Insurance is commerce. Insurance product is a financial contract entered into by parties with a define consensus of mind. It provides financial protection against unexpected events. When we buy insurance, effectively a portion of risk is transferred to the insurer. This protection comes at a price, but its a function of what we might otherwise find ourselves burdened with. Whatever stage of life we are at, chances are, and we need insurance.
Definition:
Insurance can be define as a contract by which insurance agrees to pay the insured a compensation for specified damage loss or injury suffered in exchange for periodic payment called premium Insurance cannot prevent the happening of the event; it can protect a person from the financial losses he may suffer after the happening of the event. Therefore, insurance if aimed at compensating the financial loss suffered an insured event.
Classification of insurance:
Insurance is basically classified into two categories. (1) (2) Life Insurance General Insurance
LIFE INSURANCE
This is provided for the payment of sum money on the death of the insured person due to natural causes or on the expiry of a certain number of years if the insured person is then alive. Death and life neither of them can be compensated. Life insurance aims to compensate the Income Earning Capacity of the person.
Objectives and advantages of life insurance: 1) Protection against Risk of Untimely Death:
o Life insurance is a product, with offers protection against the risk of Death the full sum assured is made available under a life assurance policy, whereas under other savings schemes, the total accumulated savings alone will be available.
3) Forced savings:
o Payment of life insurance premiums is compulsory and becomes a habit. Saving in other scheme can be easily withdrawn and may be used for less worthy purpose. Termination of a life insurance policy by the policyholder usually results in substantial loss in benefits under the policy to the policyholder. One is thus encouraged to save and keep ones policy alive.
8) Investment Option:
o The unit link products gives comprehensive insurance solution that cater to an individuals need of earning potentially high return as well as stay for life. Thus there is an option to invest money in the products that combine the best of insurance and investment. In a volatile market conditions it is possible to secure both as one can hedge the investment with saver investment vehicles that provide a diversified portfolio.
9) Tax Benefits:
o The Indian income tax act provides tax concessions to the policy holder both on payment of premium and on the maturity amount. Under sec 88 the benefits on premium paid by an individual for life insurance policy on his own life/on the life of spouse children minor or major, including married daughters.
General Insurance:
Insurance other than life fall under general insurance. It covers loss of every other physical or nonpossession. The loss may be due to fire, theft, accident etc. the general insurance is further classified into-
1) Fire insurance:
o It covers movable and immovable properly having monetary value. It covers the loss or damage to insured property by specific perils o for example: damage of property in manufacturing premises due to fire may result in total or partial stoppage of production process leading to loss of profits. Such loss of profit can be covered under loss insurance policy.
2) Marine Insurance:
o It is of the oldest branches of the insurance. It plays a significant role in both and internal and international trade. The insurers undertake to indemnify the insured against the losses occur during transit by rail, road, sea or air.
3) Miscellaneous Insurance:
o Insurance that takes other fire and marine is known as miscellaneous insurance. It is covered under the several classes of which motor insurance, burglary insurance, cattle and crop insurance are most important.
Differences between life insurance and Non life insurance (General Insurance)
Risk is certain in life insurance and non life insurance: Every person who is insured is likely to die, and the income earning capacity will be stopped by death. In non life insurance the risk is uncertain and the insured event may or may not result in the loss to the policy holder Life insurance is a long term contract while non life insurance contracts are one year contracts. Difficulty in determining value of human life in insurance. In non life insurance the value can be determined with much ease. Life insurance is not a strict contract of indemnity. Non life insurance contracts are in indemnity contracts.
Insurance as investment
Endowment plans are the best selling life insurance product in the country. This single fact says a lot about how most Indians who get investment plans to get their lives insured, save on tax build a retirement corpus and fund their childrens education, among other things. Endowment plans offers good value to novice investment and those with a low appetite for risk. They force the habit of regular saving and help to create funds for lives, many financial goals; and unlike with mutual funds on stocks, there is no risk of capital erosion. But there is a price you pay for such certainty; low returns.
Tax- benefits
One of the several reasons given to buy life insurance is to save on tax. Its true that there are extremely generous tax breaks to be avoided of life insurance,
Premiums
For the salaries, the rebate under section 88 of the income tax act is an effective way to lower tax rebates under this section, along with investments with other instruments like PPF and NSC. Note: if you claim a rebate on investment in insurance but withdraw from it within 2 years, the rebate claims will be deemed as tax payable, the amount of tax rebate that can claim under section 88 in a year on the income that year.
INDUSTRY PROFILE
History of insurance:
Insurance began as a way of reducing the risk of traders, as early as 5000 BC and 4500 BC in. Life insurance dates only to ancient Rome; "burial clubs" covered the cost of members' funeral expenses and helped survivors monetarily. Modern life insurance started in late 17th century, originally as insurance for traders: merchants, ship owners and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous. The first insurance company was formed in 1732, but it provided only fire insurance. The sale of life insurance in the U.S. began in the late 1760s. The Synods in and created the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769. Between 1787 and 1837 more than two dozen life insurance companies were started, but fewer than half a dozen survived. Prior to, many insurance companies in the United States for their owners, in response to bills passed in 2001 and in 2003, the companies have been required to search their records for such policies.
General information:
Human have always sought securities. This quest for security was an important motivating force in the earliest formation of families, clans, tribes, and other groups. Indeed, groups have been the primary source both emotional and physical security since the beginning of humankind. They ensured a less volatile source of life necessities then that which ensures isolated human & families could provide and help their less fortunate members in the time of crises. Human today continue their quest to achieve security and reduce risk uncertainty. We still rely on group for financial stability. The group may be our employer, the government, or an insurance company, but concept is the same. In some ways however, we today are more vulnerable that our ancestors. The physical and economical securities formerly provided by the tribes or extended family diminished with industrialization. Our income dependent, wealth acquiring lifestyle renders and our families more vulnerable to environment and societal changes over which we have no control. Humans are exposed to many serious perils, such as property loss from fire or windstorm, and personal losses from incapacity and death. All through individual cannot predict or completely prevent such occurrences, they can provide for their financial effects.
Encyclopedia of finance and banking defines insurance as the elimination of or protection against risk amenable to actual calculation, voidance or reduction of losses occurring through misfortunes such as death, fire, accident, tornado, shipwreck, etc. insurance is a contact between an insurer and insured where by the insurer identifies the insured against loss due to specific risks such as from fire, storm and death. Insurance contracts require an agreement, considerations, capacity, legality, compliance with the status of frauds and delivery. Insurance is an integral part of most enterprises, risk management program. Insurance does not prevent losses, it substitutes a small certain loss (premium) for a possible or contingent large loss. The insured is indemnified for the amount of loss, for the insured amount, or for the face of his policy, in return for payment of periodic premiums.
India at glance
Economy: India is 5th largest economy in the world in terms of purchase. GDP Growth rate: over 6% per year on an average for the last decade. Savings rate: around 26% of GDP Estimated middle class population: 300 million Insured population: 70 million
India has an enormous middle class that can afford to buy life, health and disability and pens on plan products. The level of penetration of life insurance in India compared to other developed nations can be judged by a comparison of per capita life premium.
Structure
Government stake in the insurance companies to brought down to 50% Government should take over the wordings of GIC and its subsidiaries, so that these subsidiaries can act as independent companies. All the insurance companies should be given greater freedom to operate.
Competition
Private companies with minimum paid up capital of Rs. 1 billion should be allowed to enter the industry; no company should deal in both life and general insurance through single entity. Foreign companies may be allowed to enter the industry collaboration with domestic companies. Postal life insurance should be allowed to operate in rural areas 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. Life insurers transact life insurance business; general insurers transact the rest. No companies are permitted as per law.
Fire and miscellaneous insurance business are predominant motor and vehicle insurance is compulsory. Tariff Advisory Committee (TAC) lays down tariff rates for some of the general insurance products.
Customer Protection
Insurance industry has ombudsmen in 12 cities. Each ombudsman is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insurance amount is less than 20 Lakhs, in accordance with the ombudsmen scheme. Address can be obtained from the officers of LIC and other insurers.
Joint venture
INDIAN COMPANY
Bajaj Birla HDFC ICICI ING Max Tata Bharti Future IDBI AEGON DLF Star Union Canara
FOREIGN COMPANY
Allianz Life Sun Life Standard Life Prudential Life Vysya Life New York Life AIG Life AXA Life Generali Life Fortis Life Religare Life Pramerica Life Dai-ichi Life HSBC Oriental Bank of Commerce Life
COMPANYS PROFILE
HDFC is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to increasing value to shareholders. HDFC is Indias leading housing finance institution and has helped build more than 23, 00,000 houses since its incorporation in 1977. In Financial Year 2003-04 its assets under management crossed Rs. 36,000 Cr. As at March 31, 2004, outstanding deposits stood at Rs. 7,840 crores. The depositor base now stands at around 1 million depositors. Rated AAA by CRISIL and ICRA for the 10th consecutive year Stable and experienced management High service standards Awarded The Economic Times Corporate Citizen of the year Award for its long-standing commitment to community development. Presented the Dream Home award for the best housing finance provider in 2004 at the third Annual Outlook Money Awards. It entered into various sectors and offering services like banking, mutual funds etc, and with the privatization in insurance sector, it also entered into insurance mark.
Family companies:
It is a leading pensions provider in the UK, and is rated by Standard & Poor's as 'strong' with a rating of A+ and as 'good' with a rating of A1 by Moody's
Standard Life was awarded the 'Best Pension Provider' in 2004, 2005 and 2006 at the Money Marketing Awards, and it was voted a 5 star life and pensions provider at the Financial Adviser Service Awards for the last 10 years running. The '5 Star' accolade has also been awarded to Standard Life
Investments for the last 10 years, and to Standard Life Bank since its inception in 1998. Standard Life Bank was awarded the 'Best Flexible Mortgage Lender' at the Mortgage Magazine Awards in 2006 Its business operates within six areas: UK Life & pensions, Bank, Healthcare, Investments, Canada and International.
The partnership:
HDFC and standard life insurance first came together for a possible joint venture, to enter life insurance market, in January 1995. It was clear from the outset both companies shared values and beliefs and a strong relationship quickly formed. In October 1995 the companies signed a 3-year joint venture agreement. Around this time standard life purchased a 5% stake in HDF, further strengthening the relationship. The next three years were filled with uncertainty, due to changes in government and ongoing delays in getting the IRDA (Insurance Regulatory and Development Authority) Act passed in parliament. Despite this both companies remained firmly committed to the venture.
In October 1998, the joint venture agreement was renewed and additional resource made available. Around this time standard life purchased 2%of Infrastructure Development Finance Company Ltd. (IDFC) standard Life also started to use the services of the HDFC Treasury department to advise them upon their investment in India. Towards the end of 1999, the opening of the market looked very promising and both companies agreed the time was right to moves the operation to the next level. Therefore in January 2000 an export team from the UK joined pocked team from HDFC to r\from the core project team, based in Mumbai. Around this time standard life purchased a further 5% stake in HDFC and 5% stake in HDFC Bank. In a further development standard life agreed to participates in the Asset Management Company promoted by HDFC to enter the mutual fund market. The mutual fund was launched on 20th July 2000.
Organization Structure
Chair Man
MD
Zonal Officer Regional Manager
RM
Alternative Chanel
Operation Channel
HR
TM
BM
TM
BM
Team Manager
Operation Manager
HR Executive
Chanel Executive
Existence in India
Range of solution:
We have a range of individual and group solutions, which can be easily customized to specific needs. Our group solutions have been designed to offer you complete flexibility combined with a low charging structure.
Vision
'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'.
Future:
HDFC has always been market-oriented and dynamic with respect to resource mobilization as wall its lending programmed. This renders it more than capable to meet the new challenges that have emerged. Over the years, HDFC has developed a vast client base of borrowers, depositors, shareholders and agents, it hopes of capitalize on this loyal and satisfied client base for future growth. Internal systems have been development to be robust and agile, to account changes in the volatile external environment. HDFC has developed a network of institutional through partnerships with some of the best institutions in the world, for providing specialized financial services. Each institution is being fine and service.
ICICI PRUDENTIAL
ICICI Prudential Life Insurance Company is a joint venture between ICICI bank, a premier financial powerhouse and prudential plc. A leading international financial service group headquartered in the United Kingdom. ICICI prudential was amongst the first private sector insurance company to being operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential equity base 74% and 26% stake respectively. In the period AprilDecember 2004, the company garnered Rs. Billion of new business premium for a total sum assured of over Rs 73.6 billion and wrote nearly 345000 policies. The company has a network of over 50000 advisor; as well as 7 bank assurance tie-ups. Today, ICICI Prudential has emerged as the No -1 Private Life insured in the country. With a wide range of flexible products that meet the needs of the customer at every step in life.
Max New York Life Insurance Company Limited is a joint venture that brings together two large forces Max India Limited, a multi-business corporate, together with New York Life International, a global expert in life insurance. With their various Products and Riders, there are more than 400 product combinations to choose from. They have a national presence with a network of 57 offices in 37 cities across India.
2. Financial Background and Experience: HDFC existing in the market since 1977. It has a very handsome experience in the field of finance because it completely involved in finance Sector only where as the others are running in many other field also like Reliance (Petroleum, Textile, Telecom etc.)
3. Ethics and Values: HDFC is an ethical and cultural organization which prevents the false selling and prohibits the false commitment to the customer.
4. Sales Force: Properly trend licensed and Educated People are the strength of the company. So that they could give the best customer service.
5. Huge branch network HDFC is having 450 branches in all over the country.
6. Online accessibility: It makes the process faster and makes the customer delighted.
PRODUCT PROFILE
Individual product:
We at HDFC Standard Life realize that not everyone has the same kind of needs. Keeping this in mind, we have a varied range of Products that you can choose from to suit all your needs. These will help secure your future as well as the future of your family. In individual product, 5 plans are available. 1) Protection plans 2) Investment plans 3) Pension plans 4) Saving plans 5) Health plans
1) Protection Plans
o You can protect your family against the loss of your income or the burden of a loan in the event of your unfortunate demise, disability or sickness. These plans offer valuable peace of mind at a small price. Term Assurance Plan Loan Cover Term Assurance Plan
2) Investment Plans
o Our investment products are well suited to meet your long-term needs. Single Premium Whole Life Plan
3) Pension Plans
o Our Pension Plans help you secure your financial independence even after retirement. Personal Pension Plan Unit Linked Pension Plan Unit Linked Pension Plus
o Our Immediate Annuity plan will aid you in receiving income post retirement and securing you financial independence.
4) Savings Plans
o Our Savings Plans offer you flexible options to build savings for your future needs such as buying a dream home or fulfilling your childrens immediate and future needs. Our Savings range includes Endowment Assurance Plan Unit Linked Endowment Unit Linked Endowment Plus Money Back Plan Children's Plan Unit Linked Young star Unit Linked Young star Plus
5) Health Plans
o Our health plans provides you with timely support in case of any health related emergencies and helps you and your family to remain financially independent in difficult times Critical care plan Surqi care plan
Group Products:
1) One-stop shop for employee-benefit solutions
HDFC Standard Life has the most comprehensive list of products for progressive employers who wish to provide the best and most innovative employee benefit solutions to their employees. We offer different products for different needs of employers ranging from term insurance plans for pure protection to voluntary plans such as superannuation and leave encashment. We now offer the following group products to our esteemed corporate clients Group Term Insurance Group Variable Term Insurance Group Unit-Linked Plan
2) Social Product
Development Insurance plan is an insurance plan which provides life cover to members of a Development Agency for a term of one year. On the death of any member of the group insured during the year of cover, a lump sum is paid to that members beneficiaries to help meet some of the immediate financial needs following their loss.
Other product:
Rural products Tax benefits
PRODUCT ANALYSIS:
Endowment Assurance Plan:
You have given your family the very best. And there is no reason why they shouldn't get the very best in the future too. As a judicious family man, your priority is to secure the well-being of those who depend on you. Not just for today, but also in the long term. More importantly, you have to guard your loved ones against any eventuality. How will they sustain their way of life, so lovingly built by you, in your absence? With our HDFC Endowment Assurance Plan, you can ensure that your family remains financially independent, even if you are not around. You can ensure that they live a life of respect and dignity always. The HDFC Endowment Assurance Plan gives you: An ideal way to secure your long-term financial goals Valuable protection to your family by way of lump sum payment in case of your unfortunate demise within policy term Lump sum payment (basic Sum Assured plus any bonus additions) on survival up to maturity date
Childrens plan:
As a parent, your priority is your child's future and being able to meet your child's dreams and aspirations. Today, providing a good education, establishing a professional career or even a modest wedding is expensive. Costs are increasing fast. Just imagine how much you'll need when your child takes these important steps in life! Plan today to ensure a bright future for your child. Start building savings today with our HDFC Children's Plan. So that your child is able to lead a life of respect and dignity with a secured financial future The HDFC Children's Plan gives you: Invaluable financial support to your child A choice to customize an ideal plan for your child Multiple options for multiple benefits
Valuable protection to your family by way of lump sum payment in case of your unfortunate
death within the policy term
PRODUCT PORTFOLIO
HDFC offers products as per the life stages of the customers and their respective needs.
Your insurance need will change as your life does, from starting to work to enjoying your golden years and all the stages in between. Each one of these stages may pose a different insurance need/cover for you. In this section, we have drawn up the basic life stages and help you analyze various insurance needs accordingly.
NEEDS: o Provide for children's education o Safeguarding family against loan liabilities o Savings for post-retirement
Policies At A Glance
SWOT ANALYSIS
STRENGTHS
1. HDFC Standard life insurance offers a range of individual and group insurance solutions. 2. HDFC Standard Life has the financial expertise required to manage your long-term investments safely and efficiently. 3. The company has covered over 8,77,000 lives year ending March 31, 2007 4. Rated AAA by CRISIL and ICRA for the 10th consecutive year for High service standards 5. Life insurance industry is a rapid growing and a decent service industry.
WEAKNESSES
1. LIC is prevalent and sustains even today a major source of population. 2. Low number of offices and network and number of life insurance agents. 3. Lack of knowledge and expertise.
OPPORTUNTIIES
1. Life insurance has captured its mere15 20% growth therefore a wide open untapped market is open to the company to develop, grow and measure its success. 2. Still the number of companies are few and company has every capabilities to grow and forward its performance areas to the widest
THREATS
1. People are hesitant to invest and put their hard earned money to the private life insurance company with the fear of getting lost. 2. Belief towards LIC as it is a government corporation phobia is continue to surmount the people of India despite lots of flaws and development and liberalization of life insurance. 3. Alternative financial services such as mutual fund, banking services, share and securities also pose problems and threats to the working of the life insurance sector. 4. Illiteracy and unemployment also pose threat. 5. Rising real estate industry also pose threat as people are investing a bulk of their money over to that industry.
Becoming an insurance Agent provides him/her the legal source by which he/she can earn money with his/her current status. It is the business in which you deal with you personal contacts and can gain extra income. This business needs low investment and not of much effort. Its all depend on your social contacts and your skills to convince people by helping them to suggest the product which suited them the most. As due to critical diseases, growing percentage of accident and fear of financial crisis everyone wants to secure his/her future. Insurance sector plays a vital role in assuring people about their future. As the scope of insurance enhancing, the need of an insurance Agent who can guide the potential customers is growing. Being an Insurance Agent of HDFC-STANDARD LIFE INSURANCE provides a legal mean to earn money which protects a person from earning through an illegal source which is harmful for society as well as him/her. For the youngsters it provides great platform to prove them. On the basis of their performance they can be recruited as unit manager. Its recruitment procedure is very easy. A person with high educating and well experience can be recruited after a personal interview and group discussion. After the training program is completed the Insurance Agent has to appear for the pre-examination conducted by IRDA. As he/she clear the exam he provides a license, which is the proof of a legalized insurance Agent, which permits him/her to deal in his/her insurance business.
Sunrise industry:
Life insurance in India has a huge potential for growth Statistics reveal that only 25% of the insurable population in India is insured and those insured are in need of still higher insurance cover. The over 100% growth displayed by private life insurers indicates this huge untapped potential.
Strong Partnership:
A powerful brand HDFC Standard Life Insurance. We were the first private life insurance company to be granted a license by IRDA. We have been rated by business world magazine. As Indians most respected private life insurance company 2004. We have grown over 130% in the last and more than 8 Lacs policy holder. HDFC standard life insurance has one of the highest brand recalls of around 80%.
IRDA Training:
o Online training of 50 hrs. Prepares for career as FCs and enables to pass the IRDA examination. After the IRDA license, first step towards a successful career as a FC.
Disha training:
o This is a professional sales skill program eased by us to one selling skills. Those programs enable to understand customer need and provide need based insurance solution. A huge step from an amateur to a true finance professional.
Advance Training:
o Once FC have settled down as a FC professional we will continuously upgrade capability and knowledge through sophisticated training program, fit for this dynamic world of financial products and markets.
UNMATCHED SUPPORT
Marketing activity support to make task easier. o Advertising and communication support throughout the year. o Customer friendly broachers and sales aid to help in selling insurance solutions to customers. o 24- Hours information support, to help track the performance and income.
LICENSING PROCESS
Step 1: Registration Step 2: IRDA Training Step 3: IRDA Examination Step 1 - Registration Documentation Required for Acquiring a License Forms o Agency Application form o Form VA o Exam Form o Agreement Copy (All pages to be signed by the FC) o Know Your Customer ( KYC ) Addendum Supporting Personal Documents required o 9 Passport size photographs o Age Proof o Proof of Education o Proof of Identity o Proof of Residence o Cancellation cheque o PAN Card or PAN Application
Step 2 IRDA Training All Candidates have to undergo and complete 50 hours of IRDA Training. Types of Training 1. Off Line (Class Room) Training 2. On Line Training IRDA Refresher Classes are conducted for the FC before the IRDA Exam.
Step 3 IRDA Examination Pre Recruitment Examination can be done by 2 Modes, 1. On line 2. Off line Exams are conducted by Insurance Institute of India (III)
RECRUITMENT PROCESS
Steps in recruitment of Insurance Agents o Approach to the likely person o Appointment as per condition o Discuss the topic o Give the documents which includes:1. Prospectus of the company 2. Brochure 3. Companys plan 4. Questionnaire o Collect the document after its completion o Forward it to project manager o Feed it in the computer as the database o Follow up as per conditions