CHAPTER 1
INTRODUCTION
Life insurance is a form of insurance that pays monetary proceeds upon the death of the insured covered in the policy. Essentially, a life insurance policy is a contract between the named insured and the insurance company wherein the insurance company agrees to pay an agreed upon sum of money to the insured’s named beneficiary so long as the insured’s premiums are current. With a large population and the untapped market area of this population insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20% annually.
Together with banking services, it adds about 7 % to the country’s GDP. In spite of all this growth statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian populations are without life insurance cover and the health insurance. This is an indicator that growth potential for the insurance sector is immense in India. It was due to this immense growth that the regulations were introduced in the insurance sector and in continuation “Malhotra Committee” was constituted by the government in 1993 to examine the various aspects of the industry.
The key element of the reform process was participation of overseas insurance companies with 26% capital. Creating a more competitive financial system suitable for the requirements of the economy was the main idea behind this reform. Since then the insurance industry has gone through many changes. The liberalization of the industry the insurance industry has never looked back and today stand as one of the most competitive and exploring industry in India. The entry of the private players and the increased use of the new distribution are in the limelight today.
The use of new distribution techniques and the IT tools has increased the scope of the industry in the longer run. Insurance is the business of providing protection against financial aspects of risk, such as those to property, life health and legal liability. It is one method of a greater concept known as risk management –which is the need to manage uncertainty on account of exposure to loss, injury, disadvantage or destruction. Insurance is the method of spreading and transfer of risk. The fortunate many who are exposed to some or similar risk shares loss of the unfortunate.
Insurance does not protect the assets but only compensates the economic or financial loss. In insurance the insured makes payment called “premiums” to an insurer, and in return is able to claim a payment from the insurer if the insured suffers a defined type of loss. This relationship is usually drawn up in a formal legal contract. Insurance companies also earn investment profits, because they have the use of the premium money from the time they receive it until the time they need it to pay claims. This money is called the float.
When the investments of float are successful they may earn large profits, even if the insurance company pays out in claims every penny received as premiums. In fact, most insurance companies pay out more money than they receive in premiums. The excess amount that they pay to policyholders is the cost of float. An insurance company will profit if they invest the money at a greater return than their cost of float. An insurance contract or policy will set out in detail the exact circumstances under which a benefit payment will be made and the amount of the premiums. Classification of insurance
The insurance industry in India can broadly classified in two parts. They are. 1) Life insurance. 2) Non-life (general) insurance.
Life insurance
Life insurance can be defined as “life insurance provides a sum of money if the person who is insured dies while the policy is in effect”. In 1818 British introduced to India, with the establishment of the oriental life insurance company in Calcutta. The first Indian owned Life Insurance Company; the Bombay mutual life assurance society was set up in 1870. the life insurance act, 1912 was the first statuary measure to regulate the life insurance business in India.
In 1983, the earlier legislation was consolidated and amended by the insurance act, 1938, with comprehensive provisions for detailed effective control over insurance. The union government had opened the insurance sector for private participation in 1999, also allowing the private companies to have foreign equity up to 26%. Following the opening up of the insurance sector, 12 private sector companies have entered the life insurance business.
Benefits of life insurance
Life insurance encourages saving and forces thrift. It is superior to a traditional savings vehicle.
It helps to achieve the purpose of life assured. It can be enchased and facilitates quick borrowing. It provides valuable tax relief. Thus insurance is found to be very useful in the lives of the person both in short term and long term.
Fundamental principles of life insurance contract
1) Principle of almost good faith: “A positive duty to voluntary disclose, accurately and fully, all facts, material to the risk being proposed whether requested or not”. 2) Principle of insurable interest: “Relationships with the subject matter (a person) which is recognized in law and gives legal right to insure that person”.
2) Non-life (general) Insurance: Triton insurance co. ltd was the first general insurance company to be established in India in 1850, whose shares were mainly held by the British. The first general insurance company to be set up by an Indian was Indian mercantile insurance co. Ltd. , which was stabilized in 1907. There emerged many a player on the Indian scene thereafter. The general insurance business was nationalized after the promulgation of General Insurance Corporation (GIC) OF India undertook the post-nationalization general insurance business.
EXECUTIVE SUMMARY
The Insurance sector, after the opening up, provides greater opportunities. Several global players have emerged and the market has changed significantly. In the changed scenario, the expectation is that the low Insurance premium as a percentage of GDP prevailing in India will improve and will offer better opportunities to the insurance players. Life Insurance sector is one of the key areas where enormous business potential exists. In India currently the life insurance premium as a percentage of GDP is 1. 3 per cent against 5. 2 per cent in the US, but in the liberalized scenario, the life insurance
premiums were projected to grow at around 18% to 20% from Rs 215 billion in 1998- 99 to Rs 592 billion in 2004-05 and to Rs 1450 billion by 2009-10. Corporate non-life premium was projected to grow from Rs 84 billion in 1998-99 to Rs 386 billion in 2009-10 and personal line non-life from Rs 4 billion to Rs 51 billion. In the life Insurance segment the Life Insurance Corporation of India (LIC) is the major player. The LIC has 2050 branches. It is constituted in to seven Zones. Currently there are 5, 60,000 LIC agents in India. General Insurance is another segment, which has been growing at a faster pace.
ICICI PruLife works to generate revenue and make profits so that the organisation is able to sustain and compete in the market. The revenue comes from the sales of its products, so as a summer trainee my job profile was the study and sales of ULIP plan. I had to study the ULIP plan to understand it and have the complete knowledge of the product and do sales so as to generate revenue for my organization.
INSURANCE INDUSTRY
Historians believe that insurance first developed in Sumer & Babylonia. The merchants & traders of these societies transferred & pooled their money to protect themselves from pirates.
In the 18th century BC, Babylonian king Hammurabi developed a code of law known as the code of specific rules governing the practices of early risk-sharing activities. Insurance developed during the 1700’s in the North American colonies. In 1730, Benjamin Frank contributed for the Insurance of Houses from Loss by Fire. The company collected contributions & this money went into an investment fund. Interest on this fund went towards paying claims dividends to those who contributed money. 1. 6 Reason for Insurance: No one knows in advance when a loss will occur or how serious that loss will be.
The uncertainty surrounding potential losses is known as Risk. Insurance offers a way for people to replace risk with known costs- the costs of buying & maintaining insurance policies. Insurance pools risks shared by many people, thereby, reducing the risks faced by a group. People pay to buy insurance coverage (protection from risk). In exchange, all policy holders (people who own insurance policies) receive a promise that the group of policyholders as represented by the insurance organization will pay when any policyholder experience any kind of loss.
Importance of Insurance
Insurance industries in India have a long history. Life Insurance in existing form came in India from UK in 1818 with Oriental Life Insurance Company. The Indian Life Assurance companies Act, 1912 was the first measure to regulate Life Insurance business. Later in 1928 the Indian Insurance Companies act was enacted, which was amended in 1938. Finally Government of India in 1950 again amended this act. Life Insurance Corporation of India was formed in September 1956 by passing LIC Act, 1956 in Indian parliament.
The first general insurance company- Sun Insurance Office Ltd. was established in Calcutta in the year 1710. General Insurance business in India was nationalized with effect from 1. 1. 73 by the General Insurance Business Act. from 1973, The General Insurance Company (GIC) as a holding company divided in four subsidiaries as: – National Insurance Company Ltd. , – The New India Assurance Company Ltd. – The Oriental Insurance Company Ltd. – The United India Insurance Company Ltd. 1. 3. INTRODUCTION OF LIFE INSURANCE IN INDIA: India at a glance: Population: 1. 1 Billion
Economy: 4th largest in the world in terms of Purchasing Power Parity (PPP) GDP growth Rate: Over 6% per year on an average for the last decade Estimated middle class population: 300 Million Insured population: 70 million only Insurance is an Rs 450 billion industry in India. The value of the market is determined by gross premium incomes. The life insurance segment writes about 80% of the overall market value. Indian Insurance market was at its all-time high in 2003 with a growth of about 17. 4% over the previous year. Since 2001 Insurance is growing at the rate of 15-20 % annually.
The growth in the insurance industry is affected by volatility in real estate rates, GDP rates and long term interest rates. Fluctuations in exchange rates also affect the growth in this sector. The gross premium as a percentage of the GDP has gone up from 2. 3 in the year 2000 to 4. 8 in 2006. Together with banking services, it adds about 7% to the country’s GDP. 1. 4. Some of the important milestones in the life insurance business in India are: British-India Period: 1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its business. 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 Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil.
All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and Indian natives were not being insured by these companies. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as substandard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates.
Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies are 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 crores from the Government of India. 1. 5. Liberalization of Indian Insurance: 1994: Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers.
1997: Insurance regulator IRDA was set up as there felt the need: To set up an independent regulatory body, that provides greater autonomy to insurance companies in order to improve their performance, In the first year of insurance market liberalization (2001) as much as 16 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, 10 were under the life insurance category and six under general insurance. Thus in all there are 25 players (12-life insurance and 13general insurance) in the Indian insurance industry till date.
1. 6. Indian Insurance in 21st Century: 2000: IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy 2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode 2007: First Online Insurance portal, www. insurancemall. in set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd.
CHAPTER 2
RESEARCH METHDOLOGY
Marketing Research: Research simply means search for knowledge.
Research is a systematic design collection, analysis and reporting of data and finding relevant to a specific marketing situation facing the company. In today’s competitive business scenario every decision could be critical and might have an immense effect on the future of business. Thus the Research is of prime importance of modern business. Marketing Research is the process of systematic gathering, recording and analyzing of data about customers, competitors and the market. Market research can help create a business plan, launch a new product or service, fine tune existing products and services, expand into new markets etc.
It can be used to determine which portion of the population will purchase the product/service, based on variables like age, gender, location and income level. It can be found out what market characteristics your target market has. With market research, companies can learn more about current and potential customers. The purpose of market research is to help companies make better business decisions about the development and marketing of new products. Market research represents the voice of the consumer in a company. A list of questions that can be answered through market research: How to get a new customer and retain older?
What is happening in the market? What are the trends? Who are the competitors? How do consumers talk about the products in the market? Which needs are important? Are the needs being met by current products?
Research Design: The project was carried out, keeping in mind the main objectives.
The research design is the conceptual framework within which the research is conducted. It contains the blueprint for the collection, measurement and analysis of data. Our project demanded the knowledge of portion of population, so we decided to go for random sample survey instead of census survey.
The population in this case we had to deal with comprised of every kind of person, an illiterate and an educated one, a young and an old one, so we designed a questionnaire that would be easy to comprehend and that would be easy for us to make people understand. However, it is worth mentioning that the questionnaire dealt with every possible problem and solution, which was usually followed by an unstructured interview/ question conditioned to cooperation of respondent and many inferences were made on the bases of these interactions.
Types of research design
There are three types of research design:
Exploratory research design Descriptive research design Causal research design. Exploratory research is method of collecting information in an unstructured and informal way. Exploratory research helps determine the best research design, data collection method and selection of subjects. Exploratory research often relies on secondary research such as reviewing available literature and/or data, or qualitative approaches such as informal discussions with consumers, employees, management or competitors, and more formal approaches through indepth interviews, focus groups, projective methods, case studies or pilot studies.
The Internet allows for research methods that are more interactive in nature. For example if the owners of a new restaurant often eat out at competitor’s restaurants in order to gather information about menu selections, prices and service quality. Descriptive research refers to a set of methods and procedures that describe marketing variables. Descriptive studies portray these variables by answering who, what, why and how questions. These types of research studies may describe such things as consumers’ attitudes, intentions, and behaviour, or the number of competitors and their strategies.
Causal research design is conducted by controlling various factors to determine which factor is causing the problem. It allows you to isolate causes and effects. By changing one factor, say price you can monitor its effects on a key consequence such as sales. Although causal research can give you a high level of understanding of the variable you are studying, the designs often require experiments that are complex and expensive.
Project Design
Our project demanded a design which would include: Research nature: An exploratory research design was adopted to conduct the study in order to know the above mentioned objectives.
Data collection method: Population being very large, the Data Collection Method demanded the Sample Survey. Primary Data Collection: Questionnaire Phrasing of Queries: Queries were made in such a way that it was easy for us to make it understand and easy to comprehend. Order of Queries: Order was most important feature which was kept in mind. Optional Data Collection: Unstructured Questions
PROBLEM SATATEMENT
“To study the Brand Awareness of IDBI FEDRAL INSURANCE CO LTD with reference to Chennai areas of Tamil Nadu”. OBJECTIVES OF THE STUDY: TO ANALYSE THE BRAND AWARENESS OF IDBI FEDRAL INSURANCE CO LTD IN CHENNAI.
The objective of our study included the following important functions: a) To check the awareness and interest of Insurance among people in general. b) To find out the popularity of different insurance providers. c) To find out the satisfaction level of existing policy holders. d) To enlighten people with the benefits of Insurance and Investments. e) To find out the reason behind less impetus of people towards Insurance. f) To find out a strategy to make people aware and develop their interest in insurance and Investments. g) To know about the most threatening substitute of Insurance.
Limitations of the Study
It is said, “Nothing is perfect” and there would be few shortcoming in this project also. Sincere efforts have been made to eliminate discrepancies as far as possible but few would have remained due to limitations of the study. • Time seemed to be my most limited resource to conduct a comprehensive research. • Project was scheduled to be completed in 07 week’s period seems to be very difficult. • Some of the respondents were not ready to fill the questionnaires and some of them were not ready to come out openly. • Due to the current hot climate in chennai, it was very difficult to get the good no. of questionnaires filled up. •
Most of the people (particularly in rural areas) were unable to fill up the questionnaire due to the lack of knowledge about the insurance industry.
Questionnaire Design
Based on the varied needs of the information required, the questionnaire was designed in such a manner that it satisfied our need and it was prepared in consultation with the chief Manager of IDBI FEDRAL INSURANCE CO LTD The necessary parameters which were taken care of during this phase were: The information needs should be completely met. Ease of understanding of the Queries. Ease of administering the questionnaire. Probing nature of the questionnaire.
To make it free from biased Queries. There should be no implicit responses. The person responding to the schedule should not be able to make assumptions about the information collection agency to prevent any intended bias that could creep in because of that. During the Interviewer development phase, emphasis was put on the following areas: 1. Question Issues a. What types of questions can be asked? b. How complex will the questions be? c. Will cross check questions be needed? d. Will lengthy questions be asked? e. Will open ended questions be asked 2. Content Issues a. The information requirement laid down prior to questionnaire
development should be completely met. b. Can the respondents be expected to know about the issue? c. Will the responses be conclusive and provide enough information to make important decisions? d. Ease of understanding of the questionnaire by the respondent. e. The language of the questionnaire was kept lucid and easy for better comprehension by the respondent f. The sequence of questions was so adjusted as to avoid any predisposition 3. Bias Issues a. Can interviewer distortion and subversion be controlled? b. Can false respondents be avoided? c. The questionnaire should be anonymous i. e.
the respondent should not be able to know on behalf of which telecom operator the research was being conducted. This was done to minimize bias. 4. Administrative Issues a. Costs b. Facilities c. Time d. Personnel e. Ease of administering the questionnaire.
CHAPTER 3
COMPANY PROFILE IDBI FEDRAL LIFE INSURANCE CO LTD IDBI
Federal Life Life Insurance Company Established in March 2008, IDBI Federal Life Life Insurance Company is a joint venture between three major companies- IDBI Bank- India’s premiere industrial bank, Federal bank – private sector bank and Ageas international insurance company operating out of Europe.
IDBI Bank holds 48% equity whereas Federal and Ageas hold 26% of equity each. Product Portfolio: Being a new entrant, IDBI is slowly increasing its portfolio which includes: Retirement Plan: With rising inflation, it’s absolutely necessary to make provisions for the future which makes retirement plan an important financial decision. Better known as Pension plan, this plan takes care of financial needs after retirement by investing a part of your savings for limited period.
Pension plan provides steady income after retirement and takes care of daily needs. The pension plan offered by IDBI Federal is Retiresurance. Term Plan: A risk plan which provides comprehensive cover for your family in the unfortunate event of untimely demise. A term life insurance plan provides good cover at relatively nominal cost and has no survival benefits. IDBI Federal Life term plan is Termsurance. Investment Plan: Popularly known as ULIP, an investment plan invests part of your savings in equity or debt market as per your preference.
The objective of investment plan is to give you returns which easily beat the rising costs since the usual returns in a bank are extremely low. ULIP’s offered by IDBI Federal Life are Wealthsurance, Bondsurance and Incomesurance. Health Plan: Slightly different from health insurance, health plan provides cover for surgery costs, critical illness. A lump sum is paid irrespective of actual hospital bill. Healthsurance is IDBI Federal Life’s health plan. Distribution Network: IDBI Federal Life Life Insurance Company leverages on the strong distribution network of its promoters and advisors.
Financial Information: The total premium earned for the half year ended September 30, 2010 was Rs 3,427 million. The profit after tax for the same period is Rs 513 million. There have been 132 death claims reported during the period out of which 43 claims were settled and 19 claims were rejected. 3. About IDBI Federal Life Insurance IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier development and commercial bank, Federal Bank, one of India’s leading private sector banks and Ageas, a multinational insurance giant based out of Europe.
In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26% equity each. At IDBI Federal, we endeavor to deliver products that provide value and convenience to the customer. Through a continuous process of innovation in product and service delivery we intend to deliver world-class wealth management, protection and retirement solutions to Indian customers. Having started in March 2008, in just five months of inception we became one of the fastest growing new insurance companies to garner Rs 100 Cr in premiums.
The company offers its services through a vast nationwide network across the branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners. As on March 31st 2011, the company has issued over 2. 92 lakh policies with over Rs 16, 384 Cr in Sum Assured. Type Public: joint venture Industry : life insurance Founded : march 2008 Headquarters: Mumbai, India Key people: GV Nageswara Rao is the MD & CEO of IDBI Federal Life Insurance. Aneesh Srivastava is the CIO of IDBI Federal Life Insurance.
Michael J Wood is the appointed actuary of IDBI Federal Life Insurance. Products: insurance
PROMOTERS OF IDBI FEDRALLIFE INSURANCE CO LTD
• IDBI Bank Ltd. continues to be, since its inception, India’s premier industrial development bank. Created in 1956 to support India’s industrial backbone, IDBI Bank has since evolved into a powerhouse of industrial and retail finance. Today, it is amongst India’s foremost commercial banks, with a wide range of innovative products and services, serving retail and corporate customers in all corners of the country from 816 branches and 1372 ATMs.
The Bank offers its customers an extensive range of diversified services including project financing, term lending, working capital facilities, lease finance, venture capital, loan syndication, corporate advisory services and legal and technical advisory services to its corporate clients as well as mortgages and personal loans to its retail clients. As part of its development activities, IDBI Bank has been instrumental in sponsoring the development of key institutions involved in India’s financial sector –National Stock Exchange of India Limited (NSE) and National Securities
Depository Ltd, SHCIL (Stock Holding Corporation of India Ltd), CARE (Credit Analysis and Research Ltd) Type Public: BSE: 500116 | NSE: IDBI | ISIN: INE008A01015 Industry : Banking Financial services Founded : 1956 Headquarters: Mumbai, India Key people: Shri R. M. Malla, CMD Products: Investment Banking Commercial Banking Retail Banking Private Banking Asset Management Mortgage Credit Cards • Federal Bank is one of India’s leading private sector banks, with a dominant presence in the state of Kerala.
It has a strong network of over 739 branches and 797 ATMs spread across India. The bank provides over four million retail customers with a wide variety of financial products. Federal Bank is one of the first large Indian banks to have an entirely automated and interconnected branch network. In addition to interconnected branches and ATMs, the Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any Where Banking, debit cards, online bill payment and call centre facilities to offer round the clock banking convenience to its customers.
The Bank has been a pioneer in providing innovative technological solutions to its customers and the Bank has won several award and recommendations. • Ageas is an international insurance company with a heritage spanning more than 180 years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market. These are grouped around four segments: Belgium, United Kingdom, Continental Europe and Asia and served through a combination of wholly owned subsidiaries and
partnerships with strong financial institutions and key distributors around the world. Ageas operates successful partnerships in Belgium, UK, Luxembourg, Italy, Portugal, China, Malaysia, India and Thailand and has subsidiaries in France, Germany, Hong Kong and UK. It is the market leader in Belgium for individual life and employee benefits, as well as a leading non-life player, through AG Insurance, and in the UK, it has a strong presence as the second largest player in private car insurance and the over 50’s market. It employs more than 13,000 people and has annual inflows of almost EUR 18 billion.
