Potentials & Dynamics of Life Insurance in India - Role of Aegon Religare

Potentials & Dynamics of Life Insurance Market India – Role of AEGON Religare

1. Abstract

The project aims at comparative analysis of potentials & dynamics of life

insurance market in India – Role of AEGON Religare in it. Analyse insurance

as an investment option/avenue.

The project has a detailed study of various insurance plans offered by the

major players in the insurance sector. Made a comparative analysis of the of

AEGON Religare life insurance plans with that of other major players. The

project aims to help understand the consumer behaviour towards various

financial services like insurance and mutual funds. The report enhances the

knowledge on how various marketing concepts learned in the classroom are

implemented in a real life environment.

The project entitled me to recommend Life Advisor (LA) who will be a

channel for bringing business to the AEGON Religare Life Insurance Company.

I was given to choose prospective clients who were inclined for a career in

insurance sector. The prospective candidate after dully scrutinised by, on

fulfilling the entire criterion will be made Life Advisor with AEGON Religare,

priority circle Bangalore.

This project also involves Brand image analysis of AEGON Religare Life

Insurance and come up with few recommendations for improvement. The

project required me design a questionnaire and to do a primary survey on

investor perception towards ULIP & mutual Funds available in the market. The

target respondents of the primary survey were managers, executives and

consultant working in various sectors through exhibitions and business meets.

The data gathered from the primary survey was for analysis and to find various

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Acharya Institute of Graduate Studies


factors that affect an investor decisions while choosing an ULIP or Mutual Fund

plan in the market.

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2. Introduction

Insurance may be described as a social device to reduce or eliminate risk

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

associate themselves by sharing risk, attached to individual.

The risk, which can be insured against include fire, the peril of sea,

death, incident & burglary. Any risk contingent upon these may be insured

against at a premium commensurate with the risk involved.

Insurance is actually a contract between 2 parties whereby one party

called insurer undertakes in exchange for a fixed sum called premium to pay the

other party happening of a certain event.

Insurance is a contract whereby, in return for the payment of premium by

the insured, the insurers pay the financial losses suffered by the insured as a

result of the occurrence of unforeseen events.

With the help of Insurance, large number of people exposed to a similar

risk makes contributions to a common fund out of which the losses suffered by

the unfortunate few, due to accidental events, are made good.

2.1 History of Insurance industry

In some sense we can say that insurance appeared simultaneously with

appearance of human society. In earlier economies, we can see insurance in the

form of people helping each other. For example, if a house is burnt, the

members of the community help build a new one. Should the same thing happen

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to one’s neighbour, the other neighbours must come to help? Otherwise,

neighbours will not receive help in the future.

Insurance in the modern sense, started as a methods of transferring or

distributing risk were practiced by Chinese and Babylonian traders as long ago

as the 3rd and 2nd millennia BC, respectively. Chinese merchants travelling

treacherous river rapids would redistribute their cargo across many vessels to

limit the loss due to any single vessel’s capsizing. The Babylonians developed a

system which was recorded in the famous Code of Hammurabi, c. 1750 BC, and

practiced by early Mediterranean sailing merchants. If a merchant received a

loan to fund his shipment, he would pay the lender an additional sum in

exchange for the lender’s guarantee to cancel the loan should the shipment be

stolen.

Greek monarchs were the first to insure their people and made it official

by registering the insuring process in governmental notary offices. They

invented the concept of the ‘general average’. Merchants whose goods were

being shipped together would pay a proportionally divided premium which

would be used to reimburse any merchant whose goods were jettisoned during

storm or sinking of the vessel in the sea.

The Greeks and Romans introduced the origins of health and life

insurance c. 600 AD when they organized guilds called “benevolent societies”

which cared for the families and paid funeral expenses of members upon death.

Guilds in the middle Ages served a similar purpose. Before insurance was

established in the late 17th century, “friendly societies” existed in England, in

which people donated amounts of money to a general sum that could be used for

emergencies.

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The first insurance company in the United States underwrote fire

insurance and was formed in Charles Town (modern-day Charleston), South

Carolina, in 1732.

2.2 Insurance industry in India

In India, insurance has a deep-rooted history. It finds mention in the

writings of Manu ( Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya

(Arthasastra ). The writings talk in terms of pooling of resources that could be

re-distributed in times of calamities such as fire, floods, epidemics and famine.

This was probably a pre-cursor to modern day insurance. Ancient Indian history

has preserved the earliest traces of insurance in the form of marine trade loans

and carriers’ contracts. Insurance in India has evolved over time heavily

drawing from other countries, England in particular.

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

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

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

degree turn witnessed over a period of almost 190 years.

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

in the year 1818 with the establishment of the Oriental Life Insurance Company

in Calcutta.

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* Source-www.Welipedia.com/insurance history


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

are:

1912 - The Indian Life Assurance Companies Act enacted as the first

statute to regulate the life insurance business.

1928 - The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life and non-life

insurance businesses.

1938 - Earlier legislation consolidated and amended to by the Insurance Act

with the objective of protecting the interests of the insuring public.

1956 - 245 Indian and foreign insurers and provident societies taken over

by the central government and nationalized. LIC formed by an Act of

Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore

from the Government of India.

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

its roots to the Triton Insurance Company Ltd., the first general insurance

company established in the year 1850 in Calcutta by the British.

2.3 Functions

The functions of Insurance can be bifurcated into two parts:

1. Primary Functions

2. Secondary Functions

3. Other Functions

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The primary functions of insurance include the following:

Provide Protection - The primary function of insurance is to provide

protection against future risk, accidents and uncertainty. Insurance cannot

check the happening of the risk, but can certainly provide for the losses of

risk. Insurance is actually a protection against economic loss, by sharing the

risk with others.

Collective bearing of risk - Insurance is a device to share the financial loss

of few among many others. Insurance is a mean by which few losses are

shared among larger number of people. All the insured contribute the

premiums towards a fund and out of which the persons exposed to a particular

risk is paid.

Assessment of risk - Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk. Risk is the basis for

determining the premium rate also.

Provide Certainty - Insurance is a device, which helps to change from

uncertainty to certainty. Insurance is device whereby the uncertain risks may

be made more certain.

The secondary functions of insurance include the following:

Prevention of Losses - Insurance cautions individuals and businessmen to

adopt suitable device to prevent unfortunate consequences of risk by

observing safety instructions; installation of automatic sparkler or alarm

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systems etc. Prevention of losses causes lesser payment to the assured by the

insurer and this will encourage for more savings by way of premium.

Reduced rate of premiums stimulate for more business and better protection

to the insured.

Small capital to cover larger risks - Insurance relieves the businessmen

from security investments, by paying small amount of premium against larger

risks and uncertainty.

Contributes towards the development of larger industries - Insurance

provides development opportunity to those larger industries having more risks

in their setting up. Even the financial institutions may be prepared to give

credit to sick industrial units which have insured their assets including plant

and machinery.

The other functions of insurance include the following:

Means of savings and investment - Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts the

unnecessary expenses by the insured's For the purpose of availing income-tax

exemptions also, people invest in insurance.

Source of earning foreign exchange - Insurance is an international business.

The country can earn foreign exchange by way of issue of marine insurance

policies and various other ways.

Risk Free trade - Insurance promotes exports insurance, which makes the

foreign trade risk free with the help of different types of policies under marine

insurance cover.

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2.4 Classification of Insurance

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

every aspect of life. No one can truly predict or even estimate what the future

has in store for him. Life offers no guarantees by itself, except the incidences of

death and taxation.

This lack of security present throughout life can be overcome partially

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

monetary value offered by insurance helps in adjusting to the new

circumstances.

Despite offering innumerable options and immense scope, insurance can

be classified into four main categories.

Insurance of Person

Insurance of Property

Insurance of Interest

Insurance of Liability

Insurance of Person:

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

human life in general can be covered up to the limit specified. A person can

insure his or her life and his health against any unplanned contingencies.

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

amount that he was insured for. Or if the insured person meets with an accident

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http://www.insuremagic.com/CONTENT/InsuranceBasics/general/classification.asp#InsuranceofLiability

http://www.insuremagic.com/CONTENT/InsuranceBasics/general/classification.asp#InsuranceofInterest

http://www.insuremagic.com/CONTENT/InsuranceBasics/general/classification.asp#InsuranceofProperty

http://www.insuremagic.com/CONTENT/InsuranceBasics/general/classification.asp#InsuranceofPerson


or suffers from an illness that cripples him forever, he will be compensated with

the complete sum assured anyway since he may not be able to lead a normal life

again.

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

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

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

policy.

Insurance of Property:

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

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

paper money.

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

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

individual's lifetime of hard work can be wiped out in a blink of an eye.

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

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

soon as the extent of damage is ascertained.

Insurance of Interest:

Every individual has to discharge certain specific duties. Everyone is

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

human nature to err. No one is infallible and no one will ever be.

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

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

compensation out of our own personal resources.

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

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

formalities that might ensue in the aftermath of legal libel.

Insurance of Liability:

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

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

responsible and liable for his actions.

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

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

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

social standing and prestige besides the financial status.

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

liabilities he might incur due to his actions and behaviour. Besides, the

premiums payable on liability insurance are fairly minimal when compared to

the damages that have to be compensated in the long run.

2.5 What’s life insurance marketing?

An Introduction To Life Insurance Marketing .

Life Insurance Marketing is one of the most strenuous jobs for those who

are involved in the insurance marketing.. It is because of the everlasting conflict

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between the insurance companies which want to profit the most and the insured

person who wants to get as much compensation as possible from the insurance

company. Commissions for the Life Insurance companies are very high and

they seldom make profits out of the policies. Also the insurance policy needs to

be transparent so that the potential customer understands it totally and should

not feel that they have been treated unfairly by the insurance company. .

Reasons for Life Insurance Marketing .

The Life insurance companies were paid very little premiums by young

children or healthy people and thus the scope for profit was very small and

those who paid high rates of premium were the older beings that died and the

Life insurance companies compensate for that. However nowadays the Life

insurance premiums are almost the same for a young adult and an old person

who just had a major operation. .

As the Life Insurance Marketing Companies already deals with this

type of a scenario, what one can do is to change the public perception about the

Life insurance companies. One can connect himself or herself with companies

whose workers need a plan for Life Insurance. One can also go to crowded

places and advertise for the Life insurance Company. .

The Life insurance companies also offer fliers and hanging banners. One

can also offer free Life check in a reputed place to the insured for at least once.

One should always give the existing life insurance policy holders a chance to

prefer the marketing techniques that the insurance company is presenting. If the

policy holder does this at a regular basis then the company has a high chance of

succeeding. .

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This is making the competition much tougher for the life insurance

companies as most of the companies offer similar types of premiums and

facilities. So it has become very important for the life insurance companies to

concentrate on Life Insurance Marketing and attract as many people as

possible towards there company. .

The Life Insurance Companies prefer to go for Group Life Insurance for a

group of people from a particular company or a family so that they get a group

of customers and even if they compensate for some of them for various reasons

they usually make it up with other's premiums. They also get fewer papers to

control and also they provide better facilities for their clients. So to promote this

type of policy they need to have social and industrial connections. Life

Insurance market helps developing that. Even for other policies like term life

insurance and permanent life insurance one needs to be aware of making people

realize the profits of the policy by various means provided by marketing

agencies. .

So before going for a Life Insurance Marketing one actually needs to

know the market target and the desires of the people who are actually seen as

potential insurance customers. The confusion about the way a Life Insurance

Marketing conductor can draw the potential Insurance holder's attention

evaporates fast if he knows his targets and aims clearly. So, it is important to

conduct a sound survey and then attract people. .

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Life Insurance Marketing Strategies

A very common way to promote a Life insurance company through Life

Insurance Marketing is to make the name of the company familiar to others

by means of television commercials, handling out pamphlets, hanging banners

in populated areas and by providing exciting offers.

Telephone marketing is another way of Life Insurance Marketing. One can

see the telephone companies send messages about various offers and they

even make phone calls. Web Insurance Marketing is another good strategy to

promote insurance policies. The pop ups that one sees while using Internet are

actually a very effective way of sending messages across the potential

insurance customers.

One should listen to the existing Life Insurance Policy Holders as well as the

potential Life insurance policy holders and listen to what people who actually

matters have to say. One common problem that the insured persons face is

that the insurance companies do not inform its clients about the hike in the

premium rates. These things should be kept in mind. Not only that, a client

should be informed about everything related to his policy and the Life

insurance company should keep the transparency as much as possible.

Community Life Insurance Marketing is another different way to get

promotion and a high recognition for the Life insurance Company. Eminent

workers join local community institutions, such as Chamber of Commerce,

and by signing up there one can help out various projects that take place.

These kinds of activities and social works on behalf of the Life insurance

company helps the company to get free publicity as their names are published

in news paper and in media also. Doing charity works also helps the Life

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insurance companies to come across various people who act as volunteers

and can act as their potential Life insurance clients. People also like to deal

with likeminded people and companies and this is how many deals are made.

A Life Insurance Company should not charge different Life insurance client

different charges for the same policy. This kind of policy gives the Life

insurance policy holders the feeling that they are being treated unfairly and

also that the Life insurance companies are only looking for profits and not the

betterment of customer welfare.

When a Life insurance claim is filed, especially for a very big hefty amount,

the Life insurance Company should help out the policy holder in processing

out the paperwork. One should not let bureaucracy enter and make it so

difficult for the one making the claim so that he gives his claim .This has

always been a common tactic on the insurance company's part to avoid paying

claims claimed by the policy holder. This though makes a short term profit for

the company but it hurts in the long run as the reputation of the company is

hampered severely.

People in this Life insurance industry should always try to keep in constant

contact with the existing customers as well. The competition in the insurance

market is so fierce today that no company wants to lose out on a customer to

another company. Clients who are not contacted for a longer period of time

normally fail to remain loyal to the insurance company and look for a

different Life insurance company. The company can keep the records of the

client's birthday and days like anniversary and sent him or her small tokens of

love or loyalty at a regular basis. If the company can afford a little more it can

send dinner coupons to the Life insurance policy holder. These things play a

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major role and can be considered as an effective Life Insurance

Marketing strategy.

May be the most crucial thing in insurance marketing is to always speak about

unity and honesty while dealing with a business. A Life Insurance Holder can

find so many frauds in various life insurance companies today, that life

insurance customers are going for products and services which are

trustworthy to them. Feeling safe is about insurances and other things are

most important as far as the insurance holder is concerned. So, if a company

remains loyal to its customers it will itself do Life Insurance Marketing for

itself. So, only by remaining loyal to its customers the company can do a

world of good to its reputation and this would in itself bring more potential

Life Insurance Holders to the company, because the customers prefer safety

more than anything else these days.

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3. Methodology Adopted

Study the concept of insurance, industry and its regulations from books,

Internet and literature survey. This will give us in-depth knowledge about the

insurance sector as a whole.

To perform Pest analysis & Porters 5 forces model of insurance sector to

come up with the ideal marketing strategies to be followed for increasing the

market share of the company.

Data collection regarding the market share, products & services offered

by different life insurance company through internet. This will help in

identifying the Unique Selling Proposition (USP) of different players in the

market.

Collection of brochures and pamphlets of different products offered by

AEGON Religare study them in order to compare and contrast the different

insurance products across industry.

Sample selection (Random Sampling Technique) and designing of a

questionnaire to collect primary data so as to map the investor perception

regarding ULIP and Mutual funds available in the market. Code the data

collected & identity the important factor that affect customer decision in

choosing an insurance plan.

Sample selection (Random Sampling Technique) and designing of a

questionnaire to collect primary data to do a brand image survey of AEGON

Religare Life Insurance Company. The data collected is used to do descriptive

analysis (Pie charts and histogram) for mapping the brand image assessment of

AEGON Religare.

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D

Define the marketing problem

E

Enumerate the controllable and uncontrollable decision factors

C

Collect relevant information

I

Identify the best alternative

D

Develop and implement a marketing plan

E

Evaluate the decision and the decision process

3.1 Title justification:

The above title is self explanatory. The study deals mainly with studying

the potentials and ever changing dynamics in the life insurance industry with a

special focus on AEGON Religare Life Insurance. The various segments of the

market are divided in terms of insurance needs, age groups, satisfaction levels

etc.will also be studied.

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3.2 Scope of the study:

A big boom has been witnessed in Insurance Industry in recent time. A

large number of new players have entered the market and are vying to gain

market share in this rapidly improving market. The study deals with AEGON

Religare Life in the focus and the various segments that it caters to. The study

then goes on to evaluate and analyse the findings so as to present a clear picture

of trends in the insurance sector.

3.3 Objectives of the study:

To map the marketing & distribution strategy of AEGON Religare Life

insurance Company limited and to compare various strategies used by various

players in Life insurance sector.

To do detailed analysis of the entire range of life insurance products/schemes

offered by AEGON Religare life insurance company Ltd. It will help in making

a detailed analysis of the spectrum of life insurance products available in the

market across the industry.

To collect data through primary survey, using a comprehensively designed

questionnaire and analysing the same for mapping the brand image of AEGON

Religare Life insurance company and investor perception about the ULIP and

mutual funds available in the market, and to identify the major factor that

influence investor for choosing an life insurance plan.

To come up with an innovative market and branding strategies for life insurance

products.

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Create a value chain between the customers and the company through network

building.

Try and sketch out a rough customer to customer approach for AEGON

Religare.

To know the hicks and kicks of marketing financial (life insurance) products in

such a hostile and ever changing volatile market....

3.4 Significance of the study:

3.4(a) Significance to the industry- This is a limited study which takes into

consideration the responses of 100 people. This data can be analysed for trends

across the industry. The significance for the industry lies in studying these

trends that emerge from the study. It is rapidly changing and evolving sector.

People are only beginning to wake up to its vast possibilities. A study like this

can attempt to guide the future of the industry based on current trends.

3.4(b) Significance for the researcher- To facilitate and provide all the useful

information of the study to the company, the insurance industry and also

provide marketing ways, methods of AEGON Religare Life.

3.5 Research Design:

Non-Probability

Exploratory & Descriptive Experimental Research

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The research is primarily both exploratory as well as descriptive in nature.

The sources of information are both primary & secondary.

A well-structures questionnaire was prepared and personal interviews were

conducted to collect the customer’s perception and buying behaviour, through

this questionnaire.

3.6 Sampling methodology:

3.6(a) Sampling technique- Initially, a rough draft was prepared keeping in

mind the objective of the research. A pilot study was done in order to know

accuracy of the questionnaire. The final questionnaire was arrived only after

certain important changes were done. Thus my sampling came out to be

judgemental & convenient.

3.6(b) Sampling unit- The respondents who were asked to fill out the

questionnaire are the sampling units. These comprise of the industry people then

the employees of MNCs, Govt employees, Self employed etc..

3.6(c) Sampling size- The sample size was restricted to only 125, which

comprised of people from different regions of Bangalore due to time

constraints.

3.6(d) Sampling Area- The area of research was Bangalore, Karnataka, INDIA.

3.7 Limitations of the Research:

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i. The research is confined to a certain parts of Bangalore and does not

necessarily shows a pattern applicable to all of country.

ii. Some respondents were reluctant to divulge personal information which

can affect the validity of all responses.

iii. In a rapidly changing industry, analysis on one day or in one segment can

change very quickly. The environmental changes are vital to be

considered in order to assimilate the findings.

iv. The period of the project conducted is of a very short span and is

subjected to have a different criterion when it is of a long term.

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4. Industry Profile - Potentials & Market Dynamics

Life insurance or life assurance is a contract between the policy owner

and the insurer, where the insurer agrees to pay a sum of money upon the

occurrence of the insured individual's or individuals' death or other event, such

as terminal illness or critical illness. In return, the policy owner agrees to pay a

stipulated amount called a premium at regular intervals or in lump sums. There

may be designs in some countries where bills and death expenses plus catering

for after funeral expenses should be included in Policy Premium. In the United

States, the predominant form simply specifies a lump sum to be paid on the

insured's demise.

As with most insurance policies, life insurance is a contract between the

insurer and the policy owner whereby a benefit is paid to the designated

beneficiaries if an insured event occurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event,

rather it is the value derived from the 'peace of mind' experienced by the

policyholder, due to the negating of adverse financial consequences caused by

the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the people

named in the policy.

Insured events that may be covered include:

Serious illness

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http://en.wikipedia.org/wiki/Illness

http://en.wikipedia.org/wiki/Beneficiary

http://en.wikipedia.org/wiki/Insurance

http://en.wikipedia.org/wiki/Death

http://en.wikipedia.org/wiki/Insurance


Life policies are legal contracts and the terms of the contract describe the

limitations of the insured events. Specific exclusions are often written into the

contract to limit the liability of the insurer; for example claims relating to

suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

Protection policies - designed to provide a benefit in the event of specified

event, typically a lump sum payment. A common form of this design is term

insurance.

Investment policies - where the main objective is to facilitate the growth of

capital by regular or single premiums.

As a whole there are different Life insurance plans satisfying different

criterions some provide life cover some for a certain number of years, some are

investment plans & some term plans based on these there are Insurance policies

which are mentioned below...

1. Term Insurance

Term insurance covers you for a term of one or more years. It pays a

death benefit only if the policy holder dies during the period the insurance is in

force. Term insurance generally offers the cheapest form of life insurance. You

can renew most term insurance policies for one or more terms even if your

health condition has changed.

However, each time you renew the policy for a new term, premiums may

climb higher, just like a rent agreement every time you renew the lease. This

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http://en.wikipedia.org/wiki/Investment

http://en.wikipedia.org/wiki/Protection


policy is particularly useful to cover any outstanding debt in the form of a

mortgage, home loan, etc.

For example if you have taken a loan of Rs10 lakh, you will have an option of

taking an insurance to protect the loan in case of passing away before the debt is

repaid.

2. Whole Life Insurance

Whole life insurance covers you for as long as you live if your premiums

are paid. You generally pay the same premium amount throughout your

lifetime.

Some whole life policies let you pay premiums for a shorter period such

as 15, 20 or 25 years. Premiums for these policies are higher since the premium

payments are made during a shorter period. There are options in the market to

have a return of premium option in a whole life policy. That means after a

certain age of paying premiums, the life insurance company will pay back the

premium to the life assured but the coverage will continue.

3. Money Back Insurance

The money back plan not only covers your life, it also assures you the

return of a certain per cent of the sum assured as cash payment at regular

intervals. It is a savings plan with the added advantage of life cover and regular

cash inflow. This plan is ideal for planning special moments like a wedding,

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your child's education or purchase of an asset, etc. Money back plan have

"participating" and "non participating" versions in the market.

4. Endowment Assurance

Endowment insurance is a level premium plan with a savings feature. At

maturity, a lump sum is paid out equal to the sum assured (plus dividends in a

par policy). If death occurs during the term of the policy then the total amount

of insurance and any dividends (par policy) are paid out.

There are a number of products in the market that offer flexibility in

choosing the term of the policy namely you can choose the term from five to 30

years. There are products in the market that offer non participating (no profits)

version, the premiums for which are cheaper

5. Universal Life

This is a flexible life insurance policy and is also market sensitive. You

decide on the several investment options on how your net premium are to be

invested. While the money invested has the potential for significant growth,

such funds are subject to market risks including the loss of the principal.

6. Unit Linked Product

Market-linked plans or unit-linked insurance plans (ULIP) are similar to

traditional insurance policies with the exception that your premium amount is

invested by the insurance company in the stock market.

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Market-linked insurance plans (MLP) mimic mutual funds and invest in a

basket of securities, allowing you to choose between investment options

predominantly in equity, debt or a mix of both (called balanced option).

The major advantage market-linked plans offer is that they leave the asset

allocation decision in the hands of investors themselves. You are in control of

how you want to distribute your money among the broad class of instruments

and when you want to do it or pull out. Any of the products mentioned above

except term products could be unit-linked.

7. Riders

Riders are additional add-on benefits that you could opt to include in your

policy over and above what the policy may provide. However, these additions

come at an extra premium charge depending of the rider you opt for. These

riders cannot be bought separately and independently. The extra premium,

nature and characteristics of the riders are based on the base policy that is

offered.

Some riders available in the market are:

Accident Death Benefit: Provides an additional amount in case death

occurs as a result of an accident.

Term Rider: It allows the payment of an additional amount should death

of the insured happens.

Waiver of Premium: In case of total and permanent disability of life

insured due to accident or any other means this rider allows premiums on

base policy or riders to be waived.

27 | P a g e



Critical Illness: It provides payment of an additional amount on the

diagnosis of some critical illness.

4.1 Life Insurance Market Dynamics

Life Insurance is a matter of solicitation. However, the rules of this

solicitation game are changing rapidly and fierce competition is becoming a

way of life. At last count, there were 22 life insurers operating in the country

and a handful of others were waiting in the wings. The industry is getting into a

frenzy players are pushing hard to partake a share of this market. The onset of

competition also means that the role of the ubiquitous life insurance agent is

evolving, expanding and in some cases, witnessing a complete turnaround.

Increased competition and proliferation of products are compelling agents to

innovate and spend greater amount of time understanding competing products.

Today life insurance policies are turning to be an alternate for unsecured

market investments in the form of Unit Linked Insurance Products (ULIP’s)

which has turned the game on for the Insurer’s with better market opportunities

and increased capital.

Day by day the market for financial products is becoming customer

frenzy with a wide range of investment options and reduced risks with added

riders & add-ons.

Life insurance portfolio’s moving towards securitization could prove to

be a dynamic move & a valuable source of financing for acquisitions and other

strategic investments by releasing the embedded value from blocks of business.

28 | P a g e



4.2 Industry profile

Life Insurance is the fastest growing sector in India since 2000 as

Government allowed Private players and FDI up to 26%. Life Insurance in India

was nationalised by incorporating Life Insurance Corporation (LIC) in 1956.

All private life insurance companies at that time were taken over by LIC.

In 1993 the Government of Republic of India appointed R.N Malhotra

Committee to lay down a road map for privatisation of the life insurance sector.

While the committee submitted its report in 1994, it took another six

years before the enabling legislation was passed in the year 2000, legislation

amending the Insurance Act of 1938 and legislating the Insurance Regulatory

and Development Authority Act of 2000. The same year that the newly

appointed insurance regulator Insurance Regulatory and Development Authority

(IRDA) started issuing licenses to private life insurers.

All life insurance companies in India have to comply with the strict

regulations laid out by Insurance Regulatory and Development Authority of

India (IRDA). Therefore there is no risk in going in for private insurance

players.

Life Insurance Corporation of India (LIC), the state owned behemoth,

remains by far the largest player in the market. Among the private sector

players, ICICI Prudential Life Insurance(JV between ICICI Bank and Prudential

PLC) is the largest followed by Bajaj Allianz Life Insurance Company Limited

(JV between Bajaj Group and Allianz).

29 | P a g e


http://www.irdaindia.org/

http://en.wikipedia.org/wiki/Life_insurance

http://en.wikipedia.org/wiki/956


The private companies are coming out with better products which are

more beneficial to the customer. Among such products are the ULIPs or the

Unit Linked Investment Plans which offer both life cover as well as scope for

savings or investment options as the customer desires.

Further, these types of plans are subject to a minimum lock-in period of

three years to prevent misuse of the significant tax benefits offered to such plans

under the Income Tax Act. Hence, comparison of such products with mutual

funds would be erroneous.

4.3 Foreign Direct Investment (FDI) Policy in Insurance Sector

As per the current (Mar 06) FDI norms, foreign participation in an Indian

insurance company is restricted to 26.0% of its equity / ordinary share capital.

The Union Budget for fiscal 2005 had recommended that the ceiling on foreign

holding be increased to 49.0%.

The government approved the much-awaited comprehensive Insurance

Bill that seeks to raise foreign direct investment (FDI) cap in private sector to

49 per cent from 26 per cent.

“Life Insurance Council secretary general S.B. Mathur hoped that the Bill

(Insurance) would be passed soon to enable flow of more FDI in the insurance

sector.

This is a clear and stable government which will work freely. As Parliament will

convene, the insurance bill will be cleared soon. Now, the economic reforms

will also be pushed forward, he said.

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Last year, the government tabled the insurance reforms bill in the Rajya Sabha

aiming increasing the cap on FDI in private companies in the sector to 49%

from existing 26%.

The minimum investment limit for health insurance companies is proposed to be

fixed at Rs50 crore. At present, the companies entering the insurance business

-- life or general insurance are required to have a minimum paid-up capital of

Rs100 crore.

The move to lower the investment limit is expected to encourage companies with

less capital to launch health insurance business and increase the penetration of

this important segment.”

4.4 List of Private sector Insurers Granted Permission by IRDA

1. Bajaj Allianz Life Insurance Company Limited

2. Birla Sun Life Insurance Co. Ltd

3. HDFC Standard Life Insurance Co. Ltd

4. ICICI Prudential Life Insurance Co. Ltd.

5. ING Vysya Life Insurance Company Ltd.

6. Life Insurance Corporation of India

7. Max New York Life Insurance Co. Ltd

8. Met Life India Insurance Company Ltd.

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*Source: www.livemint.com Posted: Sun, May 17 2009

http://www.livemint.com/


9. Kotak Mahindra Old Mutual Life Insurance Limited

10. SBI Life Insurance Co. Ltd

11. Tata AIG Life Insurance Company Limited

12. Reliance Life Insurance Company Limited.

13. Aviva Life Insurance Co. India Pvt. Ltd.

14. Sahara India Life Insurance Co. Ltd.

15. Shriram Life Insurance Co. Ltd.

16. Bharti AXA Life Insurance Company Ltd.

17. Future Generali Life Insurance Company Ltd.

18. IDBI Fortis Life Insurance Company Ltd.

19. Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd

20. AEGON Religare Life Insurance Company Limited.

21. DLF Pramerica Life Insurance Co. Ltd.

22. Star Union Dai-ichi Life Insurance Comp. Ltd.

4.5 Potentials of Life Insurance – India

Life Insurance Sector in India has a promising potential. With ever

changing money markets of mutual funds, debentures and shares life insurance

sector has again emerged victorious as the most secured solution for assuring

32 | P a g e



human life against unexpected risks as well as an ideal solution for wealth

creation and management.

After independence Indian economy started to rise in early sixties with

yet it is lagging with a time gap of 40-50 years compared to economic

development of countries like USA. Life Insurance sector in India didn’t receive

any importance from common Indian masses 20 years ago except senior citizens

and those working on secure government jobs.

Since 1990 Indian government started making tie ups with foreign

investors and commercial organizations to move India on the path of economic

progress. As a result new wave of private corporate sector developed in India

enabling rise of new corporate industries under Industrial regulations from

Indian government. Private corporate sector in India in recent years has created

new job options enabling citizens of India to plan their life in an optimized way

with life insurance as an important personal aspect.

In India life insurance solutions has to be tapped at far more depth as

people have not yet understood its real importance. Life Insurance can really

serve well in the long run for assuring against risks that threaten Indian life

expectancy as well as contribute to safe accumulation of capital funds to

enhance India’s GDP and financial progress.

Utility achieved from life insurance products in India is 8% of GDP all

we can say that a lot is to be achieved in the long run. With reduction of human

life expectancy due to wear and tear style of current day life, tensions arising

from issues to achieve materialistic progress money investors of India in age

groups from 25-50 have turned towards life insurance products as safe and

33 | P a g e



sensible money investments for securing lives of their families as well as

themselves.

Estimated figures of life insurance investment portfolios in India are quite

astonishing. In respect to large Indian population it has been declared that life

insurance market in India has a worth of more than 2000 crores comprising total

value of 300 billion all over the world. As concerning career prospects today

demand of recruiting insurance professionals has increased due to rising need of

availing life insurance services.

Keeping this fact in view life insurance industry in India will continue

recruiting service professionals in large numbers in forth coming months as

insurance sector achieved significant growth rate even during recent global

recession.

Largely untapped market with 17% of the world’s population

Nearly 80% of the Indian population is without Life, Health and Non-life

insurance

Life Insurance penetration is low at 4.1% in 2006-07

Non-life penetration is even lower at 0.6% in 2006-07

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The per capita spend on Life and Non-Life Insurance is US$33.2 and

US$5.2 (2006-07), respectively compared to a world average of US$330

and US$224

Strong economic growth with increase in affluence and rising risk

awareness leading to rapid growth in the insurance sector

Innovative products such as Unit Linked Insurance Policies are likely to

drive future industry growth

Investment opportunities exist in both life and non-life segments

Total estimated investment opportunity of US$14-15 billion

The Indian Insurance market is expected to be around US$52 billion

by 2010

Expected CAGR of over 30% p.a.

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4.6 SWOT Analysis

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Strength Patents Insurance having currently

good market Premium rates are

increasing so are commissions

The variety of products are increasing

IT bringing new dimensions to insurance sector

Weakness Insurance companies are

often slow to respond to changing needs

Buying insurance policy is a cumbersome process

Products or services similar to competitors

Opportunity

Technology is improving, paperless transactions are available

Busy life, customers need flexible and customizable policies

Like mobile banking,

Threat

Weather cycles New substitute product

emerging Increasing expenses and

lower profit margin will hit hard on the smaller agencies & insurance


4.7 Pest analysis

Political

Prohibition for Investment Manner and conditions of investment Insurance business in rural / social sector Capital requirement Renewal of registration Requirements as to Capital Investment of funds outside India Insurance business in Rural Sector Power to investigation or inspection Role of the government Government’s objectives for liberalization

of insurance Bodies that regulate the sector Business Requirement Investment of Assets Consequences of non-compliance Tax policy and Insurance sector Investment decisions mandated by

government Pattern of investment specified for life

insurance

Economical

Adequacy of capital Increased Economic Activity Interest Rates Inflation Rates Market related factors Customer Satisfaction

37 | P a g e


Opportunity

Technology is improving, paperless transactions are available

Busy life, customers need flexible and customizable policies

Like mobile banking,

Threat

Weather cycles New substitute product

emerging Increasing expenses and

lower profit margin will hit hard on the smaller agencies & insurance


Socio-cultural

Population Life style Educational level Level of earning

Societal benefits

Technological

Maintaining the database E-business insurance in India Impact on distribution channels

I. POLITICAL FACTORS AFFECTING LIFE INSURANCE

INDUSTRY:

Within India political ambitions and rise of communalism, fissiparous

tendencies are on the rise and may well continue for quite some time to time.

Therefore, it expected that the insurance companies might consider offering

political risk coverage also. The only area where Indian insurers consider

giving cover is with regard to customs duty change under certain conditions.

Certain type of political risk at the international level has serious

implications for exporters. The term ‘political risk’ has a wider connotation than

commonly understood or assumed. It covers events raising not just from

politics, but risks in the course of international transactions.

In this connection, it may be noted that export credit insurance has evolved

out of uncertainties relating to international trade, particularly due to problems 38 | P a g e



arising out of foreign legal jurisdiction, political changes and currency exchange

difficulties faced by many developing countries.

Prohibition for Investment

The funds of policyholders are prohibited from being directly / indirectly

invested outside India as per section 27 – C.

Manner and conditions of investment

Subject to the above provisions contained in Section 27 -/ 27- A / 27 B,

the IRDA may,

In the interest of the policyholders, specify the time, manner and other

conditions of investment by insurer.

Give specific directions applicable to all insurers for the time, manner and

other conditions subject to which the policyholder’s funds should be

invested in the infrastructure and social sectors.

After taking into account the nature of business and to protect the interest

of the policyholders, issue directions to insurers relating to time, manner

and other conditions of the investments provided the latter are given a

reasonable opportunity of being heard.

Insurance business in rural / social sector

All insurers are required to undertake such percentage of their insurance

business, including insurance for crops, in the rural social sector as

specified by the IRDA.

They should discharge their obligations to providing life insurance

policies to persons residing in the rural sector, workers in the unorganized

39 | P a g e



sector or to economically vulnerable classes of society and other

categories of persons as specified by the IRDA.

Capital requirement

The paid up equity of an insurance company applying for registration to

carry on life insurance business should be Rs 100 Crores.

Renewal of registration

An insurer, who has been granted a certificate of registration, should have

the registration renewed annually with each year ending on March 31

after the commencement of the IRDA Act.

The application for renewal should be accompanied by a fee as

determined by IRDA regulations, not exceeding one forth of one percent

of the total gross premium income in India in the preceding year or Rs 5

Crore or whichever is less, but not less than Rs 50000 for each class of

business as per Section 3-A.

Requirements as to Capital

The minimum paid up equity capital, excluding required deposits with the

RBI and any preliminary expenses in the formation of the country, requirement

of an insurer would be Rs 100 crore to carry on life insurance business and

Rs.200 crore to exclusively do reinsurance business as per Section 6.

Investment of funds outside India

Insurers outside India as per Section 27-C cannot invest the funds of

policyholders.

Insurance business in Rural Sector40 | P a g e



After the commencement of the IRDA Act, 1999, every insurer would

have to undertake such percentage of life insurance business in the rural sector

as may be specified by the IRDA in this behalf. It is mandatory for the new

companies to meet the obligations relating to the rural and unorganized sector as

per section 32-B.

Power to investigation or inspection

The IRDA may, at any time, order in writing a person as investigating

authority to investigate the affairs of any insurer and report to it. Government

has power to change the tax policy against life insurance industry.

• Health insurance rebate

• Pension saving rebate

• Mede claim premium rebate

• P.P.F., E.P.F., NSC all are tax exempted saving

• All life insurance policy are tax exempted saving

• Agricultural income is tax exempted

• House rent allowances

• Post office saving

• Expenses on dreaded diseases are tax exempted

• Recently there is issue to increase FDI level from 26% to 49%

Role of the government

As insurance is an important service sector, hence it is highly regulated

by government. Since 1956 insurance sector was highly regulated by

government of India. On March 16, 1999, the Indian cabinet approved on

Insurance Regulatory Authority Bills that was designed to liberalize the

insurance sector.

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Government’s objectives for liberalization of insurance

The main objective of opening of insurance sector to the private insurers

is as under:

1. To provide better coverage to the Indian citizens.

2. To augment the flow of long-term financial resources to finance the growth

of infrastructure.

Bodies that regulate the sector

For better regulation purpose of the insurance sector the government has

established following bodies;

1. IRA: Insurance Regulatory Authority.

2. IRDA: Insurance Regulatory and Development Authority.

3. TAC: Tariff Advisory Committee.

Business Requirement

A company will not be issued a license unless the IRDA is satisfied with

the sound financial condition, the general character of management, the volume

of business, the capital structure, earning prospects for the insurers and that the

interests of the general public will be served if registration is granted to the

insurer.

Foreign insurance companies have been allowed to have a maximum 26%

share holding. No life insurance company can be registered under the Act unless

they have a paid up capital of Rs. 100 crores. Every life insurer shall deposit

with the reserve bank of India one percent of the total gross premium written in

India in any financial year, not exceeding Rs. 10 crores.

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This amount would not be susceptible to any assignment or charge nor

would it be available for the discharge of any liabilities other than liabilities

arising out of policies issued, so long as any such liabilities remain

undercharged.

Investment of Assets

Every insurer is required to invest, and keep invested, assets equivalent to

not less than the net liabilities as follows:

(a) 25 % in government securities.

(b) A least 25% of the said sum in government securities or other approved

securities.

(c) The balance in any approved investment rated as “very strong” or more by

reputed rating agencies, which include various debt instruments on which

dividend on its ordinary shared for the five years immediately preceding or for

at least five out of the six or seven years immediately preceding have been paid

and which have priority in payment over ordinary shares of the company in

winding up.

The IRDA may in the interest of the policyholder’s directions relation the

time, manner and other conditions and investments of assets to be held by an

insurer. The IRDA may also direct the insurer to realize the investment, if it

sees the investments to be unsuitable or undesirable. The Act prohibits an

insurer from directly or indirectly investing policyholder funds outside India.

Further, every insurer has to always maintain an excess of the value of his

assets over the amount of his liabilities of not less than Rs. 50 crores in the case

43 | P a g e



of an insurer carrying of life insurance business. If at any time an insurer does

not maintain the required solvency margin, he is required to submit a financial

plan, as per directions issued by the IRDA, indicating a plan of action to correct

the deficiency within three months.

Consequences of non-compliance

A company failing to comply with the act shall be liable for panel action.

Further, IRDA is empowered to investigate into the affairs of the

company. Failure to comply with the directions may lead to cancellation

of the license for the company.

Also, if the IRDA has reason to believe that a company is doing business

in a manner likely to be prejudicial to the interest of policyholders, it is

required to report to the central government.

The central government may base on the report, appoint an administrator

to manage the affairs of the company. This would act as a further

assurance to the consumers, as their interests would at all times be a

priority and that in the event that the company acts in the manner

prejudicial to their interests, than an administrator would be appointed to

serve their needs.

The court may also wind up the company if it fails to deposit or keep

deposits as per the requirements of the act or if the continuance of the

company is prejudicial to the interest of the policyholders or public

interest.

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The four amendments, made in the life insurance Bill by the Lok Sabha, are as

under:

1. The Insurance Regulatory and Development Authority should give priority to

health insurance.

2. Policyholder’s fund will be invested in the social sector and infrastructure.

The percent may be specified by the IRDA and such regulations will apply to all

insurers operating in the country.

3. Insurers will be expected to undertake a certain percent of business in rural

areas, and cover workers in the unorganized and informal sectors and

economically backward classes.

4. In the event of insurers failing to fulfil the social sector obligations, a fine of

Rs. 25 lakh would be imposed the first time. Subsequent failures would result in

cancellation of licenses.

Tax policy & Insurance sector

Another factor, which affects the insurance sector, is the tax policy. The

tax reforms in India are such that it encourages the citizens to invest in the

insurance sector.

The tax policy of the government is particular relevant for life insurance

which is a long-term contract and inculcates among the policyholders the habit

of saving. Taxation of returns on investment influences, investment decisions

and high rates of taxation will discourage the desire to save. Already in India

there are complaints that the rates of return on life policies are not what they

45 | P a g e



could be. Therefore tax incentives play a vital role in determining the

attractiveness of such policies.

Such tax breaks are available in many countries and have helped in the

development of their life sector. In western countries the gain from the proceeds

of a life insurance policy is paid free of tax. Provided the policy satisfies certain

qualifying conditions. Non-qualifying policies get basic rate tax relief, though

higher rate taxpayers may still have to pay tax on the gain, although at a reduced

rate. The insurance companies can use such tax concessions rate. The insurance

companies can use such tax concessions to design products for different

categories of taxpayers.

The other factors, which affect the insurance sector, are the employment

law, and government stability. These are the factors, which affect the insurance

industry.

Investment decisions mandated by the government

Insurers are required to fulfil certain social commitments as well. As

many of the social welfare measures companies are not just regulated, but have

been mandated to hand over a portion of their funds to the state for investment

in infrastructure and for social development through government bonds and

securities. In India, the pattern was, accordingly, prescribed in great detail by

the government. This was not in the form of guidelines, but as a legal obligation

under the insurance Act, 1938.

Pattern of investment specified for life insurance:

Type of Investment Percentage

(1) Government Securities 25%

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(2) Government Securities or other

approved securities

Not less than 50%

(3) Approved Investments

Infrastructure & social sector

Other govern by exposure

norms

Not less than 15%

Not exceeding 35%

II. ECONOMICAL FACTORS AFFECTING LIFE INSURANCE

INDUSTRY

Interest rate at bank and interest rate of P.F variation very much affect to

life insurance industry, because people always attract by higher return.

Therefore, they do not prefer lower return policy. Unemployment also affects

insurance industry, because the unemployment people will not have earning, so

saving also affect to life insurance sector Life insurance industry will directly

affected by Earthquake, Monsoon, and Natural calamity. Because of these

events turns into lots of death, so the life insurance companies have to pay claim

against policy. Infant mortality rate and maternity mortality rate are also

affecting to life insurance. Typical Indian want luxurious product against low

47 | P a g e



income, so that they prefer instalment or annuity (EMI), so that they may not

have extra saving to invest in life insurance.

Adequacy of capital:

Capital adequacy is a matter of attention in view of the nature of the life

insurance business, where in the case a contingency arises, the insurers should

be in a position to meet its long-term contractual obligations and pay up the

dues or claims. In that sense, life insurance is a capital-intensive business and

must be backed by an adequate capital base on the part of the owners and the

companies should not be running their business purely on other people’s money.

So minimum start up amounts and long running capital adequacy norms are

absolutely essential, in consideration of this, the Malhotra committee suggested

and subsequently the IRDA stipulated a minimum capital base of Rs 1 bn for

any entity wanting to enter the life insurance business.

Increased Economical Activity

Although economic activity has slowed down since 1996, sooner or later

there will be an upswing. The increase in the growth rate in various sectors

accompanied by the growth in trade in the context of fulfilling of commitments

to the WTO will signal a growth in the demand for insurance covers of new

types.

For example, aviation insurance cover will be on an increasing scale in

view of the need for more frequent air travel for men and for transporting

materials. This would necessitate substantial property, liability and personal

insurance.

As far as cover against business interruption is concerned, the pace of

business and of change today is so fast that even the most careful assessment of

48 | P a g e



exposure time, and the most liberal coverage cannot protect the insured

adequate in the event of a loss be on the increase and insurance companies

cannot afford to ignore the vast potential in this business.

Interest Rates

During the last years the government has rationalized interest rate creates

better business opportunities for the life insurance sector because the substitute

products are graded lower by the customers. On the other hand the value of the

holdings of the insurance companies will increase.

Rationalization of the interest rates is still expected, and it is an

opportunity for the company. Low interested rates mean low investment return

for reinsures causing negative impact on their overall net profitability as pricing

is to a certain extent sensitive to interest rate fluctuations. The negative impact

therefore, lead to higher pricing level for reinsures in order to sustain their

profitability.

But, in reinsurance market, which is characterized by over capitalization

is also resulting intense competition. The opportunity for such rate increases

practically remains very slim and even non-existent. As a result, reinsures are

under tremendous pressure to cut their operational cost to safeguard

profitability.

Furthermore, low interest rates discourage and even prevent any outflow

of capital from reinsurance business to capital markets, causing current over

capitalization in reinsurance market to continue. A positive outcome is that low

inflation rates, if sustained for a considerable period, usually bring some relief

to reinsures from the resulting lower than forecast claims payment. Also, this

can lead stability to reinsures administrative cost.

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As interest rates fall, bond value rise, and insurers feel richer. On the

liability side, reserves are not explicitly discounted so lower interest rates do not

increase reserves, lower inflation means lower expected future claims payments

which lowers required reserves. This in turn increases surplus again allowing

insurers to feel richer.

Therefore, low interest rates and low inflation result in higher assets,

lower liabilities, hence greater surplus and greater risk capacity resulting in less

demand for, and greater surplus of reinsurance.

Low interest rates and low inflation reduce the ability of reinsures to

offset technical losses by using financial products and should, as a

consequences, force market competition downloads.

However, this will also serve to weaken the balance sheets of insurers

and create an increase in the demand for balance sheet protections. Lastly, these

conditions move risk from the liability side of the balance sheet to the asset side

while actually generating new needs for cover.

Inflation rate

Inflation can also be one of the causes to change the scenario of the

insurance sector. High inflation for instance, would tend to reduce the insurance

business, particularly life, because the real value of the money paid back to the

policyholder on maturity of the policy would go down and would, therefore,

lose its attraction for the investor. At the most, the insuring public may prefer

pure risk plans (terms insurance), which have a low premium outlay.

The response to an inflationary situation will depend on what benefit the

insured is looking for. In a situation of high inflation, clients would prefer

policies where the savings portion is periodically returned while the risk portion

is maintain for the duration of the contract.

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Those who prefer risk protection are likely to opt for long term policies,

which may also be preferred because they are likely to be low premium policies.

A flexible system, under which the sum insured, is increased from time to time

so that the real value of the cover is maintained, and could give a boost to the

market under conditions of high inflation.

III. SOCIO-CULTURAL FACTORS AFFECTING LIFE INSURANCE

INDUSTRY:

Population:

Growth in the population is a major factor pushing up the demand. It is

also going to exert a special influence on the life insurance market in other

ways. Apart from exerting pressure on demand for goods and services, and

through that, ill effects of uncontrolled growth of population also could spur the

growth of demand.

For example, overcrowding in public places of entertainment, public

support, or too many vehicles on the road can result in hazards like stampedes

and pollution, which require covers and still are not sold on a large scale today.

Thus the positive as well as the negative aspects of population growth are going

to spur demand.

Life style:

The peculiar lifestyle of a country or an age also influences the insurance

business. Change therein produces different demands for life insurance.

For e.g. All over the world, family size is shrinking and the fact that in

decades to come, both presents are more frequently likely to work outside the

51 | P a g e



home will mean that there could be a greater possibility of property loss.

Similarly, a larger number of vehicles on the roads for people commuting to

their jobs or business would mean larger incidence of accidents. This will

increase the demand for life insurance products.

However, consumers’ behaviour cannot be adequately and accurately

predicted. The younger generation is overwhelmingly influenced by

consumerism. If this trend continues or increases with increasing income, there

will be fewer propensities to save or insure, as a result of which the increasing

purchasing poser may not be reflected in the life insurance market.

Crumbling social values, the deteriorating law and order situation, the growing

incidence of crime, extortion, abduction, etc., are posing a new category of risks

which need to be covered through suitably designed policies.

Thus these are how changing life style of the citizens is affecting the life

insurance industry.

Level of education:

India is one of the developing countries: the level of education is very

low here. The literacy rate is very poor. More than 50% of the population is still

uneducated or more or less not educated. Thus the people are not able to

understand the concept of the life insurance.

Among the educated people the quality of the education is still a big

question mark. Thus the awareness is not created and it has become a big

challenge for the industry.

Thus one of the factors, which affect the life insurance sector, is low level

of education.

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Level of earning:

Another factor, which affects the life insurance sector, is the level of

earning. In India the rule of 80-20 is working. The 80% of the total population

is having the 20% of the wealth and the 20% of the total population is having

80% of total wealth. Thus the richer are richer and poorer are poorer. Due to

this the life insurance sector is affected very much.

Societal benefits:

In view of the fact that large sections of India have inadequate life

insurance cover, an important social responsibility of the government relates to

spreading it far and wide. In addition, the government attempts to extent life

insurance with certain social obligations in view in both urban and the rural

areas through such means special schemes for the weaker sections, and by

tilting of the life insurance companies’ investments in favour of social

developments.

The social changes emerging in the country provide opportunities for

insurers to sell financial services products such as family health care

programmed, retirement plans disability insurance, long-term care for senior

citizens and different employee benefit plans.

It is not the total population but the insurable population which is

material for the conclusion of potential. Apart from the usual demographic and

other well known factors such as age group, income level, sex-wise distribution,

and literacy level, a realistic assessment of this potential has to be based on

several other relevant factors.

Many invisible factors like religious faiths and social values too need to

be considered. As such, there is considerable difficulty in accurately estimating

53 | P a g e



the potential and crude estimates can be misleading. The estimate will also vary

according to the criteria used to measure if.

IV. TECNOLOGICAL FACTORS AFFECTING LIFE INSURANCE

INDUSTRY:

Internet as an intermediary in the current Indian market customer is not

aware about the intrinsic value of insurance. He thinks of insurance only in the

month of March as a tax saving measure. The security provide by an insurance

cover is rarely thought about. In such a scenario Internet can be an effective

medium for educating the consumers about insurance. It serves as a single

window for disseminating product, process and procedural information to the

consumers.

Maintaining the database

The most important factor that is affecting the insurance industry is the

marinating the database of the customers. The insurance industry having a huge

list of the customers.

In order to maintain it in manual format it is really the work of stupidity.

With the change in time the computers has taken the work of this things. Thus

with the development of the technology it has becoming possible to maintain

such huge database very easily. A person can switch over to the computer and

get the details of the customer very easily.

Thus maintaining the database has really become easy due to the

development in technology.

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E-business insurance in India

The Internet has played a vital role in transforming the business of the

21st century. Computers are now being used extensively for creating a storing

data, information with the help of complex and sophisticated technological tools

in every kind of business. This change having been widely accepted, the

advantages are numerous such as fast processing improved. Efficiency, cost

reduction among several other benefits. However, with every positive change,

there is an evil attached and technology is no exception.

In technical is an evil attached and technology is no exception. In

technical terms, increased sophistications of technology brings with it, an

increased factor of risk involved. The risk can be of various attributes, for

example, the risk of data being lost due to a virus attack, the theft of important

and confidential information and so on, which ultimately results in losses for the

business entity.

With this change in the business process, insurers have to devise new

methods for assessing, underwriting and servicing claims for the so-called e-

business insurance. Insurers face challenges to ascertain risks, in order to

quantify them because such risks don’t have any past data, which makes it all

the more difficult for actuaries.

Moreover, what financial impact a particular risk can have is very

difficult to be determined. For example, if some hackers obtain credit card

information of few customers, it’s a loss for banks, their credibility, customers

and also their brand. Will an insurance policy cover all of this is million dollars

question hence; the difficulty is to design a cover first of all, which really

answers the needs of customers.

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But even after designing and pricing such products with difficulty, the

challenge to underwrite and handle claims for such policies remains existent.

Impact on distribution channels: -

Distribution channels are the most important part of the insurance

industry. The scenario is continuously changing in this industry. In future the

customers are expected to be more technology – oriented, better informed, more

knowledgeable and more demanding. The insurers will have to offer all types of

channel to customer and it is the customer who will have the right to choose the

channel suiting him/ her. Dual income families with young children, singles

with long working days and flexi-timers all demand high level of sophistication

and ease when it comes to service.

Hence the companies have to be very careful and cautious in catering to

the needs of these customers who provides a good amount of business to the

insurers.

Thanks to the technological advancement and increased de regulation and

sophistication, the carriers and producers can now reach the customers in

different ways as has been proved in the US market and other developed nations

the web is extensively used for the access of information but when it comes to

the purchase of policy, the offline mode is preferred.

The private players in India seem to have identified this and have put

substantial information on their websites regarding policies, quotes and contact

information among other routine stuff.

4.8 Value Chain Analysis

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Competitive advantage of insurance companies:

The LIFE insurance industry has witnessed limited competition till now.

But with the entry of private sector insurance companies the scene will change

and competition among various insurance companies will become the name of

the game.

Insurance companies have to face and deal with competition not only in

terms of investments performance but also customer service.

Hence an aggressive competitive strategy is the need of the day for the

insurance companies in order to gain a competitive niche, survive and

proliferate in the insurance industry. To be successful in one’s area of business

in the presence of competitive forces the following model may adopt to fulfil

the purpose.

Value chain –the competitive advantages of a firm:

Michael porter, an authority on competitive strategy and competitive

advantage, argues that competitive advantage grows fundamentally out of the

value; a firm is able to create for its buyer that exceeds the cost of creating it.

According to him, “competitive advantage stems from many discrete

activities can contribute to a firm’s relative cost position and creates a basis for

differentiation. A systematic way is necessary for analyzing the source of

competitive advantages.

The concept developed by Michel porter is ‘value chain’ which

represents graphically the activities of the firm and their interlink ages. The

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value chain reflects the history of the firm, its strategy for the future, approach

to which it belongs. The value chain may be similar across firm in the same

industry, but different among competitors. Differences among competitors are

key source of competitive advantages.

Value chain-the valuable ingredients:

Value chain of a firm as proposed in general has five generic

categories of primary activities for a firm involved in competition in any

industry. These categories can be represented in the diagram.

Firm Infrastructure

MarginsHuman Resource Mgt.

Technology DevelopmentProcurements

Inbound Logistics

Operations Outbound logistics

Marketing & Sales

Services

4.9 Global Scenario

Life insurance not only plays an important role in national economy but

also in international economy. Marine cargo insurance provides risk coverage

for shippers and the banks, which finance international trades. This role

becomes all the more important in the context of an active government policy to

encourage exports.

Indian life insurer operates in more than 30 countries through agencies,

branches, associates companies. These operations earn foreign exchange. The

insurance business is concerned with North America, Western Europe, Japan

and Oceania.

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Together these region’s accounts for about 91% of the world annual

premium .By region’s North America and Western Europe are growing

moderately while Oceanic, Latin America, Eastern Europe and Africa display

growth above lone –term trends to a global context globalization of life

insurance helps companies practices underwriting discipline in one regions

globalization of the insurance industry received a big boost.

Countries Insurance Penetration

(premium as a % of GDP)

Insurance Density

(Per Capita Premiums in USD)

United kingdom 12.71 3028.5Japan 8.70 3165.1

United States 4.48 1611.4South Africa 14.04 392.9

Australia 6.04 1193.5South Korea 9.89 935.6

India 1.77 7.6China 1.12 9.5

Malaysia 2.13 86.4Indonesia 0.54 4.0

Brazil 0.36 12.9

India and the world market:

Unfortunately, the progress achieved by the life insurance industry in

India, it compares unfavourably not just with the developed countries. But also

even with the developing world. The global market for the life insurance is

estimated to be around $ 1412.3 billion.

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5. Company Profile – AEGON Religare

AEGON Religare Life Insurance Company Ltd is a joint venture of

AEGON, Religare and Bennett, Coleman & Company. AEGON in one of the

world's leading life insurance and pension groups. Religare is a prominent

player in the field of integrated financial services in India. On the other hand,

Bennett- Coleman & Company is India’s largest media house. The insurance

company began its operation in July 2008. Within a short span of time, it has

spread across India, by opening over 30 branches in the country.

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AEGON Religare Life Insurance offers multitude of benefits to its

customers. It offers policy servicing on the phone via Interactive Voice

Response System (IVR). This is done by issuing the customer a T-Pin for

authentication. It boasts of being the first insurance company in India to include

the customer’s medical report in the policy kit. Talking about the individual

stake holders, AEGON serves over 40 million customers in as many as 20

markets spread throughout the Americas, Asia and Europe. Headquartered in

The Hague, the Netherlands, AEGON carries out major operations in the United

States, the Netherlands and the United Kingdom.

Religare Enterprises Limited (REL) is a significant player in the field of

Retail, Institutional and Wealth spectrums. It has a diverse and wide base of

clientele. REL holds 44% equity in AEGON Religare Life Insurance Company

Ltd. Talking about Bennett, Coleman & Co. Ltd. (BCCL) it is a mammoth in

the field of media, since it is associated with the Times Group, India's largest

media house. The Joint Venture of the three giants (of their respective fields)

has given rise to AEGON Religare Life Insurance.

5.1 About Promoters

AEGON

160 years of experience in the insurance business

Ranked 5th largest insurance company in the world on revenues*

Present in 20 countries throughout the America, Europe & Asia

Track record of finding beneficiaries of policies and settling claims

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Even in the wake of crisis in the financial world, rated AA# by rating

agencies

AEGON is an international business, providing life insurance, pensions

and other long-term savings and investment products to millions of

customers around the world.

The company has major operations in the United States, the Netherlands

and the United Kingdom as well as other businesses in Asia, the

Americas and elsewhere in Europe.

AEGON is listed on the stock exchanges of Amsterdam, London, New

York and Tokyo.

With just over EUR 330 billion in revenue-generating investments at the

end of 2008, AEGON companies employ just over 31,000 people

worldwide, serving more than 40 million policyholders in over twenty

countries across the globe.

It holds 26% equity in AEGON Religare.

RELIGARE

A diversified financial services group with a pan-India presence and

presence in multiple international locations, Religare Enterprises Limited

("REL") offers a comprehensive suite of customer-focused financial

products and services targeted at retail investors, high net worth

individuals and corporate and institutional clients.

REL, along with its joint venture partners, offers a range of products and

services in India, including asset management, life insurance, wealth

management, equity and commodity broking, investment banking,

lending services, private equity and venture capital.

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Religare has also ventured into the alternative investments sphere through

its holistic arts initiative and film fund.

Has launched India's first wealth management joint venture under the

brand name 'Religare Macquarie Private Wealth'.

REL, through its subsidiaries, has launched India's first holistic arts

initiative - with a gallery - as well as the first SEBI approved film fund,

which is an initiative towards innovation and spotting new opportunities

for creation and maximization of wealth for investors.

REL operates from seven domestic regional offices, 43 sub-regional

offices, and has a presence in 498* cities and towns controlling 1,837*

business locations all over India.

To make a mark in the global arena, REL acquired UK-based Hichens,

Harrison & Co. in 2008 which was subsequently re-named as Religare

Hichens Harrison PLC ("RHH"). Hichens, Harrison & Co. was

incorporated in London in the year 1803 and is believed to be one of the

oldest firms of stockbrokers in the City of London.

Pursuant to expansion of REL's business, the company has grown from

largely an equity trading company into a diversified financial services

company.

With the addition of RHH the REL group now operates out of multiple

global locations, other than India, (the UK, the USA, Brazil, South

Africa, Dubai and Singapore).

It holds 44% equity in AEGON Religare.

Bennett, Coleman & Co. Limited

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Bennett, Coleman & Co. Limited, is the flagship company of The Times

Group, which has a heritage of over 150 years and is one of India's

leading media groups.

It reaches out to 2468 cities and towns all over India.

The group owns and manages powerful media brands like The Times of

India, The Economic Times, Maharashtra Times, Navbharat Times,

Femina, Filmfare, Grazia, Top Gear, Radio Mirchi, Zoom, Times Now,

Times Music, Times OOH, Private Treaties and indiatimes.com

All of its brands are multinational in outlook, traditional at heart and

national in spirit.

From the very first edition on November 3, 1838 the mammoth BCCL

Group has come a long way.

By way of the innovative venture of Times Private Treaties, the BCCL

Group holds 30% equity in our company.

5.2 AEGON Religare Values & Vision

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5.3 Leadership

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CHIEF EXECUTIVE OFFICERMr. Rajiv Jamkhedkar


CHIEF FINANCIAL OFFICER & APPOINTED

ACTUARY

Mr.K S Gopalakrishnan

CHIEF INVESTMENT OFFICER

Mr.Saibal Ghosh

CHIEF MARKETING OFFICER

Mr.Yateesh Srivastava

HEAD - AUDIT RISK & COMPLIANCE

Mr.Debmalya Maitra

5.4 S.W.O.T Analysis

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Strengths

The biggest strength of AEGON Religare - it is cash rich; which make

them ignorant about the gestation period.

Religare brand image & AEGON business experience has proved to be a

perfect match.

An already existing channel for marketing the financial products.

Quality service is crux of the company mission.

Investment in IT solutions in the initial stage would help in upgrading

customer service and satisfaction.

The unique marketing strategy of targeting the people who are already

insured but under insured with the punch line “KILB” can prove to be

USP for the company.

The investment plans are well planned based on the customer preferences

and life requirements when compared to the competitors and the

premium allocation charges are also low; this has made the company

Price competitive.

Weakness

Almost all the competitors in the market offer same bouquet of products

with a title difference, premium and offering.

New entrant to the Indian life insurance market which has a diversity of

customers with different cultures, attitude & preferences.

The expenses on marketing & advertisements have failed to build a

brand image in the market; it’s still an alien in the life insurance market.

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More than 70% people live in rural area but AEGON Religare is more

centric in urban area.

Opportunity

Huge market is literally untapped, out of 320 million insurable market

only 25% of the people insured

Health insurance and pension scheme, an estimated market potential of

approximately $15 billion

India is fast growing market and 80 to 85% people are below age of 45

Leverage the customer base of Banc assurance partner

Building a strong distribution network can prove to be cash cow in the

long run.

Insurance literacy is increasing in India.

Threats

Entry of other private company with equal strong experience and

financial strength of partner making the competition difficult and

saturating the urban market.

Current Govt. policies do not encourage in gross domestic saving, if the

tax liabilities of the service rise the customer will have little money to

invest.

LIC has woken up from sleep and is following competitive strategies, its

huge surplus in life fund gives a capability to lodge price war.

Product differentiation is difficult in market (banc assurance).

Competition is getting keener in couple of years.

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5.5 Product, Pricing & Market Strategies – AEGON Religare

5.5(a) Products

Life Insurance Plans & Policies

AEGON Religare Life Insurance offers insurance and pension plans

specifically designed to help you plan your life better. Select a plan based on

your need – protection, saving, child or retirement.

Protection Plans

Protection plans are Term Plans which provide only life cover. These plans can

help you get adequately covered and secure your family financially in case of

unfortunate event. These are low cost life insurance plans

Aegon Religare level term plan

Aegon Religare Increasing term plan

Aegon Religare Decreasing term plan

Aegon Religare Group term plan

Aegon Religare Rural term plan

Aegon Religare Group credit life plan

Aegon Religare I-term plan

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http://www.aegonreligare.com/life-insurance-plans.php


ULIPs

Unit Linked Insurance Plans or ULIPs as they are commonly called are a form

of Savings Plans that help you save and grow your money. ULIPs are a

category of goal-based financial solutions that combine the safety of life

insurance protection with wealth creation opportunities.

Aegon Religare Protect Gain Plan

Aegon Religare Premium Gain Plan

Aegon Religare Premium Gain Plus Plan

Aegon Religare Wealth Protect Plan

Aegon Religare Invest Maximiser Plan

Child Plans

AEGON Religare Child Plans are life insurance plans that can help you save

for your child’s future goals. This plan comes with a Waiver of premium

feature, which guarantees to waive all future premiums in event of your demise,

and ensures that your child receives full sum assured immediately and 100% of

fund value on maturity of policy.

Aegon Religare Star Child Plan

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http://www.aegonreligare.com/saving-plans.php





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http://www.avivaindia.com/


6. Data Analysis & Interpretation

The primary survey was planned in two stages, one to analyze the

consumer behavior towards life insurance products and other was to gauge the

industry potential.

The sample size for consumer behavior was 63 of which 33 male and 30

female respondents of different age groups, profession & income levels.

The sample size for Industry potential was 58 of which 30 male & 28

female insurance professionals.

6.1 Industry Potential (based on Industry people)

Male Female0

5

10

15

20

25

30

35

Demographic - Preference

Demographic - Preference

Gender No. of Respondents Total ResponseMale 27 47%Female 31 53%Total 58 100%

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http://www.iciciprulife.com/public/default.htm


6.1(a) Market share

Company Market Share

LICICICI PrudentialBajaj AllianzTata AIGHDFC StandardSBI LifeBirla SunlifeAVIVAMax New YorkAegon ReligareOthers

Company Market ShareLIC 62%ICICI Prudential 11%Bajaj Allianz 5%Tata AIG 2.1%HDFC Standard Life 2.4%SBI Life 3%Birla Sunlife 2.5%Aviva 2%Max Newyork 2.8%Aegon Religare 0.8%Others 4.4%Total 100%

Analysis: AEGON Religare being a new entrant into the market has done a good job in capturing around 0.8% of the market share and has to weave strategies to further be the market leader in the long run.

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6.1(b) Market undertreated

Market Male Female Total Response Cosmos 0 0 0Metros 0 1 1Suburbs 12 17 29Rural 15 6 21

Analysis: This primary survey revealed that the private life insurance players were mainly urban centric and neglected the rural and suburban population.

CosmosMetros

SuburbsRural

0

5

10

15

20

25

30

FemaleMale

Inference: The private life insurance sector has been focusing on the metros and cosmos and the rural and suburbs are left under treated, here the industry has high customer base and potential in future.

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6.1(c) Conversion rate lead generation to closing the sale

Conversion rate Male Female Total<10% 3 1 410% - 30% 11 14 2530% - 50% 6 9 1550%< 0 0 0

Analysis: This analysis revealed that female respondents had a better conversion rate from lead generation to closing the sale and this needs to be improved by better training programs and customer interaction.

<10% 10% - 30% 30% - 50% 50% <0

5

10

15

20

25

FemaleMale

Inference: The conversion rate from lead generation to closing the sale is averaging 25% and the female respondents from the industry said they had a better conversion rate than the male respondents.

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6.1(d) Brand Image of LIC has overshadowed other private insurance sector

Response Male Female TotalYES 12 9 21NO 9 14 23

Analysis: It was an interesting fact that around 46% of the respondents believed that LIC brand image had overshadowed the private insurance sector.

Yes

No

0

5

10

15

20

25

FemaleMale

Inference: Around 58% of the respondents said the LIC brand image has overshadowed the private life insurance sector. Hence they face a tough competition from LIC.

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6.1(e) Customer interest

Invest options Male Female TotalLife Insurance 3 0 3Mutual Funds 0 2 2Investment 18 17 35Tax savings 8 11 19

Analysis: Customer is more interested in high & constant returns with security they prefer investment instruments rather than life insurance or mutual funds.

Life Insurance Mutual Funds Investment Plans Tax savings0

5

10

15

20

25

30

35

FemaleMale

Inference: The customer is more interested in investment plans than in life insurance or mutual funds and the business people mostly opted life insurance

for tax savings.

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6.2(f) Customer perception – Life Insurance policy

Perception Male Female TotalDisciplined Saving 5 4 9Security 18 19 37Dead Investment 1 2 3

Analysis: About 80% of the customer perceived life insurance policy is a tool for securing life rather than a disciplined saving or a dead investment. The fact to be noted was very few responded that it was a dead investment.

Disciplined Saving Security Dead Investment0

5

10

15

20

25

30

35

40

FemaleMale

Inference: Around 73% of the customer perceives life insurance policy as security for life against disciplined saving & dead investment.

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6.1(g) Recommended plans for different stages of life

Product ULIP’s Pension Plan

Term Plan Child Plan

Endowment PlanAge group

<25yrs 43 0 2 2 025 – 35yrs 22 24 15 36 035 – 50yrs 5 23 25 3 2951yrs< 12 5 6 1 1

Analysis: This survey revealed that most of the life advisors and business managers recommended ULIP plans to young and enthusiastic investors who could take high risk for high return, as the life stage progresses one needs to be more responsible and secure himself & his family hence opt Child plans & Pension plans for the later stage comes the Term plans & Endowment plans.

<25yrs 25 - 35yrs 35 - 50yrs 51yrs<0

10

20

30

40

50

60

70

80

90

100

Endowment PlansChild PlansTerm PlansPension PlansULIP's

Inference: Life advisors and business managers had suggested different plans for different stages of life to the customer.

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6.1(h) Potential Customer

Potential Customer Male Female TotalBusiness People 5 5 10Professionals 17 22 39Govt. Employees 4 2 6

Analysis: The survey revealed that the respondents believed that the professionals were the main customer base when compared to the business people and government employees because they were mainly concerned about their future and had better product knowledge when compared to the other two.

Business People Professionals Govt. Employees0

5

10

15

20

25

30

35

40

FemaleMale

Inference: The main customer base was perceived to be the professionals against business people and government employees.

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6.1(i) X factor having a bearing – buying an Insurance Policy

X factor No. of Respondents ResponseFriends & Relation 24 38%Policy Scheme 10 23%Past Returns 15 23%Brand Image 15 16%Total - 100%

Analysis: When the sales force was asked for what the x factor which drives the customer to buy an insurance policy almost 38% of them responded it was friends & relations who influenced then followed the brand image & past returns at the last stood policy scheme.

Friends & Relation38%

Policy Scheme16%

Past Returns23%

Brand Image23%

X factor

Inference: The x factor which had a bearing on customer buying an insurance policy were friends and relations and the next stood past returns, brand image & policy scheme.

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6.1(j) Customer Product Knowledge

1

2

3

4

5

6

7

8

9

10

0 2 4 6 8 10 12 14 16

Rating on a scale of 10

Rating on a scale of 10

Inference: This analysis showed that customer lacked product knowledge and the companies needed to work on this field.

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6.2 Consumer Behavior (based on primary consumer feedback)

6.2(a) Demographic preference

Male Female0

5

10

15

20

25

30

35

Age Group

50+35 - 5025 - 35<25

Male Female0

5

10

15

20

25

30

35

Marital status

SingleMarried

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Self employed Professional Business other0

5

10

15

20

25

30

35

Income Group

5lacs+3.1 - 5lacs1 - 3 lacs<1

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6.2 (b) Invest instruments customer prefer

Invest Instruments Male Female TotalGold 17 19 36Real Estate 21 14 35FD’s 25 21 46Equities 6 4 10Mutual Fund 4 2 6Insurance 20 18 38

Analysis: Interestingly this primary survey with the customer revealed that they preferred a secure channel of investment instrument rather going for a high risk and high return option. And insurance stood at the second place against gold, real estate, equities & mutual funds.

Gold Real Estate FD's Equities Mutual Funds

Insurance0

5

10

15

20

25

30

35

40

45

50

FemaleMale

Inference: The investment instruments the customer preferred were the more secure than with high risk and high returns and preferred long term investments.

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6.2(c) People Insured

Gender Male Female TotalYES 15 12 27NO 10 14 24

Analysis: The primary survey revealed that approximately 47% of the respondents was not insured who formed a potential customer base.

Male Female0

5

10

15

20

25

30

1510

12

14

Gender

NoYes

Inference: No of male respondents insured were more when compared to the female respondents this showed that responsibilities were one of the influential parameter which drove customer to buy an insurance policy.

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Occupation YES NOSelf employed 2 5Professional 15 16Business 9 2Other 1 2Total 27 24

Analysis: Self employed people were the one who were less insured when compared to other category people. Business people were the one 11 of 9 were insured. So said potential customer the professionals almost 50% of the respondents were not insured.

Self Employed Profession Business Other0

5

10

15

20

25

30

35

2

159

1

9

16

2

2

Occupation

NoYes

Inference: The primary data revealed that about 46% of the respondents from different fields were not insured and they formed a potential customer base.

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6.2(d) Customer Perception about Insurance

Customer Perception

Male Female Total

Essential 7 12 19Important 22 14 36Not required 0 0 0Can’t say 5 3 8

Analysis: The primary survey revealed that the customer knew the importance of life insurance policy if just given a boost he can be converted into a potential customer.

Essential Important Not Required Cant Say0

5

10

15

20

25

30

35

40

Gender

FemaleMale

Inference: Majority of female respondents said it was essential and majority of the male respondents said it was important for life & few were confused.

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Occupation Essential Important Not required Can’t saySelf Employed 1 6 0 4Professional 16 11 0 4Business 0 13 0 0Other 1 2 0 0Total 18 32 0 8

Analysis: All the segments had a familiar opinion when it comes to securing there life they all knew insurance was an essential and the most important one in securing their future.

Self Employed Professional Business Other0

5

10

15

20

25

30

35

Occupation

Cant SayNot RequiredImportantEssential

Inference: Primary data revealed that most of the customers had an opinion that life insurance was an important criterion for their life security.

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6.2(e) Influential Parameters for an investment

Parameters Male Female TotalOld age Savings 22 18 40Children 25 24 49Regular Income 7 8 15Tax saving 6 8 14

Analysis: The survey sample revealed that the most influential parameter for an investment decision was for the future of children then the old age savings followed by regular income & tax savings.

Old age savings Children Regular Income Tax Saving0

5

10

15

20

25

30

35

40

45

50

Gender

FemaleMale

Inference: The male respondents were equally concerned about the old age savings and children’s future but the female respondents gave more importance to securing children’s future.

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Parameters Old age Saving

Children Regular Income

Tax savingOccupationSelf Employed

7 10 2 1

Professional 16 22 11 10Business 11 12 2 3Other 2 2 0 1Total 36 46 15 15

Analysis: Almost 90% of the respondents of various occupations gave the first priority to their children’s future then the old age savings when it came to investment.


10

20

30

40

50

60

Occupation

Tax savingRegular IncomeChildrenOld age saving

Inference: Children’s future played a vital role then the old age savings were the main influential parameters for buying an insurance policy.

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6.2(f) Presumption about an Insurance Policy

Presumptions Male Female TotalInvestment 14 14 28Tax saving 12 7 19Security 26 25 51Disciplined Saving

6 7 13

Analysis: Customer presumes that an insurance policy is a security for life with other options like investment & tax saving tool following the suite.

Investment Tax saving Security Discipline saving0

10

20

30

40

50

60

FemaleMale

Inference: Male and female respondents had the same response about the life insurance policy that it was for security and an investment tool.

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Presumptions Investment Tax saving Security Disciplined savingOccupation

Self employed 5 2 10 3Professional 16 11 23 5Business 5 5 11 3Other 2 1 2 0Total 28 19 46 11

Analysis: 90% of the customer of various segments agreed that life insurance policy was a tool of life security followed by an investment & tax saving tool.

Self Employes Professional Business Other0

10

20

30

40

50

60

Discipline savingSecurityTax savingInvestment

Inference: Customer presumed life insurance policy as a tool for life security than an investment.

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6.2(g) Criteria for selecting Insurance Policy

Criteria Male Female TotalPolicy Scheme 17 20 37Past returns 17 7 24Service 13 14 27Brand Image 18 15 33

Analysis: All the criteria mentioned above played a vital role in customer decision buying an insurance policy but the policy scheme stood at the top most priority followed by brand image and service.

Policy Scheme Past Returns Service Brand Image0

5

10

15

20

25

30

35

40

FemaleMale

Inference: Male respondents considered policy scheme, past returns & brand image with equal importance while selecting an insurance policy but the female respondents had a slight variation instead of past returns they had voted for a better service.

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Criteria Policy scheme

Past returns

Service Brand imageOccupationSelf employed 7 6 6 7Professional 19 9 14 14Business 9 6 7 8Other 0 2 0 3Total 35 23 27 32

Analysis: In life insurance policy selection process customer mainly looks for policy scheme and brand image then the other criteria.

Self employed Professional Business other0

10

20

30

40

50

60

Brand ImageServicePast ReturnsPolicy scheme

Inference: The primary survey revealed that the policy scheme had a major bearing on the customer decision then followed by brand image, service and past returns respectively.

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6.2(h) Opted Risk & Returns

Investment plans Male Female TotalAggressive 16 10 26Moderate 14 19 33Secure 2 0 2

Analysis: The primary survey revealed that the customer showed more interest in moderate plans that is with moderate risk and moderate returns, few mainly young respondents with long term saving plans were more interested in aggressive investment plans with high risk & high returns.

Aggressive Moderate Secure0

5

10

15

20

25

30

35

FemaleMale

Inference: A thing to be noticed from the graph was the female respondents tend to be more moderate when compared to the male respondents and the most of the male respondents tended to have an aggressive investment plan.

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Investment Plan Aggressive Moderate SecureOccupationSelf employed 6 5 0Professional 11 17 2Business 6 7 0Other 1 2 0Total 24 31 2

Analysis: The customer primary survey revealed that they would rather prefer a moderate risk moderate return plan than going for a high risk high return aggressive investment plan. Almost all the categories had the same opinion they were biased. But the younger population chose an aggressive plan that had a long term investment objective.

Self employed Professional Business Other0

5

10

15

20

25

30

SecureModerateAggressive

Inference: The major share of my respondents preferred to be at a moderate plan with moderate risk and moderate return rather with high risk and high return. The age of the customer also had a bearing on the decision.

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6.2(i) Channel to buy an Insurance Policy

Gender Male Female TotalChannelBroker 2 1 3Agents 26 23 49Banks 2 13 15Direct Co. 10 9 19

Analysis: The customer yet believed the traditional channel of buying an insurance policy that is through insurance agents when questioned for the reason they answered they preferred a personal approach with consultation rather going with improved selling channels for buying an insurance policy.

Broker Agents Banks Direct Company0

5

10

15

20

25

30

35

40

45

50

FemaleMale

Inference: Both the male & female respondents tend to choose insurance agents as a channel for buying an insurance policy, but a noticeable number of female respondents chose bank as a channel for buying an insurance policy.

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Channel Broker Agents Banks Direct Co.Occupation Self Employed

0 10 3 3

Professionals

1 21 10 9

Business 1 12 1 5Other 0 3 0 1Total 2 46 14 18

Analysis: The survey revealed that the professional had a better knowledge about the upcoming new channels for buying an insurance policy even then the traditional channel still was popular among the masses.


5

10

15

20

25

30

35

40

45

Direct CompanyBanksAgentsBroker

Inference: The customer still adopted a traditional way of buying life insurance that is through agents rather through new methods.

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6.2(j) Product Knowledge

Gender Male Female TotalProductsTerm plan 23 22 45Endowment plan 4 3 7Child plan 15 15 30Pension plan 7 5 12ULIP’s 10 7 17

Analysis: The customer product knowledge was limited to term plans and child plans they lacked knowledge about the new products in the market hence that knowledge of the customer needs to be updated by the companies through various channels and media.

Term Plan Endowment Plan

Child Plan Pension Paln ULIP's0

5

10

15

20

25

30

35

40

45

FemaleMale

Inference: Both the respondents had a similar knowledge about the products as they mainly preferred life security and child plans.

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Plans Term plan Endowment plan

Child plan Pension plan

ULIP’sOccupationSelf employed

9 2 8 1 2

Professional 18 2 10 6 8Business 12 2 6 4 4Others 2 3 1 1 1Total 41 9 25 12 15

Analysis: Most of the customers had knowledge about the term plans and the younger populace had knowledge about the ULIP’s the professionals were well aware of different plans.

Self Employed Professionals Business Others0

5

10

15

20

25

30

35

40

45

ULIP'sPension PalnChild PlanEndowment PlanTerm Plan

Inference: Most of the customers lacked knowledge about different plans and mainly all had a brief knowledge about the term plans.

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6.2(k) Payment mode preferred for premium

Gender Male Female TotalPayment optionsSingle premium 2 0 2Annually 22 13 35Half yearly 9 11 20Monthly 0 7 7

Analysis: Majority of the respondents preferred long term payment modes that are annually and half yearly payments against a single payment or monthly installments.

Single Premium Annually Half Yearly Monthly0

5

10

15

20

25

30

35

FemaleMale

Inference: The survey revealed that the male respondents were a bit hesitant in short term payments and they preferably were interested in annual premiums and the female majority was towards the half yearly premiums.

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Payment options Single premium

Annually Half yearly MonthlyOccupation Self Employed 0 6 5 0Professional 0 13 13 6Business 2 11 1 0Others 0 2 1 0Total 2 32 20 6

Analysis: The professional respondents were bifurcated with between half yearly and annual premium payments but the business people mainly preferred annual premium payments.


5

10

15

20

25

30

35

MonthlyHalf YearlyAnnuallySingle Premium

Inference: Most of the customer’s preferred half yearly and annual premium payments rather than on a monthly basis.

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7. Finding & Suggestions

7.1 General findings

Wealthier, aging Indians will help transform the country's largely

untapped life insurance market into one of the world's fastest growing

over the next five years, a global consultancy says.

Life insurance is already the most popular financial product among

Indians because of the tax benefits and income protection it offers in a

country where there is no social security.

But with household earnings accelerating in the fast-growing economy,

the life insurance income premiums market could double from 40 billion

dollars to 80 billion or even 100 billion dollars by 2012, said McKinsey

Co in a report.

All factors are in place for the Indian life insurance industry to blossom

into one of the fastest-growing financial services markets in the world.

At the size of the market we're talking about and potential the only one

with similar potential in China, the next five years will be very exciting.

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Key to insurers' enthusiasm about India is its increasing affluence, aging

population and low penetration of insurance coverage at a time when the

market in industrialised countries is relatively saturated.

The potential in the country of 1.1 billion people can be seen from the

fact the ratio of life insurance premiums to GDP -- a common measure

for penetration -- is 4.1 per cent, far lower than developed market levels

of 6-9 per cent.

This will change as India sees strongly accelerating household income

and a more favourable demographic profile over the next two decades.

Household disposable income is seen rising by 5.3 per cent annually,

much more than the 3.6 per cent annual growth over the past two

decades.

With increased GDP growth there will be more income for consumers to

put into life insurance.

Secondary data suggests the life insurance industry could witness a rise in

insurance sector premiums to between 5.1 and 6.2 per cent of GDP in

2012 from 4.1 per cent.

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Demand for pension cover is also seen raising, with 113 million Indians

expected to be over 60 by 2016, a figure seen swelling to 179 million by

2026.

"There is an untapped opportunity" in pensions where life insurance

players have no meaningful presence, said the report.

Just 10 to 11 per cent of India's working population is covered by formal

old-age social security schemes.

There are currently close to 30 public and private firms in India's

insurance market with state-owned Life Insurance Corp of India (LIC)

still holding a stranglehold of over 70 per cent.

But private players have moved aggressively, chasing for business after

being allowed to compete with LIC in 2000. And overseas insurers have

raced into the market despite rules limiting foreign direct investment in

domestic insurers to 26 per cent.

The Congress government has been seeking to raise the FDI cap to 49

percent as part of economic reform but its communist allies fiercely

oppose such a step.

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http://www.expressindia.com/latest-news/Indias-life-insurance-market-set-for-boom-Study/218245/

http://www.expressindia.com/latest-news/Indias-life-insurance-market-set-for-boom-Study/218245/


AEGON Religare initial investment in technology for providing a better

customer service and tracking the fund performance has created a era in

the life insurance market in India.

AEGON Religare’s marketing strategy of educating the people about

insurance and then approach them with ads and media has paid off a good

deal to the company.

Religare brand name in India and the experience of AEGON has been a

perfect knot to pierce into the life insurance market in India.

AEGON Religare work environment and a flat organisation structure has

been bang on target as the employees feel at home & don’t hesitate to

share their point of view to their seniors.

AEGON Religare is mainly targeting the urban people precisely the white

collared employees for ex. Sectors like IT, BT, Infrastructure, Govt.....

Gurukul session in AEGON Religare has been of great help to employees

for enhancing the overall performance and updating the product

knowledge and changes in the market.

There are two sales channel in AEGON Religare

Company – Business Manager – Life Advisor – Customer

Company – Sales Manager – Corporate – Customer

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Customer has a set mind frame that insurance calls for LIC & new

players entering the life insurance market have to face a tough

competition in this regard.

When it comes to private players ICICI has been the major player with

about 10% of the market share and has been in the market since 2000.

Customer knowledge about life insurance is below par in India.

7.2 Statistical findings from primary data

A. Industry Survey

The rural and suburban markets are undertreated which has large

customer base to exploit.

Conversion rate from lead generation to closing the sale is @ an average

of 25% and female insurance employees have better conversion rate when

compared to male employees.

Around 48% of my sample size agreed that brand image of LIC has

overshadowed other private insurance sector.

Primary survey revealed that customer prefers investment plans & tax

savings rather than life insurance & mutual funds.

Customer perception about life insurance policy, he looks at it as his

future security for him & his family then comes discipline saving.

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In the primary survey the industry people suggested some plans what they

would offer their customer for different stages of life, below the younger

the age better is the ULIP plan as the responsibilities keep growing plans

keep adding up Child plans, Term Plans, Endowment Plans, Pension

Plans....

Insurance sector has mainly targeted the professionals as their main

customer base next stands the business people and then the govt.

employees.

When the life advisors and business managers were questions about what

do they is the x factor which has a bearing on the customer decision for

buying an Insurance policy the major chunk went to friend & relations,

second preference was shared by past returns & brand image of the

company equally and the last stood policy scheme.

When they were asked about, how does the customer they deal with know

about Insurance products, it was rated 38% at an average. That meant

customer lack knowledge about the products.

B. Customer survey

When customer was surveyed about the investment instruments they

would prefer most of them preferred a more secure one the FD’s in banks

surprisingly next stood insurance later places where occupies by gold,

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real estate, equities & at the last mutual funds. This meant customer

preferred security than high returns.

Primary survey revealed that 49% of the sample size where not insured

that meant they are still the untouched customer base, it is the same when

we take the whole insurance market.

It also revealed that the business people were better insured when

compared to the professionals and self employed.

When questioned about the customer perception about insurance around

54% said it was important, 35% said it was essential remaining where yet

to make a decision but interestingly no one said it wasn’t required.

There were different influential parameters which had influence to make

an investment decision first preference was children then came the old

age savings then regular income and tax saving.

When customer was asked about his presumption about an insurance

policy he said it was security for his life then secondly an investment,

third a tax saving instrument and lastly a tool to enhance the habit of

disciplined saving.

Customer said the main criteria for selecting an insurance policy was

policy scheme then the brand image, service & past returns.

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Most of them opted to have moderate risk and moderate returns, few

opted to be aggressive & very few preferred to be secure.

Customer still mostly prefer the traditional channel of buying an

insurance policy that is through agents rather than from the company,

banks or brokers..

When the customer was questioned about their knowledge about different

life insurance products almost all knew about the term plans then came

the child plan, ULIP’s, pension plans & endowment plans.

The customer preferred to make premium payments annually firstly and

the second preference was half yearly payments.

7.3 Suggestions

In order to succeed in any business it is very essential to make and follow

the strategies. Strategies are very important for any of the business. Following

are the few strategies, which I recommend to the insurance sector.

One approach is to focus upon product quality, which will instil

confidence in minds of the customers that they would be offered best

product from out of the several available products.

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The other approach, is to focus on the customers need, would involve a

heavy investment in developing relationships with policyholders. Under

this approach, one can expect a range of products and services designed

to give the customer what he desires.

The third approach is of greater market segmentation under which the

population should be divided into several homogeneous groups, products

and services would be targeted towards such selected markets. The effort

would be to tag clients to the company- by customized combination of

coverage, easy payment plan, risk management advice, and convenient

quick claim handling.

Porter Generic Strategies:

One of the expert Michel porters has identified four internally consistent generic

strategies, which can be used singly or in combination:

Overall cost leadership is clearly under stable.

In a differentiation strategy, a company seeks to be unique in its industry

along some dimensions that are widely valuable by the customer. May be

the lowest cycle time for settling a claim under say, a med claim policy

could be differentiating factor.

In a cost focus, a company seeks a cost advantage in its target segment.

While in differentiation focus; a company seeks a differentiation target.

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Key Strategy to Success:

Marginally Different Product :

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Another strategy would be for the companies to design products that will

make Comparison-shopping difficult. They could offer a wide variety of covers

with marginal differences and varying prices, whose terms and conditions are

difficult to compare for consumers who may not have sufficient experience in

purchasing insurance and who would find it difficult to make a clear choice.

If the consumer is offered a unique policy, he will have no alternative

coverage with which can be compared. Given the combination policy, which

can offer protection against a number of losses, the consumer will find

comparison even more difficult.

Designing New Strategies :

The existing insurance companies cannot be satisfied with concentrating

on the consolidation of their existing markets, but have to achieve further

growth and penetration. They must, therefore concentrate on strengthening

existing points of service, designing new channel of distribution, direct contact

with their ultimate customers, and front line employee empowerment.

They also need to refresh their marketing set up. The new comers, on the

other hand give priority to tapping the market, left unexploited by the public

sector companies.

Move towards Rural Market:

It is one of the most important suggestions; data says that rural market is

still untreated by the private insurance sector. We believe that the sector should

move towards rural market. Insurance penetration can be achieved by tapping

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the neglected Rural Markets. There is vast potential for insurance growth in the

rural sector.

A recent survey by foundation for research, training and Education in

insurance (FORTE) suggests that insurance can be sold profitably to rural

communities in India. The survey reveals that,

1. There is distinct hierarchy of needs in rural areas.

2. Rural people find security in groups.

3. The saving habit is very strong in rural areas.

4. Average saving across the most important socio-economic strata comes to

30-35% of annual income or Rs. 13,500 annually, which is significant.

5. There is high level of awareness about life insurance and fairly high-level

about 36% already own life insurance.

6. 51% of these who own life insurance would like to buy more.

7. Amongst the savers, a significant percentage does not save through

formal financial modes or institutions.

8. Rural buyers of insurance prefer a half yearly mode of premium payment

to coincide with the time of the harvest.

9. Thus there are very much chances for any of the companies to work over

this scenario. So we believe and suggest all the players to move towards

the rural areas.

Motivation of sales force :

A life insurance company should constantly be involved in the process of

motivating the sales force in the turbulent times. The strategies I recommend;

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1. Building relationship is real perk. One should be sure to build in

networking times for agents during the program-in addition to

entertainment and education.

2. Internet can be frequently used for creating gift ideas.

3. Hold sales contests in the fourth quarter. It is the best times to motivates

agents who wants to qualify for a trip.

4. Consider a contrast within the contest ‘for- top-tier producers; additional

rewards for additional milestones that are met, such as air and guest room

upgrades.

5.

Use of Internet:

1. The present scenario is such that the products are sold with the help of

Internet. The technological advancement is such that force the companies

to take such steps. Still the full-fledged use of Internet is not done in our

country. As suggestion earlier the Internet based life insurance will help

the companies to reduce the transaction cost and time.

2. At the time it can improve the quality of service to its customers, which is

the mission of the company.

3. Company should concentrate on the quality of the premium received this

will help the companies to reduce its underwriting losses.

4. Appointing of proper and efficient agent as well as effective direct

marketing could do this.

5. One can downsize the excessive staffs, by this company could reduce

management expense to a large extent.

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7.4 A Rough Sketch of Customer to Customer Approach:

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8. Bibliography

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Stage 1Establish and define client reprentative

relationship

Stage 2 Gather data including

goals

Stage 3Analyse and evaluate

final status

Stage 4Develop & present recommendations

Stage 5Implement

recommendations

Stage 6Review with client

periodically


Reference books

Planed P.S and Shah R.S; Insurance in India, Response books-2008

Insurance 4th edition CIB Publicaion-2009

Principles of marketing- Philip Kotler (Pearson) 2009

Life insurance – IRDA 2009

Magazine

Life insurance vol 1 ICFAI PRESS 2009

Life insurance vol 2 ICFAI PRESS 2009

Insurance industry Emerging Trends ICFAI PRESS 2009

Insurance law and regulation vol 1ICFAI PRESS 2009

Web site

www.irdaindia.org

www.aegonreligare.com

www.management paradise.com

www.equitymaster.com

www.licindia.com

www.iciciprulife.com

www.incometaxindia.gov.in

www.google.com

www.wikipedia.com

www.livemint.com

www.welipedia.com

Newspaper Economic times

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http://www.welipedia.com/

http://www.livemint.com/

http://www.wikipedia.com/

http://www.google.com/

http://www.incometaxindia.gov.in/

http://www.aegonreligare.com/

http://www.irdaindia.org/


Times of India Business standard

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Potentials & Dynamics of Life Insurance in India - Role of Aegon Religare

Documents

help of insurance

plan of insurance

insurance sector

risk of life

life advisor la

real life environment

similar risk

risk contingent