Life Insurance Sector in India

Life Insurance Sector in India

- By Arun S Kaimal

Related to this project :

DECLARATION

I, Arun S Kaimal , studying in TY BMS of SIES COLLEGE OF ARTS, SCIENCE &

COMMERCE, NERUL hereby declare that I have completed this project on “LIFE

INSURANCE SECTOR IN INDIA” in the academic year 2003-04 as per the

requirements of the MUMBAI UNIVERSITY as a part of BACHELOR IN

MANAGEMENT STUDIES (BMS) programme . The information presented through

this project is true and original to the best of my knowledge.

Arun S Kaimal

TYBMS

SIES NERUL

CERTIFICATE

I, Venkat S Iyer , hereby certify that Arun S Kaimal , of SIES COLLEGE OF ARTS,

SCIENCE & COMMERCE, NERUL has completed this project on “LIFE INSURANCE

SECTOR IN INDIA” in the academic year 2003-04. The information submitted in

this project is true and original to the best of my knowledge.

Prof Venkat S Iyer       Smitha Ramakrishna      ProfG.V.Subramaniam

Project Guide              BMS  Cordinator                      Principal

ACKNOWLEDGEMENTS

This project is the culmination of a study into the wide gamut of activities

carried on in the domain of Insurance especially LIFE INSURANCE in India. This

project would just not have been complete without the valuable contributions

from various people whom I have interacted with in the course of its

completion. I would like to express my sincere gratitude to all those people who

have in their own sweet ways helped me complete this project.  I begin by

thanking my Project Guide and my Guru, Professor Venkat S Iyer,  the treasure

trove of information who has rallied strongly behind me to see me complete this

project.  Without him this project would have remained just an idea, without

form or content. My parents who have always stood by me as solid as a rock; it

is their faith in me that has seen me complete this project on time. My  brother

who helped  me in whatever small ways possible .The list goes on ……………

I wish to thank all those people who have lent me a helping hand in finishing

this project , whose names are too numerous to be mentioned here.  I am also

grateful to our Principal Prof G. V. Subramaniam and our BMS Coordinator Mrs.

Smita Ramakrishna who have always been my guiding lights .

INDEX

TOPIC PAGES

Executive Summary 01

What is Insurance 02-03

Principles of Insurance 04-05

History of Insurance 06-09

Types of Insurance 10-11

Kind of Products 12-16

Overview of the Life Insurance

Sector in India17-18

IRDA-The Watch Dog 19-21

Players in the Indian Market 22-44

Insurance Marketing 45-47

Range Of Products 48-54

The Market Scenario 55-56

The Road Ahead 57-63

Some Important Concepts 64-67

EXECUTIVE SUMMARY

This project is aimed to be an eye opener for the layman of my country. The 

huge and ever rising population levels in our country provides an attractive 

opportunity for  the global insurance majors to seek their fortunes here. This is

the reason why we find so many private players today competing with Life

Insurance Corporation of India (LIC) the only life insurer prior to liberalisation of

our economy , for insuring Indian Lives. Inspite of the loud noises made by the

various companys  vying for a slice of the large Indian Insurance Pie , the irony

is that even today not more than  20% of the populace of our country is aware

about the very basic concepts regarding life insurance. This is precisely the

reason why we see a mandatory tag  today  with every advertisement that

advertises for an Insurance product , that goes “INSURANCE IS THE SUBJECT

MATTER OF SOLICITATION”. The  Insurance Regulatory Development Authority

of India (IRDA) is aware of the fact that many Indian consumers can be taken

for a ride by fly by night operators who could seek to sell insurance as a pure

investment instrument and make good with their hard earned money,

promising them  huge returns.

This project seeks to throw light on the functioning of the insurance industry in

India. Further  this project also aims to clear most of the doubts that may be

clouding the minds of an average Indian, regarding the  LIFE  INSURANCE 

SECTOR  IN INDIA .

However this project has its own limitations as it is an effort by  a  19 year old

to understand  the working  of an industry that has existed for many hundreds

of years and is now poised to take a giant leap forward, affecting the lives,

livelihood and fortunes of millions and millions of our countrymen.

What Is Insurance?

Insurance is not necessarily an investment from which one expects to get one's

money back. Nor is it gambling. A gambler takes risks, while insurance offers

protection against risks that already exist. Insurance is a way to share risk with

others. Since ancient times, communities have pooled some of their resources

to help individuals who suffer loss.

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

insurer undertakes in exchange for a fixed sum called premiums, to

pay the other party called insured a fixed amount of money on the

happening of a certain event."

“Insurance is a protection against financial loss arising on the

happening of an unexpected event. Insurance companies collect

premiums to provide for this protection. A loss is paid out of the

premiums collected from the insuring public and the Insurance

Companies act as trustees to the amount collected.”

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

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

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

the insured receives the compensation to the extent of damage. It is a system

by which the losses suffered by a few are spread over many, exposed to similar

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

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

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

taking life insurance a person can have peace of mind and need not worry

about the financial consequences in case of any untimely death.

Certain Insurance contracts are also made compulsory by legislation. For

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

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

example of compulsory insurance pertains to the Environmental Protection Act,

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

must hold a valid Public Liability (Act) Policy.

Principles of Insurance

Insurance is a 'risk transfer mechanism' - it transfers the financial risks of

everyday life from you to an insurance company. But only in terms of the

financial consequences of risk. Without insurance, if you car was damaged, it

would cost you a lot of money to fix it or to buy another one. It could cost you

even more to pay for compensation to someone else involved in an accident.

Insurance protects your financial interests.  It cannot alleviate the emotional

consequences of an accident. It cannot provide for humanitarian ideals. It can't

help you with sentimental losses. But properly used, it will protect your financial

investment in your car and your legal obligations should you have an accident.

Insurable Interest

Before you can insure anything, you must have a legally recognised financial

interest in what you are insuring. For motor insurance, you can't take out an

insurance policy on the car driven by the latest film star in the hope that it will

crash and you can claim. That is nothing more than gambling. You have no

financial interest in the well  being of the object insured and would gain by its

destruction. But you can insure the car you own, or drive. You would suffer

financially if it is damaged or stolen and benefit from its continued existence.

Indemnity

This word is used to describe the type of payment you would receive. A motor

policy and a household policy are both a contract of indemnity. It means,

subject to the terms of the contract, you are entitled to be put back in the same

financial position after a loss as you were in before the loss. In terms of a 'new

for old' policy the measure of indemnity is agreed at the point of sale rather

than the time of claim. The term is also sometime used to indicate if your

insurer will meet the claim at all. A refusal to indemnify is a refusal to pay the

claim.

Contribution

If there is more than one policy in force that you could claim on, you can't get

payment from them both that would exceed the value of your loss. So each

policy would contribute a portion of the loss. You would receive the full value of

the loss but no more and the two policies would only bear part of it each.

Subrogation

This is the right that your insurer has to recover from someone else where you

are entitled to do so. For example, if another driver causes damage to your car,

and your insurers pay for it, subrogation gives them the legal right to 'stand in

your shoes' and reclaim their outlay from the responsible driver.

Proximate Cause

When you seek to claim from your insurers for a property or financial loss you

must show that the loss was caused as a result of a peril covered by the policy.

There must be a direct relationship of cause and effect, the cause must be

proximate in efficiency but not necessarily in point of time. There might for

example, be a chain of causes in which each cause is the natural result of the

preceding cause. It is the immediate and not the remote cause which must be

considered. The full and classic definition of this principle is given in case law

called 'Pawsey V Scottish Union and National Insurance Co (1908)'

History of Insurance

Insurance has been around since ancient times. The Babylonians and

Phoenicians had ocean marine insurance to protect a merchant against losses

incurred when a ship did not reach its intended destination with its load of

goods or did not return with payment. This form of insurance, called

respondentia, evolved because the goods on board often were used as

collateral for a loan. The lender charged the borrower interest on the loan and

levied an additional sum, the premium, to cover the cost of the respondentia

contract. If the ship reached its destination and returned, the merchant

received payment for the goods and in turn paid the moneylender. If the ship

failed to return, the debt was cancelled. This system was profitable to lenders

because many respondentia contracts were sold, and debts were paid more

often than cancelled.

In ancient Rome, associations had a form of insurance for their members. Each

member made regular payments to the association in return for coverage of

funeral expenses or for assistance to family members who were injured or ill.

Insurance also existed in 17th-century England, which was then one of the

world's principal maritime powers. Those seeking marine insurance would post

a list of their cargo and voyages in a London coffee house owned by Edward

Lloyd. Private investors would examine the list and sign their name by the

entries they were willing to guarantee for a fee. These private investors were

the first insurance underwriters, and the coffee house became the world center

of marine insurance. Today the organization is known as Lloyds of London, and

it brings together individuals, most often working in syndicates, who write all

types of insurance.

Insurance in the modern form originated in the Mediterranean during 14th

century. The earliest references to insurance have been found in Babylonia, the

Greeks and the Romans. The use of insurance appeared in the account of North

Italian merchant banks who then dominated the international trade in Europe at

that time. Marine insurance is the oldest form of insurance followed by life

insurance and fire insurance. The patterns that have been used in England

followed in other countries also in these kinds of insurance

The oldest and the earliest records of marine policy relates to a Mediterranean

voyage in 1347. In the year 1400, a book written by a merchant of Florence,

indicates premium rates charged for the shipments by sea from London to Pisa.

Marine Insurance spread from Italy to trading routes in other countries of

Europe.

Fire insurance has its origin in Germany where it was introduced in

municipalities for providing compensation to owners of the property, in return for

an annual contribution, based on the rent of those premises. The fire insurance in

its present form started after the most disastrous fire in human history known as

the 'Great Fire' in London, which had destroyed several buildings. It drew the

attention of the public and the first fire insurance commercially transacted in

1667. The Industrial Revolution (1720-1850) gave much impetus to fire

insurance. The Nineteenth century marked the development of fire insurance.

Due to the increasing demands of the time, different forms of insurance have

been developed. Industrial Revolution of 19th century had facilitated the

development of accidental insurance, theft and dacoity,  fidelity insurance, etc. In

20th century, many types of social insurance started operating, viz.,

unemployment insurance, crop insurance, cattle insurance, etc. This way the

business of insurance developed simultaneously with human and social

development. Today, the use of computers in the field of insurance is frequently

increasing. Insurance becomes an inseparable part of human development.

The early developments of life insurance were closely linked with that of marine

insurance. The first insurers of life were the marine insurance underwriters who

started issuing life insurance policies on the life of master and crew of the ship,

and the merchants. The early insurance contracts took the nature of policies for a

short period only. The underwriters issued annuities and pension for a fixed

period or for life to provide relief to widows on the death of their husbands. The

first life insurance policy was issued on 18th June 1583, on the life of William

Gibbons for a period of 12 months.

The history of life insurance in India dates back to 1818 when it was

conceived as a means to provide for English Widows. Interestingly in those days

a higher premium was charged for Indian lives than the non-Indian lives as

Indian lives were considered more riskier for coverage. The Bombay Mutual Life

Insurance Society started its business in 1870. It was the first company to

charge same premium for both Indian and non-Indian lives. The Oriental

Assurance Company was established in 1880. The first general insurance

company- Tital Insurance Company Limited, was established in 1850. Till the

end of nineteenth century insurance business was almost entirely in the hands

of overseas companies.

Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several

frauds during 20's and 30's sullied insurance business in India. By 1938 there

were 176 insurance companies. The first comprehensive legislation was

introduced with the Insurance Act of 1938 that provided strict State Control

over insurance business. The insurance business grew at a faster pace after

independence. Indian companies strengthened their hold on this business but

despite the growth that was witnessed, insurance remained an urban

phenomenon.

The Government of India in 1956, brought together over 240 private life

insurers and provident societies under one nationalised monopoly corporation

and  LIC was born. Nationalisation was justified on the grounds that it would

create much needed funds for rapid industrialization. This was in conformity

with the Government's chosen path of State- led planning and development.

The (non-life) insurance business, however, continued to thrive with the private

sector till 1972. Their operations were restricted to organised trade and

industry in large cities. The general insurance industry was nationalised in

1972. With this, nearly 107 insurers were amalgamated and grouped into four

companies- National Insurance Company Ltd., The New India Assurance

Company Ltd., The Oriental Insurance Company Ltd. and United India Insurance

Company Ltd. These were subsidiaries of the General Insurance Coororation of

India (GIC)

TYPES  OF   INSURANCE

General insurance

The basis for general  insurance is "transfer of risk".

This means that the insurer agrees to compensate you if you suffer a loss.

Without the insurance you would have to pay for that loss yourself. Obviously

this contract is made on the basis that the insurance company calculates the

risk that you, or the total number of people buying insurance, will cost more in

payouts than what is received in premiums. This is determined by the use of

statistics and the information you disclose on your application for insurance.

This includes:

Home contents. It can either be "defined event" i.e. the policy covers loss or

damage from a list of "defined" events, e.g. storm or fire; or "accidental loss or

damage" i.e. all accidental loss with some exclusions.

Motor vehicle. It can either be "comprehensive" i.e. it covers any damage to

your car as well as damage to the other car or another person's property; "third

party property" i.e. it covers damage caused by your car to another person's

property. This type of insurance will not cover you for the cost of repairs to your

own car; "third party fire and theft i.e. it covers damage partly for damage

caused by your car to another person's property, and restricted cover for

damage to your car cause by theft or fire.

Income protection. With this type of insurance the insurer agrees to pay you a

specified amount of money, usually in monthly payments, in the event that you

become disabled and unable to work. Along the same lines you an purchase

"trauma insurance" to cover a medical trauma such as a heart attack.

Also in the modern day world a number of utility specific insurance policies are

being launched by the various players in the insurance market in an effort to

stay one step ahead of their competitors. Hence to make the Definition of

General Insurance more broad based and inclusive we can say that all the

policies which do not fall  under  “Life Insurance “ category fall under the

General Insurance category.

Life Insurance

Life insurance is insurance that will protect your family and/or specified

dependents in the event of the policy holder’s death. In general, it is an

essential component in planning for the future. There are many options with

coverage, depending on your situation. And there are three main categories of

life insurance: term life, universal life, and whole life insurance.

Term life is the simplest and least expensive type of policy. It's pure insurance

with no cash value account. A term life policy has only one function: to pay a

specific lump sum to whoever you've designated, upon a specific event, your

death.

Whole life insurance provides permanent protection for your dependents while

building a cash value account. With this type of insurance, the insurance

company manages the policies various accounts. Universal life insurance

provides permanent protection for your dependents and is more flexible than

whole or variable life.

KINDS OF LIFE INSURANCE PRODUCTS

Term Life Insurance

Term life insurance is the easiest form of life insurance. It simply provides

insurance protection for a period of time and only pays a benefit during that

period. Since term life insurance has no cash value, the amount of protection in

this policy is equal to its death benefit. There are three basic forms of term life

insurance: level term, decreasing term, and increasing term.

Level Term Life Insurance

Level term life insurance provides an equal amount of protection for a period of

time. For example a Rs 150,000 ten-year level term life insurance policy pays

out Rs 150,000 of coverage until the ten years are over. At the end of the ten

years this level term life insurance policy would expire, and would pay out no

benefits.

Decreasing Term Life Insurance

Decreasing term life insurance is a policy where the benefit amount decreases

gradually over the term of the protection. A 30 year Rs 200,000 decreasing

term policy, for example, wound pay a Rs 200,000 benefit at the beginning of

the policy. This amount would gradually decline over the 30-year term and

would pay out Rs 0 at the end of the term. This type of term life insurance is

good when the need for protection declines over the years. For instance, if you

just took out a Rs 200,000 30-year mortgage on your home, the insurance

would pay off the mortgage if the insured should pass away during the

mortgage term.

Increasing Term Life Insurance

Increasing term life insurance policies provide a payout benefit that gradually

increases at periodic intervals. These increase amounts are usually a

percentage of the original amount. Increasing term life insurance is usually sold

as a protection against the effects of inflation. Therefore this type of insurance

is usually sold along with another form of life insurance.

Most forms of term life insurance allow you the option to renew. This allows the

policy owner to renew the term policy before its termination date. The benefit of

this is that you usually do not have to qualify again for the policy. The term life

insurance rate, however, for the new period would be higher than the initial

period. The one-year renewable term is the most common type of these

renewable term life insurance policies. This provides coverage for one year and

allows the policy owner to renew his or her coverage each year, even if the

policy owner becomes uninsurable.

Another option for term life insurance policies is the option to convert. This

allows the insured to exchange the term life insurance plan for a whole life plan,

even if the owner becomes uninsurable. When changing the policy, your

premium term life insurance rates are based on either your current age, or the

age when you originally took out the policy. Depending on how your policy is

set up, you could be paying much lower interest rates that you would have

normally qualified for.

Whole Life Insurance

Whole life insurance is a popular life insurance plan because it provides

permanent protection, provided premiums are paid. The advantages of whole

life insurance plans are cash values, maturity at age 100, and living benefits.

Also the policy's premiums and benefits remain constant throughout the

policy's life.

Unlike term life insurance, which provides only death protection, whole life

insurance combines insurance protection with savings benefit.  The cash value

of this type of insurance builds over the life of the policy. This is because whole

life insurance plans are given a certain guaranteed interest rate. The interest

gained is credited onto the policy and grows over time. This cash value is also

the amount of money the policy owner will receive if the policy is ever canceled.

The whole life insurance cash value is generally figured out based on the face

value of the policy, the duration and amount of payments, and how old the

policy is.

Another benefit of whole life insurance policies is that they are designed to

mature at the age of 100. The premium rate for a whole life insurance is based

on the assumption that the insured would be paying premiums until the age of

100. This means that at age 100, the cash value of the policy has come to the

point when it equals the face amount of the policy. At this point the policy has

completely matured, no more premiums are owned, and the policy is

completely paid out to the policy owner.

The living benefits of a whole life insurance policy is, through the cash value

accumulation build-up in the policy, that a policy owner has a ready source of

funds that may be borrowed against. These funds could be used for anything

from an emergency, to pay off a mortgage, or for your child's education. In

addition, because life insurance is considered property with a cash value, it may

be used as collateral for loans. However, if a loan is outstanding at the time the

insured passes away, the amount of the loan plus any interest will be

subtracted from the death benefit before it is paid.

Premiums for a generic straight whole life insurance plan provide level

protection with level premiums, from the time the policy is taken out until the

age of 100. Even though whole life premiums are calculated as if they are

payable to age 100, they don't have to be paid that way. There are several

types of whole life insurance that have been developed to accommodate a

variety different people. Limited pay whole life insurance is one of these many

types of whole life insurance. This type of insurance has level premiums that

are paid until a certain period of time. For instance, a 30 year limited pay whole

life insurance policy is one in which premiums are paid for the duration of 30

years, after which no premiums would be paid. Even though you wouldn't be

paying premiums after the 30 years, your life insurance protection and cash

value are calculated to the age of 100.

Universal Life Insurance

Universal life insurance is a variation of whole and term life insurance, with

added flexibility and transparency. This added flexibility allows the policy owner

to determine the amount and frequency of premium payments and to adjust

the benefit payout amount up or down to reflect changes in needs. Universal

life insurance also provides a type of transparency, in that the life insurance

policy is broken down into its protection, savings, and expense components.

Each month a mortality charge is deducted from the policy's cash value for the

cost of the insurance protection, then interest is added to the remaining cash

value. When the policy owner pays a premium, the insurance company takes

out an expense charge and then adds the remainder to the cash value.

Universal life insurance policies remain in force as long as there enough cash

value to pay the monthly mortality expenses, regardless of whether or not the

policy owner pays the premium. Therefore, if the premium payments made

aren't large enough or frequent enough to generate sufficient cash values, the

policy would terminate.

At stated times the policy owner can increase or decrease the face value of a

universal life insurance policy. This allows the owner to change their policy

based on their current needs. An increase or decrease in premium payment is

not required, as long as the cash values can cover the mortality charges. With a

universal life insurance you can also elect to put more into the policy, adding to

the cash value.

Your cash values on a universal life insurance policy are calculated out by using

guaranteed and current interest rates. Universal life insurance policies always

guarantee a minimum interest rate along with maximum mortality and expense

charges. The company is obligated to pay only its guaranteed values, even

though they usually pay out higher interest rates depending on current rates.

With a universal life insurance policy the money in the cash value account is

readily available to you. You can not only borrow against it, but you can

withdrawal the entire amount or withdraw part of it. However, your death

benefit is reduced by the amount you withdraw, and you cannot restore the

original benefit by simply repaying the amount withdrawn. You would have to

put money back into your policy, which is subjected to expense charges. Plus if

it is a large increase in your benefit you may have to prove that you are still in

good health.

The transparency of your universal life insurance allows you to choose your

premiums. Some insurers may require you to pay a minimum premium, which

are usually still lower than the mortality and other charges. You should be

prepared to pay a decently large premium to keep your policy in effect incase

interest rates fall or expenses rise. Universal life insurance works best if you

select a reasonably large premium, compared to what you might pay for a

traditional whole life plan. This limits your risk from possible future premium

increases.

OVERVIEW OF THE LIFE INSURANCE SECTOR IN INDIA

With largest number of life insurance policies in force in the world, Insurance

happens to be a mega opportunity in India. It’s a business growing at the rate of

15-20 per cent annually and presently is of the order of Rs 450 billion. Together

with banking services, it adds about 7 per cent to the country’s GDP.  Gross

premium collection is nearly 2 per cent of GDP and funds available with LIC for

investments are 8 per cent of GDP.

Yet, nearly 80 per cent of Indian population are without life insurance cover,

health insurance and non-life insurance continue to be below international

standards. And this part of the population is also subject to weak social security

and pension systems with hardly any old age income security. This itself  is an

indicator that growth potential for the insurance sector is immense.

A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and

at the same time strengthens the risk taking ability. It is estimated that over

the next ten years India would require investments of the order of one trillion

US dollars. The Insurance sector, to some extent, can enable investments in

infrastructure development to sustain economic growth of the country.

With a large capital outlay and long gestation periods, infrastructure projects

are fraught with a multitude of risks throughout the development, construction

and operation stages. These include risks associated with project

implementaion, including geological risks, maintenance, commercial and

political risks. Without covering these risks the financial institutions are not

willing to commit funds to the sector, especially because the financing of most

private projects is on a limited or non- recourse basis.

Insurance companies not only provide risk cover to infrastructure projects, they

also contribute long-term funds. In fact, insurance companies are an ideal

source of long term debt and equity for infrastructure projects. With long term

liability, they get a good asset- liability match by investing their funds in such

projects.

IRDA regulations require insurance companies to invest not less than 15

percent of their funds in infrastructure and social sectors. International

Insurance companies also invest their funds in such projects.

Insurance is a federal subject in India. There are two legislations that govern

the sector- The Insurance Act- 1938 and the IRDA Act- 1999. The Government

of India liberalised the insurance sector in March 2000 with the passage of the

Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry

restrictions for private players and allowing foreign players to enter the market

with some limits on direct foreign ownership. Under the current guidelines,

there is a 26 percent equity cap for foreign partners in an insurance company.

There is a proposal to increase this limit to 49 percent. Premium rates of most

general insurance policies come under the purview of the government

appointed Tariff Advisory   Committee.

The opening up of the sector is likely to lead to greater spread and deepening

of insurance in India and this may also include restructuring and revitalising of

the public sector companies. A host of private insurance companies operating in

both life and non-life segments have started selling their insurance policies

since 2001.Insurance Regulatory and Development Authority –The Watch Dog.

On 19th April 2000, the Authority has been notified in the Gazette of India in

terms of Insurance Regulatory and Development Authority Act, 1999 (IRDA Bill).

The Authority has also been constituted.

Mission:To protect the interests of the policyholders, to regulate, promote and

ensure orderly growth of the insurance industry and for matters connected

therewith or incidental thereto

DUTIES, POWERS AND FUNCTIONS OF AUTHORITY

AS per the INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY

ACT ,1999

         14(1) Subject to the provisions of this Act and any other

law for the time being in force, the Authority shall have the duty

to regulate, promote and ensure orderly growth of the insurance

business and re-insurance business.

         14(2) Without prejudice to the generality of the provisions

contained in sub-section (1), the powers and functions of the

Authority shall include,--

a.       issue to the applicant a certificate of registration, renew,

modify, withdraw, suspend or cancel such registration;

b.      protection of the interests of the policy-holders in matters

concerning assigning of policy, nomination by policy-holders,

insurable interest, settlement of insurance claim, surrender

value of policy and other terms and conditions of contracts of

insurance;

c.       specifying requisite qualifications, code of conduct and

practical training for intermediary or insurance intermediaries

and agents;

d.      specifying the code of conduct for surveyors and loss

assessors;

e.       promoting efficiency in the conduct of insurance business;

f.        promoting and regulating professional organization

connected with the insurance and re-insurance business;

g.       levying fees and other charges for carrying out the

purposes of this Act;

(h) calling for information from, undertaking inspection of,

conducting enquiries and investigations including audit of the

insurers, intermediaries, insurance intermediaries and other

organizations connected with the insurance business;

h.       control and regulation of the rates, advantages, terms and

conditions that may be offered by insurers in respect of general

insurance business not so controlled and of 1938 regulated by

the Tariff Advisory committee under section 64U of the Insurance

Act, 1938;

i.         specifying the form and manner in which books of account

shall be maintained and statement of accounts shall be rendered

by insurers and other insurance intermediaries;

j.        regulating investment of funds by insurance companies;

(l) regulating maintenance of margin of solvency;

k.      adjudication of disputes between insurers and

intermediaries or insurance intermediaries;

l.         supervising the functioning of the Tariff Advisory

committee;

m.     supervising the percentage of premium income of the

insurer to finance schemes for promoting and regulating

professional organization referred to in clause (f);

n.       specifying the percentage of life insurance business and

general insurance business to be undertaken by the insurer in

the rural or social sector; and

o.      exercising such other powers as may be prescribed.

The founder chairman of IRDA was Mr. N.Rangachary. It was under his

stewardship that the Indian Insurace industry really opened up.

Chairman: Mr. C. S. Rao

The IRDA is located at

3rd Floor, Parisrama Bhavanam

5-9-58/B, Fateh Maidan Road

Basheerbagh

Hyderabad - 500 004

Ph : 040-55820964

        040-55789768

Fax: 55823334

THE PLAYERS IN THE INDIAN LIFE INSURANCE MARKET

Allianz Bajaj Life Insurance Co. Ltd.

AMP Sanmar Assurance Company Limited

Birla Sun Life Insurance Co. Ltd.

Dabur CGU Life Insurance Company Pvt. Ltd

HDFC Standard Life Insurance Co. Ltd.

ICICI Prudential Life Insurance Co Ltd.

ING Vysya Life Insurance Co. Pvt. Ltd.

Life Insurance Corporation of India

Max NewYork Life Insurance Co. Ltd.

MetLife India Insurance Company

OM Kotak Mahindra Life Insurance Co. Ltd.

SBI Life Insurance Company Ltd.

Tata AIG Life Insurance Co. Ltd.

LIFE INSURANCE CORPORATION OF INDIA

LIC was formed on 1-9-1956 by Government of India by nationalizing the then

existing private insurance companies.  At that time the objective of

nationalization of the  life insurance business was to canalize the funds of LIC

for the benefit of the people of India.  LIC invests not less than 75% of its funds

in Central Government Securities, State  Government Securities and the

balance is invested by LIC in the private sector.

The central office of LIC is located at Mumbai.  There are 7 zonal offices and

about 200 divisional offices in LIC spread all over the country.  The zonal office

in LIC controls between 3 to 7 divisional offices.  In turn divisional offices

monitor, guide and control the branch offices. Most of the functioning of LIC like

issuing policies, collecting premiums and payments  of maturity and death

claims is done at branch office level, only cases which fall beyond the financial

powers of branch offices are referred to divisional offices for approval.

LIC also has another wing called "Pension and Group Insurance", whose

accounts are maintained seperately and are also shown seperately in the

detailed financial highlights of LIC. The group insurance business and servicing

is handled separately by Pension & Group Schemes Department  of LIC at

Divisional Office level. LIC follows the usual practice of closing its accounts on

31st March of every year.  LIC being a giant, takes about 4 to 6 months to

finalise its financial performance.  More over the detailed accounts of LIC have

to be submitted to Parliament every year. 

As the accounts of the LIC are finalised some time during Aug. - Sept.  the

bonus rates on with profit policies are declared only in October(usually).  Till

1996 LIC was following a uniform bonus rates for Endowment and Whole Life

Policies.  But it is observed that LIC has changed its earlier policy and from

1996 onwards it is declaring different rates of bonuses depending on the

term/policy etc.

Corporate Office :

Yogakshema Jeevan Bima Marg,

Post Box No. 19953,

Mumbai 400 021.

Telephone Number: 2021383/2022151

WebSite : www.licindia.com

FINANCIAL PERFORMANCE of  LIC( RS in Crores )

1997-98 1998-99 1999-2000

PREMIUM

INCOME19,252.07 22,805.80 27,461.71

OTHER INCOME

INCOME FROM

INVESTMENTS

OTHER

RECEIPTS

11,296.32

184.21

13,183.92

     362.87

16,056.62

  1,211.28

TOTAL INCOME 30,732.60 36,352.59 44,729.61

EXPENSES

COMMISSION

OTHER

1,706.55

2,246.67

 2,001.94

 2,667.56

2,506.02

3304.84

EXPENSES

TOTAL

EXPENSES3,953.22 4,669.50 5,810.86

CLAIMS FOR

THE YEAR

(INCLUDING

BONUS)

BY DEATH

BY MATURITY

1,165.17

5,507.90

 1,378.36

 6,237.42

1,637.70

7,628.55

LIFE

INSURANCE

FUND AT THE

END OF THE

YEAR

1,05,832.89 1,27,389.06 1,54,043.73

TOTAL ASSETS 1,09,954.38 1,32,764.39 1,60,935.76

Claims Settlement Operations

Claims  IntimatedClaims settled

during the year

Claims

outstanding  

(including claims

written back) at the

end of the year

YearNumber

(in lakh)

Amount

(Rs. in

crore)

Number

(in lakh)

Amount

(Rs. in

crore)

Number

(in lakh)

Amount

(Rs. in

crore)

1995-1996

1996-1997 41.90 4594.69

41.67

49.49

4532.22

5691.49

1.67

1.60

288.70

319.59

1997-1998

1998-1999

1999-2000

49.42

56.51

60.07

66.19

5722.38

6673.07

7615.78

9266.25

56.52

59.83

66.42

6677.04

7583.18

9211.30

1.59

1.83

1.60

315.62

348.22

403.17

Birla Sun Life Insurance Company Limited

The company is the result of a joint venture between The Aditya Birla Group

and Sun Life Financial, a leading international financial services organization.

The Aditya Birla Group is the second largest business house in India, with a

turnover exceeding Rs 260 billion and an asset base in excess of Rs 180 billion.

The group's market capitalization is approximately Rs 150 billion. It has 7 lakh

investors and employs around 72,000 people. It is a multinational conglomerate

in it's own right, with 75 diversified business units in India and overseas,

including operations in Canada, USA, UK, Thailand, Indonesia, Philippines,

Malaysia and Egypt.

Sun Life Financial has evolved from a single mutual fund life insurance company

into one of the most highly rated insurance and wealth management

institutions in the world. Sun Life Financial group offers a wide range of financial

solutions to individuals and corporates and these are in the areas of life, health

and disability; pension funds and plans; investment management; annuities and

savings; trust, brokerage and banking. Sun Life Assurance Company of Canada,

Sun Life's primary insurance arm, is among the largest international financial

services organizations in the world, with assets under management of over US$

201 billion.

The two groups have had a partnership in India for a long time in the areas of

asset management, retail distribution and stock broking. It was natural

therefore that when the insurance sector was opened up in India, the

partnership was extended to life insurance. Thus was born Birla Sun Life

Insurance Company Ltd.

The company has set for itself the following Business Management Philosophy:

Vision 

To be a world class provider of financial services to individuals over their

lifetime

Mission 

To be the first preference of their customers as a leading Integrated Insurance

Provider of insurance solutions through superior value creation and technology.

Core Values

         Operating with integrity to the very highest standards of business

conduct.

         Always working with the customer's needs in mind.

         Relentlessly pursuing excellence through the people they employ and

the work they do.

         Providing products and services that add value for customers, channel

partners and build value for the shareholders.

.

Corporate Office:

1st Floor, Ahura Centre,

'B' Wing, Mahakali Caves Road,

Andheri(East),

Mumbai 400 093.

Telephone Number: 022-6928300

WebSite : www.birlasunlife.com

HDFC Standard Life Insurance Company Limited

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

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

companies shared similar values and beliefs and a strong relationship quickly

formed. In October 1995 the companies signed a 3 year joint venture

agreement.

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

strengthening the relationship. The next three years were filled with

uncertainty, due to changes in government and ongoing delays in getting the

IRDA (Insurance Regulatory and Development authority) Act passed in

parliament. Despite this both companies remained firmly committed to the

venture.

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

resource made available. Around this time Standard Life purchased 2% of

Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also

started to use the services of the HDFC Treasury department to advise them

upon their investments in India.

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

both companies agreed the time was right to move the operation to the next

level. Therefore, in January 2000 an expert team from the UK joined a hand

picked team from HDFC to form the core project team, based in Mumbai. . In a

further development Standard Life agreed to participate in the Asset

Management Company promoted by HDFC to enter the mutual fund market.

The Mutual Fund was launched on 20th July2000.

 The company was incorporated on 14th August 2000 under the name of HDFC

Standard Life Insurance Company Limited.

Their ambition from the beginning was to be the first private company to re-

enter the life insurance market in India. On the 23rd of October 2000, this

ambition was realised when HDFC Standard Life was the first life company to be

granted a certificate of registration.

HDFC are the main shareholders in HDFC Standard Life, with 81.4%, while

Standard Life owns 18.6%. Given Standard Life's existing investment in the

HDFC Group, this is the maximum investment allowed under current

regulations.

HDFC and Standard Life have a long and close relationship built upon shared

values and trust. The ambition of HDFC Standard Life is to mirror the success of

the parent companies and be the yardstick by which all other insurance

companies in India are measured.

Corporate Office:

IL&FS Financial Centre,

Plot C22 - G Block,

Bandra Kurla Complex, Bandra (East),

Mumbai 400 051.

Telephone Number: 6932666

Website : www.hdfcinsurance.com

ICICI Prudential Life Insurance Company Limited

ICICI Prudential Life Insurance Company Limited was incorporated on July 20,

2000. The authorized capital of the company is Rs.2300 Million and the paid up

capital is Rs. 1500 Million. The Company is a joint venture of ICICI (74%) and

Prudential plc UK (26%).

The Company was granted Certificate of Registration for carrying out Life

Insurance business, by the Insurance Regulatory and Development Authority on

November 24, 2000. It commenced commercial operations on December 19,

2000, becoming one of the first few private sector players to enter the

liberalized arena.

Till March 31,2002 the Company has issued 100,000 polices translating into a

Premium Income of around Rs. 1,200 Million and a sum assured of over

Rs.15,000 Million.

The Company recognizes that the driving force for gaining sustainable

competitive advantage in this business is superior customer experience and

investment behind the brand. The Company aims to achieve this by striving to

provide world class service levels through constant innovation in products,

distribution channels and technology based delivery. The Company has already

taken significant steps to achieve this goal..

ICICI Ltd was established in 1955 by the World Bank, the Government of India

and the Indian Industry, to promote industrial development of India by providing

project and corporate finance to Indian industry.

Since inception, ICICI has grown from a development bank to a financial

conglomerate and has become one of the largest public financial institutions in

India. ICICI has financed all major sectors of the economy, covering 6,848

companies and 16,851 projects. In the fiscal year 2000-2001, ICICI had

disbursed a total of Rs 319.65 billion.

Prudential plc:

Prudential plc was founded in 1848. Since then it has grown to become one of

the largest providers of a wide range of savings products for the individual

including life insurance, pensions, annuities, unit trusts and personal banking. It

has a presence in over 15 countries, and caters to the financial needs of over

10 million customers. It manages assets of over US$ 259 billion (Rupees

11,39,600 crores approx.) as of December 31, 1999. Prudential plc. has had its

presence in Asia for the past 75 years catering to over 1 million customers

across 11 Asian countries.

.

  Corporate Office:

ICCI Prulife Towers,

1089, Appasahab Marathe Marg,

Prabhadevi,

Mumbai 400 025.

Telephone Number: 022-462 1600

Website : http://www.iciciprulife.com/

ING Vysya Life Insurance Company Pvt. Ltd.

ING Vysya Life Insurance is a joint venture between three pioneers, ING

Insurance Vysya Bank and GMR Group.

ING Group

Over the last 150 years, ING Group has grown to become one of the largest life

insurance organisations in the world. Today it touches the lives of over 50

million people across 65 countries. It offers a range of financial services

including insurance, pensions, banking and asset management. In the year

2000, total assets of the group stood at over INR 28, 42,000 crores.  ING Group

has wide and deep experience in setting up companies in new markets, which

require substantial investments underlining ING's long-term commitment. In the

last 20 years, ING Group has established successful life insurance companies in

15 countries contributing to the development of insurance services in these

countries.

The Vysya Bank Limited

It is one of India's premier private sector banks with a heritage of over 70 years.

With 1.5 million customers, 480 outlets and 6000 employees it is known for its

innovative banking services and for pioneering several products and services.

The Vysya Bank has a long-standing relationship with its customers and deep

understanding of the Indian market.

GMR Group

It has a solid track record of over two decades of growth and has wide-ranging

interests in fields such as power generation, infrastructure, manufacturing,

software and banking. GMR group has an excellent reputation of being able to

successfully develop ventures from scratch.

Corporate Office:

14, Sankey Road,

Sadashivanag,

Bangalore 560 006.

Telephone Number: 080-3318300-312

Website : www.ingvysyalife.com

Max New York Life Insurance Company Ltd

Max New York Life Insurance Company Limited is a joint venture that brings

together two large forces - Max India Limited, a multi-business corporate,

together with New York Life International, a global leader who is long

experienced in that unique business called life insurance.

Max India Limited

Max India Limited is a multi-business corporate, focused on the Knowledge,

People, and Service oriented businesses of Healthcare, Life Insurance, and

Information Technology. Max also has business interests in Clinical Research,

Telecom, Electronic Component distribution, Bulk Pharmaceuticals, and

Speciality Products businesses.  Max India is led by a skilled team of

professional managers and is widely acknowledged for its presence in

commercially viable manufacturing and service delivery businesses. Max has

been able to form and strengthen international alliances.

About New York Life

New York Life Insurance Company, a Fortune 100 company, is one of the largest

providers of life insurance coverage in America. Founded in 1845, the Company

has over $178 billion in assets under management and more than $25 billion in

annual revenues.  The mission of New York Life is to maintain its superior

'financial strength', adhere to the highest standards of 'integrity' and

demonstrate 'humanity' by treating its customers, agents and employees with

compassion, consideration and respect.

New York Life Insurance Company has been among the highest rated

companies by leading independent rating agencies including - A.M. Best

Company (A++), Fitch (formerly Duff & Phelps) (AAA), Moody's Investors

Service (Aa1) and Standard & Poor's (AA+)

The company has its headquarters in New York City and has operations in the

United States, Argentina, Hong Kong, India, Indonesia, Mexico, The Philippines,

South Korea, Thailand and Taiwan. The company maintains representative

offices in the People's Republic of China and Vietnam.

The company caters to millions of policyholders through a network of over

30,000 employees and agents around the world.

For the last 47 years, New York Life has had the highest number of agents who

qualify as members of the 'Million-Dollar Round Table'. The MDRT is the world's

most prestigious organisation of insurance sales professionals

.

Corporate Office:

11th Floor, DLF Square,

Jacaranada Marg, DLF City,

Phase - II,

Gaugaon 122 002.

Telephone Number: 0124 - 6561717

Website : www.maxnewyorklife.com

MetLife India Insurance Company Pvt. Ltd.

MetLife India Insurance Company Private Limited was incorporated in India on

April 11, 2001 as a joint venture between MetLife International Holdings Inc.,

The Jammu and Kashmir Bank, M. Pallonji and Co Private Limited and other

private investors.

The Metropolitan Life Insurance Company (MetLife ) is the number one insurer

in the U.S. based on over US$2 trillion of life insurance in force. MetLife serves

approximately 9 million individual households in the U.S. as well as 87 of the

Fortune 100 companies. MetLife's institutional clients have approximately 33

million employees and members.

Headquartered in New York, MetLife through its affiliates, subsidiaries and

representative offices operates in 15 countries throughout the Americas,

Europe and Asia. MetLife India inherits its parent company's over-130-year-old

reputation of helping build financial independence for its customers. MetLife

India has developed and distributes a range of life insurance products in India.

MetLife India benefits from its parent company's global presence in the field of

insurance, track record of establishing successful insurance operations in

emerging markets and the unique strengths of its other Indian promoters.

Drawing from these experiences, MetLife India hopes to be able to address the

needs of the Indian customer. MetLife India aspires to build on MetLife's history

of meeting policy holder and contract obligations and the ability to withstand

the impact of adverse economic factors.

The MetLife brand, known for empowering people to feel protected, guided and

hopeful about their lives, will it is hoped do the same for its Indian customers.

Headquartered in Bangalore, MetLife India hopes to deliver value and world-

class service to customers through its financial advisors and corporate sales

representatives. The mission of MetLife India Insurance is to build financial

freedom for all.

Corporate Office:

Brigade Sashmahal,

No.5, Vani Vilas Road,

Basarangudi,

Bangalore 560004.

Telephone Number: 080-6678617/18

WebSite : http://www.metlife.com/

OM Kotak Mahindra Life Insurance Company Ltd.

OM Kotak Mahindra Life Insurance Company Limited (OMKM) is a joint venture

between Kotak Mahindra Finance Ltd., and Old Mutual plc aims to help

customers take important financial decisions at every stage in life by offering

them a wide range of innovative life insurance products, to make them

financially independent. Jeene Ki Azaadi...

Kotak Mahindra Finance Ltd

Kotak Mahindra is one of India's leading financial institutions, offering complete

financial solutions that encompass every sphere of life. From Banking, to Stock

Broking, to Mutual Funds, to Life Insurance, to Investment Banking, the

company caters to the financial needs of individuals and corporates.

Kotak has a group net worth of around Rs.1,400 crore and currently employs

over 2,000 dedicated employees in its various businesses. With a presence in

about 50 locations in India and offices in New York, London, Dubai and

Mauritius, the group currently services a customer base of over 5,00,000.

The group has international partnerships with Goldman Sachs (one of the

world's largest investment banks and brokerage firms), Ford Credit (one of the

world's largest dedicated automobile financiers) and Old Mutual (a large

insurance, banking and asset management conglomerate).

Old Mutual

Old Mutual, a company with over 157 years of experience in life insurance

business, has the largest financial services business in South Africa, through its

life assurance, asset management, banking and general insurance operations.

Being listed on the London Stock Exchange and included in FTSE 100 list of

companies, Old Mutual’s assets under management are worth $208 billion (as

on Dec 31st, 2001).

In the USA, Old Mutual is one of the top ten fixed annuity businesses, following

its purchase during 2001 of Fidelity & Guaranty Life Insurance Company, and its

multi-style asset management business offers an array of specialist asset

management skills. In the UK, Old Mutual focuses on wealth management.

Gerrard, its largest UK operation, is one of the leading private client

stockbroking businesses in the country.

Old Mutual has made significant progress through, continued development of

core business and focused acquisitions. It has established a strong foundation,

to build the future business for customer and shareholder value.

The company has the ability to cater to a variety of consumer market

segments, and offers a comprehensive and innovative product range catering

for all income groups.

Corporate Office:

OM Kotak Mahindra Life Insurance Co. Ltd.

Address: Peninsula Chambers,

Peninsula Corporate Park,6th floor,

Ganpatrao Kadam Marg,

Lower Parel, Mumbai 400 013.

Tel: 91-22-56635000

Fax: 91-22-56635111

Website: www.omkotakmahindra.com

SBI Life Insurance Company Limited

SBI Life Insurance Co. Ltd. is a joint venture between State Bank of India and

Cardif S.A. of France. We are a registered life insurance company.SBI is a

household name, and it stands as the last word for financial strength and

security in the country.

SBI's illustrious background dates back to the year 1806 when it started

business as a presidency bank known as Bank of Bengal. Over the long journey,

it has learnt to combine the best of banking practices handed down from the

imperial management with the more dynamic ways of doing banking in the

modern India.

It has grown as a responsible giant in the banking field over the years. Today, it

has a branch network of over 9000 branches, an aggregate deposit base of

nearly Rs196821 crore (US$45,121mm) and a total balance sheet size of

Rs.261504 crore (US59,950 mm). Together with its 7 Associate Banks, SBI

commands about 30% of the market share in banking.

SBI is the strongest and most profitable bank in the country. It has a tangible

net worth of Rs.12146 crore (US$2,784mm) as at March 2000, and it earned a

pre-tax profit of Rs.2051 crore (US$470 mm) for the fiscal ending that date.

Cardif is a wholly owned subsidiary of BNP Paribas, which is one of the top 10

banks in the world, and the third largest in Europe. BNP is one of the oldest

foreign banks with a presence in India dating back to 1860. It has 9 branches in

major metros in the country.

Cardif came into being in 1973. It has grown over the years into a vibrant

insurance company specialising in personal lines such as long-term savings,

protection products and creditor insurance. Cardif had a premium income of

over US$ 4 billion in 1999, and more than US$ 23 billion of funds under its

management.

Cardif has been specialising in the art of selling insurance products through

commercial banks in France and 23 other countries.  France is the mother of

bancassurance in the world. Over 65% of life insurance business is done

through banks and financial institutions' counters in France, and the trend is

rapidly catching up in other countries. It operates joint ventures in developed as

well as developing countries, such as Brazil, Chile and the Czech Republic.

SBI Life Insurance Company Ltd is registered as a life insurance company with

the Insurance Regulator. The Company's authorised capital is Rs.250 crore, and

the paid-up capital at present is Rs.125 crore.

SBI owns 74% of the total equity, and Cardif the balance 26%.

Corporate Office:

2nd Floor, APEEJAY House,

3 Dinsha Vachha Road,

Churchgate,

Mumbai 400 020.

Telephone Number: 022 - 2351000 to 1007

Website :www.sbilife.co.in

Tata AIG Life Insurance Company

Tata AIG General Insurance Company Ltd, and Tata AIG Life Insurance Company

Ltd., (collectively "Tata AIG") are joint venture companies between the Tata

group India's most trusted industrial house and American International Group,

Inc. (AIG), the leading U. S. based international insurance and financial services

organisation.

Both promoters have a deep and abiding interest in India's insurance sector.

Prior to nationalisation, the Tatas pioneered private insurance in India when Sir

Dorab Tata set up New India Assurance in 1919. By 1973, when General

Insurance was nationalised the Tata company had a global presence with 56

overseas offices. AIG too, has always considered the Indian insurance sector to

be of significance. The AIG companies entered India in 1945 and had offices in

several Indian cities prior to nationalisation.

AIG is the leading U.S. - based international insurance and financial services

organisation and the largest underwriter of commercial and industrial insurance

in the United States. Its member companies write a wide range of commercial,

personal and life insurance products through a variety of distribution channels

in approximately 130 countries and jurisdictions throughout the world. AIG's

global businesses also include financial services and asset management,

including aircraft leasing, financial products, trading and market making,

consumer finance, institutional, retail and direct investment fund asset

management, real estate investment management, and retirement savings

products. American International Group, Inc.'s common stock is listed on the

New York Stock Exchange, as well as the stock exchanges in London, Paris,

Switzerland and Tokyo.

Today, AIG's operations extend across 130 countries and jurisdictions

throughout the world. AIG is ranked #8 in Forbes 2000 "super 100" ranking of

all US corporations. AIG is ranked #8 in Fortune 500 ranking of top US

corporations, and ranked #1 in the property and casualty business.

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

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

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

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

investment fund asset management, real estate investment management, and

retirement savings products.

The Tata Group is the most respected industrial conglomerate in India, with

revenues of more than US $ 8 billion. The Group has long been a market leader

in steel, commercial vehicles, electric power generation in the private sector

and computer software. In recent times, it has promoted several new ventures

in high growth areas of the economy such as financial services,

telecommunications, information technology, auto components, oil field

services and process management systems. The Group has had a long

association with India's insurance sector having been the largest insurance

company in India prior to the nationalisation of insurance.

Corporate Office:

Ahura Centre, 4th Floor,

82, Mahakali Caves Road,

Andheri(East),

Mumbai 400093.

Telephone Number: 022 – 6930000

WebSite :www.tata-aig.com

INSURANCE MARKETING

Insurance Agents

As Life insurance is a personalized service, personal selling plays an important

role in promoting the same. Place and promotion are being highlighted here

since the agents and development officer who form the pillars of Life Insurance

market structure discharge these two important functions. Agents are PR men

of insurance companies at the grassroot level. The role in building up good

customer relation is crucial. They work under the guidance and direct

supervision of development officers. They together sell the right type of policies

suitable to the needs of clients for the right amount at the right time (age). The

agents render various other services and also play a vital role in policy

servicing. The Development Officers under each Branch office beside guiding

and supervising activities of the agents are also responsible for their

recruitment and training so as to develop a stable agency force. They activate

the existing agents and motivate the new ones. Also they render all such

services to the policyholders as will produce better policies. Agents and

development officers, as the intermediaries in the distribution system of the

whole, develop and increase the Life Insurance business in a planned way.

For promoting Life Insurance business, sales promotion activities are also

carried out by the agents. Calendars, bags, diaries, etc. are also given to the

policyholders as a token of gifts. The insurance companies  also trains their

agents, as they do not tend to increase or update their knowledge regularly so

as to serve better to their customers. Special training programs are held for

them.

Corporate Houses and Financial Institutions:

This is a distribution network that ha shot into prominence after the opening up

of the Insurance sector.

Large corporate houses and financial institutions have now entered into the

business of selling life insurance.These institutions have employed special

employees who are trained to sell insurance.These employees are told to then

told to target the existing customers of the corporate houses or financial

institutions. They also have a help desk / promotion desk at the places where

the customer comes into contact with the company. These centers are the

effective centers where the sales pitch is made to the prospective customers.

Also sometimes the company may use marketing tactics like sending direct

mailers to the various clients or telemarketing. This form of distribution is slowly

but surely gaining prominence.

Bancassurance

With the opening up of the insurance sector and with so many players entering

the Indian insurance industry, it is required by the insurance companies to

come up with innovative products, create more consumer awareness about

their products and offer them at a competitive price. New entrants in the

insurance sector had no difficulty in matching their products with the

customers' needs and offering them at a price acceptable to the customer. But,

insurance not being an off the shelf product and one which requiring personal

counseling and persuasion, distribution posed a major challenge for the

insurance companies. Further insurable population of over 1 billion spread all

over the country has made the traditional channels of the insurance companies

costlier. Also due to heavy competition, insurers do not enjoy the flexibility of

incurring heavy distribution expenses and passing them to the customer in the

form of high prices.With these developments and increased pressures in

combating competition, companies are forced to come up with innovative

techniques to market their products and services. At this juncture, banking

sector with it's far and wide reach, was thought of as a potential distribution

channel, useful for the insurance companies. This union of the two sectors is

what is known as Bancassurance. What is Bancassurance? Bancassurance is the

distribution of insurance products through the bank's distribution channel. It is a

phenomenon wherein insurance products are offered through the distribution

channels of the banking services along with a complete range of banking and

investment products and services. To put it simply, Bancassurance, tries to

exploit synergies between both the insurance companies and

banks.Bancassurance if taken in right spirit and implemented properly can be

win-win situation for the all the participants' viz., banks, insurers and the

customer.

The wide range of Life Insurance products on offer in India :

MONEY BACK

Jeevan Chhaya(LIC)

Jeevan Surabhi(LIC)

Money Back Policy(LIC)

Jeevan Rekha(LIC)

Jeevan Samriddhi(LIC)

Money Back(HDFC)

Flexi Cash Flow

(Birla Sun Life)

ICICI Pru CashBak

(ICICI Pru)

KotakMoney Back Plan

(OM Kotak)

Money Saver Plan (TATA-AIG)

Cash Care(Allianz-Bajaj)

Maximizing Life Money Back Plan (ING Vysya)

Dhana Shree (AMP Sanmar)

Met Sukh (MetLife)

Met Junior MB(MetLife)

MULTIPLE COVERS

Double Endowment(LIC)

Jeevan Mitra (Double) (LIC)

Jeevan Mitra (Triple) (LIC)

PURE RISK COVERS

New Bima Kiran(LIC)

Bima Sandesh(LIC)

Convertible Term Assurance(LIC)

Convertible Whole Life(LIC)

Ltd. Payment Whole Life Plan(LIC)

Whole Life Plan(LIC)

Anmol Jeevan(LIC)

Flexi Life Line(Birla Sun Life)

Birla Sun Life Term Plan(Birla Sun Life)

Premium Back Term Plan (Birla Sun Life)

ICICI Pru Life Guard

(ICICI Pru)

Whole life Plan(Max New York Life)

Level Term Policy (Max New York Life)

5 year term renewable and convertible Insurance(Max New York Life)

15 Year Lifeline (with Return of Premiums) Plan(TATA-AIG)

Assure Lifeline Plans(TATA-AIG)

Mahalife(TATA-AIG)

Term Assurance Plan(HDFC )

Risk Care(Allianz-Bajaj)

Term Care(Allianz-Bajaj)

Lifetime Care(Allianz-Bajaj)

Kotak Term Assurance Plan(OM Kotak)

Kotak Preferred Term Plan(OM Kotak)

Fulfilling Life Anticipated Whole Life Plan (ING Vysya)

Rewarding Life (ING Vysya)

Conquering Life(ING Vysya)

Nitya Shree (AMP Sanmar)

Raksha Shree (AMP Sanmar)

MET 100 Gold (Participating Limited Pay Whole Life) (MetLife)

MET 100 Platinum (Participating Limited Pay Whole Life) (MetLife)

Met 100 (Non Participating Limited Pay Whole Life) (MetLife)

LifeLong (Aviva Life)

Secure life (Aviva Life)

LifeShield (Aviva Life)

RISK COVER + SURVIVAL BENEFITS

Bhavishya Jeevan(LIC)

Endowment Assurance Policy(LIC)

Endowment Ltd Assurance Policy(LIC)

Jeevan Anand(LIC)

New Janaraksha(LIC)

Endowment(HDFC)

Endowment Plan(Max New York)

Endowment to Age 60 Policy(Max New York)

Flexi Save Plus(Birla Sun Life)

ICICI PRU Save 'n' protect (ICICI Pru)

Kotak Endowment Plan

(OM Kotak)

Kotak Capital Multiplier Plan (OM Kotak)

Sudarshan(SBI Life)

Security and Growth Plans (TATA-AIG)

Save Care(Allianz Bajaj)

Invest Gain Plan(Allianz Bajaj)

Endowment Assurance Policy(ING Vysya)

Subha Shree (AMP Sanmar)

MetLife Platinum (Participating Endowment Assurance)(MetLife)

MetLife Gold (Participating Endowment Assurance)(MetLife)

MetLife Platinum (Non- Participating Endowment Assurance)(MetLife)

MetLife Gold (Non-Participating Endowment Assurance)(MetLife)

MET Junior - Participating EA(MetLife)

MET Junior Non Participating Juvenile EA(MetLife)

Easy Lifeplus(Aviva Life)

LifeSaver(Aviva Life)

FOR WOMEN ONLY

Jeevan Bharati(LIC)

FOR YOU AND YOUR SPOUSE

Jeevan Saathi(LIC)

Jeevan Saritha(LIC)

Joint Life Plans(LIC)

FOR DISABLED DEPENDANTS

Jeevan Aadhar(LIC)

Jeevan Vishwas(LIC)

FOR YOUR HOME

Mortgage Redemption Plan(LIC)

Loan Cover Term Assurance (HDFC)

Mortgage Redemption Plan (MetLife)

RURAL LIFE

Bima Kavach Yojana(Birla Sunlife)

Kotak Gramin Bima Yojana (OM Kotak)

ULIP

Unit Linked Insurance Plan

GROUP LIFE SCHEMES

Group Gratuity Scheme(LIC)

Group Insurance Scheme(LIC)

Group Savings Linked Scheme(LIC)

Group Superannuation Scheme(LIC)

Development Insurance Plan(HDFC)

Group Term Insurance(HDFC)

Kotak Term Group Plan (OM Kotak)

Kotak Credit Term Group Plan(OM Kotak)

Group Gratuity Plan (OM Kotak)

Group Protection Solutions (Birla Sun Life)

Group Superannuation Plan(Birla Sun Life)

Group Gratuity Plan(Birla Sun Life)

Super Suraksha & Swarna Ganga (SBI Life)

Group Risk Care Plan Employer - Employee(Allianz Bajaj)

Group Risk Care Plan - Non Employer - Employee(Allianz Bajaj )

Group Credit Care Plan - Employer - Employee(Allianz Bajaj)

Group Credit Care Plan Non Employer - Employee(Allianz Bajaj )

Group Gratuity Plan

(ICICI Pru Life)

Group Term Assurance(ICICI Pru Life)

Group Term Assurance AMP Sanmar

Creditplus(Aviva Life)

FOR  CHILDREN

General Plans

Children's Deferred Assurance Plan(LIC)

Jeevan Baalya(LIC)

Jeevan Kishore(LIC)

New Children's Deferred Assurance Plan(LIC)

Komal Jeevan(LIC)

SBI-Scholar(SBI Life)

ICICI Pru Smart Kid (ICICI Pru)

Kotak Child advantage plan (OM Kotak)

Children's Endowment Policy(Max New York)

Yuva Shree(AMP Sanmar)

Children's Plan(HDFC)

GIRLS ONLY

Jeevan Sukanya(LIC)

FOR RETIREMENT

Bima Nivesh Triple Cover (LIC)

New Jeevan Akshay I(LIC)

New Jeevan Dhara 1(LIC)

New Jeevan Suraksha 1(LIC)

ICICI PRU Forever Life(ICICI Pru)

Sanjeevan(SBI Life)

Kotak Retirement Income Plan(OM Kotak)

Nirvana Pension Plan (Tata-AIG)

Life Long Pensions (SBI Life)

Bhagya Shree (AMP Sanmar)

Easy Life Retirement (Participating) Plan (Max NewYork)

Flexi Securelife Retirement Plan(Birla SunLife)

Pensionplus (Aviva Life)

SPECIALPLANS

Jeevan Asha(LIC)

Major Illness (LIC)

ICICI Pru Life Time(ICICI Pru)

HealthFirst(Tata AIG)

INVESTMENT PLANS

Bima Plus(LIC)

ICICI PRU Assure Invest (ICICI PRU)

ICICI PRU Life Link(ICICI Pru)

ICICI Pru ReAssure(ICICI Pru)

Kotak Insurance Bond (OM Kotak)

Young Sanjeevan  (SBI Life)

Flexible Bond(HDFC)

Single premium insurance bond (Max New York Life)

Single Premium Bond (Birla Sun Life)

LifeBond(Aviva Life)

THE PRESENT MARKET SCENARIO

MARKET SHARE OF LIC TO THE PRIVATE PLAYERS

MARKET SHARE OF PRIVATE LTD. COMPANIES

27%

13%9%

38%

13%

ICICI Pru

BirlaSun life

HDFC Std

Max New York

Others

THE ROAD AHEAD

91%9%

PrivateSector LIC

Individual life insurance Coverage Index, 1994

Country (No. Of policies per 100

persons)

Indonesia 2.0

Philippines 5.6

India 12.4

Thailand 14.7

Malaysia 35.5

Hong Kong 69.4

South Korea 70.5

Taiwan 75.2

Singapore 112.6

Japan 198.4

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

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

of life insurance products was 19 percent of the total 400 million of the

insurable population.The state owned LIC sold insurance as a tax instrument,

not as a product giving protection. Most customers were under- insured with no

flexibility or transparency in the products. With the entry of the private insurers

the rules of the game have changed.

The 12 private insurers in the life insurance market have already grabbed

nearly 9 percent of the market in terms of premium income. The new business

premiums of the 12 private players has tripled to Rs 1000 crore in 2002- 03

over last year. Meanwhile, state owned LIC's new premium business has fallen.

Innovative products, smart marketing and aggressive distribution. That's the

triple whammy combination that has enabled fledgling private insurance

companies to sign up Indian customers faster than anyone ever expected.

Indians, who have always seen life insurance as a tax saving device, are now

suddenly turning to the private sector and snapping up the new innovative

products on offer.

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

coining money in new niches that they have introduced. The state owned

companies still dominate segments like endowments and money back policies.

But in the annuity or pension products business, the private insurers have

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

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

customers.

The private insurers also seem to be scoring big in other ways- they are

persuading people to take out bigger policies. For instance, the avaerage size of

a life insurance policy before privatisation was around Rs 50,000. That has risen

to about Rs 80,000. But the private insurers are ahead in this game and the

average size of their policies is around Rs 1.1 lakh to Rs 1.2 lakh- way bigger

than the industry average.

The insurance market is likely to witness a sea change in the marketing mix,

that is product, price, place (distribution channel) and promotion. The customer-

driven market will result in lot of flexibilities and innovations in product, pricing,

distribution channels and communication mechanisms. The IRDA, with its

developmental and regulatory guidelines, is likely to promote competition,

fairness, and reliability, and, at the same time, protect insurance against

excessive, inadequate or unfairly discriminatory rates.

While efforts to strengthen the distribution channels and make them more

effective will continue, the introduction of intermediaries, such as insurance

brokers, bancassurance, the electronic media and the Internet, would call for

new strategies. Communication to create greater and demand for insurance

products will continue to be important. At the same time, unfair or misleading

advertisements will be discouraged, and the necessary checks and controls will

be in place.

Formulating a marketing strategy is more a process than an event.

Environmental factors such as macro-economic parameters, regulatory norms

and themes, technology, infrastructure, legal set-up, competition by way of new

entry and the degree of globalisation need be considered in framing the

strategy. For instance, whether a company would adopt a strategy for market

penetration, market development or product development, or would go in for

diversification could be determined by analysing all the relevant data in terms

of the product-market scope.

The experience of the public sector Life insurance industry in India shows that

the distinction between market development and product development is often

blurred.. The product development experience with the Suhana Safar policy

highlights the problems in bundling existing products and marketing them

without reliable, real-time market research back-up. In addition, political

proclamations led to products that customers rejected completely. On paper,

the Lfe insurance industry has 90 products; at best, 15 of them have currency

in the market.

It is only after a thorough, continuous and pragmatic SWOT analysis and

appropriate financial implications review that a company should identify the

generic strategy. Achieving cost leadership and differentiation simultaneously

has an element of inconsistency because differentiation is usually costly.

Moreover, every generic strategy has a definite risk. The reality is that barriers

to imitation are never insurmountable. Therefore, the strategy needs a constant

evaluation and monitoring.

The marketing strategy cannot be taken up in isolation. All the major elements

of the organisation -- structure, systems, processes, staff, skills, managerial

styles and shared value -- should be appropriately integrated into the

implementation of the strategy. The basic tool for pinpointing competitive

advantage and finding ways to enhance it is the value chain, which divides the

a company into the discrete functions of designing, producing, marketing and

distributing.

For, in the ultimate understanding, the marketing strategy is an integral part of

the business value of the company. A business value design is the totality of

how a company selects its customers, differentiates its offerings, defines the

tasks it will perform itself and those it will outsource, configures its resources,

goes to the market, creates utility for customers and finally, captures profit. It is

the entire system for delivering utility to customers and earning profits from

that activity.

Today the Indian consumers are are increasingly becoming more aware and are

actively managing their financial affairs. Today, while boundaries between

various financial products are blurring, people are increasingly looking not just

at products, but at integrated financial solutions that can offer stability of

returns along with total protection.

To satisfy these myriad needs of products, insurance products will need to be

customized. Insurance today has emerged as an attractive and stable

investment alternatively that offers total protection - Life, Health and Wealth. In

terms of returns, insurance products today offer competitive returns ranging

from 7% to 9%. Besides returns, what really increases the appeal of insurance

is the benefit of life protection from insurance products along with health cover

benefits.

Consumers today also seek products that offering flexible options, preferring

products with benefits unbundled and customizable to suit their diverse needs.

While sales of traditional life insurance products like individual, whole life and

term will remain popular, sale of new products like single premium, investment

linked, retirement products, variable life and annuity products are also set to

rise. Firms will need to constantly innovate in terms of product development to

meet ever-changing consumer needs. However, product innovations are quickly

and easily cloned. Pricing will also not vary significantly, with most product

premiums hovering around a narrow band.

In this competitive scenario, a key difference will be the customer experience

that each insurance player can offer in terms of quality of advice on product

choice, along with policy servicing and settlement of claims. Service should

focus on enhancing the customer experience and maximizing customer

convenience. Long-term growth in the business will greatly depend on the

distribution network, where the emphasis must evolve from merely selling

insurance to acting as financial advisors, helping customer's plan their finances

depending on personal requirements. This calls for a strong focus on training of

the distribution force to act as financial consultants and build a long lasting

relationship with the customer. This would help create sustainable competitive

advantage not easily matched.

The main reason why the leading insurance companies in the world and the

leading corporate groupS in India have shown a keen interest in the insurance

sector, is the vast potential for future business. Restricted, as the market has

been, through the operations of the two monopolies (LIC and GIC), it is

generally felt that the sector can grow exponentially if it is opened up. The

decade 1987-97 has witnessed a compounded growth rate of marginally more

than 10% in life insurance business. LIC predicts for itself that its business has

potential to grow by 16.27% p.a. in a decade 1997-2007 (LIC, 1997). If we take

a look at insurance coverage index for the age group of 20-59 years a

considerable gap between India and other countries in Asia can be observed. In

this scenario, naturally insurance companies see a vast potential.

“When winds of change blow some seek shelter, while some develop

windmills” the quote can be nailed to all the Insurance companies no matter

nationalized or private. Every company is gearing up and pulling up their socks

to tap the maximum chunk of population, which is uninsured. (Statistically, it is

96.5% of population is uninsured only 35 millions or 3.5% of the total

population are insured).

The battle has started for the spoil with companies stepping out with innovative

insurance products and resorted to aggressive marketing to have a biggest bite

on the insurance cherry, which is estimated to grow to US $ 25 billion within a

decade.

The purpose of the insurance sector is to cover maximum possible potential

policyholders. Spotting opportunities at the right time is essential to influence

the target market. It is quite natural that the needs and requirements of

different users living in different segments, regions are not identical. The needs

and requirements of the rural sector would be different from the needs and

requirements of the urban sector.In the Indian perspective where we find a

large number of users living in the rural areas, the importance of the rural

sector can’t be negated. In order to increase their market share insurance

organizations need to succeed in informing, sensing and persuading the

different segments where potential users are available. It is not productive to

concentrate only on one segment. It is important to do business in all segments,

rural and urban, men and women, agricultural and industrial etc. Crop and

cattle insurance are important for furthering the interests of the agricultural

sector.

Whether the insurer is old or new, private or public, expanding the

market will present multitude of challenges and opportunities. But the

key issues, possible trends, opportunities and challenges that

insurance sector will have still remains under the realms of the

possibilities and speculation.

SOME IMPORTANT CONCEPTS

Annuitant is the person who receives certain amounts at yearly / half-yearly /

quarterly / monthly intervals.

Assignee is the person to whom the benefits under a life policy are assigned.

Assignor is the person who holds the right/title under the policy and who can

make a valid assignment.

Bonus is the amount added to the basic sum assured under a with-profit life

insurance policy.

Claim Amount is  the amount payable by the insurer under a policy on a claim

arising

Dating Back  or Back Dating is an option to the life assured to get the

advantage of lower age wherein the policy is commenced from a date earlier

than the date of signing of proposal form. However back dating is limited to one

year

.

DeferredAnnuity is an annuity plan where the first annuity payment becomes

payable after a chosen period that exceeds one year.

Deferment date is the date on which the deferment period ends.

Deferment period is the period from the date of commencement of the policy

to the date of commencement of risk on the child's life under a Children's

Deferred Endowment

Assurancepolicy.

EPDB

Extended Permanent Disability Benefit

Female lives

Category I: Women with income earned by

virtue of their employment in any reputed organisation or institution

eligible for Non Medical Special Schemes.

Professions such as Medicine, Law, Charted Accountancy etc. and lady

career agents of LIC.

Category II: Women with unearned income attracting payment on income tax or

women holding sizeable personal properties/investments yielding income

attracting assessment for income tax.

First Class Life

An Individual is categorised as First Class Life if is eligible to have insurance

coverage at normal rates of premium.

First Unpaid Premium (FUP)

First unpaid premium refers to the first default in paying premium by the policy

holder. On payment of the due premium a receipt is issued and this receipt

indicates the date of next due. If this due premium is not paid that date

becomes the date of FUP.

Guaranteed Insurance Sum (GIS)

Guaranteed Insurance Sum is equal to purchase price paid for a pension along

with final Jeevan Akshay Bonus.

Gross Insurance Value Element (GIVE)

Gross Insurance value element is the amount payable on death of a policy

holder under a Jeevan Dhara Policy.

Guaranteed Additions  are calculated at a rate per every thousand of sum

assured. They are added to the basic sum assured and are payable on

admittance of claim. This benefit is allowed only for each year for which

premiums are paid.

Life Assured refers to the person whose life is being insured.

Last Birth Day (L.B.D)

Age at last Birthday

Lien

In some cases extra risk is expected to decrease over a period of time. In such

cases proposal is considered and accepted with lien. Lien operates through out

the period, on a decreasing basis.In the event of death during the lien period

full sum assured is not payable.

Eg: If 25% decreasing lien is imposed for 5 years. It is understood that in first

year risk cover(sum assured payable) is only upto 75%, second year-80%, third

year-85%, fourth year 90%, fifth year 95%, and from sixth year onwards lien is

not operative.

Loyalty Additions

Under certain life policies loyalty additions are given as an additional benefit to

the policyholder. The rate of addition depends on the LIC's performance and is

allowed only if the policy is in full force.

Moral Hazard is said to exist in the case where we notice the absence of a

genuine need for a life insurance or when a proposal for insurance is submitted

by an individual beyond his means.

Near Birth Day (N.B.D)

Age on nearest birthday

Nominee

Nominee is the person who is nominated to receive the amount under a policy

and to give a valid discharge to the insurer on settlement of claim under a life

insurance policy.

Non-Standard Life

Any individual, who cannot be granted a policy under normal rates of premiums

but can be granted with an extra premium over normal rates of premium, is

considered as a Non-Standard Life.

Paidup value is the reduced amount of sum assured paid by the insurer in

case of discontinuation of the payment of premiums after paying the full

premiums for the first three years.

PDB

Permanent Disability Benefit

Premium is the amount paid to secure an insurance policy.

Proposal Form

It is a form which is to be completed for securing an insurance policy.

Proposer is a person who proposes the insurance policy.

Premium Waiver Benefit (PWB) are the benefits which can be availed under

children's policies, wherein the future premiums payable upto vesting date are

waived in the event of death of the proposer.

Sum assured is the amount that an insurer agrees to pay on the occurance of

an event.

Surrender value is the amount payable to the policy holder on his

surrendering his right under a policy and terminating the contract of insurance.

Target pension is the amount of pension which one wishes to receive under a

pension policy.

Term is the period for which insurance coverage is given.

Vesting Date

This is the date from which the life assured ie., child becomes the absolute

owner of the policy.

Vesting Bonus

It is the Bonus, which the insurer declares after evaluating its assets and

liabilities, and that is added to the sum assured under a policy.

Waiting Period

It is the period starting from date of commencement of a policy to the date of

commencement of risk under a Jeevan Kishore Policy.

BIBLIOGRAPHY

WEBSITES:-

Irdaonline.com

Bimaonline.com

Insurancefinder.com

Economictimes.com

Indiainfoline.com

MAGAZINES

The Insurance Journal

Intelligent Investor

Business Today

NEWSPAPERS

Economic Times

Hindu Business Line