A PROJECT SYNOPSIS ON

A STUDY ON INSURANCE INDUSTRY OF INDIA

Submitted by
VANGOORI DIVYA SRI
HALL TICKET NO: 1009-22-672-052
MBA (FINANCE)

Under the Guidance of

DR. B. MADHAVI
Project Submitted To
OSMANIA UNIVERSITY

Submitted in partial fulfilment for the award of

THE MASTER’S DEGREE IN BUSINESS ADMINISTRATION
(2022-2024)

DEPARTMENT OF BUSINESS ADMINISTRATION

NIZAM COLLEGE (Autonomous)
Osmania University, Hyderabad -500001

DEPARTMENT OF BUSINESS ADMINISTRATION

NIZAM COLLEGE (Autonomous)
Osmania University, Hyderabad -500001
 LIFE INSURANCE INDUSTRY OF INDIA

Life insurance is not simply a business proposition. It is not just a question of mobilization of
resources for development; it is a question of citizen’s sense of security. It provides a link
between the present and the future. Today India is one of the fastest growing economies of the
world. It is now Asia's third largest economy and has made inroads into the global top 10 in
terms of Gross Domestic Product (GDP). GDP originating from the service sector recorded a
growth rate of 9.30 per cent in 2010-2011. The contours of insurance business have been
changing across the globe and rippling effect of the same can be observed in the Indian market
as well. Insurance Industry is a growth-oriented industry. The life insurance sector in India has
seen an array of changes in the past one decade. The economic scenario which emerged after
globalization, privatization and liberalization has thrown a new challenge before the insurers.
Now it has to be more competitive in order to meet the needs and demands of its customers.
With a huge population base and large untapped market, life insurance industry has a big
opportunity in India for National as well as foreign investors. The profitability of the life
insurance companies has also been changed due to change in operating activity like selling new
policies, appointment of active agents, giving commission to the agents and evaluating
maturity value. The growth of insurance business of private sector companies has been higher than
government sector

Introduction
The Life Insurance Industry in India is one of the hard-core parts of the service sector. It
plays a vital role in the economic development of our nation. It not only provides safety
against life risk for individuals but also acts as savings, financial intermediary, and promoter
of investment activities and stabilizer of financial markets. This in turn generates long- term
invertible funds for nation building and enhances standard living of the people. Financial
systems are an important element for the economic growth process, because they have a
function which provides funds for wide spreading of new technologies and accumulation of
capital funds. Developed financial systems which are effectively fulfilling the functions can
increase efficiency in addition to economic growth. These functions are such as orientation of
small deposit is owned by individuals to large investments. The investments are diversified to
reduce the risk of depositors, reducing collecting and evaluating information costs about the
projects which is applied by the specialized agencies. The life insurance sector in India has
seen an array of changes in the past one decade. The economic scenario which emerged after
globalization, privatization and liberalization has thrown a new challenge before the insurers.
Now it has to be more competitive in order to meet the needs and demands of its customers.
The reforms contributed to increase the awareness of the insuring public about the wider
range of choice of insurance products and the price offered by the competing insurers in the
market. The customers know well about their rights and remedies, availability of various
grievance redress mechanisms, progressive decontrol and detoxification of pricing of
insurance products. The technical know-how, expertise and wide experience of multinationals
that have joined with the Indian companies have revolutionized almost all aspects in the
industry

Life Insurance of India

The first company that sold policies to Indians with? fair value? was the Bombay Mutual Life
Assurance Society starting in 1871. For the next hundred years, life insurance was confined
mostly to the wealthy living in large metropolitan areas. The Life Insurance Corporation of
India was formed by an Act of Parliament viz. LIC Act 1956, with the motto of spreading life
insurance to all segments of people in the country. The eagerly awaited Insurance Regulatory
and Development Authority (IRDA) Billto open the insurance sector India to private and
foreign players was passed by the Loksabha on December 2, 1999 and by the Rajyasabha in
December 1999. After passing this Act the entry of the private players is increased year-by-
year. At the end of 31st March 2011 there are 23 private players operating in India

Objectives of the Study

 To analyze the growth and progress of the Indian life insurance companies in post-
liberalization period.
 To examine the factors influencing the financial efficiency of the life insurance
companies in India.
 To offer findings and to make suggestions for the improvement of Insurance
companies in India.

Hypothesis of the Study

In this study the following hypotheses has been framed. There is no significant difference
among Gross premium, number of companies, claims paid, operating expenses, commission
expenses, income from investment, number of agencies, number of policies, and profitability.

Research Methodology
By carrying out Analytical study the performance oflife insurance companies in India are
determined.

Data and Sources of Data

The present study is based on secondary data. Data for this study are obtained from the IRDA
(Insurance Regulatory Development Authority) annual reports, Bulletins and statement of
accounts of the various Life Insurance Companies.

Period of the Study

The study covers a period of ten years from the accounting year 2001-2002 to 2010-2011.

Sampling Design
Among 24 Life Insurers in India 12 life insurance companies have been selected through
Purposive sampling method. The selection method is based on the first date of incorporation
of the life insurance companies. The following table shows the list of insurance companies
selected for this study

Framework of Analysis:
Multiple Régression Analysis:
Multiple regression is a statistical process by which several variables are used to predict
another variable. The following formula was used:

Y = a+B1 X1 + B2 +…………+ BnXn While selecting the independent variables to a larger

extent, variables which were less correlated were selected in order to avoid multicolinearity
problem. The F ratio and P valve for the model were also computed to test their significance.
If the computed P value was lower than the critical level of d=0.05the model was determined
as statistically significant. The co-efficient of determination R2 was also computed to find the
percentage of the explaining power of the model R2 which would always increase when all
independent variables are added, adjustedR2 will come down if the added variable does not
reduce the unexplained variations. The adjusted R2was calculated by Adjusted

R2 = 1-(1-R2)(N-1)/(N-K)

N = Number of Sample observations K = Number of parameters

If the adjusted R2 is close to R2 the addition of any further independent variable would not
help in better prediction, when there is a wide difference, it is an indication of the need for the
inclusion of some more independent variables. Further the best subset regression was
computed by generating all the possible combinations of the selected independent variables.
The two variables model with higher R2was chosen as the best model

Compound Annual Growth Rate

Compound Annual Growth Rate of the variable is computed per annum. The following
formula is used to compute the growth rate. When there is a continuous growth of the
variable the formula is used:(End value / Beginning value) 1-n-1Where n = Number of years
When there is a variable growth of the variable the formula used is:

N \/(1+r1) )1+r2) (1+rn)—1R growth rate All the ratios are used to find out the growth rate
of variables
Suggestions
 The LIC has to innovatively alter the operating models, business processes, channel
management and human resource strategy to control the operating expenses and the
combined ratios to compete with private players.
 With the entry of private insurers in life insurance business, it is obvious that some
proportion of new business will go in the hands of private life insurers. At this stage
LIC is in urge to retain its customer.
 In order to increase the growth rate, the insurance companies has to introduce many
new products to suit the customer needs like pension plan, special group policies, etc.
 The insurance company has to concentrate on the rural areas in order to increase the
business.
 The insurance companies should conduct more extensive market research before
introducing insurance products targeted at specific segments of the population so that
insurance can become more meaningful and affordable

Conclusion

The existence of life insurance companies is found even before nationalization in

India. After nationalization the Life Insurance Corporation of India was incorporated
by the constitution. The liberalization, privatization and globalization policies has
made the insurance companies in India to expand their business territory across the
globe. On the other hand many foreign insurance companies have also entered into
Indian insurance market. The present scenario reveals that the growth of insurance
business of private sector companies has been higher than that of government sector.
The competition has become hectic between them, which ultimately benefits the
consumer