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Aviva Life Insurance India Pvt. LTD - Final Copy-3
Aviva Life Insurance India Pvt. LTD - Final Copy-3
Aviva Life Insurance India Pvt. LTD - Final Copy-3
INDIAN INSURANCE
INDUSTRY
AN OVERVIEW
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 Indian and non-Indian lives.
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.
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LIC was formed by an Act of Parliament- LIC Act 1956- with a capital
contribution of Rs. 5 crore from the Government of India.
INDUSTRY REFORMS
Reforms in the Insurance sector were initiated with the passage of the IRDA
Bill in Parliament in December 1999. The IRDA since its incorporation as a
statutory body in April 2000 has fastidiously stuck to its schedule of framing
regulations and registering the private sector insurance companies. Since
being set up as an independent statutory body the IRDA has put in a
framework of globally compatible regulations.
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 IRDA online service for issue and renewal of licenses to
agents. The approval of institutions for imparting training to agents has also
ensured that the insurance companies would have a trained workforce of
insurance agents in place to sell their products.
The 14 private insurers increased their market share from about 13% to
about 22% in a year's time. The figures for the first two months of the fiscal
year 2005-06 also speak of the growing share of the private insurers. The
share of LIC for this period has further come down to 75 percent, while the
private players have grabbed over 24 percent.
With the opening up of the insurance industry in India many foreign players
have entered the market. The restriction on these companies is that they are
not allowed to have more than a 26% stake in a companys ownership.
Since the opening up of the insurance sector in 1999, foreign investments of
Rs. 8.7 billion have poured into the Indian market and 14 private life
insurance companies have been granted licenses.
Innovative products, smart marketing, and aggressive distribution have
enabled fledgling private insurance companies to sign up Indian customers
faster than anyone expected. Indians, who had always seen life insurance as
a tax saving device, are now suddenly turning to the private sector and
snapping up the new innovative products on offer. Some of these products
include investment plans with insurance and good returns (unit linked
plans), multi purpose insurance plans, pension plans, child plans and
money back plans.
CHAPTER II
COMPANY PROFILE
COMPANY PROFILE
AVIVA LIFE INSURANCE
INTRODUCTION
Aviva plc was previously known as CGNU plc. The name change was
effected on 1st July 2002. Prior to the re branding, CGNU was using 50
trading names across the world. The decision for the re branding was taken
with the objective of creating a strong and powerful international services
brand.
HISTORY OF THE AVIVA GROUP
1696 The worlds oldest insurance company Hand in Hand formed
in London
1797 Norwich Union founded in London
1861 Commercial Union founded in London
1885 General Accident founded in Perth, Scotland
1998 CGNU formed with the merger of Commercial Union and
General Accident
2000 CGNU formed with the merger of CGU and Norwich Union
2002 CGNU re - branded as Aviva plc on 1st July, 2002
Tie - ups with ABM Amro, American Express, Canara Bank &
Lakshmi Vilas Bank
26 million customers and over 67734 crores in deposits
Paid up capital of Rs.559 crores
Growth of 118% since the last year from new business
VISION
Aviva - Where exceeding expectations through innovative solutions is
our way of life
CORE VALUES
Passion for winning
Integrity
Innovation
Customer centricity
Empowered Team
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maximum sum assured is Annual premium * Cover level, where the cover
level ranges from 10 to 100, depending upon age at entry.
Sample Cover Level
Age
Cover
20 years
97
30 years
82
40 years
54
50 years
30
Level
One can invest their monies in a With Profits Fund and 3 Unit Linked funds;
Protector, Growth and Balanced Funds. An individual can opt for riders like
accidental death and disbursement rider, critical illness and permanent total
disability rider and hospital cash benefit. There will be 5% extra allocation
of units on the 15th policy year.
How is the money invested?
Life Long offers a With Profits Fund and 3 Unit Linked Funds which give
you the flexibility of choosing how your money should be invested in terms
of the risk and the security of the return on the investment. You can invest
100% of your premiums either in the With Profits Fund or in any of the Unit
Linked Funds. The minimum allocation in each selected unit linked fund
must be 10%.
Changing Allocation Proportions
You have the option to change the allocation proportion of your premiums to
different funds at anytime, up to 2 times a year, for all future premiums. The
minimum allocation in each selected fund must be 10%. A policy holder can
switch accumulated funds from one investment fund to another (either partly
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Units purchased with the first years premium and the first
incremental regular premium due to indexation and / or additional
regular premium will be used to allocate initial units. Units purchased
from the second years premium onwards and after the first
incremental regular premium due to indexation and / or additional
regular premium will be used to allocate accumulation units
existing at the end of the specified policy anniversary. This benefit will not
be applicable to units pertaining to the top-up premiums or additional regular
premiums.
Can I make lump-sum investments
You have the flexibility of making lump-sum investments through top-up
premiums to increase the investment value of your policy without increasing
the sum assured provided all due premiums till date are paid. The minimum
top-up premium is Rs. 1,500.
The total of top-up premiums cannot exceed 25% of the total regular
premiums paid till date at any point in time. Units purchased from top-up
premiums will be used to allocate accumulation units to various investment
funds in the same proportion as selected by you for your regular premiums
Can I increase the sum assured
You can increase your sum assured anytime before age 67 or the 27th policy
year, whichever is earlier, provided that all due premiums have been paid.
This is subject to the maximum increase allowed at that age. The sum
assured under the riders (except HCB) will also increase up to the maximum
limit allowed under each rider. Evidence of health may be required before
such an increase in sum assured is made.
Can I increase my regular premium
You can increase your regular premiums through any of the 2 methods
mentioned below:
Indexation
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You have the option to increase your regular premiums by an indexation rate
at any policy anniversary to protect the real value of your investment against
inflation. The rate of indexation will be in line with the increase in the
Whole Sale Price Index (or in the event that this Index ceases to be
published such other index as the Company may select for this purpose). The
base sum assured and sum assured of any attached rider (except HCB)
would also be increased by the corresponding indexation increase.
The maximum sum assured limits under the riders for the purchased policy
would not apply in this case. You can opt for indexation at the inception of
the plan only. Once opted for, this will become a default option unless
altered by you. The indexation benefit is available till age 67 or the 27th
policy year, whichever is earlier.
Additional Regular Premiums (ARP)
On every policy anniversary you have the option to increase the regular
premium amount through ARP at any time up to age 67 or the 27th policy
year, whichever is earlier. The minimum ARP is Rs. 1,000. ARP will
increase the sum assured automatically. The sum assured of any attached
rider (except HCB) would also increase provided the increased sum assured
is within the maximum limits allowed for the riders. Evidence of health may
be required before such an increase in sum assured is made.
When can I withdraw my money
You have the flexibility of making partial withdrawals from accumulation
units in respect of regular premiums as well as top up premiums provided all
due premiums till date are paid. Any partial withdrawal will first be made
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from the top up premium account (if any and if eligible for withdrawal)
followed by the regular premium account, if required.
The minimum partial withdrawal is Rs. 5,000 and the fund value
should not be less than two times the annual premium
Till age 58 years, the total partial withdrawal with respect to regular
premiums in a policy year should not exceed 25% of the fund value
pertaining to regular premiums at the beginning of the policy year.
Post age 58 years this restriction does not apply. There is no restriction
on the maximum amount of partial withdrawal with respect to top-up
premiums.
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Hospital Cash Benefit Rider (HCB): The Company will make fixed
cash payments for each day of hospitalization. These riders can be
attached to the base plan at inception only and the rider covers expire
at 60 years of age.
The sum assured as well as the rider sum assured will be reduced by
all partial withdrawals made from regular premium account within the
last 2 years prior to death. If death occurs after age 60, the sum
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If you have invested in the With Profits fund, a final bonus, if any,
will also be payable
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Tax benefits will be as per Section 80C & Section 10(10D) of the Income
Tax Act, 1961. Insurance is tax free up to Rs. 100000 per annum and the
returns on investment on maturity of the policy are also tax free.
Illustration
This illustration is of a 30 year old, who pays premiums annually for a sum
insured of Rs. 1,000,000.
Base Annual
Annual
Base
Premium for Discount*
Base
Premium
Policy
Annual Pension Plus
@50
Annual for Pension
Term
Premium Policyholder paise/'000 Premium
Plus
(Years)
(Rs.)
(with 7.5%
(Rs.)
(Rs.)
Policyholder
discount)(Rs.)
(Rs.)
10
3160
2923
500
3160
2423
15
3390
3136
500
3390
2636
20
3620
3349
500
3620
2849
2) LIFE SHIELD
Life Shield is an ideal life insurance plan that helps you protect your family's
future. While there can be no compensation for the loss of life, Life Shield
ensures that your family's financial needs are met should something
unfortunate happen to you. Its aim is to pay out a guaranteed cash amount in
the unfortunate event of your death during the term of the policy.
Key Features of Life Shield
Life Shield is a low cost life insurance plan which guarantees to pay a
lump sum amount in case of your death during the term of the policy.
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The minimum and maximum policy terms are 5 years and 40 years,
respectively.
This option to increase the sum insured is available if the policy has
been accepted on standard rates.
What are the benefits of this plan
The plan pays out a sum insured in the unfortunate event of your
death before the maturity date.
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2) YOUNG ACHIEVER
Young Achiever is a regular premium life insurance product designed to
meet the financial needs of your children - be it higher education, marriage,
starting a career or a business, or any other need. The plan can be purchased
on the life of any one of the parents with the child as the nominee. Through
this policy, you save regularly to meet your childrens needs, and at the same
time their financial needs are taken care of should something unfortunate
happen to you.
The entry age for this policy is 21 55 years. The term of the policy is 8 to
21 years (maximum age at maturity 65 years). If your childs age is between
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0 13 years, the policy term will be 21 minus the age of your child at entry.
For example if the age of your child is 10 years at the time of purchasing the
policy, the policy term will be 11 years (21 10). The minimum annual
premium payable is Rs. 6000. The minimum sum assured is Rs. 36000 and
maximum sum assured is Rs. 10,000,000. For each policy term there is a
low and high sum assured to choose from ranging from 6 to 21 times the
annual premium.
Can I withdraw my money during the policy term
You have the flexibility of making partial withdrawals from accumulation
units in respect of regular premiums as well as top up premiums provided all
due premiums till date are paid. Any partial withdrawal will first be made
from the top up premium account (if any and if eligible for withdrawal)
followed by the regular premium account, if required.
The minimum partial withdrawal is Rs. 5,000 and the fund value
should not be less than two times of annual premium
three policy years. If the policy has lapsed it can be reinstated within two
years from the date of the first unpaid premium. The settlement option is
available at maturity.
4) LIFE BOND
A wide age band can opt for this policy. The eligibility is 1 65 years. There
are no riders available with this policy. The minimum sum assured is Rs.
31,250 and there is no maximum limit. The minimum premium payable is
Rs. 25000 and there is no maximum limit. The customer decides how much
money he wants to set aside in this investment. Only single premium is
allowed. No additional regular premiums are allowed. The minimum top up
premium is Rs. 6250 and the maximum top up premium is 25% of the total
regular premiums paid.
Policy administration charge: 1.5% p.a. of the single premium for the first
year and 1% p.a. thereafter. This is also true for the top up premiums.
Fund management charges: 1% on with profit and protector, 1.25%
on the balanced fund and 1.5% on the growth fund.
Mortality Charges: Apply on the sum at risk which is the sum
assured less the fund value
5) SAVE GUARD
This policy is a limited premium paying term whole life plan. The eligibility
age for this plan is 18 50 years. The minimum premium payable is Rs.
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paying term. Mortality charges are based on gender, age and term of the
policy.
7) FREEDOM LIFE PLAN
Freedom life plan is a limited payment term investment cum protection plan.
The eligibility age is 18 60 years. This policy can cover you and your
spouse for the same premium amount. The maximum age at maturity is 70
years. The policy term is 10 30 years. The minimum premium payable is
Rs. 25000 p.a. for 10, 15, 20, 25 or 30 years and a minimum of Rs. 200000
p.a. for 3 or 5 years.
The minimum sum assured is 0.5*PT*AP and the maximum sum assured is
1.25*PT*AP. There is an option of increasing the sum assured before the
age of 40 years by 50%, within 3 months of marriage or within 3 months of
the birth of the child. This feature helps the policy holder to alter the policy
to suit his life stage and need. There are guaranteed loyalty additions of 5%
on the 10th policy year and 3% on every subsequent 5th policy anniversary till
the date of maturity. The HCB, CIPTD and ADD riders are available.
8) PENSION PLUS
It is a regular savings personal pension plan. The eligibility age is 18 65
years. The term of the policy is equal to the premium paying term
(maximum up to the age of 70 years). You have the option to choose term
based on retirement age. The minimum premium is Rs. 6000 per annum for
regular premium and Rs. 100,000 for single premium.
The term of the policy is subject to a maximum of 70 years. The minimum
vesting is 40 years and maximum vesting age is 70 years. You have the
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ORGANIZATION STRUCTURE
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Zonal Manager
Branch Manager
Sales Manager
Sales Manager
HR
Department
Operations
Department
Tele callers
(Recruiting)
General
Staff
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The financial planning advisors are the main link between the customer and
the company. They are the individuals who try to market the insurance
policies to prospects. They are provided training for the same. Every advisor
must pass the insurance examination as specified by the IRDA. Only a
licensed advisor is allowed to procure business for the firm. Apart from this
training is provided on unit linked funds and the savings/ protection products
Aviva offer.
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Suppose the fund value increased by 20%. As a result the Rs. 1000 invested
became Rs. 1200. Hence the value of every investor is now Rs. 12 and not
Rs. 10.
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CHAPTER III
COMPETITIVE
ANALYSIS
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COMPETITIVE ANALYSIS
LIFE INSURANCE CORPORATION OF INDIA (LIC)
LIC has an excellent money back policy which provides for periodic
payments of partial survival benefits as long as the policy holder is alive.
20% of the sum assured is payable after 5, 10, 15 and 20 years and the
balance 40% is payable at the 20th year along with accrued bonus.
For a 25 years term , 15% of the sum assured becomes payable after 5,10,15
and 20 years and the balance 40% plus the accrued bonus becomes payable
at the 25th year. An important feature of these types of policies is that in the
event of the death of the policy holder at any time within the policy term the
death claim comprises of full sum assured without deducting any of the
survival benefit amounts which have already been paid. The bonus is also
calculated on the full sum assured.
Aviva does not have a money back policy. It could offer a money back plan
and capture some portion of this market. While marketing insurance
products I found that many customers wanted to purchase these plans.
LIC offers 66 different plans; plans are formulated for specific occasions
whole life plans, term assurance plans, money back plan for women, child
plans, plans for the handicapped individuals, endowment assurance plans,
plans for high worth individuals, pension plans, unit linked plans, special
plans, social security schemes diversified portfolio of products. Aviva
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could diversify its product portfolio. It could add more plans for high worth
individuals and women.
The minimum premium payable for an LIC policy is Rs. 5000 p.a. It
increases at Rs. 1000 per year. At Aviva minimum premium for easy life plus
is Rs. 6000 which increases in multiples of 6000 per year. Hence Aviva
should reduce the minimum premium amount payable to compete with LIC.
The guaranteed sum assured in case of the death of the policyholder is larger
in LIC than in Aviva.
Switching from one fund to another is cheaper for LIC it is only Rs. 100 to
switch from one fund to another whereas at Aviva it is Rs. 500. More
number of switches is allowed free per year in the case of LIC.
There are however some drawbacks to investing in LIC. The allocation
charges are higher. Therefore the money invested in the fund is lower than
what Aviva will invest. This is true across all policies. Aviva covers its costs
over the policy term whereas LIC charges a high amount for the first five
years and then charges a very nominal amount from the 6 th year onwards.
The investment benefit is not as high as Aviva.
ICICI PRUDENTIAL
ICICI Prudential is a stiff competitor for Aviva. The company is a merger
between ICICI Bank which is the biggest private bank in India and
Prudential Plc which is a global life insurance company.
The company has an investment plan which is market related Invest Shield
Life. In this plan even if the market falls, the premium will be returned to
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Mr. Kumar Mangalam Birla. Some of the key organizations within the group
are Hindalco and Grasim.
Sun Life Financial Inc. and its partners today have operations in key markets
worldwide, including Canada, the United States, the United Kingdom, Hong
Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. It had
assets under management of over US$343 billion, as on 31st March 2006.
The company is a leading player in the life insurance market in Canada.
Being a customer centric company, BSLI has invested heavily in technology
to build world class processing capabilities. BSLI has covered more than a
million lives since inception and its customer base is spread across more
than 1000 towns and cities in India. All this has assisted the company in
cementing its place amongst the leaders in the industry in terms of new
business premium income. The company has a capital base of 520 crores as
on 31st July, 2006.
Its Flexi Life Line Plan offers life long insurance cover till the policy holder
is 100 years of age. There are guaranteed returns of 3% p.a. net of policy
charges after every 5 years from the eleventh policy year onwards. However
the charges are very high. The initial charges for the first year are 65%.
Hence the fund value is greatly reduced.
BAJAJ ALLIANZ
Bajaj Allianz is a joint venture between Allianz AG with over 110 years of
experience in over 70 countries and Bajaj Auto, a trusted automobile
manufacturer for over 55 years in the Indian market. Together they are
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committed to offering you financial solutions that provide all the security
you need for your family and yourself. Bajaj Allianz is the number one
private life insurer for the year 2005 2006. It is leading by 78 crores. It has
experienced a whopping growth of 216% in the last financial year.
The company has sold 13, 00,000 policies and is backed by 550 offices
across India. It offers travel insurance, motor insurance, home insurance,
health and corporate insurance. The mortality charges are lower than Aviva.
The entry age could be zero years which allow even new born babies to be
insured.
TATA AIG
Tata Aig is a joint venture between the Tata group and American
International Group Inc. In one of the plans the company offers hospital cash
benefit wherein it will pay Rs. 2500 per day in case of hospitalization and
Rs.12.5 lakhs in case the person suffers from any critical illness. Annual
premium is much less (about Rs. 6712) to avail such a good benefit. Charges
are relatively low compared to Aviva for some policies.
The company offers high coverage plans at low cost. There is a plan even for
a policy term of 1 year. Your family can continue to enjoy their current
lifestyle even in the case of something happening to you. These plans are
very flexible and Aviva could adopt this idea of insuring individuals for
short periods of time. For example; there is a family of four. The only
earning member is the father.
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He has just taken a loan from a bank of 20 lakhs to purchase a new home.
He is able to repay the loan with his current salary in 15 years. The problem
arises if something were to happen to him within these fifteen years. Not
only will the family face the emotional and financial loss of their father but
they will also have to repay the home loan or risk being homeless.
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CHAPTER IV
MARKETING
PROBLEMS
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MARKETING PROBLEMS
The old and out dated technique of tele marketing is used to prospect
customers. More modern techniques must be adopted. The company must
sponsor shows and give presentations in corporate houses. The financial
health check must be performed for every prospect to assess his/her true
financial position and needs. Some of the advisors skip this vital step and the
prospect ends up with a plan they do not appreciate and soon surrender or
discontinue.
Some of the main problems in marketing the policies are:
Large amount of competition (15 players in the market)
Other brands are well advertised and have higher recall value
LIC is considered a safer option
Face competition from banks and mutual funds
High premium policies are difficult to market
Incorrect perception about insurance
Interested prospects might have a lack of time and postpone
investments
Customers get defensive if you cold call
Short term plans are available only at large premium
Customers do not have risk appetite to invest in shares
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Some prospects have already invested and are not interested in further
investments
Consumers dont want to undertake medical examinations
Large amount of documentation
Customers do not like their money locked up for many years
Lack of awareness about the unit linked funds in the market
No money back plan present in the product portfolio
SUGGESTIONS FOR IMPROVEMENT
Advertise about the company and its products it motivates
individuals to purchase insurance
Create a positive perception about insurance
Speak about the good features a plan offers like high returns, life
cover, tax benefits, indexation, accident cover while prospecting
customers
Try to sell the product/plan which the consumer requires and not the
plan where the advisors benefit is higher
Improve the efficiency in operations
Bring out policies with small premiums payable for short periods of
time Rs. 5000 Rs. 10000 per annum for 10 years
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CHAPTER V
FUTURE LINE OF
RESEARCH
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48
CHAPTER VI
CONCLUSION
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CONCLUSION
Aviva life insurance is one of the worlds largest and oldest life insurance
companies. It has businesses spread out across the globe. It came to India in
the year 2002. It currently ranks number 7 amongst the insurers in India.
The company faces a large amount of competition. To sustain itself it must
promote its products through advertising and improve its selling techniques.
Consumers must be aware of the new plans available at Aviva.
The medium of advertising used could be television since most of its
competitors use this tool to promote their products. The company must be
promoted as an Indian company since consumers seem to have more trust in
investing in Indian firms. Hence its association with Dabur should be
showcased since Dabur is a trusted name in India and it could be used to
provide a push to the products Aviva has to offer.
The unit linked concept must be specifically promoted. The general
perception of life insurance has to change in India before progress is made in
this field. People should not be afraid to invest money in insurance and must
use it as an effective tool for tax planning and long term savings.
Aviva could tap the rural markets with cheaper products and smaller policy
terms. There are individuals who are willing to pay small amounts as
premium but the plans do not accept premiums below a certain amount. It
was usually found that a large number of males were insured compared to
females. This was a general conclusion drawn during prospecting clients.
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BIBLOGRAPHY
WEB ACCESS (From 28thFebruary 2010 15th March 2010)
http://articles.maxabout.com/businessfinance/marketingproblem
inlifeinsuarance/article7716
insurane company.html
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