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A Study of Factor Affecting Investment Behavior in Life Policies
A Study of Factor Affecting Investment Behavior in Life Policies
Website: http://www.mait.ac.in
ACKNOWLEDGMENT
I would like to thank my project guide Mr. Dharamendra Mishra, Channel Development
Manager, HDFC Standard Life Insurance, Mayur Vihar, New Delhi for guiding me through my
summer internship and research project. His encouragement, time and effort are greatly
appreciated.
I would like to thank Dr. Manju Gupta for for her support and guidance. We thank her for
guiding and correcting us with great attention and care. She has taken pain to
go through the project and provide her valuable suggestions at every step. It was a
truly wonderful learning experience.
We express our thanks to the Director General, Dr. N.K. Kakkar, Arya (P.G) Collage "Panipat,
for extending his support.
Lastly I would like to thank all the respondents who offered their opinions and suggestions
through the survey that was conducted by me in New Delhi and NCR.
MEGHA SETIA
STUDENT DECLARATION
This is to certify that have completed the Summer Training Project titled A STUDY OF
FACTOR AFFECTING INVESTMENT BEHAVIOR IN LIFE POLICIES under the guidance of
Mrs. MANJU GUPTA in the partial fulfillment of the requirement for the award of the
degree of Bachelor of Business Administration from "Arya (P.G.) Collage , Panipat This is an
original piece of work and I have not submitted it earlier elsewhere.
MEGHA SETIA
Designation
EXECUTIVE SUMMARY
HDFC Standard Life insurance is the oldest life insurance company in the world. It is the largest
insurer in the UK and is the 28th largest company in the world. In India, the company is
marketing life insurance products and unit linked investment plans. HDFC Standard Life
insurance is India's premier insurance enabling company. HDFC Standard Life insurance is the
one-stop-shop for requirements of services in the areas of insurance, optimum investment,
financial coverage and losses, mortality benefit, and health option etc. This is backed by HDFC
Standard life insurance service support infrastructure - the widest in the country.
It was a great opportunity to work with such a reputed organisation in its sector HDFC Life is a
subsidiary of HDFC which is formed by the collaboration of HDFC and Standard Life. In the
project we will get to know about the various factors that affects the investment behaviour of an
individual and the importance of Life Insurance in an Individuals life.
Overall, the life insurance and pension sector is set for rapid changes and growth in the years
ahead. Delivering service, building trust and being innovative are key areas in which any
company will have to excel in order to do well in the long road ahead. Different companies will
take different approaches and it would be myriad of solutions that will be found to delight the
Indian customer.
The main objective of the project is to Compare and analyze the importance of different factors
in Investment in Life Insurance. The data gave knowledge about customer satisfaction,
perception and their preference among life policies of different companies. The information
about various factors which influence customers to purchase insurance policies was collected
through questionnaire. All the data collected, primary data was filtered and analyzed, represented
in the forms of charts and graphs. Secondary data was also used in report such as company
profile, on the basis of analyzed data, conclusion is drawn. On the basis of findings and
conclusion, suggestions are given.
TABLE OF CONTENT
Particulars
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Page no.
Title Page
Certificate of the company
Certificate of the college
Acknowledgement
Declaration
Executive Summary
Chapter 1 (Profile of the Company)
Chapter 2 (Objectives and Research Methodology)
CHAPTER I
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PROFILE OF THE
COMPANY
individuals. It is estimated that over the next ten years India would require investments of the
order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in
infrastructure development to sustain the economic growth of the country. (Source:
www.indiacore.com)
HISTORICAL PERSPECTIVE
The history of life insurance in India dates back to 1818 when it was conceived as a means to
provide for English Widows. Interestingly in those days a higher premium was charged for
Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The
Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to
charge the same premium for both Indianand non-Indian lives.
The Oriental Assurance Company was established in 1880. The General insurance business in
India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first
general insurance company established in the year 1850 in Calcutta by the British. Till the end of
the nineteenth century insurance business was almost entirely in the hands of overseas
companies.
Insurance regulation formally began in India with the passing of the Life Insurance Companies
Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's
sullied insurance business in India. By 1938 there were 176 insurance companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided
strict State Control over the insurance business. The insurance business grew at a faster pace
after independence. Indian companies strengthened their hold on this business but despite the
growth that was witnessed, insurance remained an urban phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and provident
societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC)
was born. Nationalization was justified on the grounds that it would create the much needed
funds for rapid industrialization. This was in conformity with the Government's chosen path of
State led planning and development.
The non-life insurance business continued to thrive with the private sector till 1972. Their
operations were restricted to organized trade and industry in large cities. The general insurance
industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped
into four companies- National Insurance Company, New India Assurance Company, Oriental
Insurance Company and United India Insurance Company. These were subsidiaries of the
General Insurance Company (GIC).
KEY MILESTONES
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life
insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of
protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers along with provident societies were taken over by the
central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956with a capital contribution of Rs. 5 crore from the Government of India.
Important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact all classes of
general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of
conduct for ensuring fair conduct and sound business practices.
1972: The general insurance business in India nationalized through The General Insurance
Business (Nationalization) Act, 1972 with effect from 1st January 1973. 107 insurers
amalgamated and grouped into four companies- the National Insurance Company Limited, the
New India Assurance Company Limited, the Oriental Insurance Company Ltd. and the United
India Insurance Company Ltd. GIC incorporated as a company.
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.
Competition
Private Companies with a minimum paid up capital of Rs.1 billion should be allowed to enter
the sector. 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.
Regulatory Body
The Insurance Act should be changed. An Insurance Regulatory body should be set up.
Controller of Insurance- a part of 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)
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 is to be carried out in the insurance industry.
The global life insurance market stands at $1,521.2 billion while the non-life insurance
market is placed at $922.4 billion.
The United States itself accounts for about one-third of the $2443.6 billion global
insurance market and Japan stands next with a 20.62% share.
India takes the 23rd position with US $9.933 billion annual premium collections and a
meager 0.41% share.
Out of one billion people in India, only 35 million people are covered by insurance.
India's life insurance premium as a percentage of GDP is just 1.77 per cent.
The income derived by GIC and its subsidiary companies through investment was
Rs.2491.76 crore and the investable fund generated was Rs.2843 crore in 1999-2000.
Indian insurance market is set to touch $25 billion by 2010, on the assumption of a 7 per
cent real annual growth in GDP.
NATURE OF INDUSTRY
The insurance industry provides protection against financial losses resulting from a variety of
perils. By purchasing insurance policies, individuals and businesses can receive reimbursement
for losses due to car accidents, theft of property, and fire and storm damage; medical expenses;
and loss of income due to disability or death.
The insurance industry consists mainly of insurance carriers (or insurers) and insurance
agencies and brokerages. In general, insurance carriers are large companies that provide
insurance and assume the risks covered by the policy. Insurance agencies and brokerages sell
insurance policies for the carriers.
Insurance companies assume the risk associated with annuities and insurance policies and assign
premiums to be paid for the policies. In the policy, the companies states the length and
conditions of the agreement, exactly which losses it will provide compensation for, and how
much will be awarded.
The premium charged for the policy is based primarily on the amount to be awarded in case of
loss, as well as the likelihood that the insurance carrier will actually have to pay. In order to be
able to compensate policyholders for their losses, insurance companies invest the money they
receive in premiums, building up a portfolio of financial assets and income-producing real estate
which can then be used to pay off any future claims that may be brought.
There are two basic types of insurance carriers:-
Direct
Reinsurance.
Direct carriers are responsible for the initial underwriting of insurance policies and annuities,
while Reinsurance carriers assume all or part of the risk associated with the existing
insurance policies originally underwritten by other insurance carriers.
Health insurance pays the expenses resulting from accidents and illness.
A Linked product provides not only a fixed amount of money on death but also sums of money
which are linked with the underlying value of assets on the desired dates.
There are a variety of life insurance products to suit to the needs of various categories of
peoplechildren, youth, women, middle-aged persons, old people; and also rural people, film
actors and unorganized laborers.
Life insurance products could be purchased from registered life insurers notified by the IRDA.
Insurers appoint insurance agents to sell their products.
As per regulations, insurers have to give the various features of the products at the point of sale.
The insured should also go through the various terms and conditions of the products and
understand what they have bought and met their insurance needs. They ought to understand the
claim procedures so that they know what to do in the event of a loss.
The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the IRDAs
online service for issue and renewal of licenses to agents. Since being set up as an independent
statutory body the IRDA has put in a framework of globally compatible regulations.
MISSION-IRDA
To protect the interests of the policyholders, to regulate, promote and ensure orderly
growth of the insurance industry and for matters connected therewith or incidental
thereto.
The following companies have the rest of the market share of the insurance industry.
COMPANY NAME
MARKET SHARE
LIC
79.30
ICICI PRUDENTIAL
5.63
BAJAJ ALLIANZ
3.27
3.11
BIRLA SUNLIFE
2.32
TATA AIG
1.45
SBI LIFE
1.24
MAX NEWYORK
0.90
AVIVA LIFE
0.82
ING VYSYA
0.66
OM KOTAK LIFE
0.54
AMP SANMAR
0.38
METLIFE
0.33
RELIANCE LIFE
0.05
India with about 200 million middle class household shows a huge untapped potential for players
in the insurance industry. Saturation of markets in many developed economies has made the
Indian market even more attractive for global insurance majors. The insurance sector in India has
come to a position of very high potential and competitiveness in the market.
Innovative products and aggressive distribution have become the say of the day. Indians, have
always seen life insurance as a tax saving device, are now suddenly turning to the private sector
that are providing them new products and variety for their choice. Life insurance industry is
waiting for a big growth as many Indian and foreign companies are waiting in the line for the
green signal to start their operations. The Indian consumer should be ready now because the
market is going to give them an array of products, different in price, features and benefits. How
the customer is going to make his choice will determine the future of the industry.
CUSTOMER SERVICE
Consumers remain the most important centre of the insurance sector. After the entry of the
foreign players the industry is seeing a lot of competition and thus improvement of the customer
service in the industry. Computerization of operations and updating of technology has become
imperative in the current scenario. Foreign players are bringing in international best practices in
service through use of latest technologies. The one time monopoly of the LIC and its agents are
now going through a through revision and training programs to catch up with the other private
players. Though lot is being done for the increased customer service and adding technology to it
but there is a long way to go and various customer surveys indicate that the standards are still
below customer expectation levels.
BANCASSURANCE
Bancassurance is the distribution of insurance products through the bank's distribution channel. It
is a phenomenon wherein insurance products are offered through the distribution channels of the
banking services along with a complete range of banking and investment products and services.
To put it simply, Bancassurance, tries to exploit synergies between both the insurance companies
and banks.
3) Multiple Applications
The future is uncertain for each and every one. No one knows how long he or she will live. The
investment benefit is paid to the insured's beneficiaries after his death or it can be used during the
life as well. Life insurance policy owners can turn to the cash value of the policy in case of a
financial emergency when all avenues are either blocked or denied.
4) Enduring Elasticity
Since life insurance is flexible enough to serve several needs, the insured can keep several longterm goals in mind once he or she invests in the insurance plan. The cash value of the policy can
be allocated towards augmenting the monthly income during the retirement years. Leisure years
should be turned into pleasure years. Permanent life insurance is designed on the concepts of
long-term flexibility.
5) Financial Security
The insurance policy offers contractual guarantees to people looking for peace of mind when
they buy life insurance. Life insurance offers complete financial security. The purchase of life
insurance demonstrates concern for a family's future financial well being.
7) Insurance is Safer
No financial institution can do what life insurance does. No industry can back its products with
reserves and surplus as sound as those of the insurance industry.
The proof of strength and safety that insurance companies have ensured even under the most
adverse of conditions is a matter of pride for the entire insurance industry. For generation after
generation, life insurance has been acclaimed as the very benchmark of security against which
the other industries are measured.
Encouragement of new and better products and letting the hackneyed ones die
out.
This will itself ensure the market grows. And that every class/society gets a product that best
suits them.
COMPANY PROFILE
INTRODUCTION
Helping Indians experience the joy of home ownership.
Incorporated in 1977 with a share capital of Rs. 10 crores, HDFC has since emerged as the
largest residential mortgage finance institution in the country. The corporation has had a series of
share issues raising its capital to Rs. 119 crores. HDFC operates through 75 locations throughout
the country with its Corporate Headquarters in Mumbai, India.
Mr. B S Mehta
Mr. D M Sukthankar
Mr. D N Ghosh
Dr. S A Dave
Mr. S Venketaraman
Dr. Ram S. Tarneja
Mr. N M Munjee
Mr. D M Satwalekar
HDFC has a staff strength of 1029, which includes professionals from the fields of finance, law,
accountancy, engineering and marketing.
HDFC Bank
HDFC Reality
HDFC Standard Life Insurance Company Limited was one of the first companies to be granted
license by the IRDA to operate in life insurance sector. Each of the JV player is highly rated and
been conferred with many awards. HDFC is rated 'AAA' by both CRISIL and ICRA. Similarly,
Standard Life is rated 'AAA' both by Moody's and Standard and Poors. These reflect the
efficiency with which HDFC and Standard Life manage their asset base of Rs. 15,000 Cr and Rs.
600,000 Cr respectively.
HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000. HDFC is
the majority stakeholder in the insurance JV with 72.38% stake and Standard Life has a stake of
27.62%. Mr. Deepak Satwalekar is the MD and CEO of the venture.
THE PARTNERSHIP:
HDFC and Standard Life first came together for a possible joint venture, to enter the Life
Insurance market, in January 1995. It was clear from the outset that both companies shared
similar values and beliefs and a strong relationship quickly formed. In October 1995 the
companies signed a 3 year joint venture agreement.
Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the
relationship.
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 investments in India.
Towards the end of 1999, the opening of the market looked very promising and both companies
agreed the time was right to move the operation to the next level. Therefore, in January 2000 an
expert team from the UK joined a handpicked team from HDFC to form the core project team,
based in Mumbai.
The company is present across 700 cities in India and has a network of over 500 branches.
Distribution Channels HDFC Life distributes its products through a multi channel network
consisting of Insurance agents, Bancassurance partners (HDFC Bank, Saraswat Bank, Indian
Bank), Direct channel, Brokers, Online buy channel.
Principal products category of the HDFC Life include Protection plans, Childrens plans,
Savings plans, Investment plans, Health plans, Womens Plan and Group insurance solutions.
The companys portfolio currently consists of 28 retail, 9 group products and 10 rider benefits
under savings, investment, protection and retirement product category.
COMPANYS 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'.
'THE MOST OBVIOUS CHOICE FOR ALL'
COMPANYS MISSION:
To be the top life insurance company in the market.
This not only means being the largest or the most productive company in the market, but a
combination of several things like
COMPANYS VALUES:
SECURITY: Providing long term financial security to our policy holders will be our
constant endeavor. This is done by offering life insurance and pension products.
TRUST: Company appreciates the trust placed by our policy holders in us. Hence,
company will aim to manage their investments very carefully and live up to this trust.
Companys mission is to be the best new life insurance company in India and these are the
values that will guide us in this.
KEY STRENGTH
Financial Expertise
As a joint venture of leading financial services groups. HDFC standard Life has the financial
expertise required to manage long-term investments safely and efficiently.
Range of Solutions
HDFC SLIC has a range of individual and group solutions, which can be easily customized to
specific needs. These group solutions have been designed to offer complete flexibility combined
with a low charging structure.
CORPORATE OBJECTIVE
KEY MANAGEMENT PERSONNEL
Chairman
Mr. Deepak S. Parekh
Board Of Directors
Mr. Gerald E. Grimstone
Mr. Keki M. Mistry
Mr. David Nish
Mr. Renu Sud Karnad
Mr. Norman Keith Skeoch
Mr.Michae G Connarty
Dr. S. A. Dave
Mr. Prasad Chandran
Mr. Ravi Narain
Audit Commitee
Haribhakti & Company
Chartered Accountants
B.K. Khare & Co.
Chartered Accountants
Bankers
HDFC Bank Ltd.
Union Bank of India
Indian Bank
The Saraswat Co-operative Bank Ltd.
Federal Bank
PRODUCT PROFILE
HDFC Standard Life offers a bouquet of insurance solutions to meet every need. HDFC Standard
Life, cater to both, individuals as well as to companies looking to provide benefits to their
employees.
For individuals, a range of protection, investment, pension and savings plans that assist and
nurture dreams apart from providing protection.
For organizations a host of customized solutions that range from Group Term Insurance,
Gratuity, Leave Encashment and Superannuation Products. These affordable plans apart from
providing long term value to the employees help in enhancing goodwill of the company.
Protection Plans
Protection plans protect our family against the loss of our income or the burden of a loan in the
event of our unfortunate demise, disability or sickness. These plans offer valuable peace of mind
at a small price.
A pure risk cover plan, which gives us protection against the uncertainties of life. The HDFC
Term Assurance Plan is an insurance policy that is designed to help secure our family's financial
needs. The plan does this by providing a lump sum to the family of the life assured in case of
death or critical illness (if option is chosen) of the life assured during the term of the contract.
One can choose the lump sum that would replace the income lost to one's family in the
unfortunate event of one's death.
Investment Plans
HDFC Standard Life provides you with attractive long term returns through regular bonuses.
HDFC Single Premium Whole of Life Insurance Plan is a tailor-made plan well suited to meet
our long-term investment needs. This participating plan offers us the following benefits:
Whole of life plan aimed at providing long-term real growth of your money.
In case of your unfortunate demise during the policy term, this participating
(With Profits) insurance plan will pay your family the Sum Assured and compound
Reversionary Bonuses, which are usually added annually. An additional Terminal Bonus
may be paid depending on the performance of the underlying investments.
During Guaranteed Surrender Periods you get the Sum Assured and all bonuses
Pension Plans
Pension Plans help us to secure our financial independence even after retirement.
HDFC Personal Pension Plan is an insurance policy that is designed to provide a post retirement income for life with the freedom to choose our retirement date. We can choose our
premium, the Sum Assured and our retirement date. At the end of the policy term, We will
receive the Sum Assured plus any attaching bonus, which will provide our post retirement
income. The HDFC Personal Pension Plan is an insurance policy, which can benefit us in the
following ways:
Provides a post retirement income in our golden years.
Gives us the flexibility to plan our retirement date.
Gives us tax benefits on our premiums.
The plan receives simple Reversionary Bonuses, which are usually added annually. At the end of
the term an additional Terminal Bonus may be paid depending on the performance of the
underlying investment.
Savings Plans
HDFC Standard Life Savings Plans offer flexible options to build savings for our future needs
such as buying a dream home or fulfilling our childrens immediate and future needs.
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.
In case of our unfortunate demise during the policy term, this participating ('With Profits')
insurance plan will pay our family the Sum Assured (together with the attached bonuses) we had
chosen.
The plan receives simple Reversionary Bonuses, which are usually added annually. At the end of
the term an additional Terminal Bonus may be paid depending on the performance of the
underlying investment.
Assurance Plan
Childrens Plan
Money Back
Simplilife
you
will
receive
the
accumulated
value
of
our
funds.
In case of your unfortunate demise during the policy term of 15 years, they will pay the
following to our family.
The Group Term Insurance (GTI) plan meets this need and serves as an ideal way for companies
to reinforce their bond with their employees. The sort of needs, we, as an employer need to cater
to could be in form of:
Employee benefits.
Cover for housing or vehicle loans given by us to our employees.
A GTI cover for future service gratuity liability to be taken along with the HDFC Group
Unit Linked Plan.
The HDFC Group Term Insurance is a cost-effective plan that addresses these needs. In addition
we have the choice to opt for a GTI with an experience discount feature ("Profit Share"), where
a discount is given on future premiums in case of favorable claim experience (subject to group
size).
The HDFC group term insurance plan will have the following structure:
One year renewable term insurance plan.
One master policy issued covering all members of the group.
Sum assured is payable on death (either due to natural causes or accidents).
The plan covers death due to any cause; accidental or natural, and hence is more comprehensive
than Group Personal Accident Insurance. Several multinational corporations, large Indian
companies, foreign banks and software companies have already chosen the HDFC Group Term
Insurance, an innovative product from HDFC Standard Life Insurance, to protect their
employees.
Optional Rider Benefits:
Accidental Death Benefit.
Total Permanent Disability.
Total Permanent and Partial Disability Benefit.
Critical Illness Benefit.
Terminal Illness Benefit.
An investment solution that provides funding vehicle to manage corpuses with Gratuity, Defined
Benefit or Defined Contribution Superannuation or Leave Encashment schemes of your
company
Also suitable for other employee benefit schemes such as salary saving schemes and wealth
management schemes
Premium Payments
The premium to be paid will be quoted per member in the group and will be the same for all
members of the group. The premium can only be paid by the Development Agency as a single
lump sum that includes all premiums for the group to be covered. Cover will not start until the
premium and all the member information in our specified format has been received. The
premium rate is Rs.25 per Rs.10,000 of lump sum, per member.
Benefits
On the death of each member covered by the policy during the year of cover a lump sum equal to
the sum assured will be paid to their beneficiaries or legal heirs. Where the death is as a result of
an accident, an additional lump sum will be paid equal to half the sum assured. There are no
benefits paid at the end of the year of cover and there is no surrender value available at any time.
The role of the Development Agency
Due to the nature of the groups covered, HDFC Standard Life will be passing certain
administrative tasks onto the Development Agency. By passing on these tasks the premium
charged can be lower. These tasks would include:
Payment of premiums
Reporting of claims
Keeping policy holder information up to date
Training and support will be available to give guidance on how to complete the tasks
appropriately. Since these additional tasks will impose a burden on the Development Agency, the
Development Agency may charge Rs.10 administration fee to their members.
Prohibition of rebates
Section 41 of the insurance act1938 states
No person shall allow or offer to allow, either directly or indirectly ,as an Inducement to any
person to take out or renew or continue as insurance in respect Of any kind of risk relating to
lives or property in India ,any rebate of the whole or Part of the commission payable or any
rebate of the premium shown on the policy, nor shall any person taking out or renewing or
continuing a policy accept any Rebate, except such rebate as may be allowed in accordance with
the published prospectus or tables of the insurer
If any person fails to comply with sub regulation(previous point) above, he shall be liable
to payment of a fine which may extend to rupees five hundred
COMPETITIVE STATUS
Amitabh Chaudhry is fresh from a meeting on technological transformation and is visibly
charged up. HDFC Life has recently committed to spending Rs 100 crore over the next five years
on customer relationship and knowledge management and the groundworks just starting. Its not
the sum involved thats got the insurance companys managing director and CEO so excited
although thats pretty good, too its the very fact that the company is taking such key strategic
decisions. For a company that got its insurance license in 2000 and that has the backing of a
giant like HDFC, the Mumbai-based private insurer didnt really live up to expectations. In just a
few years, HDFC Lifes cautious and ultra-conservative approach had pushed it to a rather
unimpressive No. 5 slot in the private life insurance space. I think we lost the ability to take
risks. If we got it right on putting in place the right practices, the question relating to serving the
customer was not always answered, says Chaudhry candidly.
About two years ago, HDFC Life finally woke up. One of Chaudhrys first tasks after taking
over the companys leadership in early 2010 was to chalk out a comprehensive change in
strategy. It was clear to him that while the company had a trusted brand legacy, not enough
action was taking place and change would have to happen all along the value chain to get HDFC
Life back on track.
And thats exactly what he did, with impressive results, too. HDFC Life is a much stronger No.2
player now, with a 13% share of the private life insurance market. The Porter Prize jury was
impressed with both the insight and its impact, pointing out that the company has taken
significant initiatives to ensure that all its efforts are aligned towards a common goal, which
made it a winner in the Leveraging unique activities category. Take a look at how these efforts
dovetailed.
Step by step
Chaudhrys game plan centers on five simple steps. Trouble was, HDFC Life had got used to a
very narrow approach of doing business it asked for endless, time-consuming documentation,
for instance, and was slow in expanding to new territories. So, while none of the five measures
was revolutionary, it wasnt easy getting the organization to implement them. Still, the company
started off by changing its logo to get closer to parent HDFCs brand symbol. This was
important since we needed to extract the best value from the HDFC brand, Chaudhry explains.
I dont think we are still doing enough of that.
Meanwhile, the other measures were rolled out. The first was to expand distribution to new
markets, even as HDFC Life rationalized its existing branch network, weeding out oversized and
poorly located offices in a bid to become the least-cost service provider. From 568 in FY10, its
network came down to 483 in end FY12, even as it moved to new locations like Nagaland.
These were not easy decisions, but they had to be done, says Chaudhry pragmatically.
Then came a variety of products aimed at differentiating the insurer in the market, including unitlinked plans and a childrens plan, which Chaudhry says, is an attempt to reach out to a new
segment. The companys recent products and ad campaign aimed at women customers is part of
the same plan but also fit in with the insurers desired positioning as a long-term insurance
player. The emphasis on customer experience was also upped and the Rs 100 crore tech budgets
is aimed at ensuring more focused selling and follow-up.
The revised strategy has worked. HDFC Life was in the black for the first time in FY12 with a
profit of Rs 270 crore on a total weighted received premium of Rs 3,084 crore (weighted
received premium is the total premium received with 10% weight age to total single premium).
New business WRP market share among private players, too, increased from 8.7% in FY10 to
15.5% in FY11. The expense ratio, which was as high as 20.9% is down to 11.5%. The impact
also shows in HDFC Lifes ambitions in five years, it wants to be Indias largest private
insurer. Easier said than done: insurance remains one of the toughest industries, with intense
competition coupled with a lack of volumes. That doesnt worry Chaudhry, though. Ideally, we
want to be spoken of in the same breath as Life Insurance Corporation, he says. Looks like he
is really charged up to dream that big.
SWOT Analysis
Strength
Weakness
Opportunity
Threats
urban areas
2. Group Insurance through large employers
1. Economic instability and global crisis
2. Entry of new NBFCs in the sector
CHAPTER II
RESEARCH DESIGN
RESEARCH DESIGN
INTRODUCTION
A Research Design is the framework or plan for a study which is used as a guide in
collecting and analyzing the data collected. It is the blue print that is followed in
completing the study. The basic objective of research cannot be attained without a
proper research design. It specifies the methods and procedures for acquiring the
information needed to conduct the research effectively. It is the overall operational
pattern of the project that stipulates what information needs to be collected, from
which sources and by what methods.
This research tries to analyze some key factors which influence the buying
behavior of individual in Life Insurance. Solutions and recommendations are made
based on qualitative and quantitative analysis of the data.
RESEARCH METHODOLOGY
TYPE OF DATA COLLECTED
There are two types of data used. They are primary and secondary data. Primary
data is defined as data that is collected from original sources for a specific purpose.
Secondary data is data collected from indirect sources.
PRIMARY SOURCES
These include the survey or questionnaire method i.e. personal interview method of
data collection.
SECONDARY SOURCES
These include books, the internet, company brochures, product brochures, the
company website, etc.
SAMPLING
Sampling refers to the method of selecting a sample from a given universe with a
view to draw conclusions about that universe. A sample is a representative of the
universe selected for study.
SAMPLE SIZE
The sample size for the survey conducted was 100 respondents.
SAMPLING TECHNIQUE
Random sampling technique was used in the survey conducted.
PLAN OF ANALYSIS
Tables were used for the analysis of the collected data. The data is also neatly
presented with the help of statistical tools such as graphs and pie charts.
Percentages have also been used to represent data clearly and effectively.
STUDY AREA
The samples referred to were residing in New Delhi City and NCR.
CHAPTER III
ANALYSIS AND
INTERPRETATION
AGE GROUP
Lowest number of Respondents i.e. 24% from Age Group of 18-25 yrs.
EDUCATION QUALIFICATION
17% number of Respondents is graduate and invests mainly for tax saving and as a
saving tool.
Only 7% respondents are postgraduate and invest in life insurance as a saving tool.
MARITAL STATUS
Highest, 43 respondents in income bracket below 5-8 lacs, in which 27 are married
and 16 are unmarried.
Respondents of the age group 31-45 yrs, lie in all the income slabs.
34 respondents are paying premium of below 15k for the time interval of less than 7
years. This shows that the Insurance industry is gaining popularity and the people
who hesitate to take the policy are now at least taking the policy.
The most feasible time period for taking a policy and getting good returns with
keeping in mind the effect of time is 10-15 years. After this tenure the insured gets a
handsome amount which helps in the ultimate goal of their life.
The moderate time period i.e., 7-10 yrs is the time period which is having the
maximum popularity on all others.
15% prefer shares, as they provide higher returns than banking investment tools.
Insurance ranks 2nd with 17% as an investment tool choice, which itself includes
various protection, saving and pension plans.
Life Insurance has an all around image of Future Protection Tool and in India the
individual here also perceives Life Insurance to be a future protection tool which
could help as a yardstick in case of any casualties or at the later stage of life. 39%
takes insurance to safeguard their future.
The Life Insurance also plays an important role in the Tax Planning and due to its
deduction in Income Tax Act under Section 80C , it comes as a great Tax Saver
element in the Tax planning. 31% people invest in Insurance to save their Taxes.
In India Life Insurance is also taken as one of the best saving tools with its
competition with PF and PPF etc. For 23% people Insurance acts as a Saving Tool.
TYPES OF PLANS
The Business men may generally invest in Traditional Plans. Insurance accounts to
a much lesser proportion to business man as compared to other persons as they
have many other options to invest on the preference.
Professionals, due to their deep knowledge they generally invest in a portfolio style
in which they include both the ULIPs and Traditional plans.
Service Class guys are more inclined towards the Traditional plans and they are
generally risk averters. So 16 out of 43 invest in Traditional plans and 18 in both.
COMPANY PROFILE
LIC is Indias most trusted Companies as of now. The elder persons are much fond of
the LIC name and they perceive Insurance means LIC. Out of 29 persons falling in
the age group of 45 Yrs and above 21 are the hardcore LIC policy holders.
As the young and more dynamic people are entering into the earning group they want
more of services and they know that the private companies are doing well. There is
still a mixed combination of the people interested in LIC and other Companies.
The person in rural areas or the villages knows only one name and i.e., LIC. So,
Private players need to put more efforts in Rural India as compared to the Urban
Cities. They need to be updated regularly with related news.
While survey, it is clearly reflected that the persons living in Urban areas knows
about the HDFC as a brand and many of them perceives HDFC and all other sister
concern as one and the same thing.
In rural areas the persons are still not aware about the name. So the Company
needs to start a Campaign in the rural areas to boost up their sales.
68% of the persons take their Insurance policy as an Individual. It is the most
common type of investment preference in life policies.
23% and 9% of the persons take Life Insurance Policies as Joint and Group
respectively. This generally takes place in the MNCs and the Business places.
Pension plans are generally take for the people who are previously salaried.
Endowment and Money Back policy are the most preferable instruments in
Insurance. Around 3/4th of the total instrument are of this category. It acts as a
saving as well as investment tool for the traditional people.
ULIPs constitute 16% of the total policies. It is more popular in the urban areas and
the people who are related to the Capital Market are keener in investing in these
kinds of instruments which are linked to the market.
Nearly half of the total premium payment is done on the annual basis.
23% respondents prefer on semi-annually basis.
Higher returns are the basis of investment in the present or the current company. It
means the persons are running towards having higher returns. So a great future for
ULIPs could be interpreted from this.
Better facilities and after sale service or the customer support are the basis for 24%
of the persons. In this, Private companies can outperform LIC and make this as
their edge over LIC.
The availability of different plans and the best suited plans also plays an important
role while going for the policy.
Findings
CONCLUSION
Our research in the field of Life Insurance threw up some interesting trends which
can be seen in the above analysis. A general impression that we gathered during
Data collection was the immense awareness and knowledge among people about
various companies and their insurance products. People are beginning to
look beyond LIC for their insurance needs and are willing to trust private
players with their hard earned money.
Another heartening trend was in terms of people viewing insurance as a tax saving
and investment instrument as much as a protective one. A very high number of
respondents have opted for insurance for such purposes and it shows how
insurance companies a have been successful to attract public money in recent
times.
The general satisfaction levels among public with regards to policy and
agents still requires improvement. But therein lies the opportunity for a relative
new comer like HDFC Standard Life Insurance Company Ltd. LIC has never
been known for prompt service or customer oriented methods and HDFC
Standard Life can build on these factors.
RECOMMENDATIONS
As the people think that insurance is a tool to protect their family & a
tax saving device. They are aware of the fact & realizing its importance. The
company should try to expand & build up its infrastructure because there is a large
potential for insurance in India.
The government has come up with a proposal of allowing 49% FDI in Insurance
and Pension sector. Now healthy competition will be seen in the market and it will
ultimately benefit to the customers.
The government is introducing a new concept of DEMATIALIZATION in
Insurance sector which we have seen in capital market. After this, the people can
invest in insurance through their De-mat account.
Since HDFC Standard Life Insurance Company Ltd is leading
w i t h s e v e r a l policies it should be easy for them to penetrate into the market and
secure a good position if they pay greater attention to the service part provided to
their customer and thereby forming a long and trusted relationship.
1. The research is confined to a certain parts of DELHI & NCR and does not
necessarily shows a pattern applicable to all of Country.
2. Some respondents were reluctant to divulge personal information which
can affect the validity of all responses.
3. In a rapidly changing industry, analysis on one day or in one segment
can change very quickly. The environmental changes are vital to be
considered in order to assimilate the findings.
4. Sample size was only restricted to 100.
5. Lack of time is also a major limitation for the project.
6. Projections regarding environmental and political basis can be change.
7. Data Interpretation: After the data collection process, it was essential to
interpret them to figure out the result. The data collected are expressed with
the help of Bar graphs and Pie-Charts which is difficult to understand.
BIBLIOGRAPHY
Websites
www.rbi.org.in
www.irdaindia.org
www.hdfcinsurance.com
www.businessworldonline.com
www.google.com (search engine)
www.irda.gov.in
Other References:
Brochures of various plans
Business week
Published data in Economic Times
Intranet of HDFC Life (Within Branch)
Questionnaire
Dear Sir/Madam,
I am a MBA student of Maharaja Agrasen Institute of Technology, Rohini, Delhi and presently
doing a summer project in A Study of Factor affecting Investment Behavior in Life Policies. I
request you to kindly fill the questionnaire below and I assure you that the data generated shall
be kept confidential.
b) No
2. Gender
a) Male
b) Female
b)30 to 45yrs
c) 40 & Above
b) Graduate
c) Post graduate
b) Profession
c) Service
(Please mention the type of business/profession you are in incase of service please mention your
organization name and designation in the space below)
______________________________
c) Between 5 to 8 lacs
d) More than 8 lacs
No
b) Bank Deposits
c) Gold
e) Shares
f) Fixed Assets
c) Smooth &rewarding
d) No idea
b) Only LIC
c) Both
b) No
b) 2
c) 3
d) above 4
b) 15k-30k
d) above 50k
b) 7-10 years
c) 10-15 years
d) above 15 years
b) Joint
a) Group
19. In which kind of company would you prefer to make a purchase of insurance?
a) Government owned company
b) Public Limited Company
c) Private Company
d) Foreign based company
b) No
Personal Details:
Name:
Address:
Age:
Contact No. :
Profile of respondent:
Date:
Student
Housewife
Working Professional
Business
Self Employed
Government Service Employee