interested in gaining after destruction of the property. So the principle of indemnity has been applied where only the cash value of his loss and nothing more than this will be compensated, though he might have been insured for a greater amount.

3. To maintain the premium at low level :- if the principle of indemnity is not applied , larger amount will be paid for a smaller loss and this will increase the cost of insurance and the premium of insurance will have to be raised . if the premium is raised two things may happen first, person may not be inclined to insure and second, unscrupulous persons could get insurance to destroy the property to gain from such act .both things would defeat the purpose of insurance . This principle is here to help them because such temptation is eliminated when only actual loss and not more than actual financial loss is compensated provided there is insurance up to that amount.

Conditions for indemnity

i. The insured has to prove that he will suffer loss on insured matter at the time of happening of event and the loss is actual monetary loss.

ii. The amount of compensation will be the amount of insurance indemnification can not be more than insured amount.

iii. If the insured gets more amount than the actual loss the insurer has the right to get the extra amount back.

iv. If the insured gets some amount from the third party after being fully indemnified by the insurer then the insurer will have the right to get /receive all the amount paid by the third party

v. It does not apply to personnel insurance because amount of loss is not easily calculable.

iv. Doctrine of subrogation It refers to the right of the insurer to stand in place of insured, after settlement

of claims in so far as the insured‘s right of recovery from an alternative source is involved. If the insured is in apposition to recover the loss in full or part from a third party, due to whose negligence , the loss have occurred ; his right of recovery is being subrogated to insurer on the settlement of the claims . Thereafter, the insurer recovers claims from the third party. This right can be exercises by the insurer before the payment for the loss also.

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Essentials of doctrine of subrogation

1. Corollary to the principle of indemnity : - it is the supplementary to the principle of the indemnity. The latter says that only actual value of loss of property is compensated while latter says that if the damaged property has any value left or any right against the third party, the insurer can subrogate the left property or the right of property.2. Subrogation is substitution : - the insurer becomes entitled to all the rights of the insured subject matter after the payment because he has paid the actual loss of the property. He substituted in place of other person who acts on the right and claims of the property insured.

3. Subrogation is only up to the amount of payment.

4. Subrogation may b applied before payment .if the assured gets certain compensations from third party before being fully indemnified by the insurer; the insurer can pay the balance of loss.

5. This principle does not apply to personnel insurance because the doctrine of indemnity is not applicable to such insurance.

v. Warranties It is that by which the assured undertakes that some particular things shall or shall not be done or that some conditions would be fulfilled or where by he affirms or negatives the existence of a particular state of facts .warranties which are expressed in the policy are expressed warranties and which are not are implied warranties . Warranties are an important condition in insurance contract which is to be fulfilled by the insured. On the breach of the warranties the insurer becomes free from the liability. therefore insured must have to fulfill the condition and promises during the insurance contract weather it is important or not in connection with risk .the contract can continue only when warranties are fulfilled or vice versa.

vi. Proximate cause The rule is that immediate and not the remote cause is to be regarded. The maxim is “sad cause proximate non remote spectator i.e. See the proximate cause and not the distant cause. The real cause must be seen while payment of loss. If the real cause of loss is insured, the insurer is liable to compensate for the loss. But the proximate cause is not a device to avoid the trouble of discovering the real cause or the common sense cause. Proximate cause means the active efficient cause that sets in motion a train of event which brings about a result without interruption of any force started and working actively from anew and independent source. The determination of real cause depends upon the working and practice of insurance and circumstances to losses. A loss may not be occasioned by a mere event. There may be concurrent causes or chain of causes. They may occur in a sequence or in a broken chain.

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Determination of proximate cause

1. If there is a single cause of loss, the cause will be proximate cause and further if the peril was insured, insurer will have to be indemnify the loss.

2. If there are concurrent losses, the insured peril and expected peril have to be segregated. The concurrent cause may be the first separable and inseparable. The loss due to a particular cause may be separately known / distinguishably known. In such a case, if any cause is expected peril, insurer will have to pay up to the extent of the loss which occurred due to insured peril. If the circumstances are such that the perils are inseparable, then the insurers are not liable at all where an expected peril exist.

Assignment or Transfer of interest It is necessary to distinguish between assignments of - subject matter of insurance, policy, and policy money when payable. Marine and life insurance policies can be freely assigned but the assignment under fire and accidental insurance policies are not valid without the prior consent of the insurer –except changes of interest by will or operation of law . Moreover assignment under fire and accidental insurance policies must be made before the insured part with his interest. Once he has lost the interest, the policy is void and can not be assigned. Life policies can be assigned weather the assignee has an insurable interest or not. Life policies are frequently charged, assigned or otherwise dealt with, for they are the valuable securities. A marine policy is frequently / freely assigned unless it contains terms expressly prohibiting assignment. It is assigned before or after loss. Assignment in fire insurance can not be recognized without prior consent of insurer, change of interest in fire policy are not valid unless and until the consent of the insurer is obtained.

viii. Return of premium Ordinarily the premium once paid cannot be refunded.

However in following cases refund is allowed.

a By agreement in the policy :- the assured may pay full premium while affecting the insurance , but it may be agreed to reduce it wholly or partially in the happening of the event .for example special packing may reduce the risk.

b. For reasons of equity :- it includes certain important points:

1. Non attachment of risk :- where the subject matter insured or part there of has never been imperiled for ex. term insurance with returnable premium where premium is returned to the policy holder if death does not occur during period of insurance.

2. Undeclared balance of an open policy: - The policy may be canceled and premium may be return for short interest allowed provided there was no further interest in the policy.

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3. Where assured has no insurable interest : - Through out the currency of the risk. Premium is returnable provided policy was not attached by way of wagering.

4. Unreasonable delay :- Unreasonable delay in commencing the voyage may also entitle the insurer to cancel insurance by returning premium

5. Where the assured has over insured under an unvalued policy, a proportionate part of premium is returnable.

Over insurance by double insurance : - If there is over insurance by double insurance, a proportionate part of several premiums returnable provided that if policies are taken different times and any earlier policy has at any time born the entire risk or if a claim has been paid on the policy in the respect of the full insured thereby no premium is returnable in respect of that policy and when double insurance is affected knowingly by assured, no premium is returnable.

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LIFE INSURANCE

Life insurance contract may be defined as the contract whereby the insurer in consideration of a premium undertakes to pay a certain sum of money either on the expiry of the fixed period or on the death of the insured. According to section 2 (2) of Insurance Act 1938 life insurance also includes annuity business. Since the life insurance contract is not an indemnity contract, the undertaking on the part of the insurer is an absolute one to pay a definite sum of money maturity of policy at the death or an amount in installment for affixed period or during the life.

Features or Elements of Life Insurance contract

1. Nature of general contract2. Insurable interest 3. Utmost good faith 4. Warranties5. Proximate cause 6. Assignment and nomination7. Return of premium8. Others.

In life insurance contract, the first three features are very important, while rests of them are complimentary in nature.

1. Nature of general contract Life insurance is also a short of general contract. It

includes all the essential features of general contract, as agreement, competency, legal objectives, legal considerations, free consent of parties etc.

a. Offer and acceptance : - An offer or proposal is intimation to another of one’s intention to do or to abstain from doing anything with a view to obtain the assent of that other person to such an act. When the person to whom the proposal is made signifies his assent to it, the offer is said to be accepted. The offer and acceptance of life insurance is of typical type. The proposal form is completed by the proposer and along with the proposed for first premium is paid. The same may be accepted at the normal rate and norms. The agents’ canvassing or publication of prospectus and of uses of insurance constitutes invitation to offer because the public in general and individual in particular are limited to make proposal for insurance. Submission of proposal along with the premium is an offer and dispatch of acceptance letter is acceptance. The risk will commence as soon as acceptance letter dispatched by the insurer. When the proposal in not accompanied with first premium, it would be an invitation to offer by prospects and the letter of insurer (generally letter of acceptance with modification is sent) asking the proposer to pay the first without any alteration is an offer and payment of first premium is acceptance.

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b. Competency: the essential element of a valid contract is that the parties to it must be legally competent to contract. Every person is competent to contract – who is of the age of majority according to the law, who is of the sound mind, and who not disqualified from contracting by any law. The insurer will be competent to contract if he has got the license to carry on insurance business. The insurer is working with the article of association and memorandum of association or deed of partnership.

c. Free consent: both the parties must be of the same mind at the time of the contract. If the two parties do not meet in this respect, there is no perfect agreement between them. It is necessary to call it free consent of the parties that the contract is not made through coercion, undue influence, fraud, misrepresentation or mistakes. In life insurance business both parties must know about the nature of risk to be underwritten. If the consent is not free , the contract is generally voidable at the option of the other party whose consent was not freely given.(section 13)

d. Legal consideration: the presence of a lawful consideration is essential for a legal contract. The insurer must have some consideration in return for his promise to pay a fixed sum at maturity or death whichever may be the case. The consideration need not be money only. It should be any thing valuable or to which value may be assigned. It may be interest, dividend, right etc. In Raj Narayan vs. Hindustan Cooperative Insurance, the insurance was accepted but policy was not issued by the insurer. The insured died and could get the policy amount in allegiance of the policy because at the payment of the premium contract was complete. The first premium is consideration and the subsequent premium is merely conditions to contract.

e. Legal objectives: the contract would be legal only when the object is legal. The object of the legal life insurance contract is to protect oneself or one family against financial losses at the death of the insured. The contract is some times to provide for financial contingencies/emergencies that may occur in old age. In brief the contract will be lawful only when the objective is legal. The objective will be legal only when there is insurable interest. With out having this interest, the objective of the contract would not be legal. It would be a wager contract and against public policy.

2. Insurable interest It is a pecuniary interest. The insured must have an insurable interest in the life to be insured for a valid contract. Insurable interest arises out of pecuniary relationship that exist between the policyholders and the life assured so that the former stands to loose by the death of the latter and /or continues to gain by his survival. Insurable interest in life insurance may be categorized in two parts that is:

a. insurable interest in owns life:- An individual has an insurable interest in his own life. Its presence is not required to be proved. Bunyon says that “every man is presumed to possess an insurable interest in his estate for the loss of his future gains or savings

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which might be the result of his premature death.” According to the definition of insurable interest it is also evident that the person will continue to gain financially while he is surviving and he will suffer losses if he is dead because he will be unable to earn or protect the property. The insurable interest in his own life is unlimited because the loss to the insured and his dependent can not be measured in terms of money and therefore no limits can be placed to the amount of the insurance that one may take on one’s own life. Thus theoretically a person can take a policy to any unlimited amount on his own life; but in practice no insurer will issue a policy for an amount larger than amount seems suitable to the circumstances and means of applicant. Generally, it is mentioned one cannot purchase policy usually more than 10 times of his one year income. The premium can be paid by the 3rd party provided there is no intention to speculation. If there is possibility of wager contract it would be void.

b. Insurable interest in other life :- Life insurance can be affected on the life of 3rd party provided the proposer has insurable interest in others life. There are 2 type of insurable interest

a) When no proof is required:-there are only 2 cases when no proof is required for the insurable interest as they are legally presumed 1) wife have insurable interest in the life of husband:-it is presumed & decided by reed Vs royal exchange (1795) that wife is presumed to have insurable interest in the life of her husband because husband is legally bound to support the life of his wife. The wife who will suffer financially if husband is dead and will continue to gain if husband is surviving. Since the extent of loss or gain can not be measured in this case hence wife has insurable interest in the husband life up to an unlimited extent 2) Husband has insurable interest in the life of wife: - Insurable interest presumed to exist here and no proof is required. It was decided Griffith vs. Fleming (1909) that the husband has insurable interest in his wife’s life because of domestic services performed by his wife. If the wife is dead the husband has to employ other person to render domestic services & certain other financial expenditure will involve at her death which is not calculated. The husband is benefited at the survival; of his wife, so it is self proved that husband has insurable interest in his wife’s life. Since monetary loss at her death or monetary benefit at her survival can not be measured there is unlimited insurable interest in the life of wife.

b) Proof is required Insurable interest has to be proved in following cases:-

1) Business relationship : - the policyholder may have insurable interest in the life of assured due to the business or contractual relations. In this case the amount of insurable corresponds with the amount of risk involved. some of the examples are-

A creditor has in the life of debtors. A trustee has insurable interest in respect of interest of which he is trustee A partner has insurable interest in the life of the other partners. An insurer has in the life of the insured. An employee has in the life of key man.

2) family relationship : - insurable interest may arise due to family relationship if pecuniary interest exist between policyholders and life assured because mere relationship or ties of blood and of affection does not constitute insurable interest, the proper must have reasonable expectation of financial benefit from the

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continuance of the life of the person to be insured or of financial loss from his death. The interest must be based on value and not on mere sentiments. Similarly moral obligations are not sufficient to warrant existence of insurable interest although legal obligations to get support will form insurable interest of the person who is supported in life or the person who is supporting. Thus a son can insure his father’s life only when he is dependent on him and father can take insurance policy on his son’s life only when he is dependent on his son.

General rule of insurable interest in life insurance

1) Time of insurable interest: - The insurable interest must exist at the time of proposal. Policy without insurable interest will be wager. It is not essential that insurable interest must be present at the time of claim.2) Services: - except the service of wife, services of other relatives will not essentially form insurable interest. There must be financial relationship between proposer and the life insured. In other words, services performed by the son will not constitute insurable interest of the father in the life of his son. Vice versa is not essential; for forming insurable interest.3) Insurable interest must be valuable : - In business relations the value or the extent of insurable interest must be determined to avoid wager contract of additional insurance. Insurance is limited only up to the amount of insurable interest.4) Insurable interest should be valid : - insurable interest should not be against the public policy and it should be recognized by the law. Therefore the consent of the life assured is very essential before the policy can be issued.5) The legal responsibility may be on the basis of the insurable interest : - since the person will suffer financially up to the extent of responsibility, the proposer has insurable interest to that extent. For instance a person will be under the legal responsibility to expose at the funeral of his wife and children; he can purchase insurance in their lives up to that extent.6) Insurable interest must be definite : - the insurable interest must be present at the time of proposal. Mere expectation of gain or support will not constitute insurable interest.7) Legal consequences : - the insurable interest must be there to form legal and valid insurance contract. With out insurable interest, it would be null and void.

3. Utmost good faith The life insurance requires that the principle of utmost

good faith should be preserved by both parties. This says that both parties i.e. insured and insurer must be of the same mind at the time of contract because only then the risk may be correctly ascertained. They must make full and true disclosure of the facts material to the risk.

Material facts: - In life insurance national facts are age, income occupation, health, habits, residence, family history and plan of insurance. These are not determined or the basis of opinion and therefore all facts must be disclosed which insured feel as material.

Duty: - It is the duty of both the parties to disclose all material facts which are going to influence the decision of other party since the decision is taken on the basis of subject matter, the life to be insured in insurance and national facts relating to subject matter are

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known or is expected to be known by proposer; it is much more responsibility of the proposer to disclose the material facts. It should also be noted that all the disclosed facts must true to its nature and must be authenticated.

Legal consequences: - In the absence of utmost good faith the contract will be voidable at the option of the person who suffered loss due to non-disclosure. The intention at non-disclosure counts frauds and is void ab-initio and unintentional non- disclosure is voidable at the option of party not at fault. Once the voidable contract not at fault has been validated by the party not at fault the contract cannot avoided by him later on for instance, if the insurer has continue to accept the premium when certain non disclosure, say mis-statement of age, has been disclosed the insurer can not invalid the contract and cannot refute the amount of claims. If the party not at fault does not exercise its option, the contract will remain valid.

Facts not required to be disclosed

Circumstances which are diminishing the risk. Facts which are known or reasonably should be known to insurer in his ordinary

course of business. Facts which the insurer should infer from the information given. Facts which are waived by the insurer. Facts which are superfluous to disclose by reasons of a condition or warranties. Facts of public knowledge.

4. WarrantiesFor understanding warranties “representations” are to be thoroughly understood

because in life insurance those representations which are embodied in the policy and are expressly or impliedly forming the part on the basis of the contract are called warranties. Every information given by the proposer for insurance to the insurer during negotiation is representation.

Warranties are an integral part of the contract i.e. these are the basis of the contract between the proposer and insurer and if any statement, weather material or non-material is untrue, the contract shall be null and void and the premium paid by him may be forfeited by the insurer. The policy issued will contain that the proposal and the Personnel statement shall form part of the policy and be the basis of the contract. So that representation will be warranties. As has been disclosed already that the warranties may be – informative and promissory.

i. Informative warranties: - in life insurance the informative warranties are more important. The person is expected to disclose all the material facts to the best of his knowledge and belief.

ii. Promissory warranties: - warranties related to the future may only be the statement about his expectation or intention, for instance the proposer promises that he will not take up any hazardous occupation and will inform the insurer if he will take up the hazardous occupation.

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Breach of warranties: If there is breach of warranties, the insurer is not bound to perform his part of

contract unless he chooses to ignore the breach. The effect of a breach of warranties is to render the contract voidable at the option of the other party provided there is no element of fraud. In case of fraudulent representation or promise, the contract will be void ab- initio.

5. Proximate cause The efficient or effective cause which causes the loss is

called proximate cause. It is the real and actual cause of loss. If the cause of loss (peril) is insured, the insurer will pay; other wise the insurer will not compensate. In life insurance the doctrine of causa proxima (proximate cause) is not applied because the insurer is bound to pay the amount of insurance whatever may be the reason of death. It may be natural or unnatural. So, this principle is not of much practical importance of connection with life assurance, but in the following case the proximate causes are observed in the life insurance, too.

i. War risk :- where policy issued on exclusion of war an aviation risk, the proximate cause of death is important because the insurer waives its liabilities if death occurred , in this case , while the insured was in field or is engaged in operation of war and aviation . Only premium paid or surrender value whichever is higher payable and the total policy amount is not payable.

ii. Suicide : - if suicide occurs with in one year of the policy, or there, was intention to commit suicide and the payment of policy would be restricted, only up to the interest of the third party in the policy provided the interest was expressed at least one month before the suicide.

iii. Accident benefit :-a problem arises when an insured under an accident policy is killed or suffer an injury which has an immediate cause and also a remote cause. In accident benefit policy, double of policy amount is paid. So, the cause of death in this policy is of paramount importance.

6. Assignment and cause The policy in the life insurance can be

assigned freely for the legal consideration or love and affection. The assignment shall be complete and effectual only on the execution of such endorsement either on the policy itself or by any separate deed. Notice for such purpose must be given to the insurer who will acknowledge the assignment. Once the assignment is completed, it can not be revoked by the assignor because he ceases to be the owner of the policy unless reassignment is made by the assignee in favor of the assignor. An assignee may be the owner of the policy both on survival of the life assured, or on his death according to the terms of transfer. The life policy are the only which can be assigned weather the assignee has insurable interest or not. Life policies are frequently charged , assigned or dealt with for they are valuable securities because a fixed sum is certainly paid in life policies excepting a few , say, pure endowment and temporary policies .

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Nominations The holder of a policy of a life insurance on his own life may either at

the time before the policy matures, nominates the person or persons to whom the money secured by the policy shall be paid in the event of his death. A nomination can be cancelled before maturity, but unless notice is given of any such cancellation to the insurer, the insurer will not be liable for any bona fide payment to a nominee registered in a record. When the policy matures, or if the nominee dies, the sum shall be paid to the policyholder or his legal representation.

7. Return of premium Ordinarily, the premium once paid can not be

refunded. However in the following cases the premiums paid are returnable:

For reasons of equity:- Equity implies a condition that the insurer shall not receive the price of running a risk he runs .thus, there the contract does not come into effect or it is held to be void abs into. For example, an account of misrepresentation or breach of warranty, the insured, in the absence of any express condition to contrary, can claim the return of any premium paid. But if the policy runs for a time & become void later on the insured is not entitled to the return of any part of the premium. Where the insured is guilty of fraud in obtaining a policy, he will fail in his claim to the sum assured. He can not also ask for a return of the premium because he will have to allege his own fraud to succeed in his claim & no court will assist such person.

8. Other features Life insurance policies have the following additional features:

I. Unilateral contract : - life insurance contract unilateral contract because, here, only the insurer makes an enforceable promise. The proposer had already performed his duty of payment of premiums. If the first premium is paid, the insurer is bound to accept subsequent premium & to pay the amount claim when it arises except on the ground of fraud.

II. Conditional contract : life insurance is a conditional contract because the insurer shall pay the assured sum only when the contract is continuing by payment of premium. In addition the insurer’s promise to pay the sum assured is also conditional upon the furnishing of satisfactory proof of death & other condition mentioned in the policy.

III. Indemnity contract is not applied : in life insurance the indemnity contract is not applicable because the value of loss at death cannot be ascertained. It is not possible to ascertain the time up to which the insured would have survived & it is also difficult to ascertain the amount of money to be earned by him during life time. So, the doctrine of subrogation is not applicable too.

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CLASSIFICATION OF POLICIES

The life insurance contract provides an element of protection and instrument. After getting insurance, the policy holders feels a same sense of protection because he feels that he shall be paid a definite sum at the time of maturity. Since a definite sum must be paid, the element of investment provides against pre-mature death and a fixed sum at the maturity of policy .The two elements of investment and protection exist in various degrees in different types of policies. Not only this but these element vary according to different times in the same policy the older the policy the lesser the element of protection & higher the element of investment & vice0-versa. Having different element in different policies, the policyholders are free to choose the policy according the requirement. It would be known that no one policy is best for the entire policy holder due to variance in cost, element of investment & protection requirement of policyholder & availability of policy. The life insurance policies can be divided in to 5 categories:

1) Duration of policy 2) Method of premium payment 3) Participation in profit4) Number of lives covered 5) Method of payment of claim amount

1: Policy according to duration of policy The life insurance policy according to duration may be whole life, term insurance, endowment insurance, and survivorship policy.

i. Whole life policies: - such policies are issued for life. It means that the policy amount must be paid at the death of the life assured. The life assured, thus can not get the policy amount during the life time; only his dependent will get the advantage of this policy. Such policy can be affected by the payment of single payment, continuous payment or limited premium. The single premium payment is not very common where as the limited payment is the most common and popular form of whole life policy because of convenience to the policyholder to arrange the payment of premium during his income earning period. In continuous premium payment, this benefit is not available because premium is not payable up to the life of the policyholder. This is loosing its importance because only the dependent of the life assured are getting the benefit. Also in extreme cases he [pays more by way of premium than benefit receivable under the policy and that too when earning capacity of the assured is reduced. This plan is cheaper and best suited to the young man with limited resources and whose requirement for protection is maximum. It is also beneficial to pay estate duty. If the payment of premium ceases after at least 3 years premium have been paid as can be allowed according to the rule will be automatically secured provided the reduced sum assured is not less than Rs. 250.

ii. Term insurance policies: - Such policies are for the shorter period ranging from 3 months to 7 years. Sum insured is payable only in the event of the death of the life assured, occurring

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during the period, but the assurance comes to an end; should the life assured survived. These are the cheapest policies. These policies are without profit policies. Term insurance policies are useful to those :

Who need extra protection for a shorter duration or Who need protection for longer duration but are unable to purchase for the

time being due to ill health or lesser income A young business man can take the policy to save the business disaster

during initial stages of business A key man’s insurance is generally on term insurance basis A mortgagor of the property may be benefited by this scheme A father can take up this policy during the education of his children Any person who is willing to provide insurance for a shorter period.

iii. Endowment policy : these policies are of various types:

a) Pure endowment policy: - The sum assured is payable on the life assureds surviving the endowment term. In the event of his death within the term premium may be returnable or not. In corporations all the premium paid without any deduction will be refunded to. Thus the pure endowment policy is opposite to the term policy. Actually these two policies i.e. pure endowment and term policy are the bases of all the policies. Pure endowment policies are for the benefit of others. So the pure endowment policy has the element of protection. Pure endowment grants protection against “living too long” while term insurance policy grants protection against “living too short”. The former is old age protection while latter is for family protection.

b) Ordinary endowment policy: - This is the policy which actually represents life insurance in true sense. It provides an ideal combination of both the family protection and investment. It is taken out for a specific term of years, the sum assured being payable Either on the assured death during the period or on his survival to the end of the period. Premium are payable through out the term of the policy or to a limited period or till the prior death of the life assured. Ordinary endowment policy is the combination of term insurance and pure endowment. So net premium for the endowment policy is equal to the net premium of term and pure endowment polices issued at same age, for the same period of time.This provides solutions to various problems of life weather living too long or too short. In other words old age provision and family protection is possible by purchasing only this single policy. Moreover compulsory saving in possible due to this policy which is not present in other type of saving .it is a means of hedging against the this possibility of saving period being cut short by death. The neat advantage of this policy is to meet marriages, educations other requirement of family.

c) Joint life endowment policy: - this policy covers more than one life under the single policy. Under this plan, the sum assured is payable on expiry of the term or on the death of one of the assured lives during the endowment period. Premiums are payable throughout the endowment period or till the prior death of any one of the lives assured. The premium is calculated with certain modifications according to the age of all the insured partners. Paid up and surrender value are payable on the policies. This policy is suited to a partner of the firm because firm will not discontinue on the tremendous outflow of the fund at the death of the partner. It is also beneficial to a couple.

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2. Policies according to the premium payment :-

It can be again classified into two heads i.e.:

a. Single premium policy: - in this policy the whole premium is paid at the beginning of the policy. As compared to the annual premium payable, it is costlier , but as compared to aggregate of all the premium annually payable , it is much smaller because all the premium are received in advance and the insurer can earn additional amount on premium received . This type of policy can be affordable by those who get a windfall gain / income and are expected not to continue such return in the subsequent years. The single premium policy is not useful to other persons because of the chances of the deaths where after the subsequent premium are not required to be paid.

b. level premium policy: - under this policy regular and equal premium are paid at the definite interval. This premium is lesser than the single premium and is convenient to make premium at a regular period. This may take the shape of an expense and can be paid. The equal installment may be paid monthly, quarterly, half yearly, and yearly. So it suits the requirement of different types of policyholder.

3. Policies according to participation in profit

a. Without profit or non- participating profit: The holders of such policy are not entitled to share the profit of the insurer. This policyholder gets only the sum assured and no bonus is given to them. b. With profit or participating profit: the holder of such policies are entitled to share profit and not the loss, they can not be treated as the co-owner of the business. I f there is any loss; the policyholder can not get the bonus i.e. the share in the profit. The amount of bonus depends on the profit after deduction of provision for the taxes, contingencies etc. Such policy does not guarantee that policyholder will get bonus or something by way of profit every year. 4. Policies according to the number of persons insured a. Single life policy: Under such policy only one individual is insured. It is not necessary that the policy should be issued in one’s own life, it may be in others life, but the fact is that this policy insures only one life. The policy amount is payable only when insured event occurs. b. multiple life policy: In this policy more than one life is insured. It may be- joint life policy or last survivorship policy.

Joint life policy : - It covers more than two life and the policy amount is payable on first death. This is beneficial to the partners of a firm and to a couple.

Last survivorship policy: - the policy amount is payable at the death. So long as any insured is alive, no payment is made.

5. Policies according to the method of payment

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a. Lump sum policy: - where the sum is assured is paid in lump sum at the event insured against. b. Installment or annuity policy: - Under this policy the policy amount is payable in installment. It is beneficial to those whose earning capacities are reduced to minimum in old age. At that time, this policy may be more helpful. He may continue to get up to a fixed period or up to death or both.

RISK AND ITS CLASSIFICATION

Classes of risks: The various life risks cannot be treated individually so they are put under

a few broad categories based on the degree of risks. There are two main classes of risks: 1) Uninsurable risks

2) Insurable risks

Uninsurable risks : If the insurance can be purchased at higher premium there should not

be any uninsurable risks. Theoretically, after investigating all factors affecting a risk the life insurance company should be able to give each due considerations and determining the premium charge for the insurance. Practically, however there are a numbers of reasons why some persons are not insurable. The premium would be much high for these persons which will be against the insurance principle because higher premium will stimulate only to those who are at the death bed. If they are allowed it would be a case of speculation because after payment of a few premiums he will be gaining. It would be unfair to other healthy policyholders. So, in order to protect the existing policyholder, the insurance company must accept those risks against which it can assess adequate and fair premium to provide for claims. Insurable risks :

Insurable risks are those which after the selection process can be carried out by an insurer although there can be different terms and conditions for different policyholders. There is a standard of risks, if the risks are not too great it can be insured as sub standard risk even if he does not meet the requirement of a standard risk. The risk of death among sub standard lives varies but in all cases it is higher than that of standard lives. Insurable risks are divided in to three broad categories- standard, sub standard and super standard risks. Every insurer does not use all these classifications.

a) Standard risk: The standard risk is related with the normal life where there is no much or no less risk. There are certain criteria on which the risk is judged as normal life. It does not refer ideal or first class life but it is rather it is rather a mix of good and bad lives. This group does not contain only those persons who are free from all the impairments or those persons who are under serious illness. It is the group where majority of persons can be included and who may be either more or less than average.

b) Sub Standard risk: Sub standard risk is those risks which are higher though insurable than the standard risk. Thus, the sub standard risks are above the standard risks and below the uninsurable risks. If the life proposed crosses the maximum

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limit of sub standard risk that will be treated as uninsurable. The sub standard risk is insured after the payment of additional premium.

c) Super standard risk: the super standard risk is present where there is lesser risk than the standard risk. This is also called preferred risk. An insurer does not prefer risk policies because it increases the premium on the other standard risk which may cause reduction in losses of business.

PREMIUM AND CUSTOMER SATISFACTION

The premium is of two types- net premium and gross premium. The two premiums are further sub divided in to two parts:-a) single premium and b) level premium. The net premium is based on mortality and interest rate whereas the gross premium depends on mortality rate, the assumed interest rate, the expenses and the bonus loading. Single premium is paid in one lump sum while the level premium is paid periodically in installments. The level premium is yearly, half yearly, quarterly and monthly. Firstly net premium is calculated and other premiums are based on this calculation.

Net single premium It is that premium which is received by the insurer in a lump sum and is exactly adequate, along with the return earned thereon, to pay the amount of claims wherever it arises whether at death or even at surrender. It does not provide for expenses of management and for contingencies.

Step for calculation1. Determine what constitute a claim (a) death, (b) survival, or (c) both.2. Determine when claims are paid (a) at the beginning, (b) at the end, or (c)

during the year.3. Determine the number of insured.4. Determine the duration of policy.5. Determine the probable number of claims per year.6. Determine the value of claims per year.7. Determine the number of year of interest involved and find the present value of

a rupee.8. Determine the present value of claims for each year.9. Determine the present value of all future claims.10. Determine the net single premium divided by number assumed for buying

policy.

Assumption underlying the rate computations There are certain variables which are to be assumed at a level for calculation and alterations in premium calculation are made at later stage according to the changes in the variables. The following factors are assumed while calculating the net single premium.

1. As many policies of the given type are being issued as are the number of persons2. Premium is collected in advance or in the beginning of the period.3. All collections are immediately invested and will remain invested until money is

needed for the payment of claims

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4. The insurer will receive an assumed rate of interest. The assumed rate should be conservative to avoid future decline in interest rate.

5. The interest or dividend or any return of the invested fund is immediately invested for re-earning.

6. Mortality rate will be same as given in the mortality table and will be uniformly distributed through out the year.

7. All policies are of same amount.8. Claims will be paid only at the end of the period.

These assumptions may not be totally practicable but they are taken for making calculations easy. The changes in the assumptions can be adjusted accordingly.

The premium does matter in all types of policies. It is the premium rate which is determined and thus has an impact on the customer. The customers who adopt the life policy mainly belong to lower- middle, middle, and upper- middle class of the society. Hence premium amount matters a lot. Higher the premium lower will be the customer base and vice- versa. However, if the policy provides certain extra benefit to the customer then customer satisfaction would be higher.

INVESTMENT OF FUNDS

While calculating the premium, it has been assumed that the accumulated premiums are invested. The funds are invested to earn at least assumed rate of interest.

Need of investment1. Payment of claims :

The first and the most important obligation of the insurer are to pay the amount of claims whenever they arise. For this, insurer is getting a substantial amount in the form of premiums and has to preserve them for payment later on. To keep such amount idle will be failure on the part of the insurer who is expected to invest them on behalf of policyholder.

2. To avoid financial deficit : If the funds are not invested, the total income

of the insurer will fall short of its requirement for meeting its commitment because a particular rate of interest on its investment has been assumed while calculating the rate of premium. Again, if the funds are not invested and interest not earned, it would be an under estimation of its future liability which may prove disastrous at the time of higher mortality.

3. National interest : A huge fund of the society is taken by the insurer in form

of premiums. Therefore, it is essential for the insurer to invest the funds for the economical development of the country.

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Sources of funds1. Premiums2. Interest 3. Capital gains4. Non payment of claims

The principles of investment1. Safety2. Profitability 3. Liquidity4. Diversification5. Increase in life business

Basis of formulation of investment policy by a life insurer

1. Basic principle2. The outlook of management 3. The present composition of investment portfolio4. Present position of insurer5. Availability of suitable securities6. Adequacy of funds7. Socio- economic needs

POLICY CONDITIONS AND CUSTOMER SATISFACTION

The policy conditions are studied in five forms:1. Conditions relating to commencement of risk2. Condition of premium 3. Condition relating to continuation of policies4. Lapsed conditions and 5. Claims conditions.

CONDITION RELAING TO COMMENCEMENT OF RISKS

Commencement of risk: The letter of acceptance is not a cover note, it only intimates that the risk will commence when the first premium is offered to and accepted by the insurer. If the premium was paid along with proposal form, the date of letter of acceptance will be the date of commencement of risk. After acceptance of risk, policy is issued. The policy contains terms and conditions of the insurance and is a document which can be used as a proof of insurance.

Proof of age:

The proof of age must be produced at the time of proposal because the rate of premium depends on the age of life insured. The insurer does not withhold the issue of policy for the want of proof of age, but does not admit any

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claims unless the age is proved to the satisfaction of the insurer. However, if it is subsequently found that the age at entry was mentioned lower than the correct age, the assured sum is reduced to such amount as would have been purchased at the true age. If the actual age comes out to be lower than the stated age, the difference is either refunded or adjusted towards future premium or policy amount. The proof of age is very essential at the time of proposal in the term policies. Multi purpose policy, Children Deferred Endowment Assurance, Immediate Annuity and Deferred Annuity, where the life assured has not completed 20 years or where the life to be assured has completed 50 years of age or the proposal is under the Salary Saving Scheme.

CONDITION OF PREMIUM

Payment of premium: The premium rate is calculated annually, but for the convenience

of the assured, it can be paid half-yearly, quarterly, or even monthly. It should be remembered that these premiums are not just the portion of yearly premium because the insurer losses interest on the unpaid premium of a year and expenses are involved for frequent calculation of premium. When premium are not annual but fractional and if death takes place before all the premium have fallen due for the current year , the corporation deduct the unpaid installment from policy year, the corporation deduct the unpaid installment form the assured sum at the time of settling the claims.

Day of grace: Premium is paid at or before the due date. But for the convenience of

the policyholder certain additional period called day of grace, is allowed to pay the premium. The insured can pay the premium with in the day of grace and the policy would not lapse up to the day of grace. One calendar month but not less than 30 days is allowed for payment of premium.

Premium notice:

In order that the policyholder may not forfeit the benefit of his policy, notice of premium falling due will be regularly sent to him except in the case of policies under which the mode of payment of premium is monthly where no such notice is required, the insurer is not bound to give notice and the want of it can not be admitted as an excuse for not paying the due premium in time.

CONDITIONS RELATING TO THE CONTINUE POLICY

Indisputable clause: In order to protect the interest of the assured, indisputable clause is added which provides that the policies shall be indisputable after a state period, i.e. two years from the date of issue except for non payment of premium or for fraud. Section 45 of the insurance act has provided that the policy will not be disputed on the ground of unintentional misstatement, misrepresentation or non disclosure of a material fact after two years of the issue of policy. However on the ground of fraud it can be disputed at any time during the currency of the policy.

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Alterations in policies: The insurer permits certain alterations in terms and conditions of the

policy at the request of the policyholder. The insurer reserves the right to decline such request without assigning any reason. Alteration may be change: in class or term, reduction in term of sum assured, increase in sum assured, changes in the mode of premium payment, splitting up of the policy in to two or more policies and so on. The insurer, generally, does not permit alterations which increase the amount of risk to the insurer.

Lost policy: The insured must inform to the insurer whenever the policy is lost

or destroyed. On the satisfactory evidence of loss or destruction, the insurer will issue a duplicate copy after advertising the fact and will charge the assured the fee for issuing the duplicate copy.

Nominations: According to the section 39 of insurance act 1938, the holder of a

policy of life insurance on his own life may, when effecting the policy or at any time before the policy matures for the payment, nominate a person or persons to whom the policy money secured by the shall be paid in the event of his death. Nominee is the person named by the policyholder to whom the policy amount may be paid if the policy amount is payable on the death and the nominee is alive when the life assured expires. In absence of any of these the nominee does not acquire any of the right in the policy. If policy matures by expiry of time, the policy amount is payable to the insured himself and not to the nominee.

LAPSE CONDITIONS

Lapse of policy:The insurer shall remain liable for the payment of the claims so far the

assured continues to pay the premium when they fall due. If the policyholder fails to pay any of the due premiums with in the day of grace, the insurer’s liability ordinarily ceases under the policy and the contract comes to an end. Thus the policy is lapsed and all the benefit related to the policy is terminated. The insurer, however, provides certain alternatives to help the insured at the time of lapsation.

Revival of lapsed policies: If a policy lapses by non payment of premium within the days of

grace, it may be revived to the full policy amount at any time during the life time of the life assured, but with in a period of five years form the due date of the first unpaid premium and before the date of maturity. The revival is possible within six month from the due date of the first unpaid premium with out evidence of health on the Payment of premium in arrear with the interest at the rate of 7.5%per annum compounded annually. The revival after the first six month from the due date of the first unpaid premium will be effective only on the satisfactory production of evidence of health and habit of the life assured and no adverse changes in personal or family history or occupation.

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Special Revival Scheme: Many policyholders find it difficult to pay the arrears of premium with

interest to revive their policies. For them the special revival scheme is beneficial to gain the cover of insurance. Under this scheme, the date of commencement of policy will be fixed by dating back the policies. The period for which the policy will be dated back depends upon the amount of premium paid. The plan and the period of insurance will be same as those under the original policies. The revival will be effected ordinarily by issue of a fresh policy.

DEVELOPING INDIAN INSURANCE SECTOR

The insurance sector has come to a full circle from being an open market to nationalization and back to liberalized market again. Tracing the development in the Indian insurance sector reveals 360 degree turn witnessed over a period of almost ten centuries.

BRIEF HISTORY OF INSURANCE SECTOR IN DEVELOPING INDIA

1912: Indian life insurance corporation act enacted to regulate the life business in India.1928: India insurance company act enacted to enable the government to collect statistical information about both life and non life insurance business.1938: All the act consolidated and amended by the insurance act with the objective to protect the public’s interest.1956: Nearly 245 India and foreign insurance and provident societies are taken over and nationalized. Formulation of LIC act and its establishment with the initial capital of Rs. 5crores from govt. INSURANCE SECTOR REFORMS In 1993, Malhotra Committee, headed by the former finance secretary and RBI governor R.N. Malhotra was formed to evaluate the Indian insurance business industry and recommend its future direction. It was set up with the objective to compliment the reform initiated in the financial sector. Reforms aims at the “creating more efficient and competitive financial system suitable for the requirement of the economy keeping in mind the structural changes currently under way and recognizing that insurance is an important part of the overall financial system where was necessary to address the need for the similar reform . Committee submitted the following report in 1994 and the recommendations given are:-

1) S tructures : Government stake in insurance company to brought down to 50%.

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Take over of GIC and its subsidiaries so as to make them to act as insurance corporations.

More freedom to operate to the company. 2) Competitions:

Private company with a minimum capital of Rs. 1billion to be allowed to enter the industry. No company should deal in both life and non-life business through a single entity. Foreign company be allowed to enter the industry and should be allowed

collaborate with the domestic companies. Postal life insurance should be allowed to operate in rural areas.

3) Regulatory body: Change in insurance act to be made. Insurance regulatory body to be made. Controller of insurance (currently a part of Ministry of Finance) should be made

independent.

4) Investment: Mandatory investment of LIC life fund to govt. securities be reduced to 50% from

75%. Holding of securities or share of GIC in other companies be reduced to 5%.

5) Customer service: Companies must be encouraged to set up unit linked pension plans.

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HDFC STANDARD LIFE INSURANCE COMPANY LTD.

HDFC Standard life Insurance Company ltd. Is one of the India’s leading private insurance companies, which offers a wide range of individual and group insurance products / solutions. It is a joint venture between Housing Development and Finance Corporations Limited (HDFC Ltd.), India’s leading housing finance institution and a group company of Standard life, UK. HDFC and Standard Life first came together for the possible joint venture, to enter the Indian life business, in January1995. It was clear from the outset that the both the companies share same values and beliefs and a strong relations quickly formed. In October 1995, the company signed 3 years agreement on the venture.

HDFC ltd. Holds 72.37% and Standard Life (Mauritius Holding) Ltd. Holds 26.00% of equity in the joint venture, while the rest is held by others. HDFC Life’s product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. HDFC Life continues to have one of the wide reaches among new insurance companies with about 500 branches in Indian touching customers in over 900 cities and towns

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INCORPORATION OF HDFC STANDARD LIFE INSURANCE COMPANY LTD .

The company was incorporated on 14 th August 2000 under the name HDFC Standard Life Company Ltd. The company’s ambition from as far back as October 1995 was to be the first private company to re-enter the life insurance market in India. On the 23rd October 2000, this ambition was realized when HDFC Standard Life was the only company to be granted a certificate of registration. HDFC are the main shareholder in it with 81.4% share and Standard Life owns 18.6%. HDFC and Standard Life have a close relationship built upon the shred values and trust. The ambition of the HDFC Standard Life is to mirror the success of the parent companies and be the yard stick by which all other insurance companies.

ABOUT HDFC

Incorporated in 1977, as a public limited company Specialize in the provision of hou7sing finance to the individuals, cooperative

societies and corporate sectors. Listed on BSE and NSE Market capitalization as on June 2002is Rs.79 billion (US $ 1.6) Increase in deposit base from Rs. 14.58 billion in FY 94 to Rs.84.91 in FY02 Net increase in FY02 of Rs. 12.41 billion Over 52000 deposits agent and over 1.3 million depositors “AAA” rated by CRISIL and ICRA for eight consecutive years

Achievement by HDFC

Best managed company-1995&96 Most competitive Indian company-1997 Excellent in service industry-1998 National quality award-1999 Best managed company(Asia money)-2000 Asia’s top best managed company-2001 Best non banking financial company in Asia by IIRG-2000 Best product Innovation Award 2011’ for their product ‘HDFC SL Crest’ at the

Indian Insurance Awards2011. ”Life Insurer of the Year” Award at the Bloomberg UTV Financial Leadership

Awards 2012.

ABOUT STANDARD LIFE

Founded in 1825 Mutual life insurance company since 1925 Largest mutual life insurance company in Europe

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“AAA” by Moody’s and Standard and Poor’s Assets over Rs. 581000 crores

GROUP COMPANIES

HDFC Limited HDFC Bank Limited HDFC Assets Management companies Limited HDFC Securities Limited HDFC reality Limited HDFC Chubb General Insurance Companies Limited

BANCASSURANCE PARTNERS

HDFC HDFC Bank United Bank of India Indian Bank Saraswat Bank Bajaj Capital Bank Of Baroda

VISION STATEMENT

“The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offers the best value for the money and set standard in the industry.”

MISSION STATEMENT

The company included in its mission statement as: “We aim to be the top new life insurance company in the market. This does not mean being the largest or the most productive company in the market rather a combination of several things:-

Customer service of higher order Value for money for customers Professionalism in carrying out business Innovative products to cater to the needs of the customers Use of technology to improve several standards Increasing market share

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VALUE STATEMENT

Security Trust Innovation Integrity Customer Centric People Care Team Care Joy and Simplicity

Distribution Offices In its drive to deepen and widen the penetration in the market, the company opened an additional 107 offices during the year, taking the total to 276 across 28 regions. In addition, the company also adopted the hub and spoke model and opened 162 spokes during the year. Through the network of these offices the company’s financial consultant, corporate agent and brokers are able to service the customers in almost 700 cities and towns across the country.

Financial Consultant The company’s distribution strategy continues to lays down strong emphasis on the development of the agency channel. The number of the licensed financial consultant appointed by the company increased from over 33,000 in the previous year to over 74,000 in the current year, with a large part of the increase happening in the latter part of the year. This position the company well to take the advantage of a larger trained sales force in the coming year. The company provides extensive and thorough training, to not only complies with the regulatory requirement, but also to equip the financial consultants to appropriately assess the customer’s insurance needs. The need based analysis approach adopted by the sales force has resulted in a significant increase in the average premium, even beyond the limits of tax benefit available.

Corporate agents Simultaneously the company took advantage of the interest in distributing insurance product that was evinced by banks and other corporate agents. This channel ha yielded good result and account for over 43% of all first year premia collected during the year.

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Servicing the customer During the year, the company has established additional touch points for rendering the effective and efficient customer service. The customer can now visit the offices, call the service helpline, send emails, access the service through the financial consultants. Premium payment can be made easily using options like the direct debit facility as also through net banking that has been enabled on the company website. Through effective use of digital security systems, the company now issues policy document with secured digital signatures.

Investments Investments of insurance companies are regulated under the IRDA Regulations, 2000 as amended from time to time. The company has compiled with all the requirements under the said regulations. The total assets under management as on March 31st 2007 are Rs. 4976 crores as against Rs. 2554 crores in the previous year. Under the unit linked products, the company offers the choice of 6 funds ranging from growth to liquid funds.

Capital During the year, the company raised the paid up equity capital from Rs. 620 crores to over Rs.801 crores. Further the company has also enhanced the authorized capital from Rs. 620 crores to Rs. 1,500 crores. The shares subscribed to by standard life assurance company had demutualised during the year.

Risk Management Policy The company has a risk management policy. This involved risk identification, impact evaluation and mitigant identification exercise. A review mechanism has also been put in place to track the movement of various risks, both at the unit level and at the corporate level. Regular updates in this regard will be placed before the audit committee of directors and the board of directors.

Dividend As the company has not earned profit, the directors do not recommend any dividend.

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THE PRODUCTS OF HDFCSLIC

HDFCSLIC realize that not everyone has the same kind of needs. Keeping this in mind, we have a varied range of products that you can choose from to suit all you r needs. These will help secure your future of your family.

Protection plans:- Term Assurance Plan Loan Cover Term Assurance Plan

Investment Plans Single Premium Whole Of Life Plan

Pension Plan

Personal Pension Plan Unit Linked Pension Plan Unit Linked Pension Plus Plan

Saving Plans

Endowment Assurance Plan Unit Linked Endowment Plan Unit Linked Endowment Plus Plan Money Back Plan Children’s Plan Unit Linked Young star Plan Unit Linked Young star Plus Plan

COMPETITORS OF HDFC STANDARD LIFE INSURANCE CO.

Aviva Bajaj Allianz Birla sun life ICICI Pru Ing vysya Life insurance corporation Max new York life MetLife India

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Om kotak mahindra Reliance life insurance SBI life insurance Tata AIG

ORGANISATIONAL SRUCTURE OF HDFC STANDARD LIFE

45

MD & CEO

GM- SALES & MARKETING

HOD-IT

HOD- LEGAL & SECRE.

GM- FINAN.

HOD-HR

GM- OPERATIONS

BUSINESS HEAD -NORTH

ZONAL MANAGER

BUSINESS HEAD- SOUTH

ZONAL MANAGER

HOD – INSTITUTIONAL SALES

HOD- CHANNEL DEVELOPMENT & SALES

HOD - MARKETING

HOD-BUSINESS PROCESS &RESEARCH

ACCT.

MEDI.

ATRL.

OPERATION

UNDERWRITI-NG

ORGANISATIONAL STRUCTURE AT ALLAHABAD

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TERITORY MANAGER

BRANCH MANAGER

ASSISTANT BRANCH MANAGER

ASSISTANT SALES MANAGER

BRANCH DEVELOPMENT MANAGER

SALES DEVELOPMENT MANAGER

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SCOPE AND OBJECTIVE OF THE PROBLEM/ STUDY

The main aim behind study is to know about the satisfaction level provided by the HDFC Standard life to its customers. One of the aim is also to describe the importance of customer in the modern era of business as far ads insurance industry is concerned. The other objectives are:-

To study the various types of insurance policies offered by HDFC To study the awareness level of customer with respect to the different insurance

policies offered by HDFC. To study of the claim process of the HDFCSLIC. To find out the most preferred insurance plan by the customers.

RESEARCH METHODOLOGY

TYPE OF RESEARCH - Descriptive research design

METHOD OF RESEARCH –Convenience sampling

Data collection method: Primary data were used for the purpose of research.

Area of research: HDFC, Civil Lines Branch at Allahabad City.

Sample size: 100 respondents

Tool of research: Structured questionnaire consisting of both open ended and closed ended questions was used for the purpose of research

Statistical tools for analysis: Percentage system

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FINDING

After critical analysis of the view of respondent(100units). The following have come out which are as follows:-

Investment plans are mostly adopted by 18-30 years age group. The saving plan is still the best choice for the older age group. A insurance policy the reasons specified are saving purpose. It always facilitates the customers with the easiest mode of claims of their amount. Most of people say that HDFC is the private company and I don’t believe in this

type of company.

LIMITATIONS

1. The information disclosed by the respondent may not be very accurate.

2. At some places difficulty faced in obtaining the information due to absence of the proprietor.

3. Unwillingness on the part of few respondents to disclose the information as per the questionnaire.

4. Indecisiveness on the part of the respondents regarding some questions,

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50

People having life insurance policy

Analysis: From the above graph we, can easily interpret that there are 28% people who have life insurance policy and 72% people do not have any life policy. It can also be seen from the above graph that their acceptance level is high, however the case is seen only in the high and middle high class and not in lower middle and lower class people.

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People who have life insurance policy of HDFCSLIC

In the Allahabad there are percentage of people who know the HDFCSLIC is very high but ratio of people have the life insurance policy are very low only 19% of people have the policy of HDFCSLIC and rest 81% don’t have the policy in HDFCSLIC but they have the life insurance policy of other companies. Most of people say that HDFC is the private company and I don’t believe in this type of company.

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Age group: In these the highest percentage is the age group of 18-30 that is 62%, the percentage of 30-45 age group is 23%, only 15% of people have life insurance policy belonging to the age group of 45-60,and the people above the age of 60 years their proportion is 0%.

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62%

23%

15%

0%0%

10%

20%

30%

40%

50%

60%

70%

18-30 30-45 45-60 60-above

Age

Life policy

P er s o n s

Type of life insurance policy people have

Analysis From the above graph we can see that various policies / plans have been classified into four parts and then they have been valued by the customers 41% persons have opted for protection plans. It is due to the fact that the people of India are conservative in nature and always think for future growth. The second preferred plan is saving plan i.e. they have been wanted by more than 20%. The person have the invest plan 27%.

Age group analysis Further the plans have been classified in to various age group like-18-30, 30-45, 45-60, 60 & above. Investment plans are mostly adopted by 18-30 years age group and other age group are less enthusiastic about the investment plan.

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41%

27%

12%

20%

0%

10%

20%

30%

40%

50%

60%

persons

protection investment pension saving

policy

types of policies

Series1

56%

30%

10%

4%

0%

10%

20%

30%

40%

50%

60%

persons

18-30 30-45 45-60 60-above

age group

people having investment plan

Series1

However, as against the investment policy, the saving plan is still the best choice for the older age group like 45-60and 60 and above. Both the group shares same percentage level in the plan.

12%

22%

33% 33%

0%

5%

10%

15%

20%

25%

30%

35%

persons

18-30 30-45 45-60 60-above

age groups

persons having saving plans

Reasons for taking a policy

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31% 32%

20%17%

0%

5%

10%

15%

20%

25%

30%

35%

persons

security saving future need tax rebate

reasons

reasons for taking policy

Analysis The above graph represents the reasons why a person takes a life policy the reasons specified are saving purpose, securing the money, for future need or for getting rebate in tax payment. In it the people gave their first preference to saving and then to security for securing their future needs. They said that by maintaining both will serve the future needs. Very less people prefers to tax rebate facility as they are unaware about this benefit.

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Rating the HDFC Standard life

Analysis The people ranked the HDFC Standard life best on a scale of comparison of it with other company. Nearly 51% persons ranked the company as the excellent and 32% ranked it as good. This shows the image of the company has formed in the market place. And also shows it goodwill which it has crated in the minds of the customers.

Rating the customer service in HDFC Standard life

Analysis This graph shows that the people have rated the customer service better than the other company. Nearly all the customers are satisfied with the facility provided to them. The graph shows that nearly 74% of the customers are satisfied with the working.

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51%

32%

24%

3%0%

10%

20%

30%

40%

50%

60%

Persons

Excellent Good Fair PoorScale of rating

Rating HDFC Standard life

74%

22%

4%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Persons

Excellent Good Fair Poor

Scale of rating

Rating customer service

Rating unit linked plans as the best plans for the modern era

The graph shows that there is a great popularity of ULIP plans of HDFC Standard life. Almost 74% 0f the respondents have ranked the plans as the best one in comparison to other companies. Almost 22% of the responds said that the fund performances of ULIP plans are the good one.

The claim process of the company

80%

12%8%

0%0%

10%

20%

30%

40%

50%

60%

70%

80%

persons

exellant good fair poor

scale of rating

claim process

The claims process seems to be very much settled in the company, the other company always faces such problems. The company has pad the claims amount in a direct way. It always facilitates the customers with the easiest mode of claims of their amount.

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74%

22%

4%0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Persons

Excellent Good Fair Poor

Scale of rating

Rating ULIP plans

Comparison of traditional plans

22%

72%

0%

10%

20%

30%

40%

50%

60%

70%

80%

persons

traditional ulip plans

plans

comparision of plans

Source of awareness of HDFCSLIC

33%

17%

8%

42%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

persons

add. friends family fc

sources

Knowledge about HDFC Standard Life

The people who are know about HDFCSLIC by the different sources. This proportion of people shows that media which are more suitable for awareness and how a company adapts their promotional strategy to increase their market share now here only I describe the way by which people know about HDFCSLIC. The proportion different sources are as fallows:

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Advertisement 33% Friend Circle 17%Family Member 8%Financial Consultant of HDFCSLIC 42%

Arrangements for Enquiry & Assistance

For enquiry and assistance facility of the HDFCSLIC Allahabad 20% customer of the company says very good 30% customer give his mark for good, 35% are satisfied and 0nly 15% customers accept these facilities are poor.

05

10152025303540

EXCELLENT

VERY GOOD

GOOD

SATISFACTORY

POOR

Series1

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CONCLUSIONS & SUGGETIONS

Most of peoples prefer saving and investment plans in comparison of other plansInvestment plans are mostly adopted by 18-30 years age group and other age group are less enthusiastic about the investment plan. There are various policies / plans, 41% customers have opted for protection plans because they are conservative nature and others are less conservative, 27% customers opted investment plans, 12% customers opted pension plans and 20% customers opted saving plans. The company pays the claims amount in a direct way. It always facilitates the customers with the easiest mode of claims of their amount.

Good customer service was a challenge in the past as it is at present. Unless insurance companies in India could realign their systems and procedures with customer needs, take proactive stance in not only rendering good quality customer service, but also anticipating their changing as well as latent needs to add value to the service, bringing about total customer satisfaction. HDFC Standard Life insurance continuous to become the biggest challenge before than in the future also.

No insurance is an island. A few weeks insurance can bring down/tap the blood of all. There are no doubts each insurance company. Have to formulate and implement its own diagnosis specific and vision matching strategy. Cumulatively, the Indian insurance system as whole must be up graded.

The strategy adopted will have to be self renewing in the sense that it will uncover the resources needed, skill needed , expertise required from within rather than from without the insurance system and the country in the very process of implementation;

A precondition of course is the change in our mindset recognizing the opportunities of computerization and enhancing the value addition of our insurance companies. Own heritage of systems procedures and human resources, enthroning equality of opportunity facilitating better performance to collect higher rewards.

It will weave the safety net that will protect all stock holders, including labor, customers and of course the insurance companies

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Annexure

QUESTIONNAIRE

NAME ……………………………………GENDER: Male FemaleAge: 18-30 30-45 45-60 60 and aboveProfession: Serviceman BusinessmanProfessional others, please specify______________________ADDRESS……………………………………………………….......CONTACT NUMBER……………………………………………

RESERCHER NAME: Ajit Kumar

Do you have a life insurance in policy?

Yes( ) No( ) How many people of Allahabad have policy in HDFCSLIC ?

Yes ( ) No ( )

Which type of life insurance policy do you have

Protection plan ( ) Pension plan ( )Investment plan ( ) Saving plan ( )

Do you invest in investment plan according to age criteria

18-30 ( ) 30-45 ( )45-60 ( ) > 60 ( )

Do you have saving plan according to age criteria

18-30 ( ) 30-45 ( ) 45-60 ( ) >60 ( )

Please indicate the reason for investment in insurance policy’s

For security ( )For saving ( )For future need ( )For tax rebate ( )

Kindly Rate the customer service in HDFC STANDARD LIFE INSURANCE ?

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Excellent ( ) Good ( )Fair ( ) Poor ( )

Kindly rate the satisfaction level regarding the ULIP PLAN 0f HDFC STANDARD LIFE INSURANCE?

Excellent ( ) Good ( )Fair ( ) Poor ( )

Kindly rate the claim process adopted at HDFC STANDARD LIFE INSURANCE ?

Excellent ( ) Good ( )Fair ( ) Poor ( )

Among the following types of plans given below state (tick) your choice of preference?

Traditional plan ( ) Ulip plan ( )

Kindly state the source of awareness regarding HDFC STANDARD LIFE INSURANCE ?

Print Advertisement: Magazine NewspaperElectronic Family, Relatives and friends ( ) Financial Consultant of HDFC ( )

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