252033000 Blackbook Project on Insurance


Loading.... (view fulltext now)





Full text







Everyone is exposed to various risks. Future is very uncertain, but there is way to protect

one’s family and make one’s children’s future safe. Life Insurance companies help us to

ensure that our family’s future is not just secure but also prosperous.

Life Insurance is particularly important if you are the sole breadwinn er for your family.

The loss of you and your income could devastate your family. Life insurance will ensure

that if anything happens to you, your loved ones will be able to manage financia lly.

This study titled “Study of Consumers Perception about Life Insurance Policies” enab les

the Life Insurance Companies to understand how consumer’s perception diff ers from

person to person. How a consumer selects, organizes and interprets t he service quality

and the product quality of different Life Insurance Policies, offered by various Life

Insurance Companies.

Insurance is a tool by which fatalities of a small number are compens ated out of

funds (premium payment) collected from plenteous. Insurance companies pa y back for

financial losses arising out of occurrence of insured events e.g. in personal accident

policy death due to accident, in fire policy the insured events are fire and other allied

perils like riot and strike, explosion etc. hence insurance safeguard against un certainties.


It provides financial recompense for losses suffered due to incident o f unanticipated

events, insured with in policy of insurance. Moreover, through a numbe r of acts of

parliament, specific types of insurance are legally enforced in our country e.g. third party

insurance under motor vehicles Act, public liability insurance for hand lers of hazardous

substances under environment protection Act. Etc. 3


It is a commonly acknowledged phenomenon that there are countless risk s in every

sphere of life .for property, there are fire risk; for shipment of goods. There are perils of

sea; for human life there are risk of death or disability; and so o n .the chances of

occurrences of the events causing losses are quite uncertain because t hese may or may

not take place. Therefore, with this view in mind, people facing comm on risks come

together and make their small contribution to the common fund. While it may not be

possible to tell in advance, which person will suffer the losses, it is possible to work out

how many persons on an average out of the group, may suffer losses. When risk oc curs,

the loss is made good out of the common fund .in this way each and every one sha res the

risk .in fact they share the loss by payment of premium, which is c alculated on the

likelihood of loss .in olden time, the contribution make the above-sta ted notion of



Insurance has been defined to be that in, which a sum of money as a premium is

paid by the insured in consideration of the insurer’s bearings the risk of paying a large

sum upon a given contingency. The insurance thus is a contract whereby: a. Certain sum, termed as premium, is charged in consideration,

b. Against the said consideration, a large amount is guaranteed to be paid by the insurer who received the premium,

c. The compensation will be made in certain definite sum, i.e., the loss or the policy amount which ever may be, and

d. The payment is made only upon a contingency

More specifically, insurance may be defined as a contact between two parties, wherein

one party (the insurer) agrees to pay to the other party (the insured) or the be neficiary, a

certain sum upon a given contingency (the risk) against which insurance is requi red.



Insurance occupies an important place in the modern world because of the risk, which

can be insured, in number and extent owing to the growing complexity of present day

economic system. The different type of insurance have come about by p ractice within

insurance companies, and by the influence of legislation controlling th e transacting of

insurance business, broadly, insurance may be classified into the following cate gories:

1. Classification from business point of view a) Life insurance, and

b) General insurance

2. Classification on the basis of nature of insurance a) Life insurance

b) Fire insurance c) Marine insurance d) Social insurance, and e) Miscellaneous insurance

3. Classification from risk point of view a) Personal insurance

b) Property insurance c) Liability insurance

d) Fidelity general insurance



Insurance benefits society by allowing individuals to share the risks fa ced by many

people. But it also serves many other important economic and societal functions. Because

insurance is available and affordable, banks can make loans with the assurance that the

loan’s collateral (property that can be taken as payment if a loan goes unpaid) is covered

against damage. This increased availability of credit helps people buy homes and cars.

Insurance also provides the capital that communities need to quickly rebuild and recover

economically from natural disasters, such as tornadoes or hurricanes.

Insurance itself has become a significant economic force in m ost industrialized

countries. Employers buy insurance to cover their employees against wor k-related

injuries and health problems. Businesses also insure their property, including t echnology

used in production, against damage and theft. Because it makes business operatio ns safer,

insurance encourages businesses to make economic transactions, which ben efits the

economies of countries. In addition, millions of people work for insurance compa nies and

related businesses. In 1996 more than 2.4 million people worked in the insurance industry


fers a lot more in

terms of returns, risk cover & as also that tax concessions & added bonuses Not all effects of insurance are positive ones. The possibility of ea rning insurance

payments motivates some people to attempt to cause damage or losses. Without the

possibility of collecting insurance benefits, for instance, no one would think o f arson, the

willful destruction of property by fire, as a potential source of money.



Since the 1970s, the insurance business has grown dramatically and undergone

tremendous changes. As a result of the deregulation of financial servi ces businesses—

including insurance, banking, and securities trading—the roles, products, and serv ices of

these formerly distinct businesses have become blurred. For instance, citizens i n the U.S.

state of California voted in 1988 to allow banks to sell insurance in that state . In Canada,

banks may also soon be allowed to sell insurance.

Advances in communications technology have also allowed traditionally distinct financial businesses to keep instantaneous track of development s in other

businesses and compete for some of the same customers. Some insurance companies now

offer deposit accounts and mortgages. In the United States, life insurance compa nies now

sell more pension plans and other asset management services than they do conventional

life insurance.

Developments in computer technology that have given insurance providers the ability to quickly access and process information have allowed them to custo m-design

policies to fit the needs of individual customers. But the increasing complexity of policies

has also made some aspects of buying and selling insurance more difficult. In addition, improvements in geological and meteorological technology have th e

potential to change the way property insurers calculate risks of damage. For exa mple, as

scientists improve their abilities to predict severe weather patterns, such as hurricanes,

and geological disturbances, such as earthquakes, insurers may change how they p rovide

protection against losses from such events




Indian history

there are evidence that marine insurance was practiced here about thre e thousand years

ago. The code of Manu indicates that there was the practice of marine insurance carried

out by the traders in India with those of Srilanka, Egypt and Greece .it is wond erful to see

that Indians had even anticipated the doctrine of average and contribu tion. Fright was

fixed according to season and was then very much at the mercy of th e wind and other

elements. Travelers by sea and land were very much exposed to the ri sk of losing their

vessels and merchandise because of piracy on open seas and highway ro bbery of

caravans was very common. The practice of insurance was very common during the r ule

of Akbar to Aurangzeb, but the nature and coverage of the insurance in this peri od is not

well known. It was the British insurer who introduced general insuranc e in India in the

modern form. The Britishers opened general insurance in India around the year 17 00 .the

first company known as the sun insurance office was set up in Calcutta in the ye ar 1710.

This was followed by several insurance companies like London assurance and royal

exchange assurance (1720), Phoenix Assurance Company (1782). Etc. General insura nce

business in the country was nationalized with effect from 1st January 1973 by the

General Insurance Business (Nationalization) Act, 1972. More than 100 n on-life

insurance companies including branches of foreign companies operating wi thin the

country were amalgamated and grouped into four companies, viz., the National Ins urance

Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Compa ny

Ltd., and the United India Insurance Company Ltd. with head offices a t Calcutta,

Bombay, New Delhi and Madras, respectively.


Life insurance in the current form came in Indi a from united kingdom

with the establishment of a British firm, oriental life assurance company in 181 8 followed

by Bombay life assurance company in 1823, the madras equitable life insurance society

in 1829 and oriental life assurance company in 1874.prior to 1871, In dian lives were

treated as sub standard and charged an extra premium of 15% to 20%. Bombay mutual

life assurance society, an Indian insurer that came in to existence in 1871, was the first to



inter alia, to enable the government to collect statistical information about li fe and

non-life insurance business transacted in India by Indian and foreign insu rer, including the

provident insurance societies.

The first half of the 20 th

century marked by two world war, the adverse affects

of the World War I and World War II on the economy of India, and in between them the

period of world wide economic crises triggered by the Great depression. The firs t half of

the 20th century was also marked by struggles for India’s independence. The aggregate

effect of these events led to a high rate of bankruptcies and liquidation of life insurance

companies in India. This had adversely affected the faith of the gene ral public in the

utility of obtaining life cover

In this background, the Parliament of India passed the Life Insurance of India Act on

19th June 1956, and the Life Insurance Corporation of India was creat ed on 1st

September, 1956, by consolidating the life insurance business of 245 private lif e insurers

and other entities offering life insurance services.


Since 1972, the insurance sector has been to tally under the control of

government of India through LIC and GIC and its subsidiaries. As a r esult, revenue of

both of them increased in the last years .the amount of savings pooled by LIC in creased

from Rs.2704 crores in 1974 to Rs .57670 in 1994 with an annual growth rate of 1 6.53%

.similarly premium underwritten by GIC rose from 280 crores in 193 to 7647 crores in

1998 showing an annual growth rate of 25.18%.

Despite increase in premium collected by both LIC and GIC their were i nefficiency

and red tapeisum creeped in to the insurance sector. Apart from that a major pol icy shift

by the Narasimha Rau government during 1990’s.the Indian economy opened for forei gn

competition .In this background The government of India in 1993 had set-up a high

powered committee by R.N Malhothra ,former governor reserve bank of In dia, to

examine the structure of Indian insurance sector and recommended change s to make it

more efficient and competitive keeping in view structural changes in o ther part of the

financial system of the country.


e insurance

companies with the enactment of Insurance Regulatory and Development Authority A ct,

1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory and

Development Authority (IRDA) was established on 19th April 2000 to pro tect the

interests of holder of insurance policy and to regulate, promote and ensure orde rly growth

of the insurance industry. IRDA Act 1999 paved the way for the entry of private players

into the insurance market, which was hitherto the exclusive privilege of public sector

insurance companies/ corporations.



With a view to serve the society, the insurance organizations have b een developed

in different forms with innovation of insurance practice for social we lfare and

development; some of these forms are outlined here. a) Self-insurance

The arrangement in which an individual or concern sets up a private fund to meet

the future risk. If some losses happened in the future the firm meet s the loss out of the

fund. While it may be called ‘self insurance’ it is not a single matter of fact, ins urance at

all because there is no hedge, no shifting, or distributing the burden of risk a mong larger

Persons. It is merely a provision to meeting the unforeseen event. He re the insured

become the insurer for the particular risk. But it can be effectively worked only when

there is wide distribution of risks subjected the same hazard. b) Partnership

A partnership firm may also carry on the insurance business for the sake of prof it. Since it

is not an entity distinct from the persons comprising it, the personal liability of partners in

respect to the partnership debts is unlimited. In case of huge loss the partners may have to

pay from their own personal funds and it will not be profitable to them to start s insurance

business .in the early period before the advent of joint stock companie s many insurance

undertakings were partnership firms or unincorporated companies c) Joint stock companies

The joint stock companies are those, which are organized by the share holders who


subscribe the necessary capital to start the business. These are formed for earn ing profits

for the stockholders who are the real owners of the companies. The m anagement of a

company is entrusted to a board of directors who is elected by the shareholders from

amongst themselves. The company can operate insurance business and poli cyholders

have nothing to do with the management of the concern. But in life insurance it is the

practice to share certain portion of profit among the certain policyholders. 11

d) Mutual fund companies

The mutual fund companies are co- operative association formed for the

purpose of effecting insurance on the property of its members. The po licyholders are

themselves the shareholders of the companies each member is insured as well as i nsured.

They have power to participate in management and in the profit sharing to the fu ll extent.

Whenever the income is more than the expenses and claims, it is accumulated I th e form

of saving and is entitled in reducing the rate of premium. Since the insured are insurers

also, they always try to reduce the management expenses and to keep the business at

sound level.

e) Co-operative insurance organizations

Cooperative insurance organizations are those conce rns, which are

incorporated and registered under Indian cooperative societies Act. The concerns are also

called ‘co operative insurance societies’ these societies like mutual fund companies are

non profit organization .the aim is to provide insurance protection to i ts members at the

lowest reasonable net cost .the Indian insurance Act. 1938, has pr ovided special

provisions for the co-operative insurance societies, but after nationalization t he societies

have ceased to exist. f) Lloyd’s Association

Lloyd’s association is one of the greatest insurance institutio ns in the world.

Taking its name from the coffee house Lloyd where underwriters assembl ed to transact

business and pick-up news. The organization traces its origins to the latter part of the

seventeenth century .so it is the oldest insurance organization in exi sting form in the

world. In 1871,Lloyds Act was passed incorporating the members of the associatio n into

a single corporate body with perpetual succession and a corporate seal .the powers of

Lloyds corporation were extended from the business of marine insurance to the other


insurance and guarantee business. The Lloyds Association also publishes, Lloyds list and

register of shipping for the information of insuring public and the insurers 12

g) State Insurance

The government of a nation, some times, owns the insurance and runs the

business for the benefit of the public. The sate insurance is defined as that insurance

which is under public sector. In Brazil, Japan and Mexico, the insura nce are largely

nationalized. Previously, the state undertook only those insurances, which were regarded

as vital for the national interest.


Having looked at the insurance sector, the efforts made by the govern ment to

make the industry more dynamic and customer friendly. To begin with, the Malhotra

committee was set up with the objective of suggesting changes that wo uld achieve the

much required dynamism.

T Th he e M Ma al lh ho ot tr ra a C Co om mm mi it tt te ee e R Re ep po or rt t

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI

Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry an d

recommend its future direction. In 1994, the committee submitted the report and gave the

following recommendations: S St tr ru uc ct tu ur re e

Government stake in the insurance Companies to be brought down to 50%

Government should take over the holdings of GIC and its subsidiaries so that the se

subsidiaries can act as independent corporations

All the insurance companies should be given greater freedom to operate


C Co om mp pe et ti it ti io on n

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter

the industry

No Company should deal in both Life and General Insurance through a single entit y

Foreign companies may be allowed to enter the industry in collaboratio n with the

domestic companies.

Postal Life Insurance should be allowed to operate in the rural market.

Only one State Level Life Insurance Company should be allowed to operate in each stat

R Re eg gu ul la at to or ry y B Bo od dy y The Insurance Act should be changed.


An Insurance Regulatory body should be set up.

Controller of Insurance (Currently a part from the Finance Ministry) I In nv ve es st tm me en nt ts s

Mandatory Investments of LIC Life Fund in government securities to be reduced from

75% to 50%.

GIC and its subsidiaries are not to hold more than 5% in any compan y (There current

holdings to be brought down to this level over a period of time). C Cu us st to om me er r S Se er rv vi ic ce e

LIC should pay interest on delays in payments beyond 30 days.

Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the

insurance industry.

Overall, the committee strongly felt that in order to improve the cus tomer services and

increase the coverage of the insurance industry should be opened up to competiti on.

But at the same time, the committee felt the need to exercise caution as any fai lure on the

part of new players could ruin the public confidence in the industry


Few Life Insurance policies are:

Whole life policies - Cover the insured for life. The insured does no t receive money

while he is alive; the nominee receives the sum assured plus bonus u pon death of the


Endowment policies - Cover the insured for a specific period. The insu red receives

money on survival of the term and is not covered thereafter.

Money back policies - The nominee receives money immediately on death of the

insured. On survival the insured receives money at regular intervals d uring the term.

These policies cost more than endowment with profit policies.

Annuities / Children s policies - The nominee receives a guaranteed amo unt of money

at a pre-determined time and not immediately on death of the insured. On survival the

insured receives money at the same pre-determined time. These policies are best suited

for planning children s future education and marriage costs.

Pension schemes - are policies that provide benefits to the insured only upon re tirement.

If the insured dies during the term of the policy, his nominee would receive the benefits

either as a lump sum or as a pension every month. Since a single policy cannot m eet all

the insurance objectives, one should have a portfolio of policies covering all t he needs




“Life Insurance is a contract for payment of a sum of money to the person assured on the

happening of the event insured against”. Usually the insurance contract provi des for the

payment of an amount on the date of maturity or at specified dates at periodic i ntervals or

at unfortunate death if it occurs earlier. Obviously, there is a pric e to be paid for this

benefit. Among other things the contracts also provides for the payment of premi ums, by

the assured.

Life Insurance is universally acknowledged as a tool to eliminate risk, substitu te certainty

for uncertainty and ensure timely aid for the family in the unfortunate event of the death

of the breadwinner. In other words, it is the civilized world’s partial solution to the

problems caused by death. Life insurance helps in two ways dealing wi th premature

death, which leaves dependent families to fend for themselves and old age withou t visible

means of support.

The most common types of life insurance are whole life insurance and term life

insurance. Whole life insurance provides a lifetime of protection as long as you pay the

premiums to keep the policy active. They also accrue a cash value an d thus offer a

savings component. Term life insurance provides protection only during the term of the

policy and the policies are usually renewable at the end of the term


There are many Life Insurance Companies like LIFE INSURANCE CORPORATION OF INDIA










This Study will help us to understand the consumer’s perception about l ife

insurance companies. This study will help the companies to understand, how a

consumer selects, organizes and interprets the Quality of service and product

offered by life insurance companies. 2.2 SCOPE OF THE STUDY

This study is limited to the consumers within the limit of Bangalore city. The study will be able to reveal the preferences, needs, perception o f the

customers regarding the life insurance products, It also help the insu rance

companies to know whether the existing products are really satisfying the

customers needs .


1) The deeper the understanding of consumer’s needs and perception, the earlier the product is introduced ahead of competitors, the expected contributi on

margin will be greater .Hence the study is very important.

2) Consumer markets and consumer buying behavior can be understood bef ore

sound product and marketing plans are developed

3) This study will help companies to customize the service and produc t,

according to the consumer’s need.

4) This study will also help the companies to understand the experien ce and

expectations of the existing customers.

5) Apart from creating, manufacturing and distribution capabilities for life


insurance products, an in depth study of the consumers, their preferences and demand for their product is very necessary for setting up an efficien t

marketing network. 19


o Ascertain the profile and characteristics of potential buyers. o To have an insight into the attitudes and behaviors of customers.

o To find out the differences among perceived service and expected service .

o To produce an executive service report to upgrade service characteristics of life insurance companies.

o To access the degree of satisfaction of the consumers with their current bran d

of Insurance products. 2.5. REVIEW OF LITERATURE:

The literature review section critically examine the recent or historic ally significant

studies, company data or industry reports that acts as a basis for proposed stud ies to begin

with the research discussion of the related literature and relevant se condary data from a

comprehensive prospective, moving to more specific studies, that are as sociate with

research problem. Basically the literature should be applied to the st udy, than the

researcher proposes. The literature may also explain the needs for the proposed work to

appraise the short comings and informational gaps in secondary data sources. To carry the research work the researcher has gone thro ugh a few reports,

books, journals and websites. The details regarding Life Insurance Indu stry, history,

origin and growth of the industry is also taken from some books, mag azines etc. The

sources of this information are as follows:

Catalogues and Broachers from various life insurance companies. Articles from magazines and news paper.

Information from various websites.



A research design is a basic plan, which guides the researcher in the collectio n and

analysis of data required for practicing the research. Infect the research desig n is the

conceptual structure where the research is conducted. It constitutes the ‘Blue Pri nt’ for

the collection, measurement and analysis of the data. The study is carried out t o

understand the Consumer Perception about life insurance companies in Bangalore city .For this study the researcher used exploratory research design. This resea


rch covers

50 consumers in Bangalore city, belonging to various age groups. 2.7 SAMPLE DESIGN:

The process of drawing a sample from a large population is called sampling. Popu lation

refers to the total of items about which information is defined. Well -selected samples

may reflect fairly and accurately the characteristics of the population. Sampling Unit:

The sample unit of this survey was the customers having life insurance policies in

Bangalore city. Sample Size:

The sample size was 50 customers of different life insurance companies, from the

various parts of the Bangalore city. Sampling Technique Adopted:

Convenient sampling 2.8 SOURCES OF DATA:

After identifying and defining the research problem and determining specific inf ormation

required to solve the problem the researcher will look for the type and sources of data

which may yield the desired results, while deciding about the method of data col lection to

be used for the study, there are two types of data.


Secondary Data:

Secondary data means data that are already available i.e. they refer to the data which have

been collected and analyzed by someone and can save both money and t ime of the

researcher. Secondary data may be available in the form of company re cords, trade

publications, libraries etc. Secondary data sources are as follows: Company Reports

Daily Newspaper Standard Textbook Various Websites Primary Data:

Primary data are those, which are collected for the first time. Primary data is collected by

framing questionnaires. The questionnaire contained questions, which are both

open-ended and closed-open-ended. Open-open-ended questions are questions requiring answers in the

responder’s own words. Closed-ended questions are those wherein the respondent has to

merely check the appropriate answer from a list of options available. Any doubts raised

by the respondents were clarified to get the perfect answers from the distributo rs.

Open-ended questions yielded more insightful information, whereas closed-Ended questions


were relatively simple to tabulate and analyze. 2.9 FIELD WORK:

An interview-schedule and well-structured questionnaire is administered t o the target

respondents to collect primary data (Copy of questionnaire is attached in the ap pendix)

Open and close-ended questions are used in the questionnaire. The orders of the questions

are in such a manner that they begin with simple questions and lead on the quest ions that

needed more involvement from respondents.The secondary data are collecte d from

periodicals, magazines, journals and Internet.



Marketing is a social and managerial process by which individuals and group obta in what

they need and want through creating, offering and exchanging products of value with

others .

Marketing Management:

Marketing Management is the process of planning and executing the conception, pr icing,

promotion and distribution of individual and organizational goals. Marketing Research:

Marketing research is the systematic and objective search for, and analysis of i nformation

relevant to the identification and solution of any problems in the field of mark eting.

Consumer Research:

Consumer research is the methodology used to study consumer behaviour. Consumer Behaviour:

Consumer behaviour is the study of how individuals make decisions to spend their

available resources [time, money, efforts] on consumption related items .

Market Segmentation:

Market segmentation is the process of dividing a market in the distin ct subsets of

consumer with common needs or characteristics and selecting one or mor e segments to

target with distinct marketing mix. Positioning:

Positioning is the act of designing the company’s offering and image so that they occupy

a meaningful and distinct competitive position in the target consumer’s mind. 23


Perception is the process by which an individual selects, organizes, a nd interprets

information input to create a meaningful picture of the world. For a marketer t o influence

a motivated buyer to buy their products rather than competitors they must be careful to

take the perception process into account while designing their marketin g campaigns.

Perception therefore influence what product consumer buys. Attitude:

An attitude is a person enduring favorable or unfavorable evaluation, em otional feeling,

and action tendencies towards some object or idea. Attributes:

Attributes are the strengths and weaknesses of a brand that create attitudes an d are used

by consumers to choose between brands that are relatively similar or functionally

equivalent. Values:

A value is a concept of the desirable. An internalized standard of evaluation a person

possession. This standard determines or guide an individual evaluation of the ma ny

objects encountered in everyday life. Brand:

A brand is a name, term, sign, symbol, or design or a combination o f them, used to

identify the goods or services of one seller or group of seller and the differentiate them

from those of competitors.



Although the study was carried out with extreme enthusiasm and careful planning there

are several limitations, which handicapped the research viz. Time Constraints:

The time stipulated for the project to be completed is less and thus there are c hances that

some information might have been left out, however due care is taken to include all the

relevant information needed. Sample size:

Due to time constraints the sample size was relatively small and would definitel y have

been more representative if I had collected information from more respondents .


It is difficult to know if all the respondents gave accurate information; some r espondents

tend to give misleading information.





History and Development of Life Insurance

Life Insurance, in its present form, came to India from the United K ingdom with

establishment of a British firm, Oriental Life Insurance Company in Ca lcutta in 1818,

followed by Bombay Life Assurance Company in 1823, the Madras Equitabl e Life

Insurance society in 1829 and Oriental Government security Assurance Co mpany in

1874. Prior to 1871, Indian Lives were treated as sub-standard and ch arged an extra

premium of 15% to 20%. Bombay Mutual Life Assurance Society, a Indian insurer wh ich

came into existence in 1871 was the first to cover Indian lives at normal rates.

The Indian life Assurance Companies Act, 1912 was the first statutory measure to

regulate life insurance business. Later, in 1928, the Indian Insurance Companies Act was

enacted, to enable the government to collect statistical information ab out both life and

non-life insurance business transacted in India by Indian and foreign insurers, including

the provident insurance societies. Comprehensive arrangements were, howev er, brought

into effect with the enactment of the Insurance Act, 1938.

By 1956, 154 Indian insurers, 16 non-Indian insurers and 15 provident societies were

carrying online insurance business in India. On 19 th

January 1956, the management of the

entire life insurance business of 229 Indian insurers and provident insurance so cieties and

the Indian life insurance business of 16 non-Indian Life insurance com panies then


ed on 1 st

September 1956 when the Life Insurance Corporation came into existence.

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

be a mega opportunity in India. It’s a business growing at the rate o f 15-20 per cent

annually and presently is of the order of Rs 450 billion. Together with banking services,

it adds about 7 per cent to the country’s GDP. Gross premium collection is nearly 2 per

cent of GDP and funds available with LIC for investments are 8 per cent of GDP. 27

Yet, nearly 80 per cent of Indian population is without life insuran ce cover while

health insurance and non-life insurance continues to be below internati onal standards.

And this part of the population is also subject to weak social secur ity and pension

systems with hardly any old age income security. This itself is an i ndicator that growth

potential for the insurance sector is immense.

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

development as it provides long-term funds for infrastructure developmen t and at the

same time strengthens the risk taking ability. It is estimated that ove r the next ten years

India would require investments of the order of one trillion US dolla r. The Insurance

sector, to some extent, can enable investments in infrastructure develo pment to sustain

economic growth of the country. INSURANCE AND BUSINESS ENVIRONMENT

Insurance is considered as one of the important segment of the econom y for its growth

and development. This industry provides long term funds which are esse ntial for the

growth and development of the nation .so the growth of insurance indu stry largely

depends up on the environment in which they exists. Here I would like to mention about

Indian business environment and their impact on insurance sector. There are two type of

environment which affect the business one is environment which is inte rnal to the

organization (internal environment) and the other one which is external to the

organization (external environment). Internal environment includes managem ent,

technology, competitors, employees, shareholders, policyholders, marketing inter mediary

etc. The external environment of insurance business has been classified in four parts,

namely legal, economic, financial, and commercial. let us discus them in detail by taking


one by one.



The Malhotra Committee felt the need to provide greater autonomy to insurance

companies in order to improve their performance and enable them to act as indepe ndent

companies with economic motives. For this purpose, it had proposed set ting up an

independent regulatory body- The Insurance Regulatory and Development Au thority.

Based on the Malhotra committee report in April 2000 IRDA was incorpo rated. Since

being set up as an independent statutory body the IRDA has put in a framework of

globally compatible regulations. Section 14 of the IRDA Act 1999, lays the dutie s, power

and functions of the authority .the authority shall have the duty to regulate, p romote and

ensure orderly growth of the insurance business and reinsurance business. Reforms and Implications

The liberalizations of the Indian insurance sector has been the subjec t of much heated

debate for some years. The sector is finally set to open up to priv ate competition. The

Insurance Regulatory and Development Authority bill will clear the way for priva te entry

into insurance, as the government is keen to invite private sector pa rticipation into

insurance. To address those concerns, the bill requires direct insurers to have a minimum

paid-up capital of Rest. 1 billion, to invest policyholder’s funds only in India; and to

restrict international companies to a minority equity holding of 26 pe rcent in any new

company. Indian Promoters will also have to dilute their equity holdin g to 26 percent

over a 10-year period.

Over the past three year, around 30 companies have expressed interest in entering the

sector and many foreign and Indian companies have arranged alliances. Whether the

insurer is old or new, private or public, expanding the market will present chal lenges. A

number of foreign Insurance Companies have set up representative office s in India and

have also tied up with various asset management companies. Some of th e Indian

companies, which have tied up with International partners, are.


Indian Partners International Partners Bombay Dyeing General Accident, UK

Tata American Int. Group, US

Dabur Group Liberty Mutual Fund, US ICICI Prudential, UK

Sundaram Finance Winterthur Insurance, Switzerland Hindustan Times Commercial Union, UK

Ranbaxy Cigna, US HDFC Standard Life, UK

CK Birla Group Zurich Insurance, Switzerland DCM Shriram Royal Sun Alliance, UK

Godrej J Rothschild , UK M A Chidambaram Met Life

Cholamandalam Guardian Royal Exchange, UK SK Modi Group Legal and General, Australia 20th Century Finance Canada Life

Alpic Finance Allianz Holding, Germany Vysya Bank ING

Kotak Mahindra Chubb, US

The likely impact of opening up of India’s insurance sector is that private players

may swamp the market. International insurers often derive a significant part of

their business from multinational operations. Multinational insurers are indeed

keenly interested as; perhaps there home markets are saturated while e merging

countries have low insurance penetration and high growth rates


Type of life insurance policies

Whole life insurance

Whole life is a form of permanent insurance, with guaranteed rates and guarantee d cash

values. It is the least flexible form of permanent insurance. Universal life insurance

Universal life is similar to whole life, except that you can change the death be nefit (the

money paid to the beneficiary when the insured person dies), the amount of premi ums

and how often you pay the premiums. Variable life insurance

Variable life insurance is the riskiest form of permanent insurance, but it can also give

you the best return for your money. Essentially, the life insurance company will invest

your insurance premiums for you. If the investments do well, the death benefit a nd cash

value of the policy go up. If they do poorly, they go down. It s a little like p utting your


Group life insurance

Many companies allow their employees to buy group life insurance through the com pany.

Usually, you can get very good rates for this insurance but you have to give the insurance

up when you stop working there. For that reason, group insurance can be a good w ay to

buy a little extra life insurance, but it does not make sense to make it your ma in policy.


There are a number of policies for specific insurance needs. Some of these inclu de:

1. Family income life insurance.

This is a decreasing term policy that provides a stated income for a fixed perio d of

time, if the insured person dies during the term of coverage. These payments continue until the end of a time period specified when the policy is purchased. 2. Family insurance.

A whole life policy that insures all the members of an immediate family -- husband, wife and children. Usually the coverage is sold in units per person, wi th

the primary wage-earner insured for the greatest amount. 3. Senior life insurance.

Also known as graded death benefit plans, they provide for a graded amount to be paid to the beneficiary. For example, in each of the first three to five years a fter

the insured dies, the death benefit slowly increases. After that period, the ent ire

death benefit is paid to the beneficiary. This might be appropriate if the beneficiary is not able to handle a large amount of money soon after the death, but

would be in a better position to handle it a few years later. 4. Juvenile insurance.

This is life insurance on a child. Coverage is paid for by an adult, usually the parents or guardians. Such policies are not considered traditional life insuranc e

because the child is not producing an income that needs to be protected. However ,

by buying the policy when the child is young, the parents are able to lock in an extremely low premium rate and allow many more years of tax-deferred cash

value buildup .


5. Credit life insurance.

This insurance is designed to pay off the balance of a loan if you die before yo u

have repaid it. Credit life insurance is available for many kinds of loans inclu ding

student loans, auto loans, farm equipment loans, furniture and other personal loans including credit cards. Credit life insurance can be purchased by an individual. Usually it is sold by financial institutions making loans, like bank s, to

borrowers at the time they take out the loan. If a borrower dies, the proceeds o f

the policy repay the loan directly to the lender or creditor. 6. Mortgage insurance

This decreasing term coverage is designed to pay off the unpaid balance of a

mortgage if you die before the mortgage is paid off. Premiums are generally leve l

throughout the term of the policy. The policy is usually independent of the mortgage, meaning that the financial institution granting the mortgage is separa te

from the insurance company issuing the policy. The proceeds of the policy are paid to the beneficiaries of the policy, not the mortgage company. The beneficia ry

is not required to use the proceeds to pay off the mortgage 7. Annuity

An annuity is a form of insurance that enables you to save for your retirement.

Basically, you give the insurance company money for a certain period of time,

and then after you retire they will pay you a certain amount of money every year until you die. There are many different forms of annuities. . Most people who bu y

annuities are 55 or older



Life Insurance Corporation of India was formed in September 1956 by passing LIC Act, 1956 in Indian parliament. On the nationalization of the life insurance in 1956,

the premium rating of Oriental Government security life Assurance company were adopted by LIC with a reduction of 5% of the tabular premium or Re. 1 per

thousand sum assured, whichever was less. This reduction was made in anticipation of economies of scale that would emerge on the merger of



insurers in a single entity.

Life Insurance Corporation Of India - there are many things to consid er as Life

Insurance Corporation of India offers various insurance products which are very

complex, but underlying this complexity is a simple fact. The building blocks for

all Life Insurance Corporation of India are (1) investment return; (2) mortality

experience; and (3) expense management; for your Life Insurance Corporation Of India


Objectives of LIC

• Spread Life Insurance much more widely and in particular to the rural areas and

to the socially and economically backward classes with a view to reac hing all

insurable persons in the country and providing them adequate financial cover

against death at a reasonable cost.

• Maximize mobilization of people s savings by making insurance-linked sa vings

adequately attractive.

• Bear in mind, in the investment of funds, the primary obligation to its

policyholders, whose money it holds in trust, without losing sight of the interest

of the community as a whole; the funds to be deployed to the best advantage of

the investors as well as the community as a whole, keeping in view national

priorities and obligations of attractive return.

• Conduct business with utmost economy and with the full realization th at the

moneys belong to the policyholders.

• Act as trustees of the insured public in their individual and collective capaci ties.

• Meet the various life insurance needs of the community that would ar ise in the

changing social and economic environment.

• Involve all people working in the Corporation to the best of their capability in

furthering the interests of the insured public by providing efficient service with


Promote amongst all agents and employees of the Corporation a sense o f participation,

pride and job satisfaction through discharge of their duties with dedi cation towards



"A trans-nationally competitive financial conglomerate of significance to societies and

Pride of India “ MISSION

"Explore and enhance the quality of life of people through financial security by providing

products and services of aspired attributes with competitive returns, a nd by rendering

resources for economic development”

Various policies offered by life insurance corporation of India are 1) Whole Life Schemes

• Whole life with profit • Limited payment whole life • Single Premium whole life • Convertible whole life plan 2) Endowment Schemes • Endowment plan with profit • Limited payment Endowment • Jeevan Mitra (Double Cover) • Jeevan Mitra (Triple cover) • Bhavishya Jeevan

• Jeevan Anand • New Jana Raksha 3) Term Assurance Plan • Anmol Jeevan

• 2 Year Term Assurance • Covertible Term

• New Bima Kiran


4) Plan for needs of Children • Komal Jeevan • Jeevan Sukanya • Jeevan Kishore • Jeevan Balya • Jeevan Chaya • Marriage/educational annuity • Deffered Endowment

5) Periodic Money Back Plan • Jeevan Samridhi

• Jeevan Rekha Plan • Money Back Plan • Jeevan Surabhi • Jeevan bharathi

6) Medical benefits linked insurance • Asha Deep II

• Jeevan Asha II

7) For benefits to Handicapped • Jeevan Aadhar


• Jeevan Vishwas

8) Plans to cover housing loans • Mortagage redemption

9) Joint life plan • Jeevan sathi


10) Investment plan

• Bima Nivesh Triple cover 11) Capital market linked plan • Bima plus.

Description of the LIC Policies Whole life plan:

Whole life plan are those policies which life assured has to pay pre miums till his

death the sum assured will be paid to his dependent generally 70 years is assume d as

a maximum age for payment of premium.

Under the whole life premium are payable throughout the life time of the life as sured

and this is the cheapest form of policy.

This plan is ideally suited to person who wants maximum provision for his family at

minimum cost. It also meets the needs for funds required for funeral, religious rites

and ceremonies to be performed, tax liabilities if any and expenses connected wi th the

last sickness and hospital charges etc. Endowment Assured Plan:

Endowment plans are not covering the risk for whole life of the life assured. Th e term

of risk cover under this plan is as per the need of life assured. Endowment assurance plan are the most popular. They are eminently

Suited to meet it one policy the twin demands of old age provision and risk cove r for

family. The sum assured is payable on maturity or at death if earlie r. Thus an

Endowment Assurance Policy provides for retirement and also serves as a means of

family provisions. Term Assurance

Under the term assurance the risk cover is generally for specific short term. Su ch term

assurance is maximum for 2 years. Generally this type of assurance is useful for air

traveling. 38

Money Back Plans

Under this plan specific percentage of sum assured will be backed to the life as sured

after specific period of time. This plan is of special interest to p erson who besides

desiring to provide for their own old age and family feels the need for lump sum


s paid to

the life assured in installments at selected intervals. Children Plan

Under the children plans the risk on the life of the children where covered gene rally

this type of plans are helpful in education and marriage of the children. Jeevan Balya:

This plan is designed to enable a parent to provide for the child by payment of a very

low premium an Endowment Assurance Policy, the risk under which will commence from the vesting date. In addition, Premium benefit and income benefit are in cluded

as additional benefit by payment of appropriate additional premium duri ng the

deferment period.

This policy shall be cancelled in case the life assured shall die before the deferred

dates and in such an event provided the policy is then in full forc e in for a reduced

cash option.

Marriage Endowment/ educational annual plan

Every father desires to see that his children are well settled in li fe through sound

education, leading to good jobs and happy marriage. These needs arise at ages wh ich

can be approximately anticipated. Say when the children are between 18 to 25 yea r of

age. This plan provides for a sum assured to keep aside to meet marriage educati onal

expenses of children. Under this plan the S A along with the vested bonus shall be

payable at the end of the selected term either is lump sum or in t en half yearly

installment, at the option of the life assured nominee beneficiary. Jeevan Mitra

This plan provides additional insurance cover equal to the sum assured in the ev en of

death during the term of policy so that the total insurance cover in the event o f death

is twice the basic sum assured. i.e. The basic sum assured is doubled and the a ccrued

bonus is also paid. 39


ING Vysya Life Insurance Company Private Limited entered the private life insura nce

industry in India in September 2001, and in a short span of 18 months has establ ished

itself as a distinctive life insurance brand with an innovative, attractive and customer

friendly product portfolio and a professional advisor force. It also distributes products in

close cooperation with its sister company ING Vysya Bank through Bank assurance. Currently, it has over 3000 advisors working from 22 locations across the countr y and

over 300 employees.


ed a

strong presence in the cities of Delhi, Mumbai, Kolkata, Hyderabad and Chennai. In

addition ING Vysya Life operates in Vizag, Vijaywada, Mangalore, Mysore, Pune, Nagpur, Chandigarh, Ludhiana and Jaipur.

ING Vysya Life has pioneered product innovations in the Indian life insurance ma rket

with customer-oriented cash bonus endowment and money back products. (Reassuring Life and Maximising Life), the first anticipated whole life product (Fulfilling Life) and

the first Term/Critical Illness combination product (Conquering Life). Conquerin g Life is

an innovative term and critical illness product that has been launched recently. Conquering Life provides affordable term cover and critical illness coverage for 10

critical illnesses of upto 50% of the Sum Assured. ING Vysya Life declared a bon us in

September 2002 of 5% (cash bonus - payable immediately) and 4% (reversionary bon us -

payable at the end of the term).


The company has over 25,000 customers at the end of 2002 and has achieved a firs t

premium income of Rs. 17 crores in 2002.

ING Vysya Life Insurance is a joint venture between ING Insurance International BV a

part of ING Group, the world s largest life insurance company (Fortune Global 50 0,

2002), ING Vysya Bank, with 1.5 million customers and over 400 outlets and GMR Technologies and Industries Limited, part of GMR Group also based in Bangalore a nd

involved in the field of power generation, infrastructural development and sever al other


ING Vysya Life has a paid up capital of Rs.140 crores and an authorised capital of Rs.

200 crores.

Life insurance products offered by the company are: 1) Protection plan

• Critical illness plan • Endowment plan

2) Savings plan • Endowment plan

• Child protection plan • Money back plan

3) Investment Plan • Whole life plan

• Limited payment endowment plan • Anticipated whole life plan



TATA-AIG Life Insurance

Tata-AIG Life Insurance Company is a joint venture between the Tata Gr oup

and American International Group Inc (AIG), the leading US-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in America. Its member companies write a wid e

range of commercial, personal and life insurance products through a variety of distribution channels in approximately 130 countries and jurisdictions throughou t the

world. AIG’s global businesses also include financial services and asset managemen t,

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

finance, institutional, retail and direct investment fund asset management, real estate

investment management, and retirement savings products. TATA holds 76% shares and AIG holds 24% shares in the total share capital of TATA AIG.

Tata AIG Life Insurance Company Ltd. "Tata AIG Life" offers a broad array of life insurance products to individuals, associations and businesses of all sizes , with a

wide variety of additional coverage to ensure our customers can find an insuranc e

product to meet their needs. Tata-AIG Life Insurance and Tata-AIG General Insura nce,

both joint ventures between the Tata Group and American International Group (AIG ),

provide life and general insurance policies and solutions to companies, institut ions and

organizations across India. It is licensed to operation on 12 th

February 2001. TATA-AIG

life is spread over28 branch offices and 39 training offices across the country.

Tata-AIG Life offers a broad array of life insurance products and solutions to

corporate and other organizations. These products and solutions have various val

ue-added benefits and options that deliver flexibility and choice to the company s clients.

Tata AIG Life has completed its 4th year of operations and registered a Total Pr emium of

Rs. 497 Crores for the period April 2004 - March 2005.


The company has some 20 life insurance products with over 250 product combina tions,

including endowment to term, pension to group life and credit life, money back t o whole

life plans, etc. Tata-AIG Life uses different distribution channels, in cluding direct

marketing, brokerage and banc assurance, to service client groups in 19 Indian c ities.



schemes. Additionally, the company s group management division focuses on provid ing

employee benefit solutions. PRODUCTS

The product range of TATA-AIG Life is wide-spread across different seg ments.

Some of the products are mentioned below. Maha life Invest Assure Health Protector Star Kid Shubh Life Nirvana Nirvana Plus Money Saver Plan Health First

Assure Golden Life

Assure 10, 20, 30 years – Security and Growth Assure Educate at 18, 21

Assure Career Builder Plan at 27 Assure Golden Years Plan

Assure 21 Money Saver Plan

Assure 1/5/10/15/20/25 years/ to age lifelines TROP



HDFC and Standard Life first came together for a possible joint venture, to ent er the Life

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

shared similar values and beliefs and a strong relationship quickly fo rmed. In October

1995 the companies signed a 3 year joint venture agreement.

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


The next three years were filled with uncertainty, due to changes in government and

ongoing delays in getting the IRDA (Insurance Regulatory and Developmen t authority)

Act passed in parliament. Despite this both companies remained firmly committed to the


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

available. Around this time Standard Life purchased 2% of Infrastructur e Development

Finance Company Ltd. (IDFC). Standard Life also started to use the se rvices of the

HDFC Treasury department to advise them upon their investments in India.

Towards the end of 1999, the opening of the market looked very promi sing and both



in January 2000 an expert team from the UK joined a hand picked team f rom HDFC to

form the core project team, based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and a 5% sta ke in

HDFC Bank.

In a further development Standard Life agreed to participate in the Asset Manage ment

Company promoted by HDFC to enter the mutual fund market. The Mutual Fund was launched on 20th July 2000


Incorporation of HDFC Standard Life Insurance Company Limited:

The company was incorporated on 14th August 2000 under the name of HDFC Standard Life Insurance Company Limited. Companies ambition from as far back as October 1 995,

was to be the first private company to re-enter the life insurance market in Ind ia. On the

23rd of October 2000, this ambition was realized when HDFC Standard Life was the only

life company to be granted a certificate of registration. HDFC are the main shar eholders

in HDFC Standard Life, with 81.4%, while Standard Life owns 18.6%. Given Standar d

Life s existing investment in the HDFC Group, this is the maximum investment all owed

under current regulations. HDFC and Standard Life have a long and close relation ship

built upon shared values and trust. The ambition of HDFC Standard Life is to mir ror the

success of the parent companies and be the yardstick by which all other insuranc e

company s in India are measured. Products offered by the company are: INDIVIDUAL PLAN

• With Profit Endowment Assurance • With Profits Money Back

• Single Premium Whole of Life • Term assurance Plan

• Loan Cover Term Assurance • Personal Pension Plan • Children’s Plan


• Group Term Insurance

• Development Insurance Plan 45


ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and prudential plc, a leading internati onal financial


services group headquartered in the United Kingdom. ICICI Prudential was amongst the

first private sector insurance companies to begin operations in Decembe r 2000 after

receiving approval from Insurance Regulatory Development Authority (IRDA).

ICICI Prudential’s equity base stands at Rs. 925 crore with ICICI Bank and

Prudential plc holding 74% and 26% stake respectively. In the quarter ended June 30,

2005 , the company garnered Rs 335 crore of new business premium for a total sum

assured of Rs 2,619 crore and wrote 111,522 policies. For the past f our years, ICICI

Prudential has retained its position as the No. 1 private life insurer in the co untry, with a

wide range of flexible products that meet the needs of the Indian customer at ev ery step

in life.

Products offered by ICICI Prudential are 1. Savings Plan 1) Smart kid 2) Life Time 3) Save ‘n’ Protect 4) Cash Bak 2. Protection plan • Life Guard 46

• Extra Protection Through • Riders

3. Retirement Plans • Forever Life • Life link pension • Life time pension • Reassure 4. Investment Plans • Assure Invest • Life Link 5. Group plans • Group Superannuation • Group Gratuity

• Group Term Assurance




d by Uday

Kotak the company has come a long way since its entry into corporate finance. It has

dabbled in leasing, auto finance, hire purchase, investment banking, co nsumer finance,

broking etc. The company got its name Kotak Mahindra as industrialists Harish Ma hindra

and Anand Mahindra picked a stake in the company. Kotak Mahindra is today one of

India s leading Financial Institutions

Old Mutual plc is an international financial services group bas ed in London with

expanding operations in life assurance, asset management, banking and g eneral

insurance. Old Mutual is listed on the London Stock Exchange (where i t is included on

the FTSE 100 Index) and also on the South African, Namibian, Malawi and Zimbabwe

stock exchanges. It has 156 years of experience in the life insurance business. The

Products offered by the Company are Individual Plan

• Kotak Endowment Plan • Kotak Term Plan

• Kotak Retirement Income Plan • Kotak Child Advantage Plan • Kotak Preferred Term Plan • Kotak Capital Multiplier Plan • Kotak Safe Investment Plan • Riders

• Exclusions Under Riders 48

Group Plan

Kotak Term Group plan Kotak Gratuity Group plan Kotak Credit Term Group plan Riders

Exclusions Under Riders Rural

Kotak Gramina Bima Yojana



For almost 137 years, Metropolitan Life Insurance Company has been insuring th e lives

of the people who depend on them. Their success is based on their long history of social


responsibility, strong leadership, sound investments, and innovative prod ucts and


MetLife Begins

The origins of Metropolitan Life Insurance Company (MetLife) go back to 1863, w hen a

group of New York City businessmen raised $100,000 to found the National Union L ife


Helping and Healing People

In 1909, MetLife Vice President Haley Fiske announced that "insurance, not mere ly as a

business proposition, but as a social program" would be the future policy of the company

Supporting Country and Community

Over the years, MetLife has made a difference by supporting urban renewal projec ts and

community financing. The company s social commitment and its commitment to the

security of its policyholders have proven to be good business.

MetLife Today In 2001 MetLife was the first insurance company to establish a fi nancial

holding company with a nationally chartered bank. Products Offered by the company are

1) Whole Life • Met 100 Non par • Met 100 Gold par • Met 100 Platinum par


2) Endowment • Met Gold par • Met Platinum par • Met Junior par • Met junior Non par

3) Money Back • Met Sukh • Met Junior MB 4) Term

• Met Mortagage Protector • Met Riders





Related subjects :