A

SEMINAR - REPORT WRITING

ON

“LIFE INSURANCE IN INDIA”

IN THE PARTIAL FULFILLMENT OF THE REQUIREMENT OF
MASTER OF BUSINESS ADMINISTRATION (M.B.A.)
UNDER THE GUIDANCE OF
Prof. VAISHALI SAHOO
-SUBMITTED BY-
(Swapnil Sanas)
PRN No.-MITU20MBAG0064

Submitted to

MIT College of Management, Pune

2020-2021
 MIT COLLEGE OF MANAGEMENT

CERTIFICATE

This is to certify that   Mr./Ms. SWAPNIL SANAS_ has submitted a summer project on
“LIFE INSURANCE IN INDIA” to MIT-ADT University, Pune for the partial fulfilment of
Master in Business Administration (M.B.A.).

We further certify that to the best of our knowledge and belief, the matter presented in
this project has not been submitted to any other Degree or Diploma course. 

Prof. Vaishali Sahoo Dr. Vijaya Gondane

Internal Guide Head of Department

External Examiner
 DECLARATION

I undersigned hereby declares that, the project titled “LIFE INSURANCE IN INDIA “is
executed as per the course requirement of two-year full-time MBA program of MIT-ADT
University, Pune. This report has not submitted by me or any other person to any other
University or Institution for a degree or diploma course. This is my own and original work.

Place: ……………..   

Date: ……………..                                                       (SWAPNIL SANAS)

PRN NO.:
MITU20MBAG0064
MBA-2020-2022
 ACKNOWLEDGEMENT

I express my sincere thanks to Dr. Sunita karad, Principal, MIT-COLLEGE OF

MANAGEMENT, Loni-Kalbhor Pune Dist. for helping me in many ways throughout the
period of my project with his timely suggestions. I sincerely owe my respect and gratitude to
Dr. Vijaya Gondane, HOD, MIT-COLLEGE OF MANAGEMENT, for his continuous and
patient encouragement during all times of my project and helped me in completing this study
successfully.

I express my sincere and heart full thanks to my internal guide Prof. Vaishali Sahoo, MIT-
COLLEGE OF MANAGEMENT for his encouragement and valuable support in bringing the
present shape of my work.

I am deeply indebted to my parents and family members for their warm love and support
throughout my life. In addition, I am grateful to all those who helped directly or indirectly for
completing this project work successfully.
 INDEX

Chapter Chapter Name Page No.

No.
1 Introduction

2 Conceptual Background

3 Objectives

4 Reasons of Merger

5 Challenges

6 Merger Analysis

7 Impact on Telecom Industry

8 SWOT Analysis

9 Summary

10 Conclusion
INTRODUCTION
Life insurance is a financial product, wherein the policy holder and the life
insurance company come to an agreement. A lump sum amount is paid by the
insurance company in the form of insurance coverage to the nominee/insured
in return for the premium after a specific period or in case of the death of the
insured. Life insurance provides financial protection to the family in cases like
the sudden death or the permanent disability of the main earning member of
the family. Thus, it is an assurance that the insurance company will take care of
the financial well-being of the family members even when the breadwinner is
not around. This is done by paying the sum assured to the nominee or the
beneficiary. The insurance can also cover other contingencies like critical illness
and permanent or temporary disability. The policyholder is called the insured,
while the insurance company is called the insurer

WHAT IS A LIFE INSURANCE POLICY?

A life insurance policy offers financial coverage wherein the insurance
company guarantees to pay a certain amount to the nominated beneficiary
upon the guarantees to pay a certain amount to the nominated beneficiary
upon the policyholder’s demise during the term of life insurance plans. In
exchange, the policyholder agrees to pay a predefined amount of money as
premium either regularly or as a single premium.
A life insurance policy helps in meeting three goals in life. Let us look at them:
1. Protection: A life insurance policy provides financial security to the family
on the untimely demise of the insured.
2. Investment: Along with protection, life insurance also helps in investment
so that the money can be used for meeting various financial goals
3. Saving: Along with protection, through life insurance, you also get to save
money which can be used during retirement or for other financial needs
WHAT IS LIFE INSURANCE PREMIUM?
A premium is the amount paid to the insurance company for getting a life
insurance policy. The premium or the cost of the insurance is an important
aspect to be considered before finalizing a policy. It depends on various factors
like age and gender. To reap the benefits of the insurance policy, it is
important to pay the premium on time. In case of a non-payment or a payment
delay, the policy can be considered as a lapsed policy. However, before a policy
happens to expire, you usually get a grace period of 30 days. The payment
mode can be regular or single. A regular payment can be monthly, annually
and so on. Let us understand some factors on which the premium depends.
Age: his is an important deciding factor while buying an insurance policy. Older
you are, higher the premium amount. Accordingly, younger people have to pay
lower premium amount for a life insurance policy. Gender: Premium amount
for women is lower compared to that for men. Smoker/Non-smoker: In case
you are a smoker, the premium will be higher because you are prone to higher
risks in life. Thus, a non-smoker has to pay lower premium. Sum assured:
Higher the sum assured or the death benefit, higher the premium amount to
be paid. Policy term: If the policy is for a longer duration, the premium amount
will be higher

WHAT LIFE INSURANCE COVER?

Along with the standard coverage which varies with plan to plan, you can
further enhance the protection with the help of riders, such as accidental
death benefit rider, total or permanent disability rider and many more. The
additional benefits can be availed on payment of some extra amount.
Following are some common riders:
• Accidental death benefit rider: Nominee gets this financial benefit along with
the sum assured, if the insured happens to dies in an accident
• Accidental total and permanent disability rider: Insured gets financial
assistance if he/she is not able to earn due to some disability mentioned in the
policy
• Critical illness rider: This covers major critical ailments like cancer, heart
attack
• Hospital cash rider: A fixed amount is paid to meet the expenses of non-
medical items in case of any hospitalization • Waiver of premium rider: Once
you have this rider along with your life insurance policy, the company waives
off the remaining premium payment on the sudden demise or total permanent
disability of the insured

CONCEPTUAL BACKGROUND
In this world, human life is considered as the most precious one. And
‘Insurance' offers protection against financial loss resulting from one’s death.
The liberalization of the Indian economy in the 1990s and the subsequent
entry of international players have contributed to the growth of life insurance
in India. In India, up to 26% foreign direct investment is allowed in Insurance.
In India, insurance was first introduced in the year 1818 with the establishment
of the ‘oriental life insurance company’ in Calcutta. Due to the British
discrimination against Indians, the Indian leaders like politician’s mahatma
Gandhi and Jawaharlal Nehru encouraged Indian people to start their own
insurance businesses. After the passing of insurance act 1870, the first Indian-
owned insurance company, named ‘Bombay life insurance’ was established.
Then insurance business grew very fast, and to regulate the business, a new
act was passed in 1938. After independence, there were 209 insurance
companies in both general and life insurance sectors. Regulated Indian insurers
are divided into two core categories: life insurance and general or nonlife
insurance. Life insurance includes products like endowment policies and
annuities, whereas general insurance covers all other types of insurance
(Narayanan and Saravanan, 2011). Life insurance has a long and deep-rooted
history in India (Shukla, 2011). Devasenathipathi et al. (2007) stated that in
1818, the British Government introduced life insurance in India with the
establishment of the Oriental Life Insurance Company in Calcutta. In course of
Time, the thought process of insurance authorities also changed and they
decided to commence an Indian government-owned insurance company for
the welfare of Society. So, India’s first government-owned insurance company,
named ‘Life Insurance Corporation of India (LIC)’, was established on
September 1, 1956, which basically provided life as well as general insurance. It
was later revitalized by the creation of a governing body in 1919 named
‘Insurance Regulatory and Development Authority (IRDA)’. The governing body
was established to govern the Growth of all insurance companies or insurance
business in India. Chauduri and Chakraborty (2008) stated that the statutory
body even emphasized upon the Liberalization of the insurance sectors for
private (both Indian and foreign) players in order to infuse fresh capital and
become more competitive. So, the Indian Government approved a Page | 10
legislative committee named ‘Malhotra Committee’ in 1993 Under the
chairmanship of R N Malhotra. This committee was appointed to make a
Layout for the privatization of life insurance sector. The committee submitted
its Report in 1994 but it took six years to implement it and to decide about the
Foreign Direct Investment (FDI) percentage in Indian insurance sector. At the
dawn of the twentieth century, many insurance companies were founded. In
the year 1912, the Life Insurance Companies Act and the Provident Fund Act
were passed to regulate the insurance business. The Life Insurance Companies
Act, 1912 made it necessary that the premium-rate tables and periodical
valuations of companies should be certified by an actuary. However, the
disparity still existed as discrimination between Indian and foreign companies.
The oldest existing insurance company in India is the National Insurance
Company, which was founded in 1906, and is still in business. The Government
of India issued an Ordinance on 19 January 1956 nationalizing the Life
Insurance sector and Life Insurance Corporation came into existence in the
same year. The Life Insurance Corporation (LIC) absorbed 154 Indian, 16 non-
Indian insurers and also 75 provident societies—245 Indian and foreign
insurers in all. In 1972 with the General Insurance Business (Nationalization)
Act was passed by the Indian Parliament, and consequently, General Insurance
business was nationalized with effect from 1 January 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd and the United India Insurance Company Ltd. The General
Insurance Corporation of India was incorporated as a company in 22 November
1972 as a private company under Companies Act, 1956 in Bombay and
received its Certificate for Commencement of Business on 1 January 1973

1818
In 1818, the first insurance company in India was established in Calcutta
(modern day Kolkata), The Oriental Life Insurance Company. Similarly, Bombay
(Mumbai) had the Bombay Life Assurance Company and Madras (Chennai) had
the Madras Equitable Assurance Company, which were started in 1823 and
1829 respectively. In the initial days, Indians had to pay an extremely high
premium than compared to the British residents. It was the Bombay Life
Assurance Company, which became the first insurance company established by
an Indian that started insuring Indians without charging extra premiums.

1912
During the initial year of this century, the industry was highly unregulated. It
was only in 1912 that the Indian Life Insurance Companies Act, 1912 was
passed. This Act structured insurance and made it mandatory for premiums
and company valuations to be certified by an actuary.

1938
By 1938, there were around 176 insurance companies in India with the total
business valuing around Rs. 300 crores. It was around the same time that the
Insurance Act of 1938 was passed. This was the first piece of legislation
covering both life insurance and general insurance.

1950
While the demand for nationalization of insurance companies had been going
on for a while, it was only with the passing of the Life Insurance Corporation
Act of 1956 that nationalization of insurance as finally achieved. On September
1, 1956, the Life Insurance Corporation of India (LIC of India) was established
with the intent of covering all Indians across the length and breadth of the
nation.

1972
In 1972, the General Insurance Business (Nationalization) Act was passed
which nationalized all general insurance companies in India. The 107 odd
companies existing around the time were all merged into four companies :
IDEA - VODAFONE
On March 20, 2017, India’s third-largest telecommunications company, Idea
Cellular (Idea), announced US $ 23 billion, to merge with the world’s second-
largest company, Vodafone India Limited (Vodafone), to build India’s most
lucrative company estimated at US $ 12.5 billion. 
The company will have a subscription base of 394 million and a customer
market share of 35% and 41% respectively. As the merger is expected to take
24 months to complete, both companies have agreed to operate as separate
companies until then. Together, Kumar Mangalam Birla, Chairman of Aditya
Birla Group said, “Idea and Vodafone will build a very important company
when we look at our mutual power.” The merger of fierce competitors in the
Indian telecommunications industry came after India’s largest company
Reliance Industries Limited, owned by Mukesh Ambani, launched Reliance Jio
Info comm Limited (Jio) in September 2016. Jio came up with prices, offering
free voice and the lowest prices in the world. It has disrupted the
telecommunications industry in the country where telecom operators receive
70% of their revenue through voice telephony.
And this merger was the largest telecom merger in India. As per this merger,
Vodafone holds a 45.2% stake, Aditya Birla Group holds 26% and the
remaining stakes were held public. So, to understand the Vodafone case study,
let’s understand the reasons for the Vodafone Idea merger case study.

Objectives:

To examine the merger between Vodafone India and Idea and the specifics of
their deal'
To analyse the impact of the merger on the Indian Telecom industry"
Study of challenges faced by Vodafone and idea.
How Jio affected whole telecom sector.

Reasons of the merger

Equal partnership:
Idea promoters and Vodafone Group will be joint promoters of the combined
entity
Equal affirmative rights to both promoters on key matters
Board Composition:
12 member board with 6 independent directors
Equal representation from Aditya Birla Group and Vodafone Group
Chairman: Mr Kumar Mangalam Birla
Key Management:
CEO & COO – “Best person for the job” – joint appointment
CFO – Vodafone to appoint
Shareholding Equalisation:
Aditya Birla Group has the right to acquire up to 9.5% additional shareholding
from Vodafone Group
If equalization is not achieved, Vodafone Group to sell excess stake
Till equalisation, voting on excess stake held by Vodafone to be restricted and
exercised jointly as per the agreement.

At last, the combined entity of Vodafone and Idea was expected to hold a strong
position in the industry. Such as in some circles it became the largest cellular
service provider and in some circle, it was the second-largest after Bharti Airtel.
So, a joined company can focus on being the service provider in pan India.

India’s Telecom Sector

India’s telecommunications sector is divided into three categories – wireless
services, telephone lines, and the Internet, a sector that contains services
provided by public and private organizations. The main public sector
organizations were Mahan agar Telephone Nigam Limited (MTNL) and Bharat
Sanchar Nigam Limited (BSNL), while the leading private sector organization
was Bharti Airtel Limited (Airtel).

Idea-Vodafone Integration

To prove that the experts are real, the major telephone operators went into
merger mode. Airtel acquires Telenor; business and scope from other small
telecommunications companies such as Videocon, Augere Wireless, Tikona (4G
Spectrum), etc. Reliance Communications (RCom) has agreed to merge with
Aircel and acquire MTC; Tata Telecom was also in the process of merging with
RCom. In just seven months after Jio took office, the number of telephone
operators in the country dropped to seven out of twelve.

Challenges
However, the announcement of the merger creates a negative image in the
public, when the Vodafone and Idea merger was announced the Idea prices
started to drop. And the share price of Idea declines from Rs. 97.70 on 20th
March 2017 to Rs. 81.81 on 6th Sep 2017.

But the merger was important it gave support to the two companies, which
were struggling to survive in the industry. Combined resources will help to
compete with only the two biggest brands (Jio and Airtel).

Merger Analysis

The integration of Idea-Vodafone will be the grand launch of the telecom sector
post Reliance JIO in September 2016. The promoters of Idea and Vodafone
Group will be joint ventures of the integrated business and will have equal
assurance rights for both promoters on key issues. Together, Vodafone will be
allocated 364.50 crores shares containing 50.3% of Equity amounting to
approximately INR 27,600 crores.

However, the Aditya Birla group will receive a 4.9% share of the combined
business at Vodafone for INR 3900 crores (INR 109 / – per share) so the share
of the Aditya Birla group reaches 26%.

Aditya Birla Group is also entitled to receive up to 9.5% of additional shares in

Vodafone Group within three years after the closing of the contract at the
agreed price of INR 130 per share. But these Aditya Group rights will be the
work based on the growth achieved and the market value of the combined
business.Vodafone had appointed the Chief financial officer. As, after that new
CEO was named under both the companies.

Lastly, the promotors of both entities have the right to nominate three members
for the board. Also, there are 12 members out of which 6 are independent on the
board in the Vodafone case study of Vodafone and Idea merger.

Idea Positioning Before Merger

In Vodafone case study of Vodafone and Idea merger, now lets understand the
Idea Cellular Limited is an Aditya Birla Group company. Founded in 1995, the
company was incorporated as Birla Communications Limited and had a license
of GSM-based services in Gujarat and Maharashtra Circle. In the following
years, the organization started to expand its business with Tata Group, Birla and
AT&T group of the US in joint venture form. 

In August 2015, Idea announced the rollout of its 4G services. It was now
competing with Airtel and Vodafone – in a non-monopolistic market. The
company relaunched its “What an Idea” campaign taking 4G to the rural areas
and empowering people through the usage of 4G services.
But in the year 2016 sudden announcement from Mukesh Ambani about
Reliance Jio disrupted the Indian telecom sector. Below pie chart shows the
market share of different telecom players before the entry of Jio.

As the Indian market is very sensitive towards price and Jio used it to make
most of the profits. So, Jio started to make its all services free for the first six
months. Afterwards, they made the services of voice calls, data extremely
cheap. As a result, JIO captured a significant share of the telecom industry. Here
is the pie chart of the post-Jio market share of various telecom players.

Vodafone Idea Merger

This transaction required various approvals from government authorities
including SEBI, dept. of Telecom and Reserve Bank of India among others. The
Department of Telecommunications (DoT) has given the green signal for the
merger of Vodafone India and Idea in our Vodafone case study, the largest
Merger and Acquisition agreement in the sector, which has displaced Bharti
Airtel from top position after over 15 years. The approval conditions, which
were given over a year after the agreement, were announced in March 2017
which included an advance payment of Rs 7,268 crore.

Idea Contribution

Promoters Aditya Birla Group infused Rs 3,250 crore in Idea Cellular, which
separately raised Rs 3,000 crore ahead of a planned merger with Vodafone
India. Following the equity infusion by Idea’s promoters, their stake in India’s
third-largest telecom operator rose to 47.2% from 42.4% now. Idea contributed
its assets which included standalone towers with 15,400 tenancies and a stake in
Indus towers Ltd of 11.5%.

Reliance Jio Entry

For telecommunications workers who were dealing with costly problems and
debt, the announcement that Jio was entering the telecommunications industry
was a major blow. Jio has been working for almost six years, and acquired the
pan-India 4G spectrum in 2010. The 4G network testing phase started in
December 2015.
The entry of Reliance Jio Infocomm Ltd in September 2016, with free services
for almost seven months and cheap tariffs, had eroded margins and impacted the
revenue of rivals. The contribution of Vodafone will be Vodafone India along
with standalone towers with 15,400 tenancies without including an 11.5% stake
in Indus Towers. According to the agreement between Idea and Vodafone.

Vodafone will contribute more amount of net debt, about Rs 2,480 crore than
Idea at the completion of the merger. Post-termination of both companies, the
combined entity will be a joint venture between Vodafone and Idea in the
Vodafone case study. Which will account for the under the equity method,
controlled by both Aditya Birla Group and Vodafone.

Idea promoters hold the rights to acquire a 9.5% additional stake from
Vodafone under the agreed deal to equalize shareholdings over time as per the
following proposition

Vodafone: 45.1% – 9.5% = 35.6%

Idea: 26% + 9.5% = 35.6%

Impact Of Merger on Telecom Industry

There are also several other implications that this merger of Vodafone case
study will bring forth on the telecom industry.

1. Firstly, there can be initiatives based on the renewal of price discipline for

the disruptive entry by Jio has caused some serious misbalance

2. Secondly, the poor financial health of the telecom sector can be observed.
And through such mergers, there will be an infusion of health and life. Since
India is the fastest-growing market in terms of subscriber base.

3. Through the merger, Vodafone and Idea will overcome their debts and a

large sum of credit will be infused into the system

4. The deal has also saved both the telecom companies from selling off their
business. As was being planned by them initially and this would directly impact
the quality of services being provided by different players in the industry
The merger in the Vodafone case study will surely boost the pace of the telecom
sector. It has also been found that the savings, synergies and also the spectrum
will have a substantial impact on the escalating growth. 

There will be a saving of over 60 per cent of the cost of the operation and this
will aid in improving the quality and performance of the service through
investments from the saved money.

Enhancement in network infrastructure will be observed while the

operational efficiencies have a chance to reach excellence. Moreover,
the revenue market share is expected to rise for all the locations and the
spectrum of the entity would exceed the initial caps.

Resulting Structure:
SWOT Analysis

Strengths:

Vodafone Idea is the leading mobile operator across rural areas of India with
approximately 40% market share

Established brand name.

Highly capable telecom player bringing expertise from across the world to
India.

Strong network capabilities across the length and breadth of the country.

Highly dominant with strong network capabilities in rural markets ahead of

many other players.

Strong 4G presence in India

Strong customer base and retail presence.

Weakness:

Not been able to exploit the mobile wallet market even after m peas is in place.
Channel sales managers don't visit retailers often.
Tendency to become a market follower rather than an aggressor or leader.
Difficult in identifying new market trends targeting millennials lack of clarity of
vision (where is the company moving, what new offerings to highly connected
millennials which is enticing etc).
Unlike its competitors, Vodafone has failed to make its product and service
portfolio a success. Apart from the core mobile services business, Airtel has
DTH and Broadband service which are a success and aids in the company
growth. But the same is not the case with Vodafone, the company relies heavily
on its core business only for growth and revenue generation
Opportunities

Try and bring market offensive strategies to target millenials like the new airtel
Post-paid promise or Jio dhan Dhana dhan offers.

One major issue that mobile users face is a call drop or bad/spotty network
coverage and it's one issue that none of the telecom providers have been able to
solve. And this becomes a good opportunity for the company to outdo its
competitors and provide customers with a better and seamless network.

The relief package by the centre now allows a moratorium on the payments of
dues for the next four years. The government has further redefined AGR and
will now not include non-telecom revenues in it

Threats
Reliance Jio with better technology money and muscle power is already a
disruptive force.
Competition from Airtel, Reliance Jio, etc is the main threat to Vodafone. Low
tariffs of the competitors like Reliance Jio has made Vodafone take a big hit in
terms of revenue as well as mobile subscribers.

Competitive Analysis

Jio is seen as one of Airtel's biggest rivals. Jio was founded in 2007, and is
headquartered in Mumbai, Maharashtra. Jio is in the Telecommunication
Services industry. Jio generates $6.9Bless revenue vs. Airtel.
Not very long ago, India had a booming telecom industry with a dozen
operators battling for market share in this billion user market. But three years
ago, Reliance Jio entered the sector which rock-bottom tariffs. A brutal tariff
war started, which kicked several operators out of the race to provide wireless
services and left many with battle scars. Today, just two other private
operators, Bharti Airtel and Vodafone Idea are left to compete with Jio.
Present Status of Vodafone India and Idea Merger
In September 2020, they rebranded itself. The Vodafone Idea Limited company
used the initials to rebrand itself as “Vi”. This took place after two years of the
merger, but it shows the integration spirit. The company, in their statement, said
that the name Vi is to be pronounced a “we“. The long-overdue rebranding was
done to remember the final lapse of the merger. It marked the combination of
the two companies after three years of merger execution & talks.
The rebranding announcement was but led by the Supreme Court of India
directing Vodafone Idea to pay back government dues. This company owes
approximately Rs. 504 billion. To pay off such debts, the company has to
increase $ 3.41 billion. The company plans to increase capital via a mix of
equity & debt. It has received the required Board consent. It also plans to aim at
joining the 5G service in India.

Current Holding Structure:

Sharing Changes

POST
ADITYA POST
IDEA GROUP ADITYA
VODAFON ACQUISITI TOTAL
DETAILS IDEA
E POST ON ON ACQUISITI
MERGER MERGER ON FROM
FROM VODAFONE
VODAFONE

IDEA
42.45
Facilitato 21.10% 26.00% 35.50%
%
rs

Vodafone
Promoter   50.30% 45.40% 35.90%
s

57.55
Social 28.60% 28.60% 28.60%
%

Total 100% 100% 100% 100%

Summary:

Creation of India’s largest telecommunications company with nearly 400 Mn

subscribers.
Combination a strong proposition for all stakeholders realizes ‘Digital India’
vision, deliver benefit to consumers and create shareholder value.
Equal partnership between Aditya Birla Group and Vodafone Group.
Strategic fit and complementary assets pan India broadband (3G/4G) with
robust spectrum profile, in 21 circles.
Significant synergies substantial cost and capex synergies with an estimated
NPV.

Conclusion

The merger between Idea and Vodafone will make them a top player. For the
benefit of co-operative management, synergies of up to INR 670 billion can be
acquired & INR 140 billion on operating costs for 4th year. It will also bring
credit for the sale of Towers Assets to a consolidated business.

The concept of consolidation seems to save costs and financial opportunities

that aid financial performance. And whether the company will be able to
monetize the remaining spectrum must be seen.

Aditya Birla Group’s promoters are smart enough to integrate with Vodafone in
this price war and at the same time they have the rights to measure the pole in
stages. So far, there is no benefit for public shareholders and they will hope to
benefit from the long-term merger.

It can be ended that the Vodafone India and Idea Merger was required to fight
the competitive pricing strategy taken up by Reliance Jio. The customer is the
most beneficial due to Vodafone India and Idea Merger as now all the telecom
entities will try to bring in the best technology at the best cost and with better
client service to maintain client loyalty.