A PROJECT REPORT ON

An analysis of Indian insurance industry with

special reference to

ICICI PRUDENTIAL

PRESENTED BY
Prem Prasad Maharana
Roll no.: 13771U072039

GUIDED BY

Mr.Jayanta Kumar Bihari Kumari Rosalin

Faculty of KIIMS,Cuttack H.O.D of KIIMS, Cuttack

Session 2007-09
 PREFACE

The Indian Insurance Industry is broadly segmented into public and

private insurance companies. Before year 2000, only public sector
insurance companies were allowed to do business in India. But after
year 2000, insurance sector was thrown open for private insurance
companies as well.

But there is now around 12 private life insurance companies and

around 9 private non-life insurance companies doing business in
India.

This report is prepared with an aim to provide an overview of present

Indian Insurance Industry. Also with LIC, heading the public life
insurance companies and ICICI Prudential heading the private life
insurance players, this report also provides a comparative analysis of
all the ;ife insurance companies in India.

Based on this report, the prospecting insurance customers would get

help in choosing the right insurance products for themselves.

(ii)
 CERTIFICATE

This is to certify that the project entitled: “An analysis

of Indian insurance industry with special reference to
ICICI PRUDENTIAL” submitted by ‘Prem Prasad
Maharana’, of “Kushagra Institute of Information &
Management Science”(KIIMS) towards the partial
fulfillment of the degree of “Master Of Finance &
Control”(MFC) is a bonafied record of research work
carried by him under my supervision. The content of
the record in full or in part have not been submitted to
any other Institution for award of any degree or
diploma.

Jayanta Kumar Bihari Kumari Rosalin

(Project Guide) (Counter Sign by H.O.D.)

(iii)
 CERTIFICATE

This is to certify that the project entitled: “An analysis

of Indian insurance industry with special reference to
ICICI PRUDENTIAL” submitted by ‘Prem Prasad
Maharana’ of “Kushagra Institute of Information &
Management Science” (KIIMS) towards the partial
fulfillment of the degree of “Master Of Finance &
Control” (MFC) is a bonafied record of research work
carried by him under the supervision of ‘Mr. Jayanta
Kumar Bihari’. The content of the record in full or in
part have not been submitted to any other Institution
for award of any degree or diploma.

Date: 04.09.08 Prof. (Dr.) Ananta Kumar Sahoo

(Principal, KIIMS)
(iv)
 DECLARATION

I do hereby declare that the project entitle “An

analysis of Indian insurance industry with special
reference to ICICI PRUDENTIAL” is an original work
done by me. This is submitted as a part of fulfillment
of the requirement for the degree of Master of
Finance & Control (MFC).This is entirely of my own
work and this is not submitted to any other Institution
or published anywhere before.

Date: 04.09.08 Prem Prasad Maharana

(KIIMS)
Roll No: 13771U07203
(v)
ACKNOWLEDGEMENT

The Project report has been prepared with proper

advice and suggestions of many teachers and friends’
.It is my duty to acknowledge all of them for their help
and contribution in connection with my project work.

First of all I expressed my sincere thanks to Head of

Dept. MBA” Mr. O N Kapoor” for his kind support and
co-operation.

I expressed my sincere gratitude to my Project

Supervisor ‘Mrs.Priyanka Vashist’ for her able
guidance.

I expressed my gratitude to all the faculty members of

our department for their cons tinted support and
inspiration in completing this project work.

Last but not the least I pay my thanks to all my friends

and family members for their kind support and co-
operation.

(vi)
 TABLE OF CONTENTS

Chapter 1: Introduction 01-36

1.1 Overview of the Industry 10

1.2 Profile of the Organization 16
1.3 Problems of the Organization 33
1.4 S.W.O.T. Analysis of the Organization 34
1.5 Competition Information 35

Chapter 2: Objective & Methodology 37-38

2.1 Significance of the study 37

2.2 Managerial usefulness of the study 37
2.3 Objectives of the study 37
2.4 Scope of the Study 38
2.5 Methodology 38

Chapter 3: Conceptual Discussion 39-49

Chapter 4: Data Analysis 50-53

Chapter 5: Findings & Recommendations 54-55

Annexure 56-62

Bibliography 63

(vii)

Chapter – 1
 INTRODUCTION
The entire effort of human life is to proceed from uncertainty to
certainty. The rigmarole of life proceeds with first acquiring the
wherewithal to earn a living and then striving for its betterment and
ensuring that the comfort and pleasure derived from a physical
commodity or a human being continues. It is at the latter stage that
the mechanism of Insurance comes in play.

The concept of insurance is in essence related to the protection of the

economic value of assets. Every asset whether physical or in form of
a human being has a value. The asset is built up in the expectation
that, either through the income generated there from or some other
output, some needs of the individual would be met. For example, in
the case of an industry its production is sold and income generated.
In the case of a vehicle, it provides comfort and convenience in
transportation.

1ST Insurance in India started from 1817.Basically it is divided into

two types such as General insurance & Life insurance. After freedom
there are 245 companies in India who provide life insurance. In 1956
finance minister ‘C.D.Deshmukh’ seize all those companies. There is
only one life insurance company from1956-2000 that is ‘LIC of India’.
In 1993 the finance secretary ‘R.N.Malhotra’ introduce
IRDA(Insurance Regulatory Development Authority) act. After that
private life insurance companies came into existence. HDFC is the 1st
private insurance company in India. After that ICICI prudential Life
insurance corporation started its operation. From 2001-2008 ICICI
place the 1st position among all private insurance company. Now days
there are 12 private life insurance companies.
As compare to past now a days insurance companies provides not
only life cover plan but also provides investment plan. In recent trend
there are two type of plan provided by the Life insurance company
such as:
(1)

- Traditional Plan
– ULIP (Unit Linked Insurance Plan)
Traditional Plan consisting of a long maturity period where as ULIP
consists of both insurance and investment having shorter maturity
period.

Fundamental definition:
In the words of ‘D.S. Hansell’, “Insurance accumulated contributions
of all parties participating in the scheme.”

Contractual definition:
In the words of ‘Justice Tindall’, “Insurance is a contract in which a
sum of money is paid to the assured as consideration of insurer’s
incurring the risk of paying a large sum upon a given contingency.”

Characteristics of insurance:
♦Sharing of risks
♦Cooperative device
♦Evaluation of risk
♦Payment on happening of a special event
♦The amount of payment depends on the nature of losses incurred.
♦The success of insurance business depends on the large number of
people insured against similar risk.
♦Insurance is a plan, which spreads the risk and losses of few people
among a large number of people.
♦The insurance is a plan in which the insured transfers his risk on the
insurer.
♦Insurance is a legal contract which is based upon certain principles
of insurance which includes utmost good faith, insurable interest,
contribution, indemnity, causes proximal, subrogation, etc.
♦The scope of insurance is much wider and extensive.

(2)
Functions of insurance:
Primary functions:

1. Provide protection: - Insurance cannot check the happening of the

risk, but can provide for the losses of risk.
2. Collective bearing of risk: - Insurance is a device to share the
financial losses of few among many others.
3. Assessment of risk: - Insurance determines the probable volume of
risk by evaluating various factors that give rise to risk.
4. Provide certainty: - Insurance is a device, which helps to change
from uncertainty to certainty.

Secondary functions:

1. Prevention of losses: - Insurance cautions businessman and

individuals to adopt suitable device to prevent unfortunate
consequences of risk by observing safety instructions.
2. Small capital to cover large risks: - Insurance relives the
businessman from security investment, by paying small amount of
insurance against larger risks and uncertainty.
3. Contributes towards development of larger industries.

Other Function:

Means of savings and investment:

Insurance companies are business houses. The product they sell is
financial protection. To succeed and survive, they must cover their
costs, which include payments to cover the losses of policyholders,
as well as sales and administrative expenses, taxes and dividends.

(3)
Insurance companies have two sources of income for
covering these costs:
Premiums and Investment income. The premiums are collected on
a regular basis and invested in Government Bonds, Gilt, stocks,
mutual funds, real estates and other conservative avenues. However,
investment income depends on market conditions, interest rates,
economy etc. and varies from year to year. Because of the
uncertainty associated with the investment income, insurance
companies must generate enough income from premiums to cover
the bulk of their expenses.

The risk becomes insurable if the following

requirements are complied with:

♦The insured must suffer financial loss if the risk operates.

♦The loss must be measurable in money,

♦The object of the insurance contract must be legal.
♦The insurer should have sufficient knowledge about the risks he
accepts.

Fundamentals of Insurance

The fundamental Principles of the Insurance are as follows:

♦Insurable Interest: Insurable interest means the legal right to
insure. Insurable Interest is a must and only then the insurance
contract is enforceable at law. This principle differentiates a Contract
of insurance from wager. Lack of insurable interest renders the
contract null and void. For Insurable Interest to exist there must be
Property, Rights, Interest, Life or Liability; this must be insured and
the Insured should have a legally recognizable relationship thereto.
The Insured should be benefited by the safety of the property or is
prejudiced by its loss. Insurable Interest may arise in the following
manner:

(4)
1. Ownership: Absolute ownership entitles the owner to insure the
property. This is the commonest method whereby Insurable Interest
arises.

2. Partial Interest is also insurable e.g. a mortgagee. A creditor can

also insure the life of his debtor but only to the extent of his loan.

3. Administrators and executors i.e. officials appointed by a court

of law to take care of a property may also insure the property.

4. Relationship does not automatically constitute insurable interest.

The only relationship recognized by law for this purpose is the one
between a husband and wife.

5. An employer can insure his employee under a Personal Accident

Policy as he has insurable interest in them.

♦Proximate cause: Generally, the claims are payable under

insurance policies if they arise out of events which are proximately
caused by the insured perils. In other words, the proximate cause of
the event has to be peril covered by the policy, so as to constitute a
valid claim.
♦Contribution: An insured may have several insurance on the same
subject matter. If he recovers his loss under all these insurance, he
will obviously make a profit out of loss. This will be an infringement of
the principle of indemnity. Common Law has, therefore, evolved the
doctrine of contribution whereby the insured is prevented from
recovering more than his loss, despite his having several insurance
on the subject matter.

♦Subrogation: The principle of indemnity seeks to prevent the

insured from making profit out of loss. However, it may so happen
that that the insured may recover his loss under his policy and he
may also have rights against third parties. If, after the insurance claim

(5)
is settled, the insured is allowed to enforce his rights against third
parties and to retain whatever damages he receives from them, he
will certainly make a profit and the principle of indemnity will be
infringed.

Common Law has therefore, evolved the doctrine of subrogation as

corollary to the principle of indemnity. Subrogation may be defined as
the transfer of rights and remedies of the insured to the insurers who
have indemnified the insured in respect of the loss. The Common
Law right of subrogation is implied an all contracts on indemnity, as it
arises only after payment of loss.

♦Utmost Good Faith: In all General Insurance contracts we know

that a property or interest or liability or life is offered for insurance and
the insured has to take decisions on the acceptance of the proposal.
If he decides to accept the proposal a premium commensurate with
the risk has to be charged. To enable him to take necessary decision
in this regard, the insurer must have certain facts about the risk
offered. These facts influence the judgment of the insurer in deciding
about the acceptance or otherwise of the risk and the rate of premium
to be charged, if accepted. Such facts are known as material facts.

Nature of Insurance Contracts

When the insured pays the premium and the insurers accept the
risks, the contract of insurance is concluded. The policy issued by the
insurers is the evidence of the contract. The contract of insurance,
like any other contract, for example a contract for the sale of goods, is
subject to the general law of contract as embodied in the
Indian Contract Act, 1872.

According to this Act, a contract must have certain essential features

in order to make it legally valid and enforceable. The following are the
essential elements:

(6)
a) Offer and acceptance: Usually, the offer is made by the proposer,
and acceptance made by the insurer.

b) Consideration: This means that the contract must involve some

mutual benefit to the parties. The premium is the consideration from
the insured and the promise to indemnity is the consideration from
the insurers.

c) Agreement between the parties: Both the parties should agree to

the same thing in the same sense.

d) Capacity of the parties: Both the parties to the contract must legally
competent to enter into the contract. For example, minors cannot
enter into insurance contracts.

e) Legality: The object of the contract must be legal and the contract
should not violate any legal requirements. E.g. no insurance can be
had for smuggled goods.
Risk
Reasonable or not, risks are inescapable in business. Every business
venture is something of a gamble, because the possibility of loss is as
real as the prospects for profits. And even though managers do
everything possible to ensure that their business succeed, they
cannot guard against every conceivable form of risk.
Pure Risk versus Speculative Risk
♦Pure Risk: Events representing the kind of risk that no business can
predict or escape, known as Pure Risk, it is the threat of a loss
without the possibility of gain. In other words, a disaster such as
avalanche or fire is costly for the business it strikes, but the fact that
no disaster occurs contributes nothing to a firm's profit.
♦Speculative Risk: It is the type of risk that offers the prospect of
making profit - and prompts people to go into business in the first
place. Every business accepts the possibility of losing money in order
to make money.
(7)
Approaches to Risk Management
Risk Management is the process of reducing the threat of loss due to
uncontrollable events. Steps in selecting a risk management
approach:
♦To identify all the things those can possibly go wrong. ·
♦To consider the probability that an event will occur.
Techniques of Risk Management are:
1. Avoiding the Risk: When a company avoids risk, it eliminates the
possibility that a particular event will occur. To avoid the possibility of
a suit, for example, not to produce any products -which would, of
course, eliminate both the threats of a lawsuit and the opportunity to
profit. With rare exceptions, avoiding risk entirely is extremely difficult.

2. Reducing Risk: A more practical approach is to reduce the risk by

taking precautions. Risk reduction is an important element in most
companies' approach to risk management. Typical precautions
include putting safety locks on doors to prevent robberies, installing
overhead sprinklers to minimize fire damage, and periodic checking
motor vehicles to prevent accidents.

3. Assuming risk: Many companies draw on current revenues or set

aside a "Contingency Fund" to cover unexpected losses. Setting
aside money on regular basis could be cheaper than purchasing
insurance. Moreover, the company can earn interest on the reserved
cash. Such assumption of risk is also called self-insurance or risk
retention.

4. Transferring the risk: Most companies still rely on outside

insurance firms for financial protection against catastrophic losses. In
buying insurance, companies transfer the risk of loss to an insurance
firm, which agrees to pay for certain types of losses. In exchange, the
insurance firm collects a fee known as a premium.

(8)
Insurable and Uninsurable Risks:
Insurable risks: An insurable risk - one that an insurable company
will cover - Generally meets the following requirements. The peril
insured against must not be under the control of the Insured. This
means, of course that insurer do not pay for losses that are
intentionally caused by an insured, caused at the Insured's direction,
or caused with the insured's collusion. For example, a fire insurance
policy excludes loss caused by the Insured’s own arson. It does,
however, include loss caused by an employee's arson. Losses must
be calculable, and the cost of insuring must be economically feasible.
To operate profitably, insurance companies must have data on the
frequency of losses caused by a given peril. If this information covers
a long period of time and is based on a large number of cases,
Insurance companies can usually predict quite accurately how many
losses will occur in the future. For example, the insurance companies
to fix up the rate of premium of Personal Accident Insurance may use
the information of the number of people who will die each year in
India in accidents. The peril must be unlikely to affect all insured
simultaneously. Unless an insurance company spreads its coverage
over large geographic areas or a broad population base or different
classes of Insurance, a single disaster might force it to pay out all its
policies at once. The possible loss must be financially serious to the
Insured. An Insurance company could not afford the paperwork
involved in handling numerous small claims of a few Rupees each.
As a result, many policies have a clause specifying that the insurance
company will pay only that part of a loss greater than an amount - the
deductible or excess - stated in the policy. The excess represents
small losses that the Insured has to absorb.

(9)
1.1 OVERVIEW OF THE INDUSTRY

Origin of life insurance

Life Assurance was born in England when the first policy providing
temporary cover for a period of 12 months was issued as easy as
1583 A.D. The Amicable Society started granting fluctuating sum on
death since 1705 and a fix sum since 1757, with the development of
mortality tables, the life Assurance acquired a scientific character.
The Equitable Society founded in 1762 was the first Society
established on scientific basis.

Origin of life assurance in India

In India, after failure of two British companies, the European and the
Albert in 1870, which attempted writing business on Indian lives, first
Indian Life Assurance Society was formed in the same year called
Bombay Mutual Assurance Society Ltd. It was followed by the
Oriental Life Assurance Company Limited in 1874, Bharat in 1896
and Empire of India in 1897. The Idea of insurance was born out of a
desire of the people to share loss of an individual by many.

Originally it restricted to forms other than life assurance. It started

with Marine Insurance, where the losses on account of perils of sea
were shared by all who were engaged in trade. Reference to some
forms of insurance, is found in the codes of Hammurabi, Manu
(Manav Dharma Shastra). The word `Yogakshema’ is used in the Rig
Veda suggesting that some form of community insurance was
practiced by the Aryans in India over 3000 years ago. In India during
Buddhist period burial societies existed which were mutual in their
character and used to help a family by building a house, protecting
the widow, marrying the girls.

(10)

The Swadeshi Movement of 1905 provided impetus to the formation

of several companies such as the `Hindustan Cooperative’, the
`United India’, the `Bombay Life’, the `National’. Further in the wake
of freedom movement number of companies such as the `New India’,
the `Jupiter’ the `Lakshmi’ emerged.

The Government began to exercise a certain measure of control on

Insurance business by passing the `Insurance Act’ in 1912. For
controlling investment of funds, expenditure and management, a
comprehensive Act was passed known as `The Insurance Act 1938’.
For controlling the affairs, the office of Controller of Insurance was
established. The act was extensively amended in 1950.

In the year 1955, approximately 170 Insurance Offices and 80

Provident Fund Societies had been registered for transacting Life
Assurance business in India. There were, however, no full
guarantees to the policyholders. The concept of trusteeship was
lacking. Many insurance companies went into liquidation. There were
malpractices in insurance business. For achieving the following
purposes it was felt necessary to nationalize the insurance business
in India.

(i) To provide security to the policyholders.

(ii) To utilize the funds for nation-building activities.
(iii) To avoid cut throat competition.
(iv) To abolish mal-practices.
(v) To spread the insurance message to the rural areas.

The first step in this direction was taken by the Government of India
by issuing the Life Insurance (the Emergency provisions) Ordinance,
1956 on 19th January, 1956. The then Finance Minister, Shri C. D.
Deshmukh mentioned the purpose of nationalisation as reaching the
goal of socialistic pattern of society, rendering genuine service to the

(11)

people in the rural area. The Life Insurance Corporation Act (Act
XXXI of 1956) was passed by the Parliament in June 1956 which
came in force on 1st July 1956. The Life Insurance Corporation of
India came into existence on 1st September 1956.
Insurance Sector Reforms

Having looked at the insurance sector, let us look at the efforts made
by the government 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 would achieve the much
required dynamism.

The Malhotra Committee Report

In 1993, Malhotra Committee, headed by former Finance Secretary

and RBI Governor R. N. Malhotra, was formed to evaluate the Indian
insurance industry and recommend its future direction. In 1994, the
committee submitted the report and gave the following
recommendations:

Structure:

♦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 these subsidiaries can act as independent-
corporations.

♦All the insurance companies should be given greater freedom to

operate.

(12)
Market Regulations

♦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 entity.

♦Foreign companies may be allowed to enter the industry in

collaboration 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 state.

Regulatory Body

♦The Insurance Act should be changed.

♦An Insurance Regulatory body should be set up.

♦Controller of Insurance (Currently a part from the Finance Ministry)

should be made independent.

Investments

♦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
company (There current holdings to be brought down to this level
over a period of time).

(13)
Customer Service

♦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

customer services and increase the coverage of the insurance
industry should be opened up to competition. But at the same time,
the committee felt the need to exercise caution as any failure on the
part of new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs.1 bn. This amount
is not very high for foreign firms, as it translates to only about US$25
million. Further, to date it is unclear whether equity should be payable
in one go or should be brought in as installments. Also, the foreign
equity participation was to be restricted to only 40%.The committee
felt the need to provide greater autonomy to insurance companies in
order to improve their performance and enable them to act as
independent companies with economic motives. For this purpose, it
had proposed setting up an independent regulatory body.

The industry and analysts find that there is lack of clarity in the
following areas:-
♦Though coverage of rural areas was to be made compulsory, it
raises the question as to who would subsidies the rural policies as
they would be difficult to service and hence costs will go up.
♦There is some confusion with respect to investments. Where the
funds should be invested? Currently 70% of the funds with LIC & GIC
are invested in Government securities. Would new entrants be
allowed to invest in GOI securities?
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♦The report also does not enumerate exit options available to the new
entrants. In the event of failure, there should be an arrangement
made whereby the other Companies pool in to bail the customers,
who in all probability would be middle class individuals.

Potentiality of Insurance in Indian Market

Marketing inefficiency of general insurers has kept society in dark
even when so many personal as well as commercial lines of
insurance covers are available for them. Insurers have failed to
identify the need of the individual risk factors and thereafter selecting
proper market segments and developing demand of these needs by
adopting proper marketing mix. There is great scope of commercial
line of insurance as we are developing at a very fast rate but the
potentiality and scope of personal lines of insurance is vast as this
area is still under-tapped. Product designing and pricing is also
simple and growth of this portfolio is guaranteed in this country which
has a base of over 100 crore population, where there are about 25
crore dwellings, 20 crore schools, colleges and educational
institutions and about 5 crore small and big shops. But despite this
the Indian insurers share in personal line of business is very low or
negligible.

There are enormous growth opportunities to Indian as well as foreign

insurers because of such a huge base of population there is ample
scope to introduce the new line of covers as per the changing needs
and to increase the per capita share of the insurance.

By encouraging risk transfer by investing small portion of the savings

of the individuals.By opening up the sector far more opportunities has
came up in insurance and reinsurance market. After privatization of
this sector presence of the foreign players has also increased.
Therefore the insurers, in time to come, will have to change their
attitude from selling of the product to marketing of the protection
needs of the insured and for this is required is:

(15)
♦ Effective product planning
♦ Suitable pricing
♦ Efficient promotion and physical distribution.
♦ Proper physical evidence.
♦ Good and well trained sales force.

1.2 PROFILE OF THE ORGANISATION:

ICICI Prudential Life Insurance
ICICI Prudential Life Insurance is a joint venture between the ICICI
Group and Prudential PLC, of the UK. ICICI started off its operations
in 1955 with providing finance for industrial development, and since
then it has diversified into housing finance, consumer finance, mutual
funds to being a Virtual Universal Bank and its latest venture Life
Insurance.
Foreign Partner:

Established in 1848, Prudential PLC. of U.K. has grown to be the

largest life insurance and mutual fund company in U.K. Prudential
PLC. has had its presence in Asia for the past 75 years catering to
over 1 million customers across 11 Asian countries.

Prudential is the largest life insurance company in the United

Kingdom (Source: S&P's UK Life Financial Digest, 1998).

ICICI and Prudential came together in 1993 to provide mutual fund

products in India and today are the largest private sector mutual fund
company in India.

Their latest venture ICICI Prudential Life plans to take care of the
insurance needs at various stages of life.

(16)

ICICI Prudential Life Insurance was established in 2000 with a

commitment to expand and reshape the life insurance industry in
India. The company was amongst the first private sector insurance
companies to begin operations after receiving approval from
Insurance Regulatory Development Authority (IRDA), and in the time
since, has taken several steps towards its realizing its goal.
The company's wide range of products, distribution strengths and
powerful brand has driven its growth across a cross-section of people
and cities. As on March 31, 2003, the company had issued nearly
350,000 policies, with a total premium income of over INR 5 billion
and a total sum assured in excess of INR 87 billion. Today, the
company has established itself as the No. 1 private life insurer in the
country.
ICICI Prudential Life Insurance Company is a joint venture between
ICICI, a premier financial powerhouse and Prudential PLC, a leading
international financial services group headquartered in the United
Kingdom. ICICI Prudential was amongst the first private sector
insurance companies to begin operations in December 2000 after
receiving approval from Insurance Regulatory Development Authority
(IRDA).

ICICI Prudential’s equity base stands at Rs. 4.25 billion with ICICI
Bank and Prudential plc holding 74% and 26% stake respectively. As
of March 31, 2003, the company had issued nearly 350,000 policies
with a sum assured in excess of Rs 8,700 crore and total premium
income of over Rs. 500 crore. Today the company is the #1 private
life insurers in the country.

Company Vision

To make ICICI Prudential the dominant Life and Pensions player built
on trust by world-class people and service.

(17)
This is what ICICI Prudential hope to achieve by:

•Understanding the needs of customers and offering them superior

products and service
•Leveraging technology to service customers quickly, efficiently and
conveniently
•Developing and implementing superior risk management and
investment strategies to offer sustainable and stable returns to our
policyholders

•Providing an enabling environment to faster growth and learning for

ICICI Prudential employees
•And above all, building transparency in all ICICI Prudential dealings.

The success of the company will be founded in its unflinching

commitment to 5 core values -- Integrity, Customer First, Boundary
less, Ownership and Passion. Each of the values describes what the
company stands for, the qualities of our people and the way we work.

We do believe that we are on the threshold of an exciting new

opportunity, where we can play a significant role in redefining and
reshaping the sector. Given the quality of our parentage and the
commitment of our team, there are no limits to ICICI Prudential
growth.

(18)
Board of Directors

The ICICI Prudential Life Insurance Company Limited Board

comprises reputed people from the finance industry both from India
and abroad.

Mr. K.V. Kamath, Chairman

Mr. Mark Tucker

Mrs. Lalita D. Gupte

Mr. Danny Bardin

Mrs. Kalpana Morparia

Mrs. Chanda Kochhar

Mr. M.P. Modi

Mr. R Narayanan

Mr. S.P.Subhedar, (Alternate Director to Mr. Danny Bardin)

Mr. Derek Stott, (Alternate Director to Mr. Mark Tucker)

Ms. Shikha Sharma, Managing Director

Management Team

Ms. Shikha Sharma, Managing Director

Ms. Anita Pai, Chief - Operations & Underwriting

Mr. Bill Lisle, Chief Agency Officer

(19)

Mr. Sandeep Batra, Chief Financial Officer & Company Secretary

Mr. Saugata Gupta, Chief – Marketing

Mr. Shubhro J. Mitra, Chief - Human Resources

Mr. V. Rajagopalan, Appointed Actuary

Mr. Anil Tikoo, Head - Information Technology

Products Insurance Solutions for Individuals:

ICICI Prudential Life Insurance offers a range of innovative,

customer-centric products that meet the needs of customers at every
life stage. Its 13 products can be enhanced with up to 4 riders, to
create a customized solution for each policyholder.

Savings Solutions:

ICICI Pru Save n Protect is a traditional endowment savings plan that

offers life protection along with adequate returns.

ICICI Pru CashBak is an anticipated endowment policy ideal for

meeting milestone expenses like a child's marriage, expenses for a
child's higher education or purchase of an asset.

Protection Solutions:

ICICI Pru LifeGuard is a protection plan, which offers life covers at

very low cost. It is available in 3 options - level term assurance, level
term assurance with return of premium and single premium.

(20)
Child Solutions:

ICICI Pru SmartKid provides guaranteed educational benefits to a

child along with life insurance cover for the parent who purchases the
policy. The policy is designed to provide money at important
milestones in the child's life.

Market-linked Solutions:
ICICI Pru LifeLink is a single premium Market Linked Insurance Plan
which combines life insurance cover with the opportunity to stay
invested in the stock market.

ICICI Pru.LifeTime offers customers the flexibility and control to

customize the policy to meet the changing needs at different life
stages. It offers 3 investment options - Growth Plan, Income Plan and
Balanced Plan.

Retirement Solutions:

ICICI Pru ForeverLife is a retirement product targeted at individuals

in their thirties. Market-linked retirement productsICICI Pru

LifeTime Pension is a regular premium market-linked pensionplan

ICICI Pru LifeLink Pension is a single premium market-linked

pension plan.

Single Premium Solutions:

ICICI Pru AssureInvest is a single premium savings product with life
cover for terms of 5, 7 or 10 years.

ICICI Pru ReAssure is a retirement product for senior citizens who

are on the verge of retirement or have just retired.

(21)

ICICI Prudential also launched ''Salaam Zindagi'', a social sector

group insurance policy targeted at the economically underprivileged
sections of the society.

Group Insurance Solutions:

ICICI Prudential also offers Group Insurance Solutions for companies

seeking to enhance benefits to their employees.
ICICI Pru Group Gratuity Plan:

ICICI Pru''s group gratuity plan helps employers fund their statutory
gratuity obligation in a scientific manner. The plan can also be
customized to structure schemes that can provide benefits beyond
the statutory obligations.

ICICI Pru Group Superannuation Plan:

ICICI Pru offers a flexible defined contribution superannuation

scheme to provide a retirement kitty for each member of the group.
Employees have the option of choosing from various annuity options
or opting for a partial commutation of the annuity at the time of
retirement.

ICICI Pru Group Term Plan:

ICICI Pru''s flexible group term solution helps provide affordable

cover to members of a group. The cover could be uniform or based
on designation/rank or a multiple of salary. The benefit under the
policy is paid to the beneficiary nominated by the member on his/her
death.

(22)
Flexible Rider Options:

ICICI Pru Life offers flexible riders, which can be added to the basic
policy at a marginal cost, depending on the specific needs of the
customer.
1.Accident & disability benefit: If death occurs as the result of an
accident during the term of the policy, the beneficiary receives an
additional amount equal to the sum assured under the policy. If the
death occurs while traveling in an authorized mass transport vehicle,
the beneficiary will be entitled to twice the sum assured as additional
benefit.

2. Accident benefit: This rider option pays the sum assured under
the rider on death due to accident.

3.Critical Illness Benefit: protects the insured against financial loss

in the event of 9 specified critical illnesses. Benefits are payable to
the insured for medical expenses prior to death.

4.Major Surgical Assistance Benefit: provides financial support in

the event of medical emergencies, ensuring that benefits are payable
to the life assured for medical expenses incurred for surgical
procedures. Cover is offered against 43 different surgical procedures.

(23)
About The Partners

ICICI Bank (NYSE:IBN) is India’s second largest bank with an asset

base of Rs. 106812 crore. ICICI Bank provides a broad spectrum of
financial services to individuals and companies. This includes
mortgages, car and personal loans, credit and debit cards, corporate
and agricultural finance. The Bank services a growing customer base
of more than 7 million customer accounts and 5 million bondholders
accounts through a multi-channel access network. This includes
about 450 branches and extension counters, 1675 ATMs, call centres
and Internet banking (www.icicibank.com). ICICI Bank posted a net
profit of Rs.1, 206 crore for the year
ended March 31, 2003. ICICI Bank is the only Indian company to be
rated above the country rating by the international rating agency
Moody''s and the only Indian company to be awarded an investment
grade international credit rating. The Bank enjoys the highest AAA (or
equivalent) rating from all leading Indian rating agencies.

Established in 1848, Prudential plc is a leading international

financial services company in the UK, with some US$250 billion funds
under management and more than 16 million customers worldwide.
Prudential has brought to market an integrated range of financial
services products that now includes life assurance, pensions, mutual
funds, banking, investment management and general insurance. In
Asia, Prudential is UK''s largest life insurance company with a vast
network of 22 life and mutual fund operations in twelve countries -
China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the
Philippines, Singapore, Taiwan, Thailand and Vietnam. Since 1923,
Prudential has championed customer-centric products and services,
supported by over 60,000 staff and agents across the region.

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Insurance Plans

Savings Plans:

Most endowment policies are a good way of saving for the future. A
policy can be designed to make your savings grow and have them
available to you at the end of a fixed number of years. Or, a policy
could provide you with an income every three or four years.
You can browse through these policies to find one that best suits your
needs:
•SmartKid - a superior way to guarantee your child’s future no matter
what the uncertainty.

•LifeTime - a complete market-linked insurance plan that adapts

itself to your changing protection and investment needs, throughout a
lifetime.

•Save'n' Protect - a traditional endowment savings plan that offers

both high returns and protection.

•CashBak - an endowment savings plan that allows you to get back

substantial survival benefits without having to wait till the maturity
date.

Depending on your particular needs, Savings Plans could allow

you to do one or more of the following:

•Plan For Tangibles: buy that fashionable car, that huge refrigerator,
etc.

•Plan For A Cosy Nest: by facilitating the purchase of that home you
have always dreamt of.

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•Plan For Milestones: ensure a good education for your children,
children's wedding, etc.

•Save on Deferred Taxes: because the interest income and maturity

benefits of the Policy are tax exempt.

•Lifestyle Planning: maintain your lifestyle - even if your income was

to reduce in the future.

•Legacy Creation: buy property; invest in shares, bonds, etc. for

your children or grandchildren.
•Attain Greater Heights: ensure that your children's education
continues undisrupted.
Protection Plans

We all hope to live a full life till a ripe old age... to ensure our
children's sustenance and healthy growth. But what if a sudden
disability or illness strikes? Besides the grief and the pain, such an
event also completely disrupts life for all the people who are
financially dependent on us. Our life insurance policies offer a
comprehensive range of protection benefits:

•Lifeguard - A low cost-high protection plan that offers protection over

a specified period.

•Riders - Additional benefits that one can add on to the policy. The
rider can be opted for at the time of taking the basic policy. Additional
premium is charged for each rider.

•An insurance policy can be tailor made to provide protection to you

and your loved ones. If something were to happen to you, it can help:

•Safeguard Your Better Half: ensure life's continuity for your loved
one.

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•Dear and Near Ones: ensure continuity of lifestyle for your
dependents.

•Attain Greater Heights: ensure your children's education continues

undisrupted.

Unforeseen circumstances: bear the cost of fighting an illness,

disability, etc.

Retirement Plans

Most of you picture yourselves enjoying the fruits of labor after

retirement, going on your dream vacation, or helping your children's
career take wing. But do you realize that financing all this will most
likely depend partly on your personal savings? Because personal
savings and investments represent a significant source of retirement
income for many people, you can never save too much.

Currently, you are at a stage where you are juggling many roles, as
nurturing parents, dutiful caregivers to elders, supportive life partners,
while trying to maintain a career. It is too easy to get carried away
handling and solving the day-to-day problems to not look into your
retirement needs. It may also seem too far away to be of concern. But
a look at the issues below will make the need for some strategic
planning at this stage amply clear.

Today, thanks to a healthier lifestyle and advances in medicine, the

average Indian lives longer. This makes the challenge of
accumulating enough money for retirement even more difficult, since
it may have to last longer. Also, with the falling interest rate scenario
and the rising costs of medical expenses retirement means monetary
uncertainty for most of us. More so, because there is also the ever-
persistent evil of inflation, which erodes your purchasing power. The
graph below illustrates how much Rupees will 10,000/- amount to
after some years:

(27)
Inflation erodes your purchasing power

Therefore, the message is simple - no matter whether you are 30 or

50, you should start planning early to have a healthy retirement kitty.
(See graph below for an illustration)

Start early, Gain more

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As can be seen the cost of delaying is high. Situation A is when
you are saving Rs 10000 annually from the age of 25 to 34 years and
Situation B is when you save the same annual amount from the age
of 35 to 59 years. As can be seen in the example, even after
investing your money for a 2.5 times longer duration, the maturity
value in the second case is much lesser (the figures are based on a
hypothetical interest rate of 10%). The longer your money is allowed
to grow at a compounded rate, the more dramatic will the difference
be eventually.

Therefore, the message is simple - Put Time on Your Side and

Start Early.

ICICI Prudential Life Insurance believes in the philosophy of providing

meaningful and comprehensive insurance solutions to plan your
retirement. Our insurance solutions are the most optimal tools to plan
your retirement because they give you Safety, Liquidity, Tax benefits,
Health cover and Life protection and thus ensure that you are
comprehensively covered.

ICICI Prudential offers flexible products for planning your

retirement:
ForeverLife - A deferred annuity plan that helps you save for
retirement while providing you life insurance protection.

LifeLink Pension- A single premium plan which allows you to park

a lump sum amount for a secure future.

LifeTime Pension - A plan which gives you the twin benefit of

market-linked annuity and life insurance cover.

ReAssure - A plan that helps you invest your money prudently

and safely and offers you the benefit of a regular income while
providing you life insurance protection.

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Depending on your particular needs, our Retirement Solutions could
allow you to do one or more of the following:

Maintaining the Same Living Standard Post-retirement:

 Get your retirement monies to earn you the benefit of a regular
income while providing life insurance protection. So now you can
really enjoy even your post-retirement days.

Provide for a Lifetime of Pension:

Annuities can play a valuable role in retirement saving. A deferred

annuity allows you to accumulate money for retirement on a tax-
deferred basis. You are also in control of when you want to begin
receiving payments. An annuity gives you a fixed income for life.
Protect Your Better Half:

If you are married, it is preferable that your retirement plan includes

your spouse. The "Joint Life Last Survivor" annuity option in ICICI
ForeverLife pays benefits as long as either one of you is living.

Investment Plans:

Often you may have some investible funds lying idle - a bonus or
maybe a windfall. You can either secure your family through
insurance or invest it for growth. The need for insurance is crucial but
you also want to see your money grow through market investments.
But in volatile market conditions how do you secure both?

Relax, because now you can hedge your investments with safer
investment vehicles that provide you with a diversified portfolio.

ICICI Prudential Life Insurance presents a package of Investment

Solutions, which provide you high returns, while guaranteeing
complete peace of mind.

(30)
This follows from our understanding that life has many facets and
they are manifested through its various needs. Therefore our
philosophy is to provide you with comprehensive insurance solutions
that cater to your dual needs of earning potentially high returns as
well as stay insured for life. Thus we offer you a unique package of
Investment Solutions that combine the best of insurance and
investment.

ICICI Prudential offers flexible solutions for planning your

investment.

LifeLink - an investment plan that gives you the flexibility of

choosing your investment options while keeping you insured for life.

AssureInvest - a single premium endowment plan that gives you

potentially high returns coupled with insurance protection.
Depending on your particular needs, Investment Plans could
allow you to do one or more of the following:

•Plan for Tangibles: buy that fashionable car, that huge refrigerator,
etc.

•Earn Market-linked Returns: earn market-related returns while your

family remains protected, even in volatile market conditions.

•Save on Deferred Taxes: because the interest income and maturity

benefits of the Policy are tax exempt.

•Lifestyle Planning: maintain your lifestyle - even if your income was

to reduce in the future.

•Legacy Creation: buy property; invest in shares, bonds, etc. for

your children or grandchildren

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Group Insurance Solutions

Employee care - the defining edge

In this new age of rapid developments and just-in-time

methodologies, one big challenge that organizations face is to
establish and maintain a competitive edge over others. Today's
cutting-edge product or service becomes tomorrow's undifferentiated
commodity. In an era of competitive parity, the only asset that makes
a decisive difference between corporate success and failure is the
quality of human capital.

Investment in one’s employees is an investment in the future:

Employees are a company’s human capital. Not only do companies

care for them, but also provide an environment that fosters a deep
and lasting sense of belonging. Employees determine the present
and decide the future of a company.

Employee benefits have proven to be an excellent tool to optimize the

retention of talent and improve an organization’s bottom line. The
quality of an organization’s employee benefits establishes and
maintains a company's image as a caring employer. Optimum care of
employees is a long-term investment that results in a sustained
competitive advantage for an organization in the times to come.

ICICI Pru Group Insurance Solutions Advantage

•An integrated basket of flexible group insurance solutions that offer

incomparable flexible benefits.

•Sound investment management that focuses on safety, stability and

profitability of the portfolio.

•Personalized financial planning for your employee that takes care of

his/her changing financial needs at every stage of life.
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•Quality service initiatives and transparency across all operations,
promising superlative operational efficiency.

Group Gratuity Plan:

A plan that helps employers funds their statutory gratuity obligation in

a scientific manner.
Group Term Assurance: A plan that helps provides affordable cover
to members of a group.
Group Superannuation Plan: A flexible Defined Contribution
Superannuation scheme that provides for a retirement kitty for each
member of the group.

Contact Information

ICICI Prudential Life Insurance Company Limited

Registered Office

1089, ICICI Prudential Towers,

Appasaheb Marg,
PrabhaDevi,Mumbai - 400 051.

1.3 PROBLEMS OF THE ORGANISATION:

Multiple players in the life insurance so, ICICI Prudential faces very
tough competition from other leaders in the industry. The ICICI
Prudential needs to work hard in order to stay competitive insurance
market. Further, the ICICI Prudential should appoint professional
agent who should be able to provide customer with a comparison of
multiple schemes and also explain them in simple terms, so that
customer able to make an informed decision.

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1.4 S.W.O.T. ANALYSIS

Strengths

The biggest strength of this organization is the:

Money power, which makes them ignorant about the gestation
period.

Brand image, Business experience, and Innovative products

The agents are very selectively chosen have excellent

communication skills.

Service quality, which is the crux of their mission.

Large network branches which is helped to customer for the

payment

Weaknesses

High targets for financial advisors and for the sales departments.

Many competitors in the market offer same product by the little

difference in the premium and offerings.

Sustainable to risk associated with investments in money market.

Try to catch middle-lower level people also.

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Opportunity

Huge market is literally untapped; out of estimated 320 millions

insurable markets only 20% of the population is insured.
Health insurance and pension schemes, an estimated market
potential of approximately $15 billion.
ICICI Prudential should give the insurance coverage both to the
parent and child so that their life could be covered in both cases. The
customer doesn’t mind paying some extra premium for that.

Threats

Players like Bajaj and Birla Sun life with low premium for the similar
plans.

Entry of many other private companies with equally strong

experience and financial strength of foreign partners making the
competition difficult and saturating the urban markets.

Current Govt. policies do not encourage gross domestic savings. If

the tax liability of the service class rises, 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.

1.5 COMPETITION INFORMATION:

•Bajaj Allianz General Insurance: Bajaj Allianz General Insurance

Company Limited is a joint venture between Bajaj Auto Limited and
Allianz AG of Germany. Both enjoy a reputation of expertise, stability
and strength.

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•Birla Sun Life Insurance: The Aditya Birla Group contributes its
knowledge of the Indian market while Sun Life Financial contributes
global expertise in the areas of protection and wealth management.
•HDFC Standard Life Insurance: HDFC and Standard Life have a
long and close relationship built upon shared values and trust.
Providing long term financial security to policy holders will be the
constant endeavor.
•ING Vysya Life Insurance: ING, the world’s second largest life
insurance company together with Vysya Bank, one of India’s leading
private sector banks, forms ING Vysya Life Insurance.

•Life Insurance Corporation (LIC): Life Insurance Corporation (LIC)

has been one of the pioneering organizations in India who introduced
use of Information Technology in their business.

•MetLife India: The Metropolitan Life Insurance Company is the

number one insurer in the U.S. It is helping build financial
independence for its customers.

•Oriental Insurance: The Oriental Insurance Company Ltd. (OICL) is

one of the leading General Insurance companies in India and is a
subsidiary of the General Insurance Corporation (GIC) of India.

•Royal Sundaram Alliance Insurance: Royal Sundaram marks the

coming together of Sundaram Finance; one of India’s most respected
and trusted finance companies, and Royal and Sun Alliance, one of
the largest insurance groups in the world.

•Tata AIG Insurance: Life insurance & general insurance for

individuals & corporates by Tata AIG. This site will guide you on how
to capitalize on opportunities and protect against uncertainties.

(36)

Chapter 2

OBJECTIVE & METHODOLOGY

2.1 SIGNIFICANCE OF THE STUDY

A study of the products and services of the ICICI Prudential Life
Insurance will help me understand the difference between its
products and that of competitors. Also I will get to know the consumer
perception about the various life insurance products available in India

2.2 MANAGERIAL USEFULNESS OF THE STUDY

ICICI Prudential Life Insurance has a place in the Insurance sector.

The study of its marketing strategies and consumer perception of life
insurance product will give me a crucial idea behind the success of
the company and the facets of marketing that made the success
possible.

2.3 OBJECTIVES OF THE STUDY

1. To Study the marketing strategies of ICICI Prudential Life

Insurance

2. To study the consumer perception about the various life insurance

products available in India.

3. To analyze the life insurance products of ICICI Prudential Life

Insurance Company and compare them with other players in Life
Insurance segment.

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2.4 SCOPE OF THE STUDY

The study is for the products of ICICI Prudential Life Insurance and
Consumer Perception of life insurance product will be limited to the
New Delhi and NCR only. The information will be based on the
company’s website, literature provided by the company and
questionnaire analysis.

2.5 METHODOLOGY
Primary Sources:

Data collected from Insurance companies through verbal

Questionnaire

Secondary Sources:

•IRDA act, 1999

•Handbook of Insurance agents of different Life Insurance companies

•Internet websites of IRDA and various Life Insurance companies &

various websites.

The primary study will be targeted towards the marketers. The study
will also include semi-structured interview with marketing managers
of various Insurance companies who are successfully selling Life
Insurance Policies to Indian Consumers.

The Secondary Sources will help in tracing the historical framework of

Insurance companies of post independent India as well as the pre-
privatization and post-privatization Insurance environment in India.
This secondary study will help in serving the theoretical groundwork
for the study.

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Chapter – 3

CONCEPTUAL DISCUSSION

MARKETING CONCEPT IN FINANCIAL SERVICES MARKETS

Financial Services Marketing

 According to ‘Philip Kotler’:

“Marketing is a social and managerial process

by which individuals and groups obtain what
they need want through creating, offering and
exchanging products of value with others. This
definition of marketing rests on the following
core concepts: needs, wants, and demands;
products (good, services and ideas); values,
cost and satisfaction; exchanger and
transactions; relationships and networks;
markets; and marketers and prospects".
The concept of financial Services Markets is a combination of two
different words, Finance and Marketing. In a true sense, it is
application of marketing principles in the financial services or
conceptualization of marketing in the decision-making process of
financial organization.

It is a right to say that financial marketing is related to the product,

promotion, place, and pricing and people decisions of the financial
organizations, which simplify the taste of restructuring of revamping
their decisions in tune with the changing business environment. In
addition, the financial marketing also includes in it’s the activities
related to the behavioral profile of the customers and the marketing
information system so that the marketing decision involve more
dynamism in it’s to meet the financial and more the customers and
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market. The right from the making of services product, promotion,
place, pricing and people decisions to the study of financial
organisations and customers, market conditions and environment
become an integral part of financial marketing. Further it also includes
in its purview the auditing of marketing strategies so as to make the
marketing decisions creative and innovative.
In an age of electronic financial services the concept of financial
marketing is required to be reviewed. The emerging trends in the
word economy indicate recession, the mounting intensity of
competition, and the increasing domination of information
technologies.

Thus we find financial marketing helping an optimal blending of the

core and peripheral services. The elimination and inclusion processes
it the service mix are done effectively and this simplified the task of
formulating and innovating the product mix in tune with the changing
expectations of customers.

DISTINCTION BETWEEN SERVICES MARKETING AND

PRODUCT MARKETING

Nature and Role of Goods Marketing

In manufacturing, the marketing function plays an important role in

the identification of customer’s need. Here customer needs are
identified before production. Customers assess the brands promised
benefits during consumption, strengthening or weakening brand
preference accordingly. In figure below the sequence of the four
functional phases are show. It also gives the contributions of post-
production marketing, consumption and word of mouth
communications.

(40)
Nature of Role of Goods Marketing
Pre-production
Marketing Create Awareness

Production Induce Trial

World of Mouth
Communication
 Post-production Demonstrate
Marketing Benifits

Build Brand
Consumption Preference

Strong Influence Weak Influence

Nature and Role of Services Marketing

Although both services marketing and goods marketing start with the
critical need identification and product design functions, goods
generally are produced before it is sold and services generally are
sold before it is produced. Moreover, services marketing has more
limited influence an customers before the purchase than goods
marketing. Figure given below shows the nature and roles of
marketing for services.

In services, both post sale marketing and word-of-mouth

communication has prominent effect in winning customers loyalty.
Thus, services marketers can create brand awareness, and include
trial before the sale, but they demonstrate benefits and build brand
awareness most effectively after the sale.
(41)
Nature and role of Service Marketing

Pre production Create Awareness

marketing

Induce Trial
Word of Mouth
Communication
Post-production Demonstrate
Marketin, Benefits
Consumption &
Marketing
 Build Brand
Preference

Strong Influence Weak Influence

MEANING OF INSURANCE
The business of insurance is related to the protection of the economic
value of assets. Every asset has a value. The asset would have been
created through the efforts of the owner, in the expectation that,
either through the income generated there from or some other output,
some of his needs would be met. In the case of a motorcar, it
provides comfort and convenience in transportation. There is no
direct income. There is a normally expected lifetime for the asset
during which time, it is expected to perform. The owner, aware of this,
can so manage his affairs that by the end of that life time, a substitute
is made available to ensure that the value or income is not lost.
However, if the asset gets lost earlier, being destroyed or made non-
functional, through an accident or other unfortunate event, the owner
and those deriving benefits there from suffer. Insurance is a
mechanism that helps to reduce such adverse consequences.

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Life Assurance

It is the business of effecting contracts of insurance upon human life,

including any contract whereby the payment of money is assured
(except death by accident only) or the happening of specified any
contingencies dependent on human life, like death a specified age.
The contract would be subject to the payment of premiums for a term,

Non-Life Insurance or General Insurance

Even though conventional classification of General Insurance has
been in three branches-

1.Fire Insurance

2.Marine Insurance

3.Miscellaneous (Accident) Insurance,

In modern times, it is classified as follows:

a)Insurance of Person

b)Insurance of Property

c)Insurance of Interest

d)Insurance of Liability

(43)
WHY INSURANCE?

However there is a normally expected life cycle for every asset during
which time it is expected to perform its assigned role. So, a prudent
individual can manage his affairs so that by the end of that life cycle,
a substitute is in place to ensure continued benefit/comfort. However,
if due to an accident or other unfortunate event, the asset gets
destroyed or made non- functional, the person deriving benefits there,
from suffer. Insurance is the mechanism that helps to soften the
impact of such adverse consequences by providing for some
monetary substitution to face such unforeseen circumstances.

The need of insurance arises from the chances of an accidental

occurrence destroying or making an asset non-functional. Such loss
producing eventualities are called perils e.g. Fire, floods,
breakdowns, lightning, earthquakes, etc However, it has to be
remembered that what is being talked about is only a probability of a
loss. The protection of Insurance is against a contingency that may or
may not happen.

A business man always keeps some reserve to meet the future

unexpected loss. In our day to day life we also plan for secured
future. Similarly to face and to overcome the unexpected risk of life
one must have to insure his/her life.

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THE INSURANCE BUSINESS

The business of insurance done by insurance companies (called

insurers), is to

bring together persons with common insurable interests (sharing the

same risks) collecting the share or contribution (called premium) from
all of them, and paying out compensations (called claims) to those
who suffer. The premium is determined as indicated above with some
addition for the expenses of administration.
The insurer acts as a trustee for managing the common fund for and
on behalf of the community. He has to ensure that nobody is allowed
to take undue advantage of the arrangement. In other words the
management of the business requires care to prevent entry into the
group of people whose risks are not of the same kind, as well as not
paying claims on losses which are not accidental. The decision to
allow entry is the process of underwriting of risk. Both underwriting
and claim settlement have to done with great care.

INSURANCE AS A SOCIAL SECURITY TOOL

On the eve of the promulgation of the Life Insurance (Emergency

Provision) Ordinance the then Finance Minister C.D. Deshmukh said
in his broadcast to the nation. "The nationalisation of Life Insurance
will be another milestone. In the implementation of the Second Five
Year Plan, it is bound to give material assistance. Into the lives of
millions in the rural areas, it will introduce a new sense of awareness
of building for the future in the spirit of calm confidence which
insurance alone can give. It is a measure conceived in a genuine
spirit of service to the people. It will be for the people to respond,
confound the doubters and make it a resounding success. With this
as the guiding light the corporate objectives of the Life Insurance
Corporation inter alia sought to achieve the following:

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•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 reach 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 savings 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 that the moneys belong to the policyholders.

•Act as trustee of the insured public in their individual and

collective capacities.
The need for these objectives is obvious in the eyes of a family which
may have lost its sole bread winner. With his death the family's
income dies. The economic condition of the family is affected, unless
other arrangements come into being to restore the situation. Life
insurance provides such an alternate arrangement. If there was no
life insurance the social cost would be reflected in a impoverished
family becoming a burden on the Government or taking to anti social
means to make both ends meet. Therefore, the life insurance
business is complimentary to the state's efforts in social
management.

Conceptually under a socialistic system it is the responsibility of the

State to find resources for providing social security, where as in a
capitalistic society, providing for security is largely left to the
individuals. The society provides instruments like insurance, which

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can be used in securing this aim. However the distinction between
these systems have got blurred over a period of time, with Socialists
leaving individuals to fend for themselves and Capitalist taking the
first steps to social security.

In India, Article 41 of our Constitution requires the State, within the

limits of its economic capacity and development, to make effective
provision for securing the right to work, to education and to provide
public assistance in case of unemployment, old age, sickness and
disablement and in other cases of undeserved want. Part of the
State's obligations to the poorer sections, are met through the
mechanism of life insurance.
In keeping with its social responsibility as an instrument of the
Government and as a good business organization LIC has made
payments to policyholders amounting to Rs.11,170 crores in 1999-
2000 (as against Rs.9,106 crores in the previous year). During the
same period, LIC settled 66.42 lacs claims for an amount of Rs. 9211
crores.
ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT

Insurance benefits society by way of

a)Providing relief to the insured from any mishappening.

b) Reducing burden of Government in providing relief to the senior

citizens.

c) Providing funds to Govt. for nation building activities.

Direct investments made by LIC serve a twofold purpose. It acts as a

major instrument for the mobilization of savings of people, particularly
from the middle and lower income groups. These savings are
channelled into investments for economic growth thereby creating

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employment. These savings in turn go into the task of nation building.
As on 31.3.2000, the total investments of the LIC exceeded Rs
1,47,000 crores, of which more than Rs. 84, 000 crores were directly
in Government (both State and Centre) related securities, nearly
Rs.12,000 crores in the securities State Electricity Boards, Rs.16,000
crores in housing loans and Rs.3,000 crores in water supply and
sewerage systems: Other investments included road transport,
setting up of industrial estates and direct financing of industry.
Investments in the corporate sector (shares, debentures and term
loans) exceeded Rs. 28,000 crores.

LEGISLATIVE AND REGULATORY MATTERS

Market consists of buyers, sellers, intermediaries and regulators.
There is hardly any market which is not regulated. As between
markets, the only difference in the matter of regulation could be in the
degree of regulation which is exercised in different markets but every
market is regulated without exception.
For regulating any market, laws are required to be passed by the
appropriate legislature. The market economy has to function within
the legal framework. The legal frame work in turn has to undergo
changes to take care of the market aspirations and the advancement
in technology.
Some of the important legislative measures taken up in the insurance
sector of the Indian economy are considered herein.

LIFE INSURANCE CORPORATION ACT, 1956

Life Insurance business in India was nationalised with effect from 1st
September 1956. From this date, the life insurance business
transacted by 154 Indian life insurers, the Indian business of 16
foreign insurers and 75 provident societies was taken over by
Government of India. Earlier, LIC of India Act had been passed by the
Parliament on 18th June 1956 which came into effect from 1st. July
1956. Some of the important provisions of this Act (as amended by
IRDA Act 1999) are stated hereafter.
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Life Insurance Corporation (LIC) was established w.e.f. 19 May 1956,
as a body corporate having perpetual succession and a common seal
with power to acquire, hold and dispose of property and may by its
name sue and be sued in its name. It consists of not more than 16
members appointed by the Government, one of whom shall be
appointed as its Chairman.

Under Section 30 of the LIC of India Act, from the appointed date i.e.
1 Sept 1956, the corporation shall have the exclusive privilege of
carrying on life insurance business in India and that certificate of
registration granted to any insurer under the Insurance Act, 1938
shall cease to have effect from the said date. Now the above
provisions of Section 30 have been altered by insertion of Section
30A consequent to the enactment of the IRDA Act, 1999. As a result,
the exclusive privilege given to the LIC has been withdrawn.

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Chapter – 4

DATA ANALYSIS

Data gives preference of respondents of insurance company.

Company’s Name No.Of Respondent Share(%)

LIC 78 78
SBI Life Insurance 7 7
ICICI Prudential 10 10
OM Kotak Mahindra 3 3
HDFC 2 2
 Total 100 100

Interpretation

78% of the people have LIC policy and is ranked number one by that
percent of respondent.

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Data gives benefits of insurance cover perceived by respondents.

Benefits No. Of Respondent Share(%)

Cover future 55 55
Uncertainity
Tax Deduction 20 20
Future Investment 25 25
Total 100 100

Interpretation

55% of the respondents believe that covering future uncertainty is the

biggest benefit of insurance policy20% & 25% of them believe that
other benefits are tax deduction & future investment

20% & 25% of them believe that other benefits are tax deduction &
future investment

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Data provides features of insurance policy attracted the respondents.

 Feature No. Of Respondent Share (%)
Money Back 15 15
Guarantee
Larger Risk Coverage 37 37
Easy Access to 7 7
Agent
Low Premium 30 30
Reputation Of 11 11
Company
Total 100 100

Interpretation

Majority of the respondent found larger risk coverage as the most

attracted feature of their policy.

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Data provides number of insurance policy type respondents.

Policy Type No. Of. Share (%)

Respondents
Life Policy 75 75
Non- Life Policy 25 25
Both 45 45

Nature of Policy

Interpretation
75% of the respondents have life insurance policy while 45% have
both.

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Chapter 5

FINDINGS AND RECOMMENDATIONS

5.1 FINDINGS

The project study report has the following findings:

1. Almost 80% of respondents have an insurance policy.
2. People have more number of life insurance policies as compared
to non life insurance.
3. Majority of the respondent preferred/have L.I.C. policy since it was
the only option due to complete government control in insurance
sector.
4. Majority of the respondents believe that covering future uncertainty
is the most important benefit of an insurance policy.
5. Majority of the respondent believed that larger risk coverage of
their policy was the main feature of their policy that attracted them to
buy that policy though low premium was the next important feature.
6. Due to the increasing concern of people towards their health/life
the life insurance business has good prospects.
7. Due to increased in consumerism new product is launched
everyday. Thus non-life/general insurance business is also going to
have boom period.
8. ICICI Prudential is the largest private player in the insurance
industry in India. It has sold over one lakh fifty thousand policies till
date. Besides LIC, ICICI Prudential is facing stiff competition from
other private insurance players.
9. Out of total population of 1 billion of country, only 22% have
insurance cover. So we can say that there is still large potential for
both the public and private companies. Private companies have to
give varied customized product to compete with the LIC which is
holding about 97% of the total market.
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5.2 RECOMMENDATIONS

The insurance companies should now try to identify the gap between
current level of customer service and customer expectations. Some
of the strategies being recommended are as follows:

 Product Differentiation: Offering a product that is distinctly different

from other products available in the market.

Innovativeness: Identifying means of a delightful customer

experience.

Riders: These are additional offerings along with the main product.

Flexibility: The companies should make their products flexible for

the convenience of their customer.

Hassle Free Service: All bureaucracy in customer interactions

should be eliminated.

Proper Policy Documentation: Wrong interpretations/ non-

awareness of policy document by the customer may have serious
implications in the long term and the possibility of the same should be
alleviated by the insurance companies.
 (55)

ANNEXURES
 (56)
QUESTIONNAIRE

1. Are You Employed?

Yes [ ]

No [ ]

2. Do you have any insurance policy?

Yes [ ]

No [ ]

If Answer of Q.2 is Yes, then proceed else answer Q.8

3. Which insurance policy do you have?

Life [ ]
Non-Life [ ]
Both [ ]

4. Which Company’s Insurance Policy you prefer the most?

(Rank them)
a) LIC [ ]
b) ICICI Prudential [ ]
c) SBI Life Insurance [ ]
d) ING Vysya Life [ ]
e) Om Kotak Mahindra [ ]
 f) TATA AIG Life [ ]
g) Any Other (please specify)________________________

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5. For how many years do you have insurance policy? (Please tick)
a)<5YRS

b) 5-10 YRS
c)10-15 YRS
d) Any Other (please specify)_____________________________

6. What do you think are the benefits of insurance cover? (rank them)
a) Cover Future Uncertainty
b) Tax Deductions
c) Future Investment
d) Any Other (please specify)_____________________________

7. Which feature of your policy attracted you to buy it? (Rank Them)
a) Low Premium
b) Larger Risk Coverage
c) Money Back Guarantee
d) Reputation of Company
e) Easy Access to Agents
f) Any Other (please specify)_____________________________

8. YOUR MONTHLY HOUSEHOLD INCOME?

a) <10k
b) 10k-20k
c) 20k-30k
d) 30k-40k
e) Any Other (please specify)_____________________________
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9. Do you really think insurance policy cover in today’s scenario is not
essential?
_______________________________________________________
_______________________________________________________
______________________

THANKYOU!

NAME: _________________________

ADDRESS:

OCCUPATION:___________________
 (59)
COMPARATIVE ANALYSIS OF MAJOR INSURANCE PLAYERS
MONEYBACK POLICIES - 20 Years (Increasing insurance cover, Tax-free
money receivable at regular intervals)

ALLIANZ BIRLA ICICI PRU ING VYSYA LIC OM TATA AIG

BAJAJ SUNLIFE KOTAK
(Rs) Cash care Money Cash Back Maximizing Life Money Money Assure 21
Protect Back Moneyback Back Back Years Money
Pack Saver
Sum 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Assured
Term(yrs) 20 20 20 20 20 20 21

Prem. 20 20 20 20 20 20 21
Paying
term(yrs)
Yrly. 6,402 6,144 6,818 6,158 6,564 7,495 9,369
Prem.
Tot. Prem. 1,28,040 1,22,880 1,36,366 1,23,160 1,31,280 1,49,900 1,96,749

ALLIANZ BIRLA ICICI PRU ING VYSYA LIC OM TATA AIG

BAJAJ SUNLIFE KOTAK
(Rs) Cash care Money Cash Back Maximizing Life Money Money Assure 21
Protect Back Moneyback Back Back Years Money
Pack Saver

Death
Benefit
Min. 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000 1,00,000
Cover
Year 8 1,26,677 1,48,080 1,36,857 1,00,000+Bonus 1,46,400 1,56,000 1,47,746

Year 16 160,471 243,854 1,87,298 1,92,800 2,12,000 2,28,287

ALLIANZ BIRLA ICICI PRU ING VYSYA LIC OM TATA AIG

BAJAJ SUNLIFE KOTAK
(Rs) CashCare Moneyback Cashbak Maximizing Life Moneyback Money back Assured 21
Protect Moneyback Years Money
Single Cover Saver
Interim 10,000Yr 4, 15,000 Yr 10,000Yr4, 20,000 Yr 5, 20,000Yr5, 20,000Yr5, 10,000Yr3,
Benefits 15,000Yr 8, 5, 15,000Yr8, 20,000 Yr 10, 20,000Yr10, 20,000Yr10, 10,000Yr6,
25,000Yr12, 15,000Yr1 20,000Yr12, 20,000 Yr 15 20,000 Yr15 20,000 Yr15 10,000Yr9,
25,000Yr16 0, 25,000 Yr16 10,000Yr12,
15,000Yr 10,000Yr15,
15 10,000 Yr18
Maturity Benefits

On 130,611 217,048 169,112 40,000 + bonus 156,000 130,300 228,596

Maturity
Total amt 205,611 217,048 239,112 100,000+bonus 216,000 190,300 288,596
 (60)

Rate of return (%)

Pre-tax 6.8 5.2 7.0 not indicate 6.5 3.3 4.3
Post-tax 11.9 8.2 11.7 not indicate 11.7 8.4 8.6
30%
Post-tax 9.9 7.1 9.9 not indicate 9.7 6.4 6.9
20%
Post-tax 9.1 6.5 9.1 not indicate 8.8 5.6 6.2
15%

Comparison Of Premium of Money back Policies

Age 30 years Policy Term 20 Age 30 years Policy Term 15
Years Years
PREMIUM PREMIUM
Company SA:1Lac SA:2lac Company SA:1Lac SA:2Lac
1 LIC 6280 12559 1 LIC 7953 15906
2 ICICI PRU 6592 12884 2 ICICI PRU 9094 17888
3 ALLIANZ BAJAJ 6158 11836 3 ALLIANZ BAJAJ 8362 16244
4 TATA-AIG 9099 17698 4 TATA-AIG N.A N.A
5 OM KOTAK 7120 14240 5 OM KOTAK 8890 16480
6 MAX NEWYORK N.A N.A 6 MAX NEWYORK N.A N.A
7 BIRLA SUNLIFE 5856 11412 7 BIRLA SUNLIFE 7572 14844

Age 35years Policy Term 20 Age 35 years Policy Term 15

Years Years
PREMIUM PREMIUM
Company SA:1Lac SA:2lac Company SA:1Lac SA:2Lac
1 LIC 6464 12928 1 LIC 8089 16177
2 ICICI PRU 6683 13067 2 ICICI PRU 9160 18019
3 ALLIANZ BAJAJ 6252 12024 3 ALLIANZ BAJAJ 8432 16384
4 TATA-AIG 9219 17938 4 TATA-AIG N.A N.A
5 OM KOTAK 7330 14660 5 OM KOTAK 9010 16700
6 MAX NEWYORK N.A N.A 6 MAX NEWYORK N.A N.A
7 BIRLA SUNLIFE 6000 11700 7 BIRLA SUNLIFE 7668 15036

SA-Sum Assured
 (61)

GUARANTEES ON INSURANCE & PENSION PRODUCTS

Current as on March 2006

IRRs/
Guarantees
Company Insurance Pension
ALLIANZ BAJAJ 2.14% NA
AVIVA -1.80% FDNA
AMP sanmar FDNA FDNA
Birla Sun Life 0.7-1.5% 1-1.5%
HDFC Standard 0.73% 1.7-1.9%
ICICI Pru 1.7-4.95% 3.06%
ING Vysya 0.70% NA
LIC 4-6% 1.3-2%
MXNYL 3.05% 1.4-1.9%
Metlife 5.5-5.7% NA
OM Kotak -0.04% 2.10%
SBI Life 0.73-4.7% 4%*
Tata AIG -2-4.4% 1.3%

FDNA - Further Data Not Available

# - From April 1, 2003 when 3% guaranteed returns would be

provided on all three fund options.

* - Guarantees for premiums for first seven years.

Pls. note that the above provides a range of returns offered by
companies wherever possible. For others returns have been
computed for a particular term, age and Sum Assured of an
Endowment product. Most of the returns pertain to particular
products.
 (62)

BIBLIOGRAPHY
•Insurance Advisor’s Manuals and Study Material of ICICI Prudential.

•NIS Sparta Ltd. (New Delhi)

•Insurance Watch and other Magazines.

•Economic Times

•Library of College

•www.google.com

•www.icicipru.com

•www.bimaonline.com

•www.moneycontrol.com

•www.licindia.com
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