Professional Documents
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Project FM
Project FM
Project FM
Objective
To study of Financial Planning In insurance sector.
To study the importance of Insurance in today’s scenario.
To generate leads for Unit Linked Insurance and the Unit Linked
Pension Plans, by interacting with walking and existing customers of the
company.
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2. Methodology
The study of Financial Planning in insurance sector and particularly the insurance
sector covers data collection through observation, questionnaire and interview of
consumers.
2.1 Type of research:
EXPLORATORY:
Type of research carried out was EXPLORATORY in nature; the objective of
such research is to determine the approximate area where the drawback of the
company lies and also to identify the course of action to solve it. For this purpose
the information proved useful for giving right suggestion to the company.
2.2 Data Collection:
Primary data
Secondary data
Method of collection: -
Field procedure for gathering primary data included observation and interview
schedule in which the questionnaires were filed by the interviewer.
Personal interviews through self administered survey was done to collect the data,
market research was undertaken, that was accomplished by performing various
activities designed.
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Research Instrument:
Questionnaire
2.3 Limitations:
The following were the limitations that were there during the course of the study:
1. Limited time period.
2. Less number of respondents.
3. Biasness of the respondents.
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3. Industry Profile
3.1 Overview
With largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of
15-20 per cent annually.
Together with banking services, it adds about 7 percent to the country’s GDP .In
spite of all this growth the statistics of the penetration of the insurance in the
country is very poor. Nearly 80 per cent of Indian population is without life
insurance cover while health insurance and non-life insurance continues to be
below international standards. And this part of the population is also subject to
weak social security and pension systems with hardly any old age income
security. This it-self is an indicator that growth potential for the insurance sector
is immense.
Historical Perspective
The insurance came to India from UK; with the establishment of the Oriental Life
insurance Corporation in 1818.The Indian life insurance company act 1912 was
the first statutory body that started to regulate the life insurance business in India.
By 1956 about 154 Indian, 16 foreign and 75 provident firms were been
established in India. Then the central government took over these companies and
as a result the LIC was formed. Since then LIC has worked towards spreading life
insurance and building a wide network across the length and the breath of the
country.
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Important milestones in the life insurance business in India:
1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.
1956: 245 Indian and foreign insurers and provident societies were taken over by
the central government and nationalized. LIC formed by an Act of Parliament-
LIC Act 1956- with a capital contribution of Rs.5 cr. from the Government of
India.
1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact
all classes of general insurance business.
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.
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3.2 Insurance Sector Reforms
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.
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Regulatory Body
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.
This section gives the users important and detailed statistics of the Indian as well
as the Global insurance industry. These statistics would give important insights of
where the respective markets are headed for.
• The global life insurance market stands at $1,521.2 billion while the non-
life insurance market is placed at $922.4 billion.
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• 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 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
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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 and 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.
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Property-casualty insurance protects against loss or damage to property
resulting from hazards such as fire, theft, and natural disasters.
Human life is subject to risks of death and disability due to natural and accidental
causes. When human life is lost or a person is disabled permanently or
temporarily, there is a loss of income to the household. The family is put to
hardship. Risks are unpredictable. Death/disability may occur when one least
expects it. There are a number of life insurance products which offer protection
and also coupled with savings.
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A Money Back Assurance product provides not only fixed amounts which are
payable on specified dates during the period of contract, but also the full amount
of money assured on death during the period of contract.
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 people—children, 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.
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Insurance is a federal subject in India. The primary legislation that deals with
insurance business in India is: Insurance Act, 1938, and Insurance Regulatory &
Development Authority Act, 1999.
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.
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’s 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
The introduction of private players in the industry has added to the colors in the
dull industry. The initiatives taken by the private players are very competitive and
have given immense competition to the on time monopoly of the market LIC.
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Since the advent of the private players in the market the industry has seen new
and innovative steps taken by the players in this sector.
The new players have improved the service quality of the insurance. As a result
LIC down the years have seen the declining phase in its career. The market share
was distributed among the private players. Though LIC still holds the 79% of the
insurance sector but the upcoming natures of these private players are enough to
give more competition to LIC in the near future. LIC market share has decreased
from 95% (2002-03) to 81 %( 2004-05).
Among the private players ICICI Prudential has the maximum of appx 5.60%
Followed by Bajaj Allianz (3.27 %) and HDFC Standard Life of about 3.11%.
Below is the table that shows the market share of various players of the industry.
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3.6.1 Market share of various Players
The following companies have the rest of the market share of the insurance
industry.
1.1
The liberalization of the Indian insurance sector has opened new doors to private
competition and the new and improved insurance sector today promises several
new job opportunities. With private players now in the field, there will be
innovative products, better packaging, improved customer service, and, most
importantly, greater employment opportunities.
There are a number of options to choose from for a career in Insurance. Ideally an
insurance company will have openings in the following fields:
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• Actuaries
• Underwriter
• Surveyor
• Investment
• Marketing & Distribution
Actuaries
Underwriters
Agents/Brokers:
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• Insurance agents may work for one insurance company or as independent
agents selling for several companies.
• Insurance agents and brokers can find openings in the health insurance
sector, financial planning services, retirement planning counseling or even
provide other services, for e.g. sell mutual funds, annuities etc.
Surveyor/Loss Assessor:
• Surveyors are professionals who assess the loss or damage and serve as a
link between the insurer and the insured.
• They usually function only in non life business.
• Their job is to assess the actual loss and avoid false claims.
Sales/Marketing:
And who can forget the guys who make and break a brand. They would be
required in a large number in order to promote the number of products that
will be launched by numerous companies in the insurance sector.
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.
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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.
DISTRIBUTION CHANNELS
Till date insurance agents still remain the main source through which insurance
products are sold. The concept is very well established in the country like India
but still the increasing use of other sources is imperative. It therefore makes sense
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to look at well- balanced, alternative channels of distribution.LIC has already well
established and have an extensive distribution channel and presence. New players
may find it expensive and time consuming to bring up a distribution network to
such standards. Therefore they are looking to the diverse areas of distribution
channel to have an advantage. At present the distribution channels that are
available in the market are:
• Direct selling/Retail
• Corporate agents
• Group selling
• Brokers and cooperative societies
• Bancassurance
DIRECT SELLING/RETAIL
Direct selling or retail business is carried out by Agents of the company. This is
the main distribution channel due to the complexity of most insurance
products (Endowment, Whole of Life, Unit Linked). This tends to be the focus of
most companies due to its past success as well as its ability to deliver the right
advice. However, this channel can be expensive and it is a time consuming sales
process. An agent is the public face of an Insurance company. Hence it is
important that this face is always smiling and
Presentable and the facts and figures at his/ her command are updated and correct.
An agent should be a pleasing personality with complete knowledge about the
various plans and solutions which the company has to offer and must also
understand the customer’s psychology well to deal in an efficient manner.
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BANCASSURANCE
Advantages to banks
• Productivity of the employees increases.
• By providing customers with both the services under one roof, they can
Improve overall customer satisfaction resulting in higher customer retention
Levels.
• Increase in return on assets by building fee income through the sale of
Insurance products.
• Can leverage on face-to-face contacts and awareness about the financial
Conditions of customers to sell insurance products.
• Banks can cross sell insurance products e.g.: Term insurance products with
Loans.
Advantages to insurers
• Insurers can exploit the banks' wide network of branches for distribution of
products. The penetration of banks' branches into the rural areas can be
utilized to sell products in those areas.
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• Customer database like customers' financial standing, spending habits,
investment and purchase capability can be used to customize products and
sell accordingly.
• Since banks have already established relationship with customers,
conversion ratio of leads to sales is likely to be high. Further service aspect
can also be tackled easily.
Advantages to consumers
• Comprehensive financial advisory services under one roof. i.e., insurance
services along with other financial services such as banking, mutual funds,
personal loans etc.
• Enhanced convenience on the part of the insured
• Easy accesses for claims, as banks are a regular go.
• Innovative and better product ranges
Life insurance is many different things to many different people. For some, it is a
premium to be paid on time. For others it offers liquidity since cash can be
borrowed when needed. For the investment-minded, it denotes a constantly
growing capital account and numerous other benefits.
The contractual guarantee is the promise to pay, backed by one of the oldest and
most stably regulated financial industry operating in the Indian sub-continent
today.
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People like to refer to life insurance as time insurance, the reason being that life
insurance proceeds are paid to the insured's beneficiaries in case of death. The
money proffered by life insurance helps buy time to adjust to the change of
circumstances. Insurance provides large amounts of cash that will keep the
lifestyle for the survivors the way it was before the insured's death.
For the person who buys an insurance policy, it offers absolute and complete
peace of mind. He or she knows that the decision made by him will provide sound
benefits in the future, whether or not the individual may live to see it.
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 long-term 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
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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.
The purchase of life insurance clearly displays care and concern for the people the
policy owner loves.
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.
In the now open sector on insurance, the following is what I feel will determine
the success of the company in particular and the industry in general:
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Indians have always been wary of employing their hard-earned money in a
venture that will pay them on their death. Insurance has always been used as a
Tax saving tool. No more, no less. It is upon the insurers to educate the people to
secure/insure their future against any unknown calamity and make a shield around
their families and businesses.
The reason for this being on the top of our understanding is that when ever we
have seen any sector open up in India there are always grey areas and unsure
policies. These are not exactly what any player, be it Indian or foreign, looks for.
It creates an air of uncertainty in all the decision making process. Insurance as a
sector requires players who are strong financially and are willing to wait for
returns. Their confidence can be bolstered only if there is an open and a
transparent policy guidelines. This will also help the consumers feel safe that the
regulatory is an active one and cares to do everything possible to keep things
under control and help the insurance environment grow maturely.
It is said that the insurance agent is the best salesman in the world. He makes you
pay, regularly, an amount promising to pay back only on your death. Thus the
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players will require an excellent sales team to sell their products in the now
competitive environment.
• 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.
SPECIAL PROVISIONS
• Under Section 10(10D), any sum received under a Life Insurance policy
(not being a Key Man policy) is also exempt from taxation. But it is wise to
remember that Pensions received from Annuity plans are not exempted from
Income Tax.
POLICYHOLDERS GRIEVANCES
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the respective companies for speedy resolution. The IRDA however does not
adjudicate on complaints.
STRENGTH
1. Best returns with the added advantage of 100% life insurance coverage.
2. Good option for new investors into the market as all the money is invested
by best fund managers so with less knowledge also they can earn good
returns.
3. Best commission charges paid to the agents which vary from 12% to 35%
which is much higher as compared to mutual funds i.e. , only 2-2.5%.
WEAKNESS
1. HDFC SLIC could not able to match LIC in remote areas services.
2. Misleading facts given by life advisors about the returns of ULIPs.
3. Hidden charges taken by the companies.
4. Less Promotional Campaigns.
OPPORTUNITY
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the investors but as in ULIPs there is proper mixture of debt securities and
equity so the loss is incurred during dark trading days also.
3. Unit-linked products are exempted from tax and they provide life insurance.
4. Increasing consumer awareness about Insurance and its use.
THREAT
3.9 CONCLUSION
With largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India, which is growing at the rate of 15-20
per cent annually. Nearly 80 per cent of Indian population is without life
insurance cover while health insurance and non-life insurance continues to be
below international standards. And this part of the population is also subject to
weak social security and pension systems with hardly any old age income
security.
And also the changing attitude and increasing awareness level of the population is
an indicator that growth potential for the insurance sector is immense.
4. Company’s profile
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4.1HDFC Ltd
4.1.1 INTRODUCTION
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.
Background
HDFC was incorporated in 1977 with the primary objective of meeting a social
need – that of promoting home ownership by providing long-term finance to
households for their housing needs. HDFC was promoted with an initial share
capital of Rs. 100 million.
Business Objectives
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ORGANIZATION AND MANAGEMENT
HDFC has a staff strength of 1029, which includes professionals from the fields
of finance, law, accountancy, engineering and marketing.
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• HDFC Bank
• HDFC Reality
4.2.1Introduction
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
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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 81.4 % stake
and Standard Life has a stake of 18.6%. 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.
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.
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Therefore, in January 2000 an expert team from the UK joined a hand picked
team from HDFC to form the core project team, based in Mumbai.
Around this time Standard Life purchased a further 5% stake in HDFC and a 5%
stake in HDFC Bank.
COMPANY’S MISSION:
This not only means being the largest or the most productive company in the
market, but a combination of several things like-
COMPANY’S VALUES:
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• INNOVATION: Recognizing the different needs of our customers,
company will be offering a range of innovative products to meet these
needs.
Company’s mission is to be the best new life insurance company in India and
these are the values that will guide us in this.
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.
This is an important stage where one lays down the foundation of a successful life
ahead. Take advantage of the time and power of compounding to ensure that you
build up your dreams, so start saving early.
Your needs:
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oTax Planning
oSave for Golden years
Marriage brings about a significant change. New dreams and new opportunities
also bring in additional responsibilities. While both of you look forward to a
happy and secure life , it is equally important to ensure that eventualities don’t
come in the way of shaping your dreams.
Your needs:
Once you have children, your need for life insurance is even more. You need to
protect your family from an untoward incident. Ensure your protection umbrella
takes into account the future cost of securing your child’s dream. You will want
life to go on for your loved ones, and having enough life insurance is a way to
help ensure that.
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Your needs:
While you are busy climbing the ladder of success today, it is important for you
to take time and plan for your life after retirement. Having an early start for
retirement planning can make a significant difference to your savings. Think
about your golden years even before you have reached them. The key is to think
ahead and plan well using your time and money.
Your needs:
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Building cash flows correlating all expenses and income. Inflation and
outflows due to loans are considering in building the financial plan.
Future goals like retirement, housing and children's education / marriage or
other needs.
You may have many dreams, needs and desires. For example, you could be
dreaming of:
But in today's world of skyrocketing costs and increasing inflation, how many of
these dreams can you hope to turn into reality? By planning well, you can utilize
your limited resources to the fullest.
The only thing permanent in life is change. Times change. People change. So
does life. You expect life to be much better tomorrow than it is today. Tomorrow,
you hope to fulfill all your dreams and aspirations. But what happens if things
take an untoward turn? Or, if there is an eventuality? Perhaps it's time for you to
change the way you plan your investments...
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• How will 360° Financial Planning help?
Instead of investing in an ad-hoc manner, 360° Financial Planning helps you take
a holistic, all-round view. Briefly, 360° Financial Planning comprises:
Investment Planning
Cash Flow Planning
Tax Planning
Insurance Planning
Children’ Future Planning
Retirement Planning
Everyone needs to save for a rainy day. Once you have saved enough to take care
of emergencies, you should start thinking about investing and to make your
money grow.
• Risk Profiling
• Asset Allocation and Portfolio Construction
• Creation and Accumulation of Wealth through Systematic Investment
Plans (SIP)
• Regular review of progress and Portfolio Rebalancing
CASH FLOW PLANNING: To provide for assets and meet the periodic cash
requirements
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In simple terms, cash flow refers to the inflow and outflow of money. It is a
record of your income and expenses.
Cash flow planning refers to the process of identifying the major expenditures in
future (both short-term and long-term) and making planned investments so that
the required amount is accumulated within the required time frame.
Proper tax planning is a basic duty of every person which should be carried
out religiously.
According to the Income Tax Act, 1961, One will be eligible for Tax Benefits
under Section 80C and Section 10(10D) of the act.
One has to compare the advantages of several tax saving schemes and depending
upon your age, social liabilities, tax slabs and personal preferences,
Decide upon a right mix of investments, which shall reduce your tax liability to
zero or the minimum possible.
"Insurance is not for the person who passes away, it for those who survive,"
goes a popular saying that explains the importance of Insurance Planning.
It is extremely important that every person, especially the breadwinner, covers the
risks to his life, so that his family's quality of life does not undergo any drastic
change in case of an unfortunate eventuality. Insurance Planning is concerned
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with ensuring adequate coverage against insurable risks.
Like every parent, you too must be overjoyed to watch your child grow. All
parents want to give the best possible upbringing to their children. This includes
good education and security, in case of any eventuality. Soon, your little bundle
of joy will grow up, and it will be time to provide for his or her higher education
and wedding.
Some like it. Some don’t. But retirement is a reality for every working person.
Most young people today think of retirement as a distant reality.
However, it is important to plan for your post-retirement life if you wish to retain
your financial independence and maintain a comfortable standard of living even
when you are no longer earning. This is extremely important, because, unlike
developed nations, India does not have a social security net.
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5. CONCLUSION
The various conclusions drawn from the project are:
There has been a tremendous change in the insurance industry. And with it there
has been continuous growth in this sector both in Indian as well as world context.
The opening up of the insurance sector has changed the whole look of the
industry. While the LIC, in order to face the competition is coming up with new
strategies. New private players are leading the sector due to their strategic
management and tailored made projects. From the research, we also conclude that
though the awareness and people opting for LIC plans are more as compared to
other private players’ but the latter are gaining momentum in the market day by
day. The demand for insurance is likely to increase with rising per-capita income,
rising literacy rates, and growth of service sector. In-fact opening up of the
insurance sector is an integral part of the liberalization process being persued by
many developing countries. Life insurance as a form of protection is the single-
most important financial product any earning member of a family must have.
Having said this, a well-diversified portfolio is one of the first rules of financial
planning, and as such one should consider different instruments as the ability to
save increases.
Possible investment options range from bank deposits and government small
saving schemes to mutual funds, stocks and property.
Certainly ULIPs successfully combine the first and most important need of
protection, with savings, and hence are an excellent addition to your portfolio.
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All financial products have a certain amount of risk and charges, be it a mutual
fund, property, or even a bank deposit. It would be unrealistic to assume that the
features and benefits of a ULIP come at no cost, though the charges are
considerably lower than that of a traditional product.
In fact, the very reason the product is transparent is because the customer knows
the charges and risks. There is no right or wrong in this. The success of marketing
insurance depends on understanding the social and cultural needs of the target
population, and matching the market segment with the suitable intermediary
segment.
All intermediaries can’t sell all lines of business profitably in all markets. There
should be clear demarcation in the marketing strategies of the company from this
perspective. Clients should also receive price differentials for using different
channels.
The intermediaries need to be empowered with the right learning, training and
sales tools and technology enablers. Coupled with the right product mix, this
Will help the insurers to survive and flourish in this competitive market scenario.
So let’s conduct this business with utmost economy with the spirit of
trusteeship; thereby making insurance widely popular.
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6. RECOMMENDATION
• Positioning insurance as a means to fulfilling one’s duties during one’s
lifetime.
• Fears relating to thefts, ailments, death could be addressed through
‘sensitive’ communication
• Fears relating to claims: Need to promote “trust”. Demonstrating claim
testimonials, positioning as “worry free”.
• Low returns: Reposition insurance as a risk cover, security instrument
rather than a financial investment.
• Lack of understanding: Training of Channels
To provide quality advice on products best suited
• Lack of Knowledge: Ease of Process, simplifying the
product and the procedure
• Need to promote the quality of awareness
The benefits: Leverage
on Risk Protection or Returns oriented or both
The product: catering
to life stages
• Need for Branding in Insurance: Branding is more relevant in the
Insurance market which not only faces the problem of securing and retaining
customers in an increasingly competitive marketplace but also experiences the
need for heightened relevance of the brand proposition in a world where brand
has been termed the new religion. In rural India, the LIC is especially
synonymous with insurance. But in the wake of competition insurance
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companies have to do a considerable brand building exercise at least in
urban India. Adequate time, investment and
Longer-term management of the brand are essential, not only for success
but also survival. All brands need to be built around well-differentiated and
credible positioning that springs from the organization’s history. The brand
must not only be believed but lived by management and employees.
• Focus on different segments to survive and thrive in a competitive
environment. Each company has to choose its own unique positioning based
on its unique strengths. Below-mentioned positioning alternatives can be
worth considering.
VARIETY-BASED POSITIONING
This type of positioning is based on varieties in products and services rather
than customer segments. It is a sensible strategy for those companies who
have distinctive advantages or strengths in offering certain products and
services. In the insurance industry too, it is possible to achieve a unique
position by focusing on certain category of products.
NEEDS-BASED POSITIONING
This is the most commonly understood positioning and is based on the
differing needs of different groups of consumers. This can be done
successfully if a company has unique strengths to service a group of customer
needs better than others.
The insurance needs of customers vary significantly for different groups of
customers. The insurance needs of young family with small children will be
quite different from that of a family in which the income-earner is close
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to retirement. However, in India most of the life insurance companies have a
wide variety of products tailored for different customer needs and there is no
company focusing on a particular customer need.
ACCESS-BASED POSITIONING
Positioning of customers can also be done by the way they are accessible. That
is different groups of customers may be accessible in different ways even
though they may have similar needs. Access is typically a function of
customer geography or customer scale. There is excellent opportunity in
the insurance industry to employ access-based positioning by targeting the
rural insurance sector.
The rural market for life insurance is very different from the urban market in
terms of needs, income levels and distribution (seasonality, for example),
penetration of media and so on. Rural market can be a highly profitable
position if one is able to carefully plan and tailor an entire set of low-cost
activities of advertising, distribution, and product design etc. to successfully
exploit the potential.
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Bibliography
Websites
www.rbi.org.in
www.irdaindia.org
www.banknetindia.com
www.hdfcinsurance.com
www.businessworldonline.com
Other References:
Brochures of various plans
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Appendix
QUESTIONNAIRE
Name: ________________________
Age: ______
Gender: M F
Marital Status: Married Single
Occupation: ___________________
YES NO
Q2) Mention the names of Life insurance companies you have heard of:
1) ________________ 4) ________________
2) ________________ 5) ________________
3) ________________ 6) ________________
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Q4) where do you invest/would like to invest your savings?
(Rank in order of preference, 1 being most preferable)
Q5) Have you taken any life insurance policy on your own life or on life of any
of your family member?
YES NO
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Endowment Plan
Pension Plan
ULIP
Q8) What was your purpose/will be your likely purpose of taking insurance?
RANK THEM (1 being most ideal)
a) PROTECTION
OF FAMILY
b) TAX BENEFIT
c) INVESTMENT
d) RETIREMENT
PLANNING
Q9) Have you ever been approached for Life insurance by any of the following
(Please √), also Rank according to your preference from whom you are most
likely to buy insurance?
(√ here) (Rank)
1) Known/Current Advisor
Q10) Do you feel opening up of the sector has created more insurance awareness
among the public?
YES NO
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Q11) How many dependents do you have?
Q12) Do you really think insurance cover in today’s scenario is not essential?
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