Description
Tata Group is an Indian multinational conglomerate company headquartered in Mumbai, Maharashtra, India
EXECUTIVE SUMMARY
TATA-AIG entered into microinsurance as a condition for acquiring a license to sell insurance in India. Unlike many other insurance companies, the CEO of TATA-AIG, the Director Alternate Channels, immediately saw the benefits of microinsurance. These included fulfilment of corporate social responsibility; use of the microinsurance to get the brand into a new market and as a means of developing a good relationship with the Indian insurance regulator. The Insurance Regulatory and Development Authority (IRDA) feels strongly about the importance of microinsurance and the need for private insurers to play a role in serving the rural and social sectors. The CEO realised that microinsurance would require innovative thinking because insurance products for low-income households was not just normal insurance with lower premiums and benefits. In particular, he realised that selling microinsurance would require a new distribution mechanism. He created a specialised microinsurance department within TATA-AIG called the rural and social team and provided it with the support and resources it needed. In particular, he did not pressure it to make immediate profits and gave it latitude to consider alternative distribution strategies. head up the team developing microinsurance distribution models. At first, the rural and social team decided to collaborate with MFIs using a partner-agent model. The MFI became the agent selling and servicing the products in return for commission income. The limitations of this strategy soon became clear. Many insurers were seeking to develop relationships with microfinance institutions, but there were not enough good MFIs to go around. So the rural and social team developed a model of micro-agents. In this model, TATA-AIG would obtain recommendations of NGOs that had a good relationship with a local community in an area it wished to sell microinsurance. It would develop a partnership with the NGO. In return for a consulting fee, the NGO would provide suggestions on members of the community who could be good agents for microinsurance policies (micro-agents). If
the suggested people show an interest in becoming microagents, they are asked to form into groups of peers. The group, referred to in the TATA-AIG model as a community rural insurance group (CRIG), operates in a similar fashion to an insurance agent’s firm. TATA-AIG helps the group leader obtain an agent’s license. The members of the group all refer policies for their own account, but the leader with the agent’s license submits the policies and receives an additional commission for the extra work she does. The model relies on direct marketing similar to that used by firms such as Tupperware and Avon. The NGO can do a variety of tasks in this model including aggregating the premiums and sending them on as a single sum to TATA-AIG, allowing the agents to use their offices to conduct business, playing a role in the training of micro-agents, and helping to distribute benefits. The model thus has some additional positive externalities by providing a new income stream for rural NGOs and for micro-agents. Good and Bad Practices in Microinsurance TATA-AIG, India v TATA-AIG’s rural and social team is in the process of developing and establishing in distribution network. Consequently, the current figures on number of clients served and the costs of servicing need to be read with caution. To date, TATA-AIG has sold 34 100 term and endowment life policies from March 2002 to June 2005, of which more than half were sold to women. These products have thus far generated a premium income of $122 000. The total cost of establishing the channel to date is $234 000.1 This paper provides a broad overview of how the microinsurance programme at TATA-AIG emerged and how it operates. It places particular focus on the micro-agent. Because of the low value of microinsurance premiums, low cost distribution is critical in microinsurance. In its microagent model, TATA-AIG has introduced a new and exciting distribution methodology to microinsurance in India. The scheme’s benefits and possible shortcomings are discussed in the paper. While the micro-agent model holds much promise, the scheme is still too new to be definitively declared a success or failure. 1 The above cost is only the overhead cost of establishing the channel and includes
expenses such as TATA-AIG’s wage costs, travel and training expenses. It does not include claims, other policyholder benefits and the agents’ commission. Good and Bad Practices in Microinsurance TATA-AIG, India
COMPANY HISTORY
The TATA Group
The TATA Group comprises 98 operating companies in seven business sectors: information systems and communications; engineering; materials; services; energy; consumer products; and chemicals. Jamsetji TATA founded the Group in the mid 19th century, a period when India had just set out on the road to gaining independence from British rule. Consequently, Jamsetji TATA and those who followed him aligned business opportunities with the objective of nation building. This approach remains enshrined in the Group's ethos to this day. The TATA Group is one of India's largest and most respected business conglomerates, with revenues in 200607 of $28.8 billion (Rs129,994 crore), the equivalent of about 3.2 per cent of the country's GDP, and a market capitalisation of $72.8 billion as on January 10, 2008. TATA companies together employ some 289,500 people. The Group's 27 publicly listed enterprises — among them stand out names such as TATA Steel, TATA Consultancy Services, TATA Motors and TATA Tea — have a combined market capitalisation that is the highest among Indian business houses in the private sector, and a shareholder base of over 2.9 million. The TATA Group has operations in more than 85 countries across six continents, and its companies export products and services to 80 countries. The TATA family of companies shares a set of five core values: integrity, understanding, excellence, unity and responsibility. These values, which have been part of the Group's beliefs and convictions from its earliest days,
continue to guide and drive the business decisions of TATA companies. The Group and its enterprises have been steadfast and distinctive in their adherence to business ethics and their commitment to corporate social responsibility. This is a legacy that has earned the Group the trust of many millions of stakeholders in a measure few business houses anywhere in the world can match. The TATA Group comprises 96 companies in seven business sectors. 65.8% of the ownership of TATA Group is held by the charitable trust of TATA.
American International Group, Inc. (AIG)
American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. The TATA Group is one of the largest and most respected industrial houses in the country, while AIG is a leading US based insurance and financial services company with a presence in over 130 countries and jurisdictions around the world.
AIG INDIA
AIG India, the Indian arm of AIG, established its presence in India in 1994. AIG entered India in 1945, prior to nationalization of the insurance sector, and had offices n several Indian cities. On opening up of the insurance sector to private insurance company's in2000, AIG and the TATA Group formed a Joint venture, TATA AIG. AIG and its affiliate funds have invested approximately $450 m in private equity in India. These direct investments have been made in telecommunication. And toll roads & bridges in the e infrastructure sector. Besides, investments have also been made in the manufacturing, technology, pharmaceuticals and retailing sector. AIG continues to look with interest for made direct investment opportunities in these sectors and in new emerging sectors like biotechnology, IT-enabled services etc.
'Bailout won't affect AIG's India business'
When contacted, a customer care executive said TATA AIG has got adequate capital to meet the liabilities. As per the IRDA norms, certain amount has to be kept in reserve for meeting liabilities. Customers holding ULIP policy should not be worried, as the money is invested in the Indian market, the executive said.
More India business stories
The statement said that the recent developments in the New York Financial Markets have caused concern in the financial markets in India.
INTRODUCTION TO TATA AIG
The non-life insurance arm, TATA AIG General Insurance Company, which started its operation in India on Jan 22, 2001, offers the complete range of insurance for automobile, home personal, accident, travel, energy, marine, property and casualty, as well as several specialized financial lines. TATA AIG Life InvestAssure Extra(InvestAssureExtra) is a unique, Investment linked insurance plan for protection. Given a choice, most people would like to increase the earning potential of their insurance premium by deciding their own investment and risk limits. It combines the security of a life insurance policy with the opportunity to exploit the upside of market returns (subject to investment volatility) by providing an option to invest in different kinds of securities through multiple fund options like - Growth Maximiser Fund, Growth Enabler Fund, Capital Guarantee Fund and Short Term Fixed Income Fund. What’s more, you can direct the investments by creating your own investment fund portfolio from a range of options to suit your needs and preferences. Note: This product is only for customers of premier banks.
Key features include:
* Provides security to your family in case of your unfortunate demise. * Gives you the flexibility to choose your funds based on your risk profile. * Gives you Return of Premium guarantee on maturity in case you opt for Capital Guaranteed Fund**. * Provides an in-built Payor Benefit for juvenile ages (0-17 years). * Enables you to enjoy market-linked returns with a potential for higher growth. *Guarantee is applicable only if all due premiums have been paid. The guarantee will not apply on premium allocated towards other funds and on top-up premiums.
TATA AIG General Insurance Company Ltd
TATA AIG General Insurance Company Ltd. (TATA AIG) is a joint venture between the TATA Group and American International Group, Inc. (AIG). TATA AIG combines the strength and integrity of the TATA Group with AIG's international expertise and financial strength. The TATA Group holds 74 per cent stake in TATA AIG, while AIG holds the balance 26 per cent stake. TATA AIG General Insurance Company Limited, which started its operations in India on January 22, 2001 offers the complete range of insurance for automobile, home, personal accident, travel, energy, marine, property and casualty, as well as several specialized financial lines.
The TATA Group is one of the largest and most respected industrial houses in the country, while AIG is a leading US based insurance and financial services company with a presence in over 130 countries and jurisdictions around the world.
The various policies and services by TATA AIG Life include INDIVIDUALS: Children: o Assure Career Builder o Assure Educare At 18 & Assure Educare At 21 o Assure 21 Years Money Saver o InvestAssure II o Invest Assure Plus o Mahalife o Mahalife Gold o TATA AIG Life Nirbhay Life
Adults: o Assure 1/5/10/15/20/25 and 60 years Lifeline Plans Assure 10/ 20 / 30 years Security & Growth Plans o Assure 21 years Money Saver o Assure Golden Years Plan o InvestAssure II o InvestAssure Extra o InvestAssure Gold o InvestAssure Plus o LIFE Plus o MahaLife
o o o o o o
MahaLife Gold Raksha 10/15/20/25 ShubhLife TATA AIG Health First TATA AIG Life Health Protector - 5 Year Guaranteed Renewal Accident and Health Plan TATA AIG Life Nirbhay Life
Retirement: • Assure Golden Years Plan • Invest Assure II • Invest Assure Gold • Mahalife • Mahalife Gold • Nirvana • Nirvana Plus CORPORATIONS Employee Benefits: o Group Term Life o Group Term Life In Lieu of EDLI Credit Life: o Group Credit Card Term Insurance Protection Plan & Credit Shield Plus. o Group Single Premium Mortgage Reducing Term Insurance Plan / Group Regular Premium Mortgage Reducing Term Insurance Plan o Group Single Premium Personal Loan Reducing Term Insurance Protection Plan / Group Regular Premium Personal Loan Reducing Term Insurance Protection Plan Group Pensions: • TATA AIG Comprehensive Superannuation (Non-Unit Linked) Scheme • TATA AIG Comprehensive Gratuity Scheme (Non-Unit Linked) • Retirement Assure Group Superannuation Scheme (Unit Linked)
•
Retirement Assure Group Gratuity Scheme (Unit Linked)
MICRO INSURANCE
• • •
Navkalyan Yojana Ayushman Yojana Sampoorn Bima Yojana
TATA AIG LIFE FUNDS • NAV For Individual Life Products • NAV For Group Products • Fund Performance - Life Portfolio • Fund Performance - Pensions Portfolio TATA AIG General Insurance Co Ltd offers various policies and products covering vehicle insurance - car insurance, two wheeler insurance and auto insurance, health insurance providing medical insurance and Mediclaim facilities, health protection and care plus, motor insurance, overseas travel insurance and many other services namely: INDIVIDUAL PRODUCTS: • Motor Insurance:Auto Secure • Home Insurance: Fire Cover, Supreme Cover, PrePackaged Cover and Privilege • Accidental and Health Insurance: Accident Guard, Secured Future Plan, Hospital Care, Maharaksha, Healthcare Plus and Criticare • Travel Insurance: Travel Guard, Student Guard, Asia Travel Guard and Domestic Travel Guard. SMALL BUSINESS INSURANCE PRODUCTS: • Society Insurance Policy • Office Policy
• •
Manufacturing Unit - Package Policy
CORPORATES:
• • • • • • •
Accident and Health: Group Personal Accident, Group Multi Guard and Voluntary Employee Benefits Travel Energy: Contractor's All Risks, Erection All Risks, Boiler and Machinery, Chemical, Utilities and Oil & Petroleum Property: Standard Property Insurance Coverages, Business Guard and Risk Management Marine: eMarine and Marine Loss Control (MLCE) Liability: Financial Lines, Casualty Lines and Trade Credit Insurance Corporate Fleet
Techno Marketing Group
COMPANY OVERVIEW
The TATA GROUP
The TATA group is India's best-known industrial group in the private sector with a turnover of around US $ 10.4 billion (equivalent to 2.4% of India's GDP). It is India's most respected private business group. With 219000 employees across 94 major companies, it is also India's largest employer in the private sector. Founded by Jamsetji TATA in the 1860s, the TATA group's early years were inspired by the spirit of nationalism. The TATA group pioneered several firsts in Indian industry: India's first private sector steel mill, first private sector power utility, first luxury hotel chain, and first international airline, amongst others. In more recent times, the TATA group's pioneering spirit continues to be showcased by companies like TATA Consultancy Services (TCS), today Asia's largest software and services company, and TATA Engineering, the first carmaker in a developing country to design and produce a car from the ground up.
The 5 core values of the Group
The TATA group has always sought to be a value-driven organization. These values continue to direct the group's growth and businesses. The five core TATA values underpinning the way we do business are:
Integrity
We must conduct TATA’S business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.
Understanding
We must be caring, show respect, compassion and humanity for TATA’S colleagues and customers around the world and always work for the benefit of India.
Excellence
We must constantly strive to achieve the highest possible standards in TATA day to day work and in the quality of the goods and services we provide.
Unity
We must work cohesively with TATA colleagues across the group and with TATA customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation.
Responsibility
We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.
Business Sectors
The TATA Group operates business in seven key industry sectors. The chart below illustrates how, in percentage terms, TATA companies in each of these sectors contribute to the overall makeup of the group. The table follows the group's sector wise financial performance.
TATA Group figures:
Year 2002-03 2001-02 2000-01 1999-00 Total turnover 542270 494568 412906 386071 Sales Value of turnover assets 521337 50927 479999 400623 371535 496222 447341 417381 Gross PAT block 434809 38926 403647 34307 352938 10982 329014 9873 Export s 130764 125738 65120 50170
Group Companies
There are 80 companies across seven sectors.
Some of them are:
Engineering
Materials
Energy
Chemicals * TATA Chemicals * Rallis India
* TATA * TATA steel * TATA Motors * TATA power * TATA Metaliks Cummins * TATA * Telco Refractoriness Consumerprodu Communication & Services cts IT * TATA Tea * TATA Tetley * Titan Industries * TATA Telecom * TATA Teleservices * TATA Consultancy * CMC
The TATA brand is recognized as the largest homegrown brand in India and the most respected brand across consumer segments. The TATA Group's stable of brands also include many national and some internationally renowned product and service brands, including TATA Indica, TATA Indigo, TATA Safari, Taj(Hotels, Resorts & Palaces), Voltas, TATA Tea, TATA Sault, Titen, Tanishq, Westside and the largest addition, TATA Indicom. The TATA Group has always believed in returning wealth to the society it serves. Thus, nearly two-third of the equity of TATA sons, the TATA Group's promoter company, is held by philanthropic trusts which have created a host of national institutes in community development, education and research centers, hospitals and scientific and cultural establishments. The trusts also give substantial annual grants and endowments to deserving individuals and institution in the areas of education, healthcare and social upliftment.
By combining ethical values with business acumen, globalization with national interests and core business with emerging ones, the TATA Group aims to be the largest and most respected global brand from India whilst fulfilling its long-standing commitment to improving the quality of life of its stakeholders. TATA AIG General Insurance Company Limited provides general insurance products and services to individuals, small businesses, and corporate customers. It offers a range of general insurance for motor, home, accident and health, travel, energy, marine, property and casualty, and liability, as well as various specialized financial lines. The company was incorporated in 2000 and is based in Mumbai, India. TATA AIG General Insurance Company Limited operates as a subsidiary of The TATA Group.
KEY DEVELOPMENTS FOR UNDEFINED
TATAs Eyeing 26% Stake In TATA AIG Life, TATA AIG General TATA Sons Limited might be in talks to buy 26% stake in TATA AIG Life Company Ltd and TATA AIG General Insurance Company Ltd. respectively from American International Group Inc (AIG). The sources said that, “With the changing dynamics in the global financial markets, the TATAs have made up their mind that they would take a more active role in managing these companies. The proposed acquisition of AIG’s stake is in line with that decision.” A banker said that, “AIG is unlikely to dictate the price in this transaction for two reasons. One, it needs the deal to happen quickly and two, there are not many suitors.”
VISION
To be the fastest growing Life Insurance Company in India, measured by annualized premium growth, procuring
persistent business, delivering first class customer service, adding shareholder value by 2007.
INSURANCE HISTORY
The State of the Insurance Industry
India’s Insurance Industry, private and public, has its roots in the 19th century. The British government set up state-run social protection schemes for its colonial officials, many of which evolved into today’s schemes. The first private insurance company was the Oriental Life Insurance Company, which started in Calcutta in 1818. Under British rule, many insurers operated in India. In 1938, the British passed the Insurance Act, comprehensive insurance legislation, which remains the cornerstone of the insurance industry today. Regulated insurers are divided into two categories: life and general insurance. Life insurance includes products like endowments policies and retirement annuities. General insurance covers all other types of insurance. In 1956, the Indian government nationalized the life insurance industry. The reasons given at the time were high levels of fraud in the industry and a desire to spread insurance more widely, as Nehru noted at time in parliament, “we require life insurance to spread rapidly all over the country and to bring a measure of security to TATA 2 This exchange rate will be used in all calculations of current figures in this report. Good and Bad Practices in Microinsurance TATA-AIG, India 2 people.” The government combined 154 insurance providers and formed the Life Insurance Corporation (LIC) of India. General insurance remained in private hands until 1973 when it too was nationalized. Prior to nationalization, 68 Indian and 45 nonIndian entities sold insurance. All of these were absorbed into one giant corporation, the General Insurance Corporation (GIC) with its four subsidiaries: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited, United India Insurance Company Limited. Despite Nehru’s desires, in the
decades following nationalization, insurance products were designed primarily for those with regular income streams, i.e., those in formal employment. These were overwhelmingly men in urban areas. The poor, working mostly in agriculture, were largely overlooked by these new companies. When the ideological winds of change blew in the early the early 1990s, the Indian government set about liberalizing its insurance markets. It set up a commission of enquiry under the chairmanship of R N Malhotra. The central outcome of the commission was the establishment of the Insurance Regulatory and Development Authority (IRDA) that in turn laid the framework for the entry of private (including foreign) insurance companies. At the beginning of 2005, there were 14 life and 14 non-life insurers operating in India.3 India’s insurance penetration (premiums as a percent of gross domestic product) in 2003 is low at 2.9 percent, and ranks 54th in the world. In premium collection, the record is better, at 19th position collecting US$17 billion in 2003. The 2003 ratio of premiums collected per capita (insurance density) is 16.4. Compared with a world average of 469.6, India’s insurance industry is still at a very nascent stage. Of the US$16.4 per capita expenditure on insurance, a mere US$3.5 is spent on general insurance. This is primarily because in India, non-life insurance is not considered important and people perceive it as an unnecessary expenditure.
Insurance Industry Basics
Issues Observations Name of insurance regulatory body Insurance Regulatory & Development Authority (IRDA) Key responsibilities of the regulatory authority Regulate, promote and ensure orderly growth of the insurance and re-insurance industries Minimum capital requirements for insurance license Rs 100 Crores ( 1 Crore = 1x107 ) ($22.22m) NB: No waivers are granted to microinsurers Other key requirements for an insurance license The IRDA distinguishes between life insurance that includes endowment and annuities, and insurance for all other risks that fall under a
general insurance category. In India, an insurer must form separate entities and cannot sell life insurance and general insurance together on the same policy. Foreign companies can only enter the industry in collaboration with the domestic companies Other key requirements for regulatory compliance Investment in the rural and social sectors (see Section 1.2) 3 A complete land up to date list can be obtained from the website of the IRDA – www.irdaindia.org 4 Swiss Re Sigma No.3 / 2004 Good and Bad Practices in Microinsurance TATA-AIG, India 3 Minimum capital requirement for a Reinsurer Rs 200 Crores (1 Crore = 1x107) ($44.44m) Number of regulated private insurers / value of annual premiums Life Insurance 13 / Rs 3 120.33 crores ($693.41 m) Non-Life 8 / Rs 2257.83 crores ($501.74 m) Number of regulated public insurers / value of total annual premiums Life Insurance 1 / Rs 63 167.60 crores ($14 037.24m) Non-Life 6 / Rs 15099.35 crores ($3355.41m) Number and type of other regulated insurance organizations
WHAT IS INSURANCE
1. The business of insurance is related to the protection of the economic values of assets. Every asset has a value. The asset would have been created through the efforts of the owner. The asset is valuable to the owner, because he expects to get some benefits from it. The benefit may be an income or some thing else. It is a benefit because it meets some of his needs. In the case of a factory or a cow, the product generated by is sold and income generated. In the case of a motor car, it provides comfort and convenience in transportation. There is no direct income. 2. Every asset is expected to last for a certain period of time during which it will perform. After that, the benefit may not be available. There is a life time for a machine in a factory or a cow or a motor car. None of them will last fro ever. The owner is aware of this and he can so manage his affairs that by the end of that period or life time, a substitute is made
available. Thus, he makes sure that the value or income is not lost. However, the asset may get lost earlier. An accident or some other unfortunate event may destroy it or make it non-functional. In that case, the owner and those deriving benefits there from, would be deprived of the benefit and the planned substitute would not have been ready. There is an adverse or unpleasant situation. Insurance is a mechanism that helps to reduce the effect of such adverse situations.
BRIEF HISTORY OF INSUREANCE
3. The business of insurance started with marine business. Traders, who used to gather in the Lloyd's coffee house in London, agreed to share the losses to their goods while being carried by ships. The losses used to occur because of pirates who robbed on the high seas or because of bad weather spoiling the goods or sinking the ship/ the first insurance policy was issued in 1583 in England. In India, insurance began in 1870 with life insurance being transacted by an English company was the Albert. The first Indian insurance company was the Bombay Mutual Assurance Society Ltd, formed in 1970. This was followed by the Oriental Life Assurance Co. 4. Later, the Hindustan Cooperative was formed in Calcutta, the United India in Madras, the Bombay Life in Bombay, the National in Calcutta, the New India in Bombay, the Jupiter in Bombay and the Lakshmi in New Delhi. These were all Indian companies, started as a result of the swadeshi movement in the early 1900s. By the year 1956, when the life insurance business was nationalized and the Life Insurance Corporation of India (LIC) was formed on 1st September 1956, there were 170 companies and 75 provident fund societies transacting life insurance business in India. After the amendments to the relevant laws in 1999, the L.I.C. did not have the exclusive privilege of doing life insurance business in India. By 31/3/2002, eleven new insures had been registered and had begun to transact life insurance business in India.
PURPOSE & NEED OF INSURACE
5. Assets are insured, because they are likely to be destroyed, through accidental occurrences. Such possible occurrences are called perils. Fire, floods, breakdowns, lightning, earthquakes, etc, are perils. If such perils cab case damage it the asset, we say that the asset is exposed to that risk. Perils are the events. Risks are the consequential losses or damages. The risk to an owner of a building, because of the peril of an earthquake, may be a few lakhs or a few crores of rupees, depending on the cost of the building and the contents in it. 6 . The risk only means that there is a possibility of loss or damage. The damage may or may not happen. Insurance is done against the contingence that it may happen. There has to be an uncertainty about the risk. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against. In the case of a human being, death is certain, but the time of death is uncertain. In the case of a person who is terminally ill, the time of earth is not uncertain, though not exactly known. He cannot be insured. 7. Insurance does not protect the asset. It does not prevent its loss due to the peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided, through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It only compensates the losses- and that too, not fully. 8 . Only economic consequences can be insured. If the loss is not financial, insurance may not be possible. Examples of non-economic losses are love and affection of parents, leadership of managers, sentimental attachments to family heirlooms, innovative and creative abilities, etc. 9. The mechanism of insurance is very simple. People who are exposed to the same risks come together and agree
that, if any one of them suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to these risks, which are related to water damage, ship sinking, piracy, etc. Those owning factors are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquakes, lightning, burglary, etc. Like this, different kinds of risks can be identified and separate groups made, including those exposed to such risks. By this method, the heavy loss that any one of them may suffer (all of them may such losses at the same time) is divided into bearable small losses by all. In other words, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all. 10. If a Jumbo Jet with more than 350 passenger's crashes, the loss would run into crores of rupees. No airline would be able to bear such a loss. It is unlikely that many Jumbo Jets will crash at the same time. If 100 airline companies flying Jumbo Jets, come together into an insurance pool, whenever one of the Jumbo Jets in the pool crashes, the loss to be borne by each airline would come down to a few lakhs of rupees. Thus, insurance is a business of "haring". 11. There are certain principles, which make it possible for insurance to remain a fair arrangement. The first is that it is difficult for any one individual to bear the consequences of the risks that he is exposed to. It will become bearable when the community shares the burden. The second is that the peril should occur in an accidental manner. Nobody should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of an arrangement put into place to protect people from the risks they are exposed to. The occurrence has to be random, accidental, and not the deliberate creation of the insured person. 12. The manner in which the loss is to be shared can be determined before-hand. It may be proportional to the risk
that each person is exposed to. This would be indicative of the benefit he would receive if he the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid. 13. The collection to be made from each person in advance is determined on assumption. While it may not be possible to tell beforehand, which person will suffer, it may be possible to tell, on the basis of past experiences, how many person, on an average, may suffer losses.
RESEARCH OBJECTIVES AND APPROACH
The intended outcome of the research program is the provision of practical advice on financial sector policies and reforms relevant to the needs of policymakers in the low income economies. The research will provide policy advice on such issues as: strengthening the efficiency and regulation of the domestic financial sector; boosting domestic savings; enhancing the access of small and medium scale enterprises to credit; the provision of financial services to meet the needs of poor people. The main objective is to increase understanding of the crucial relationship between the parallel strategies of financial development and thereby improve the effectiveness of policy design and implementation.
The Approach
My approach to the research topic is premised on two propositions. The first is that a marked acceleration in higher levels of savings and investment, in particular, private investment. A key function of the financial system is to facilitate increased savings mobilization and to allocate the increased savings to those private investors capable of generating the highest returns to capital. The institutional features of the financial system are crucial for the efficient functioning of financial markets and their distributional impact.
My second premise is that the effectiveness of the financial system in stimulating overall savings and investment and the efficiency with which financial institutions allocate these resources across sectors, depend upon the regulatory regime for financial markets and institutions. Regulatory design, both internal incentive and governance structures and external monitoring and supervision, is a key instrument for financial development. The research program will cover a wide range of topics within the overall remit of financial sector development; various research methodologies will be employed. The focus and content of the research program have been designed to complement and extend the current body of knowledge in the area of development finance.
RESEARCH OBJECTIVE
To find out the expectations of an individual Customer about the Insurance Investment. And what should be done to fulfill the expectations of customers.
RESEARCH SCOPE
The study was conducted within the city limit of Bhavnagar. The aim was to cover as many geographical areas of Bhavnagar as possible and also to get varied demographics.
Sampling method and size
Research methodology states how the research study is under taken. It includes specification of research design source of data, method of primary data collection, sampling design and analysis procedure adopted. Research methodology states what procedures were employed to carry out the research study.
RESERCH FINDINGS About Investment Pattern
Investmenst Pattern
100% 80% 60% 40% 20% 0% 70% 80% 60% 20% Govt Bonds Shares Insurances Mutual Funds
Percentage
Investment AVenues
First of the respondents were asked that whether they are having insurance or not then it was explained that what is adequate Insurance or not on the basis of below formula. Adequate Insurance= (54 Years- present Age)* Yearly Income
Insurance
32%
Having Adequate Insurance Not Having Adequate Insurance
68%
About Private Insurance:
In the survey It was found out that 80% of the people believe in private insurance company as they are professionally and well managed.
About Private Insurance
20%
Believe In Private Insurance Does Not Believe In Private Insurance
80%
INSURANCE AS A SECURITY TOOLS
The United Nations Declaration of human Rights 1948 provides that "Everyone has a right to a standard of living adequate for the health and wellbeing of himself and his family, including food, clothing, housing and medical care and necessary social services and the right to security the event of unemployment, sickness, disability, widowhood or other lack of livelihood in circumstances beyond the control." When the bread winner dies, to that extent, the family's income dies. The economic condition of the family is affected, unless other arrangements come into being to restore the situation. Life insurance provides if this did not happen, another family would be pushed into the lower strata creates a cost on society. The lower strata create a cost on society. Poor people cost the nation by way of subsidies and doles and so on. Poor people also cost by way of larger growth in population, poor education and vagaries in behavior of children. Life insurance tends to reduce such costs. In this sense life insurance business is complementary to the state's efforts in social management.
Under a socialistic system the responsibility of full security would be placed upon the state to find resources for providing social security. In the capitalistic society, provisions of security are largely left to the individuals. The society provides instruments, which can be used in security this aim. Insurance is one of them. In a capitalistic society too, there is a tendency to provide some social security by the state under some schemes, where members are required to contribute e.g. Social Security Schemes in U.K. In India, social security finds a place in TATA constitution. Article 41 requires state, within the limits of its economic capacity and development, to make effective provisions for security right to work, to education and to provide public assistance incase of unemployment, old age, sickness, and disablement and in other cases of undeserved want. Part of the state's obligations to the poorer sections is met through the mechanism of life insurance.
Common Types of Insurance
Life insurance, originally conceived to protect a man's family when his death left them without income, has developed into a variety of policy plans. In a "whole life" policy, fixed premiums are paid throughout the insured's lifetime; this accumulated amount, augmented by compound interest, is paid to a beneficiary in a lump sum upon the insured's death; the benefit is paid even if the insured had terminated the policy. Under "universal life," the insured can vary the amount and timing of the premiums; the funds compound to create the death benefit. With "variable life," the fixed premiums are invested in a portfolio (with earning reinvested), and the death benefit is based on the performance of the investment. In "term life," coverage is for a specified time period (e.g., 5-10 years); such plans do not build up value during the term. Annuity policies, which pay the insured a yearly income after a certain age, have also been developed. In the 1990s, life insurance companies began to allow early payouts to terminally ill patients. Fire
insurance usually includes damage from lightning; other insurance against the elements includes hail, tornado, flood, and drought. Complete automobile insurance includes not only insurance against fire and theft but also compensation for damage to the car and for personal injury to the victim of an accident (liability insurance); many car owners, however, carry only partial insurance. In many states liability insurance is compulsory, and a number of states have instituted so-called no-fault insurance plans, whereby automobile accident victims receive compensation without having to initiate a liability lawsuit, except in special cases. Bonding, or fidelity insurance, is designed to protect an employer against dishonesty or default on the part of an employee. Title insurance is aimed at protecting purchasers of real estate from loss by reason of defective title. Credit insurance safeguards businesses against loss from the failure of customers to meet their obligations. Marine insurance protects shipping companies against the loss of a ship or its cargo, as well as many other items, and so-called inland marine insurance covers a vast miscellany of items, including tourist baggage, express and parcel-post packages, truck cargoes, goods in transit, and even bridges and tunnels. In recent years, the insurance industry has broadened to guard against almost any conceivable risk; companies like Lloyd's will insure a dancer's legs, a pianist's fingers, or an outdoor event against loss from rain on a specified day.
INDIAN INSURANCE INDUSTRY
Insurance
Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:
Life Insurers
•
Life Insurance Corporation of India (LIC) General Insurance Corporation of India (GIC) effect from Dec'2000, a National Reinsurer) (with
General Insurers
•
GIC had four subsidary companies, namely ( with effect from Dec'2000, these subsidaries have been de-linked from the parent company and made as independent insurance companies.
1. 2. 3. 4.
The Oriental Insurance Company Limited The New India Assurance Company Limited National Insurance Company Limited United India Insurance Company Limited.
Yr: 2000-2001 : ( From 2nd April '2000 to 31st December'2001) Insurance Industry in the year 2000-2001 had 16 new entrants, namely:
Life Insurance
S. Registratio Date of No. n Reg. Number 1 2 3 4 5 6 101 104 105 107 109 110 Name of the Company
23.10.200 HDFC Standard Life Insurance Company Ltd. 0 15.11.200 Max New York Life Insurance Co. Ltd. 0 24.11.200 ICICI Prudential Life Insurance Company Ltd. 0 10.01.200 Kotak Mahindra Old Mutual Life Insurance 1 Limited 31.01.200 Birla Sun Life Insurance Company Ltd. 1 12.02.200 TATA AIG Life Insurance Company Ltd. 1
7 8 9 10 11 12
111 114 116 117 133 135
30.03.200 SBI Life Insurance Company Limited . 1 02.08.200 ING Vysya Life Insurance Company Private 1 Limited 03.08.200 Bajaj Allianz Life Insurance Company Limited 1 06.08.200 Metlife India Insurance Company Ltd. 1 04.09.200 Future Generali India Life Insurance Company 7 Limited 19.12.200 IDBI Fortis Life Insurance Company Ltd. 7
General Insurance
S. Registrati Date of Name of the Company No. on Registrati Number on 1 2 3 4 5 6 7 102 103 106 108 113 115 131 23.10.2000 Royal Sundaram Alliance Insurance Company Limited 23.10.2000 Reliance General Insurance Company Limited. 04.12.2000 IFFCO Tokio General Insurance Co. Ltd 22.01.2001 TATA AIG General Insurance Company Ltd. 02.05.2001 Bajaj Allianz General Insurance Company Limited 03.08.2001 ICICI Lombard General Insurance Company Limited. 03-08-2007 Apollo DKV Insurance Company Limited
8 9
132 134
04-09-2007 Future Generali India Insurance Company Limited 16-11-2007 Universal Sompo General Insurance Company Ltd.
Yr: 2001-2002 : ( From 1st Jan 2001 to Dec. 2002) Insurance Industry in this year, so far has 5new entrants; namely
Life Insurance
S.No Registrati . on Number 1 121 Date of Reg. Name of the Company
03.01.200 Reliance Life Insurance Company 2 Limited. 14.05.200 Aviva Life Insurance Co. India Pvt. Ltd. 2
2
122
General Insurance
S.No Registrati . on Number 1 2. 3. 123 124 125 Date of Registration 15.07.2002 27.08.2002 27.08.2002 Name of the Company
Cholamandalam General Insurance Company Ltd. Export Credit Guarantee Corporation Ltd. HDFC-Chubb General Insurance Co. Ltd.
Yr: 2003-2004 : ( From 1st Jan 2003 till Date) Insurance Industry in this year, so far has 1new entrants; namely
Life Insurance
S.N o. 1 Registrati Date of on Reg. Number 127 Name of the Company
06.02.200 Sahara India Insurance Company 4 Ltd.
Yr: 2004-2005 : Insurance Industry in this year, so far has 1new entrants; namely
Life Insurance
S.No. Registration Date of Number Reg. 1 128 Name of the Company
17.11.2005 Shriram Life Insurance Company Ltd.
Yr: 2006-2007 : Insurance Industry in this year, had 1new entrants; namely
Life Insurance
S.N o. Registrati Date of on Reg. Number Name of the Company
1
130
14.07.200 Bharti AXA Life Insurance Company 6 Ltd.
Yr: 2007-2008 : Insurance Industry in this year, had 2 new entrants; namely
Life Insurance
S. Registrati Date of No on Reg. . Number 1 2 133 135 Name of the Company
04.09.200 Future Generali India Life Insurance Company 7 Limited 19.12.200 IDBI Fortis Life Insurance Company Ltd. 7
Yr: 2008-2009 : Insurance Industry in this year, so far has 3 new entrants in Life and 1 new entry in General ; namely
Life Insurance
S. No . 1 Registrati Date of Name of the Company on Reg. Number 136 08.05.2008 Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. 138 27.06.2008 Aegon Religare Life Insurance Company Ltd.
2
3
140
27.06.2008 DLF Pramerica Life Insurance Company Ltd.
General Insurance
S.N o. 1 Registrati Date of on Reg. Number 139 Name of the Company
27.06.200 Bharti Axa General Insurance Company 8 Ltd.
INSURANCE BUSINEES:
Insurance business is divided into four classes : 1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Life Insurers transact life insurance business; General Insurers transact the rest. No composites are permitted as per law. LEGISLATION (as on 1.4.2000): Insurance is a federal subject in India. The primary legislation that deals with insurance business in India is: Insurance Act, 1938, and Insurance Development Authority Act, 1999. Regulatory &
INSURANCE PRODUCTS (as on 1.4.2000) (for latest information get in touch with the current insurers – website information of insurers is provided at the web page for insurers ):
Life Insurance
Popular Products: Endowment Assurance (Participating), and Money Back (Participating). More than 80% of the life insurance business is from these products.
General Insurance
Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory. Tariff Advisory Committee (TAC) lays down tariff rates for some of the general insurance products (please visit website of GIC for details ) 2001 New products have been launched by life insurers. These include linked-products. For details, please visit the websites of life insurers.
INFORMATION
About the insurance industry, the following documents may be helpful: Malhotra Committee Report (The Report of the Committee on Reforms in the Insurance Sector); IRDA's First Annual Report – 2001
MICRO INSURANCE
Micro insurance Legislation
As in much of the developing world, India has a large number of informal insurance schemes. These schemes are often run by cooperatives, NGOs, and other community organizations that pool their members’ premiums to create an insurance fund against a specific peril, for example funeral costs. In many countries, there is specific legislation to regulate these schemes, but in India no such law exists; any individual or institution conducting insurance has to comply with the stipulations of, among other regulations, the 1938 Indian Insurance Act as amended. Compliance with this Act requires, among other conditions, over $21 million of capital to get an insurance licence. Schemes that do not comply with the Act—such in-house insurance offered by MFIs, NGOs and trade unions—operate in a legal vacuum. At present, the IRDA has not taken action against these schemes. However, regulated insurers have expressed their unhappiness to the IRDA about needing to compete against non-regulated insurers. The situation may thus change if regulated insurers place sufficient pressure on the regulator to act. Two possible scenarios may occur: either the development of particular legislation to cater for
microinsurers or active closure of non-regulated insurers. The authors recommend that the IRDA takes the former approach i.e., the development of particular legislation to cater for and support currently unregulated microinsurers. Many unregulated insurance schemes are run by wellintentioned staff and confer positive social benefits. Indeed much of innovation in microinsurance has emerged from unregulated microinsurers. Moreover, informal insurers often sell insurance to clients that regulated insurers ignore. Unregulated microinsurers may hold significant funds on behalf of lowincome clients. The risk of working with these unregulated organisations is that there is no legal framework that ensures that they meet minimum prudential standards and other professional insurance qualifications. In addition, they do not have a statutory ombudsman or other feasible means of enforcing consumer rights.
Rural and Social Sector Obligations
There are two central regulations that have shaped microinsurance in India. The first is a set of regulations published in 2002 entitled the “Obligations of Insurers to Rural Social Sectors.” This is essentially a quota system. It compels insurers to sell a percentage of their policies to de facto low-income clients. It was imposed directly on insurers that entered after the market was liberalised. The old public insurance monopolies have no specified quotas, Good and Bad Practices in Microinsurance TATA-AIG, India 4 but have to ensure that the amount of business done with the specified sectors was not “less than what has been recorded by them for the accounting year ended 31st March, 2002.” Rural areas are all locations outside of officially classified urban areas. Life insurers must sell 7% of total policies by number (not value) in the first year, with increasing amounts of up to 16% in Year 5. With general insurance, 2% of gross premium income must come from rural areas in the first year, 3% in Year 2, and 5% thereafter. The regulations for the rural sector do not specify the income levels of clients directly. They specify that the clients must come from rural
areas. With the great majority of poverty in India located in rural areas, the effect of such a stipulation is to ensure that poor clients are sold policies. At present, the rural quotas are relatively low, so it is possible for many insurers to meet their rural sector targets by selling high value policies to wealthier residents of rural areas, but the quota rises each year. The targets for life insurance are likely to be easier to hit than for general insurance. Consider, for example, how many insurance policies covering huts need to be sold to equal 5% of the premium of a $100,000 house in Bangalore. This regulation has generated massive pressure on insurers to sell microinsurance. Without selling microinsurance, they cannot sell their more profitable products. To date the IRDA has fined a number of insurers for failing to meet their targets. Continued non-compliance to the rural and social obligations could result in suspension of license to operate. The social sector includes low-income groups consisting of unorganized workers and economically vulnerable or backward classes in urban and rural areas, for example Dalits or untouchables. Insurers must cover a specified number of new lives each year from these groups, from 5000 policies in Year 1, up to 20,000 policies in Year 5. It is difficult to assess the costs and benefits of the regulation without further research. On the one hand, the regulation has created a frenzy of interest by regulated insurers to enter into microinsurance. The regulation has also been the motor for important innovation. To date, much of the innovation in other countries has derived from donors, academics, or MFIs working on the issue. In India, in their drive to meet their rural and social sector targets, regulated insurers are developing innovative new products and delivery channels. They bring their considerable resources to this task. The impact of the quota is of course not all positive. There have been unverified reports that some insurers are dumping poorly serviced products on clients solely to meet their targets. As soon as they have met their targets, some have immediately stopped selling microinsurance. This practice is difficult to regulate, as it is harder to police the quality of insurance sold and serviced to
the poor than its quantity. It would certainly be socially unfortunate if the regulation resulted in a mass of poorly serviced products sold at a loss, to enable insurers to concentrate on their more profitable products. This situation would not result in meaningful sustainable financial deepening, but more akin to charity, forced on insurers to allow them to do business in India. Good and Bad Practices in Microinsurance TATA-AIG, India
Concept Paper for Microinsurance Regulation
The next central regulatory document, published by the IRDA in August of 2004, is entitled “Concept Paper on Need for Regulations on Micro-Insurance in India.” While not regulation, it nonetheless reflects the intentions of the regulator. Overall, the Concept Paper is commendable, but there are two significant concerns: 1) the implicit restriction of microinsurance to the partner-agent model; and 2) the lack of product flexibility. There are various models for selling and servicing microinsurance, for example cooperative insurance and NGOs or other institutions providing insurance on their own. These models all have strengths and weaknesses, but overall, with appropriate regulation, they expand the frontier microinsurance provision. By restricting microinsurance provision to the partner-agent model, the IRDA restricts the development of microinsurance. The concept paper also prescribes many of the products features, which may leave insurers with undesirable products that may not be bought by their clients.
Profile of Microinsurance in India
Prior to the passage of the Obligations of Insurers to the Rural and Social Sector, and its resultant partnerships between insurers and MFIs and NGOs, for the most part Indian microinsurance schemes were either some variant of a community-based model or managed by MFIs in-house. An
exception is the Self-employed Women’s Association based in Ahmedabad, one of the world’s microinsurance pioneers. In 1991, SEWA developed a relationship with LIC to act as an agent selling life insurance. In 1992, SEWA developed a health insurance scheme in partnership with the United India Insurance Company. Over the years, it has moved between partner-agent and in-house insurance, although now it only partners with insurance companies and provides integrated life, health and asset coverage for more than 90,000 adults.5 In the community-based model, a group of people get together and essentially develop their own insurance scheme in which they pool their own funds, develop their own rules, and run their own scheme. The Swayamkrushi / Youth Charitable Organization (YCO) is an example of a community-based model that still operates. Based in Andhra Pradesh, it is primarily a savings and credit association with an added insurance feature. The co-operative’s 8,100 members pay an annual insurance premium of Rs 100 ($2.20) and receive insurance cover for life and assets. Their life cover is Rs 15,000 ($333) in the event of a natural death and double that in the event of an accidental death. The fund’s premium pool is held and operated by members of the cooperative. In the in-house model, an MFI or NGO runs an insurance scheme for its microcredit borrowers. For example, SPANDANA, a large MFI also in Andra Pradesh, operates such a scheme. Although its principle business is lending, SPANDANA has introduced a compulsory life and hut insurance scheme. The MFI has dealt with co-variant risks primarily by excluding them. So far, it has made a profit on the scheme because transactions costs are very low. Premiums do not need to be physically collected; they are deduced from the loan amounts. Claims are easily verified by loan officers, and benefits are paid directly by loan 5 For more details, see Garand (2005), “VimoSEWA, India” CGAP Working Group on Microinsurance Good and Bad Practices Case Study No. 16. Geneva: International Labour Organization. Good and Bad Practices in Microinsurance TATA-AIG, India 6 officers. SPANDANA has used the profits from the scheme to provide bursaries for the children of its
clients.6 Although these informal schemes do, on the face it, provide a beneficial social service to lowincome people, they are strictly speaking unregulated. These schemes often circumvent regulations by giving their insurance policies names that do not use the word insurance. Whatever the name of the schemes, their practices contravene the Insurance Act of 1938 as Amended.
TATA AIG INSURACE PRODUCT Single premium unit linked plan
TATA AIG Life Insurance Company Limited (TATA AIG Life) announced the launch of its single premium unit linked plan InvestAssure Plus. This plan combines the security of a life insurance plan and provides the opportunity to earn higher, market linked returns. It is an easy investment policy option for those who are looking at investing lumpsum cash for long-term tenure of 15, 20, 25 and 30 years. The premium paid under this policy is eligible for tax deduction under Section 80C of the Income Tax Act, 1961.
InvestAssure Plus will provide the policyholder with the option of investing under the following five pure investment funds:
• • • • •
Equity Fund; Income Fund; Short Term Fixed Income Fund; Aggressive Growth Fund; Stable Growth Fund.
The policyholder has the option to choose from different investment funds depending on the prevailing market conditions and the risk appetite. According to Trevor Bull, managing director, TATA AIG Life, "The launch of this policy comes close on the heels of the new IRDA guidelines for unit-linked products and the addition of InvestAssure Plus to TATA AIG’S exciting product suite will enable us to fulfill the new needs of TATA AIG’S existing customers and meet the needs of fresh customer type." The new policy allows policyholders the choice to switch between various fund types - debt, equity and balanced depending on market conditions. "Due to its low charge patterns InvestAssure plus will also give the opportunity for higher investment returns," Apart from death and maturity benefits, the policy provides the flexibility of partial withdrawal from the third policy anniversary onwards. The policyholder also has an option to pay additional premiums as top-up premiums at any time with or without uplift on the prevailing sum assured. If during the term of the contract, the total amount of topup premiums paid is greater than 25 per cent of the single premium; then such excess amount of top-up premium will be used to provide additional sum assured subject to underwriting.
TATA AIG Life Insurance Company Ltd on launched its unit-linked insurance plans (ULIP) for superannuation and gratuity schemes in the city, making it the first private life insurance entity offering both traditional and ULIP products in the country. TATA AIG Life has entered into agreements with Franklin Templeton Investments (India) for their nondiscretionary investment advisory services and AIG Global Investment group for their investment advisory services, The ULIP superannuation scheme provides individual members the flexibility to decide on the allocation of their money based on their risk appetite. In case of the ULIP gratuity scheme, the employer or trustee has the flexibility to decide the ratio of investment. TATA AIG Life managing director said, “We are delighted to announce that corporates and institutions can now benefit from TATA AIG’S ULIP as they can invest for their superannuation and gratuity schemes. We are encouraged by TATA AIG’S early success, with millions being invested in this business by some of the big names in the corporate world.” Earlier TATA AIG Life Insurance Company had launched its ULIP - ‘investassure’ - a unit linked insurance plan for individuals.
Launches Insurance
New
Product
Travel
TATA AIG General Insurance Company Limited has launched a new product called TravInsure that can be purchased by customers while making their domestic airline bookings. The TravInsure policy can be purchased online at a price of INR 129 per round trip and covers travelers against
flight delays, medical expenses, lost baggage, flight cancellations. The TravInsure policy will cover damages ranging from INR 1,500 to INR 0.75 million.
CUSTOMER PROTECTION
Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs. 20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained from the offices of LIC and other insurers.
Benefits
Before designing the social products, the preferences of the target market were determined. During the research, it was clear that the target market desired products with a savings element, but at the same time could not afford annual premiums in excess of US$25. It also became clear that the there were slightly wealthier households who, while still poor (with a monthly household income of less than US$125), could afford slightly more expensive products. This finding suggested to TATA-AIG that it needed a diverse portfolio of products to meet the preferences of this heterogeneous market. Unfortunately, it was not actuarially feasible to offer very significant returns to counter inflation at such low premium levels. The two “term return of premium products” (TROP) were designed to be sold for an annual premium of US$7 (Rs 300) and US$17 (Rs 720). These TROP products essentially return the cumulative premiums paid over 15 years plus 25 percent. A further issue emerged once the products were priced. The death cover at higher ages of entry worked out very low. To keep the premium low, it was decided to increase the death benefit and reduce the maturity benefit. This is the reason for the decreasing savings element for the Karuna and Jana Suraksha Yojana products (see Tables 4.3 and 4.4). The
agents have been trained to emphasize the death benefit while selling. The third social product is a 5-year term product where there is no return on maturity, but only a death cover capped at Rs 15000 ($333) with an entry age of between 18 and 40 and at Rs 10,000 ($222) if they enter the scheme in the more risky age group of 41to 55. This offering was designed to suit the needs of pure term cover at the lowest cost so that even the poorest could afford it. Part of the motivation for the product came not from client demand but rather from MFIs that wanted insurance to cover their loans. By far the most successful products have been those offering a TROP, perhaps indicating the importance that clients attach to savings.
TATA AIG Life Invest Assure II
TATA AIG Life Invest Assure II (Invest Assure II) is a unique, flexible insurance plan, which combines the security of a life insurance policy with the opportunity to exploit the upside of market returns by investing in different kinds of securities through multiple fund options. You can direct the investments by creating your own investment fund portfolio from a range of options to suit your needs and preferences.
Key features include
• • •
•
Policy terms of 15, 20 or 30 years. No penalty for surrendering the policy any time after the 6th year. The Sum Assured is a multiple of the Annual Regular Premium payable. The multiple varies according to age at entry and policy term. You have a choice of premium multiples to choose from. Any premium not deducted for coverage and charges may be invested in a wide range of investment
•
vehicles, including: an Equity Fund, Income Fund, Aggressive Growth Fund, Stable Growth Fund, a Short Term Fixed Income Fund and Select Equity Fund. InvestAssure II also offers the flexibility to switch between funds, premium top-ups, partial withdrawal, premium holiday, policy reinstatement, and multiple premium payment modes.
Tax Benefits, Riders and Age Eligibility
Premiums paid under this plan are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Any sum received under this plan is exempt from tax under section 10(10D) of the Income Tax Act, 1961.* Attach Accident, Waiver of premium, Payor Benefit (for juvenile policy) and Critical Illness riders to this policy at a nominal extra cost for added protection.
TATA AIG Life Invest Assure Care
An inspiration that translates into a host of innovative product solutions for you. TATA AIG Life introduces TATA AIG
Life Invest Assure Care (Invest Assure Care), a unique investment linked insurance plan with an in-built Critical Illness benefit for the first 5 years of the policy. Given a choice, most people would like to increase the earning potential of their insurance premium by deciding their own investment and risk limits. Invest Assure Care, a unique, flexible insurance plan combines the security of a life insurance policy with the opportunity to exploit the upside of market returns (however, with increased investment volatility) by providing an option to invest in different kinds of securities through a choice of five fund options. What's more, you can direct the investments by creating your own investment fund portfolio from a range of options to suit your needs and preferences.
Benefits
• • • •
Provides security to your family in case of your unfortunate demise. Gives you the flexibility to choose your funds based on your risk profile. Gives you Return of Premium guarantee on maturity incase you opt for Capital Guarantee Fund Enables you to enjoy market-linked returns with a potential for higher growth.
Provides Critical Illness cover for the first five years of the policy.
Key features include
•
Initial Sum Assured: You have an option to choose either the sum assured or premium you are willing to pay.
•
•
•
•
Top-Up: Single Premium top up is allowed anytime during the period. Minimum Single top-Up Premium is Rs. 5000/- and will be allowed a maximum of four times in a policy year. Top-Up Sum Assured: You have an option to choose an additional sum assured equal to 1.25 or 5 times Single Top-Up Premium, subject to underwriting. Critical Illness (CI) Benefit: InvestAssure Care offers inbuilt Critical Illness (Lumpsum) benefit equal to 50% of the basic Sum Assured for issue ages 18-45 years. This benefit is an integral part of the product and is mandatory. This benefit is applicable for the first 5 years of policy term. This Critical Illness covers the following Critical Illnesses and Surgeries: (a) Cancer (b) Stroke (c) Heart Attack (d) Coronary Bypass Graft Surgery (e) Kidney Failure (f) Major Organ Transplant like Heart, Lung, Liver, Kidney or Pancreas or Bone Marrow Transplant. Choice of Five Fund Options: Growth Maximizer Fund, Growth Enabler Fund, Short Term Fixed Income Fund,Capital Guarantee Fund and Select Equity Fund.
Eligibility
Term of Policy 15 years 20 years Minimum Age at Issue 30 days 30 days Maximum Age Minimum at Issue Annual Premium 45 years Rs.12,000 45 years Rs.12,000
TATA AIG Life Invest Assure Plus
TATA AIG Life Invest Assure Plus(Invest Assure Plus) is a single premium Unit Linked insurance plan especially designed for the investment-savvy. It gives you the flexibility of choosing your own investment strategy, besides providing protection to your loved ones in case of a misfortune. This plan gives you an opportunity to make the most of good market returns, albeit with an increased investment volatility. At the same time, it does not compromise the security that you want to provide to your loved ones.
Multiple benefits of InvestAssure Plus
• • •
Provides security to your family in case of your unfortunate death. Gives you the flexibility to choose your fund based on your risk profile. Enables you to enjoy market-linked returns with a potential for higher growth. Policy terms of 15, 20, 25 or 30 years. No penalty charges for surrendering the policy any time after the 3rd year. Flexibility to choose your Sum Assured, depending on your age profile and your needs. You have a choice of premium multiples to choose from. Any premium not deducted for coverage and charges will be invested in the funds chosen by you viz. Equity Fund, Income Fund, Aggressive Growth Fund, Stable Growth Fund ,a Short Term Fixed Income Fund and Select Equity Fund.
Key features include:
• • • • •
• •
Flexibility to switch between funds and partial withdrawal. InvestAssure Plus also offers Top-ups premiums and the facility to have a Sum assured on the Top-up premium as well.
Tax Benefits
•
Premiums paid under this plan are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Any sum received under this plan is exempt from tax under section 10(10D) of the Income Tax Act, 1961.*
Age Eligibility
Term of Policy 15 years 20 years 25 years 30 years Minimum Age 30 days 30 days 30 days 30 days Maximum Age 60 years 55 years 50 years 45 years Maturity and Death Benefits
Want to know more?
• • • •
Meet an Advisor Download the Product Brochure
Premium Calculator
View
Premium charges, Surrender charges and other charges
Disclaimer
Unit linked insurance plans are popular today. Why?
The demand for Unit Linked Insurance Plans is guided by the returns that the instrument generates and the
strengths of the insurance company. Awareness and knowledge of unit linked insurance plans have increased substantially today as compared to the time they were first launched. Unit Linked Insurance Plans primarily offer protection in the form of life insurance and along with it; also offer the opportunity to earn better returns on the premiums, thus helping the policy holder to accumulate savings. The Indian economy, growing at a brisk pace, has positively impacted the capital market sentiments and the overall investment climate. This has, in some measure, led to the increased popularity of unit linked insurance plans.
How many unit linked products have you launched?
TATA AIG has recently launched its first unit linked insurance produce called ‘Invest Assure”. TATA AIG offers the option of choosing among a variety of funds, which includes three pure funds - Equity, Income and Liquid Fund and two pre-packaged funds - Growth and Balanced Fund. The Equity Fund will invest in listed equity shares whereas the Income Fund will invest primarily in government bonds and fixed income instruments. The Liquid Fund will invest in a variety of liquid options such as treasury bills, short-term Government bonds, bank deposits, commercial papers and other money market securities. The Growth Fund will invest in the pure funds in proportions of 50% to 80% in Equity, 20% to 50% in Income and 0% to 25% in the Liquid Fund. The Balanced Fund will invest in the Equity, Income and Liquid Pure Funds in the proportions of 25% to 55% in Equity, 35% to 70% in Income and 5% to 35% in the Liquid Fund.
Is the Indian customer matured enough to understand the nuances of the product? Absolutely. Heavy consumers of insurance and mutual fund products have responded very favourably towards these products. They are able to immediately identify with the benefits offered. Who is your target audience in case of unit linked plans? Since unit-linked plans appeal to both, insurance and mutual fund consumers, TATA AIG is targeting heavy users in both categories of consumers. Does your product "Invest Assure" offer any minimum guarantee on the returns in case the market tanks out? Like all investment plans that are linked to equity or debt markets, investments in ‘Invest Assure’ are also subject to market risks. Investors are advised to understand the risks involved while choosing the investment options. ‘InvestAssure’, like any other unit linked insurance plan, doesn’t offer any minimum guarantee. How many free switches between funds do you allow in a year. What are the charges for more switches? Under the ‘InvestAssure’ plan investors have the freedom to move between funds and there is no restriction on the quantum of switching between funds. However, this will be without charges for the first FOUR switches in a policy year What are the points that a customer should take into account while purchasing unit-linked products? Investors should carefully consider what their investment priorities are and map them against what kind of risks they can take.
Since these products are directly related to the ups and downs associated with the stock market, when the market sees a downward phase, will the customer not lose? Customers have the flexibility of switching between investment options. These options should ideally be exercised in the event of changes in the market. While transparency is one thing, regularly monitoring the fund is an important aspect. How far will the common man be able to do so considering that insurance products hitherto did not have such features? Unit Linked Insurance Plans are quite transparent. NAVs will be declared on a regular basis enabling the policyholder to assess and monitor the growth of their investments regularly. Will it not make better sense and also mean better returns if an individual invests in mutual funds if returns are what he looks forward to instead of investing in unit linked risk plans since insurance should be for protecting risks? The first promise that a life insurance product makes is to insure life. Life insurance is one product that provides a guaranteed sum assured from the day the policy begins. This ensures that in the unfortunate event of demise of the policyholder, the income flow to his dependents does not cease. And no other financial product can compete with insurance companies in this aspect. In the case of unit linked insurance plans, they primarily offer protection in the form of life insurance and, along with it, also offer the opportunity to earn better returns on the premiums helping the accumulation of savings. A mutual fund, however, is a pure investment avenue, with no life
cover whatsoever. Further, mutual funds are short-term plans, whereas insurance plans have a long-term horizon. The decision to invest in either of the investment avenues would entirely vary from one individual to another. It will depend upon an individual’s financial need which can be assessed by an individual himself or with the help of a financial advisor. How much of the premium component goes into administration, fund management & other charges and how much of it actually constitutes the risk cover? A monthly administration fee, initially of Rs. 38, is automatically deducted from the account. This rate will be revised every 1st April in accordance with Retail Price Index changes. Besides the fund management fee can vary anywhere between 0.90%-1.75% depending on the fund chosen. The cost of insurance is also deducted every month from the InvestAssure account.
COMPARISION BETWEEN LIC & TATA AIG
SR FEATURES LIC KOMAL NO. JEEVAN 18-age of the child 1. Term
2.
TATA AIG MAHALIFE JR
12 years Rs.50,000/-
Minimum SA
3.
Mode of payment Loan Bonus
4. 5.
Min. SA 1,00,000 Mix. SA 25,00,000 (pol.will be issued only in multiples of Rs.25,000/Single premium, yearly, half-yearly, SSS and quarterly No loan can be granted
Annual, bi-annual, quarterly or mothly.
__
6.
Maturity benefit
Guaranteed additions
Eligible to avail a loan against Bonus from 6th years onwards. The bonus is declared based on company’s performance & has been assumed at the rate of 0.5% in the years 6-9, 1% in the years 10-19 & 1.5% from year 20 onwards. Payment of sum plus assured on
7.
Death benefit
loyalty addition if any (A)Before commencement of risk-refund of premium in full. (B)After commencement of risk-sum assured plus guaranteed addition plus loyalty additions without any deduction/adjustme nt of installment benefit received earlier. No medical examination of LA is required Under section 88 & section 10(10D) as per the prevailing income tax laws. Combination with jeevan chhaya would be an ideal product mix to receive the installments of cash flow before the attainment of majority for new born child. Similar combination at later stage would
maturity of policy at 100 years. Payment of SA on death.
8.
Medical examination Tax benefit
No medical tests All benefits tax – free. Premiums eligible for tax exemption as per current income Tax Act. Option to attach any of TATA AIG’s other benefit like Accident benefit, Disability benefit, Term benefit or critical illness to this plan.
9.
10.
Product Mix
supplement with cash flow during early settlement in career, and many other plan this product is mix.
LIFE INSURANCE & NON-LIFE INSURANCE COMPANY Life Insurance Companies
• • • • • • • • • •
AVIVA Life Insurance Bajaj Allianz Life Insurance ICICI Prudential Life Insurance Kotak Mahindra Old Mutual Life Insurance Life Insurance Corporation of India Life Insurance Council Max New York Life Insurance Reliance Life Insurance SBI Life Insurance TATA AIG Life Insurance
Non-Life Insurance Companies
Bajaj Allianz General Insurance • Cholamandalam MS General Insurance • ICICI Lombard General Insurance • IFFCO Tokio General Insurance • Reliance General Insurance • Royal Sundaram General Insurance • TATA AIG General Insurance Universal Sompo General Insurance
•
OVERALL SUGGESTION
TATA AIG’s is found to be a one very popular leading industry serving in insurance by joint venture of TATA AIG INSURANCE CO. LTD. It has been ranked 2 by the noted magazines in business worlds for TATA AIG there is some of suggestions like. The company should take advantage of all the favourable factors, which developing and expanding the activities and there by increasing the market share, which ultimately results into increasing turnover and profit. Company should make more flexible plans Company should use new techniques to analyse between competitor & Company should find more effective ways to grow in booming market.
OVARALL CONCLUSION
At summing up the report, I would like to highlight here that TATA AIG INSURANCE CO. LTD. has bright and pros porous future. After taking the training in this unit I find that following points; • TATA AIG makes excellent efforts for achiving the target market share • TATA AIG always invites suggestions form its employee to give a full opportunity to develop their carrier and human resource opportunity • TATA AIG INSURANCE CO. LTD. Has a very good public relation and maintains a very high reputation in insurance sector 7 • TATA AIG has a very wide international market.
BIBLIOGRAPHY
* PAMPLETS OF TATA AIG PRODUCTS • STFF GUINDANCE AT BHAVNAGAR BRANCH • WEBSITE :- WWW.TATAAIG.COM • WEBSITE :- WWW.HIESTORY OF INSURACE.COM • REPORTS BY AGENCIES
doc_794144504.doc
Tata Group is an Indian multinational conglomerate company headquartered in Mumbai, Maharashtra, India
EXECUTIVE SUMMARY
TATA-AIG entered into microinsurance as a condition for acquiring a license to sell insurance in India. Unlike many other insurance companies, the CEO of TATA-AIG, the Director Alternate Channels, immediately saw the benefits of microinsurance. These included fulfilment of corporate social responsibility; use of the microinsurance to get the brand into a new market and as a means of developing a good relationship with the Indian insurance regulator. The Insurance Regulatory and Development Authority (IRDA) feels strongly about the importance of microinsurance and the need for private insurers to play a role in serving the rural and social sectors. The CEO realised that microinsurance would require innovative thinking because insurance products for low-income households was not just normal insurance with lower premiums and benefits. In particular, he realised that selling microinsurance would require a new distribution mechanism. He created a specialised microinsurance department within TATA-AIG called the rural and social team and provided it with the support and resources it needed. In particular, he did not pressure it to make immediate profits and gave it latitude to consider alternative distribution strategies. head up the team developing microinsurance distribution models. At first, the rural and social team decided to collaborate with MFIs using a partner-agent model. The MFI became the agent selling and servicing the products in return for commission income. The limitations of this strategy soon became clear. Many insurers were seeking to develop relationships with microfinance institutions, but there were not enough good MFIs to go around. So the rural and social team developed a model of micro-agents. In this model, TATA-AIG would obtain recommendations of NGOs that had a good relationship with a local community in an area it wished to sell microinsurance. It would develop a partnership with the NGO. In return for a consulting fee, the NGO would provide suggestions on members of the community who could be good agents for microinsurance policies (micro-agents). If
the suggested people show an interest in becoming microagents, they are asked to form into groups of peers. The group, referred to in the TATA-AIG model as a community rural insurance group (CRIG), operates in a similar fashion to an insurance agent’s firm. TATA-AIG helps the group leader obtain an agent’s license. The members of the group all refer policies for their own account, but the leader with the agent’s license submits the policies and receives an additional commission for the extra work she does. The model relies on direct marketing similar to that used by firms such as Tupperware and Avon. The NGO can do a variety of tasks in this model including aggregating the premiums and sending them on as a single sum to TATA-AIG, allowing the agents to use their offices to conduct business, playing a role in the training of micro-agents, and helping to distribute benefits. The model thus has some additional positive externalities by providing a new income stream for rural NGOs and for micro-agents. Good and Bad Practices in Microinsurance TATA-AIG, India v TATA-AIG’s rural and social team is in the process of developing and establishing in distribution network. Consequently, the current figures on number of clients served and the costs of servicing need to be read with caution. To date, TATA-AIG has sold 34 100 term and endowment life policies from March 2002 to June 2005, of which more than half were sold to women. These products have thus far generated a premium income of $122 000. The total cost of establishing the channel to date is $234 000.1 This paper provides a broad overview of how the microinsurance programme at TATA-AIG emerged and how it operates. It places particular focus on the micro-agent. Because of the low value of microinsurance premiums, low cost distribution is critical in microinsurance. In its microagent model, TATA-AIG has introduced a new and exciting distribution methodology to microinsurance in India. The scheme’s benefits and possible shortcomings are discussed in the paper. While the micro-agent model holds much promise, the scheme is still too new to be definitively declared a success or failure. 1 The above cost is only the overhead cost of establishing the channel and includes
expenses such as TATA-AIG’s wage costs, travel and training expenses. It does not include claims, other policyholder benefits and the agents’ commission. Good and Bad Practices in Microinsurance TATA-AIG, India
COMPANY HISTORY
The TATA Group
The TATA Group comprises 98 operating companies in seven business sectors: information systems and communications; engineering; materials; services; energy; consumer products; and chemicals. Jamsetji TATA founded the Group in the mid 19th century, a period when India had just set out on the road to gaining independence from British rule. Consequently, Jamsetji TATA and those who followed him aligned business opportunities with the objective of nation building. This approach remains enshrined in the Group's ethos to this day. The TATA Group is one of India's largest and most respected business conglomerates, with revenues in 200607 of $28.8 billion (Rs129,994 crore), the equivalent of about 3.2 per cent of the country's GDP, and a market capitalisation of $72.8 billion as on January 10, 2008. TATA companies together employ some 289,500 people. The Group's 27 publicly listed enterprises — among them stand out names such as TATA Steel, TATA Consultancy Services, TATA Motors and TATA Tea — have a combined market capitalisation that is the highest among Indian business houses in the private sector, and a shareholder base of over 2.9 million. The TATA Group has operations in more than 85 countries across six continents, and its companies export products and services to 80 countries. The TATA family of companies shares a set of five core values: integrity, understanding, excellence, unity and responsibility. These values, which have been part of the Group's beliefs and convictions from its earliest days,
continue to guide and drive the business decisions of TATA companies. The Group and its enterprises have been steadfast and distinctive in their adherence to business ethics and their commitment to corporate social responsibility. This is a legacy that has earned the Group the trust of many millions of stakeholders in a measure few business houses anywhere in the world can match. The TATA Group comprises 96 companies in seven business sectors. 65.8% of the ownership of TATA Group is held by the charitable trust of TATA.
American International Group, Inc. (AIG)
American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. The TATA Group is one of the largest and most respected industrial houses in the country, while AIG is a leading US based insurance and financial services company with a presence in over 130 countries and jurisdictions around the world.
AIG INDIA
AIG India, the Indian arm of AIG, established its presence in India in 1994. AIG entered India in 1945, prior to nationalization of the insurance sector, and had offices n several Indian cities. On opening up of the insurance sector to private insurance company's in2000, AIG and the TATA Group formed a Joint venture, TATA AIG. AIG and its affiliate funds have invested approximately $450 m in private equity in India. These direct investments have been made in telecommunication. And toll roads & bridges in the e infrastructure sector. Besides, investments have also been made in the manufacturing, technology, pharmaceuticals and retailing sector. AIG continues to look with interest for made direct investment opportunities in these sectors and in new emerging sectors like biotechnology, IT-enabled services etc.
'Bailout won't affect AIG's India business'
When contacted, a customer care executive said TATA AIG has got adequate capital to meet the liabilities. As per the IRDA norms, certain amount has to be kept in reserve for meeting liabilities. Customers holding ULIP policy should not be worried, as the money is invested in the Indian market, the executive said.
More India business stories
The statement said that the recent developments in the New York Financial Markets have caused concern in the financial markets in India.
INTRODUCTION TO TATA AIG
The non-life insurance arm, TATA AIG General Insurance Company, which started its operation in India on Jan 22, 2001, offers the complete range of insurance for automobile, home personal, accident, travel, energy, marine, property and casualty, as well as several specialized financial lines. TATA AIG Life InvestAssure Extra(InvestAssureExtra) is a unique, Investment linked insurance plan for protection. Given a choice, most people would like to increase the earning potential of their insurance premium by deciding their own investment and risk limits. It combines the security of a life insurance policy with the opportunity to exploit the upside of market returns (subject to investment volatility) by providing an option to invest in different kinds of securities through multiple fund options like - Growth Maximiser Fund, Growth Enabler Fund, Capital Guarantee Fund and Short Term Fixed Income Fund. What’s more, you can direct the investments by creating your own investment fund portfolio from a range of options to suit your needs and preferences. Note: This product is only for customers of premier banks.
Key features include:
* Provides security to your family in case of your unfortunate demise. * Gives you the flexibility to choose your funds based on your risk profile. * Gives you Return of Premium guarantee on maturity in case you opt for Capital Guaranteed Fund**. * Provides an in-built Payor Benefit for juvenile ages (0-17 years). * Enables you to enjoy market-linked returns with a potential for higher growth. *Guarantee is applicable only if all due premiums have been paid. The guarantee will not apply on premium allocated towards other funds and on top-up premiums.
TATA AIG General Insurance Company Ltd
TATA AIG General Insurance Company Ltd. (TATA AIG) is a joint venture between the TATA Group and American International Group, Inc. (AIG). TATA AIG combines the strength and integrity of the TATA Group with AIG's international expertise and financial strength. The TATA Group holds 74 per cent stake in TATA AIG, while AIG holds the balance 26 per cent stake. TATA AIG General Insurance Company Limited, which started its operations in India on January 22, 2001 offers the complete range of insurance for automobile, home, personal accident, travel, energy, marine, property and casualty, as well as several specialized financial lines.
The TATA Group is one of the largest and most respected industrial houses in the country, while AIG is a leading US based insurance and financial services company with a presence in over 130 countries and jurisdictions around the world.
The various policies and services by TATA AIG Life include INDIVIDUALS: Children: o Assure Career Builder o Assure Educare At 18 & Assure Educare At 21 o Assure 21 Years Money Saver o InvestAssure II o Invest Assure Plus o Mahalife o Mahalife Gold o TATA AIG Life Nirbhay Life
Adults: o Assure 1/5/10/15/20/25 and 60 years Lifeline Plans Assure 10/ 20 / 30 years Security & Growth Plans o Assure 21 years Money Saver o Assure Golden Years Plan o InvestAssure II o InvestAssure Extra o InvestAssure Gold o InvestAssure Plus o LIFE Plus o MahaLife
o o o o o o
MahaLife Gold Raksha 10/15/20/25 ShubhLife TATA AIG Health First TATA AIG Life Health Protector - 5 Year Guaranteed Renewal Accident and Health Plan TATA AIG Life Nirbhay Life
Retirement: • Assure Golden Years Plan • Invest Assure II • Invest Assure Gold • Mahalife • Mahalife Gold • Nirvana • Nirvana Plus CORPORATIONS Employee Benefits: o Group Term Life o Group Term Life In Lieu of EDLI Credit Life: o Group Credit Card Term Insurance Protection Plan & Credit Shield Plus. o Group Single Premium Mortgage Reducing Term Insurance Plan / Group Regular Premium Mortgage Reducing Term Insurance Plan o Group Single Premium Personal Loan Reducing Term Insurance Protection Plan / Group Regular Premium Personal Loan Reducing Term Insurance Protection Plan Group Pensions: • TATA AIG Comprehensive Superannuation (Non-Unit Linked) Scheme • TATA AIG Comprehensive Gratuity Scheme (Non-Unit Linked) • Retirement Assure Group Superannuation Scheme (Unit Linked)
•
Retirement Assure Group Gratuity Scheme (Unit Linked)
MICRO INSURANCE
• • •
Navkalyan Yojana Ayushman Yojana Sampoorn Bima Yojana
TATA AIG LIFE FUNDS • NAV For Individual Life Products • NAV For Group Products • Fund Performance - Life Portfolio • Fund Performance - Pensions Portfolio TATA AIG General Insurance Co Ltd offers various policies and products covering vehicle insurance - car insurance, two wheeler insurance and auto insurance, health insurance providing medical insurance and Mediclaim facilities, health protection and care plus, motor insurance, overseas travel insurance and many other services namely: INDIVIDUAL PRODUCTS: • Motor Insurance:Auto Secure • Home Insurance: Fire Cover, Supreme Cover, PrePackaged Cover and Privilege • Accidental and Health Insurance: Accident Guard, Secured Future Plan, Hospital Care, Maharaksha, Healthcare Plus and Criticare • Travel Insurance: Travel Guard, Student Guard, Asia Travel Guard and Domestic Travel Guard. SMALL BUSINESS INSURANCE PRODUCTS: • Society Insurance Policy • Office Policy
• •
Manufacturing Unit - Package Policy
CORPORATES:
• • • • • • •
Accident and Health: Group Personal Accident, Group Multi Guard and Voluntary Employee Benefits Travel Energy: Contractor's All Risks, Erection All Risks, Boiler and Machinery, Chemical, Utilities and Oil & Petroleum Property: Standard Property Insurance Coverages, Business Guard and Risk Management Marine: eMarine and Marine Loss Control (MLCE) Liability: Financial Lines, Casualty Lines and Trade Credit Insurance Corporate Fleet
Techno Marketing Group
COMPANY OVERVIEW
The TATA GROUP
The TATA group is India's best-known industrial group in the private sector with a turnover of around US $ 10.4 billion (equivalent to 2.4% of India's GDP). It is India's most respected private business group. With 219000 employees across 94 major companies, it is also India's largest employer in the private sector. Founded by Jamsetji TATA in the 1860s, the TATA group's early years were inspired by the spirit of nationalism. The TATA group pioneered several firsts in Indian industry: India's first private sector steel mill, first private sector power utility, first luxury hotel chain, and first international airline, amongst others. In more recent times, the TATA group's pioneering spirit continues to be showcased by companies like TATA Consultancy Services (TCS), today Asia's largest software and services company, and TATA Engineering, the first carmaker in a developing country to design and produce a car from the ground up.
The 5 core values of the Group
The TATA group has always sought to be a value-driven organization. These values continue to direct the group's growth and businesses. The five core TATA values underpinning the way we do business are:
Integrity
We must conduct TATA’S business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny.
Understanding
We must be caring, show respect, compassion and humanity for TATA’S colleagues and customers around the world and always work for the benefit of India.
Excellence
We must constantly strive to achieve the highest possible standards in TATA day to day work and in the quality of the goods and services we provide.
Unity
We must work cohesively with TATA colleagues across the group and with TATA customers and partners around the world, building strong relationships based on tolerance, understanding and mutual cooperation.
Responsibility
We must continue to be responsible, sensitive to the countries, communities and environments in which we work, always ensuring that what comes from the people goes back to the people many times over.
Business Sectors
The TATA Group operates business in seven key industry sectors. The chart below illustrates how, in percentage terms, TATA companies in each of these sectors contribute to the overall makeup of the group. The table follows the group's sector wise financial performance.
TATA Group figures:
Year 2002-03 2001-02 2000-01 1999-00 Total turnover 542270 494568 412906 386071 Sales Value of turnover assets 521337 50927 479999 400623 371535 496222 447341 417381 Gross PAT block 434809 38926 403647 34307 352938 10982 329014 9873 Export s 130764 125738 65120 50170
Group Companies
There are 80 companies across seven sectors.
Some of them are:
Engineering
Materials
Energy
Chemicals * TATA Chemicals * Rallis India
* TATA * TATA steel * TATA Motors * TATA power * TATA Metaliks Cummins * TATA * Telco Refractoriness Consumerprodu Communication & Services cts IT * TATA Tea * TATA Tetley * Titan Industries * TATA Telecom * TATA Teleservices * TATA Consultancy * CMC
The TATA brand is recognized as the largest homegrown brand in India and the most respected brand across consumer segments. The TATA Group's stable of brands also include many national and some internationally renowned product and service brands, including TATA Indica, TATA Indigo, TATA Safari, Taj(Hotels, Resorts & Palaces), Voltas, TATA Tea, TATA Sault, Titen, Tanishq, Westside and the largest addition, TATA Indicom. The TATA Group has always believed in returning wealth to the society it serves. Thus, nearly two-third of the equity of TATA sons, the TATA Group's promoter company, is held by philanthropic trusts which have created a host of national institutes in community development, education and research centers, hospitals and scientific and cultural establishments. The trusts also give substantial annual grants and endowments to deserving individuals and institution in the areas of education, healthcare and social upliftment.
By combining ethical values with business acumen, globalization with national interests and core business with emerging ones, the TATA Group aims to be the largest and most respected global brand from India whilst fulfilling its long-standing commitment to improving the quality of life of its stakeholders. TATA AIG General Insurance Company Limited provides general insurance products and services to individuals, small businesses, and corporate customers. It offers a range of general insurance for motor, home, accident and health, travel, energy, marine, property and casualty, and liability, as well as various specialized financial lines. The company was incorporated in 2000 and is based in Mumbai, India. TATA AIG General Insurance Company Limited operates as a subsidiary of The TATA Group.
KEY DEVELOPMENTS FOR UNDEFINED
TATAs Eyeing 26% Stake In TATA AIG Life, TATA AIG General TATA Sons Limited might be in talks to buy 26% stake in TATA AIG Life Company Ltd and TATA AIG General Insurance Company Ltd. respectively from American International Group Inc (AIG). The sources said that, “With the changing dynamics in the global financial markets, the TATAs have made up their mind that they would take a more active role in managing these companies. The proposed acquisition of AIG’s stake is in line with that decision.” A banker said that, “AIG is unlikely to dictate the price in this transaction for two reasons. One, it needs the deal to happen quickly and two, there are not many suitors.”
VISION
To be the fastest growing Life Insurance Company in India, measured by annualized premium growth, procuring
persistent business, delivering first class customer service, adding shareholder value by 2007.
INSURANCE HISTORY
The State of the Insurance Industry
India’s Insurance Industry, private and public, has its roots in the 19th century. The British government set up state-run social protection schemes for its colonial officials, many of which evolved into today’s schemes. The first private insurance company was the Oriental Life Insurance Company, which started in Calcutta in 1818. Under British rule, many insurers operated in India. In 1938, the British passed the Insurance Act, comprehensive insurance legislation, which remains the cornerstone of the insurance industry today. Regulated insurers are divided into two categories: life and general insurance. Life insurance includes products like endowments policies and retirement annuities. General insurance covers all other types of insurance. In 1956, the Indian government nationalized the life insurance industry. The reasons given at the time were high levels of fraud in the industry and a desire to spread insurance more widely, as Nehru noted at time in parliament, “we require life insurance to spread rapidly all over the country and to bring a measure of security to TATA 2 This exchange rate will be used in all calculations of current figures in this report. Good and Bad Practices in Microinsurance TATA-AIG, India 2 people.” The government combined 154 insurance providers and formed the Life Insurance Corporation (LIC) of India. General insurance remained in private hands until 1973 when it too was nationalized. Prior to nationalization, 68 Indian and 45 nonIndian entities sold insurance. All of these were absorbed into one giant corporation, the General Insurance Corporation (GIC) with its four subsidiaries: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited, United India Insurance Company Limited. Despite Nehru’s desires, in the
decades following nationalization, insurance products were designed primarily for those with regular income streams, i.e., those in formal employment. These were overwhelmingly men in urban areas. The poor, working mostly in agriculture, were largely overlooked by these new companies. When the ideological winds of change blew in the early the early 1990s, the Indian government set about liberalizing its insurance markets. It set up a commission of enquiry under the chairmanship of R N Malhotra. The central outcome of the commission was the establishment of the Insurance Regulatory and Development Authority (IRDA) that in turn laid the framework for the entry of private (including foreign) insurance companies. At the beginning of 2005, there were 14 life and 14 non-life insurers operating in India.3 India’s insurance penetration (premiums as a percent of gross domestic product) in 2003 is low at 2.9 percent, and ranks 54th in the world. In premium collection, the record is better, at 19th position collecting US$17 billion in 2003. The 2003 ratio of premiums collected per capita (insurance density) is 16.4. Compared with a world average of 469.6, India’s insurance industry is still at a very nascent stage. Of the US$16.4 per capita expenditure on insurance, a mere US$3.5 is spent on general insurance. This is primarily because in India, non-life insurance is not considered important and people perceive it as an unnecessary expenditure.
Insurance Industry Basics
Issues Observations Name of insurance regulatory body Insurance Regulatory & Development Authority (IRDA) Key responsibilities of the regulatory authority Regulate, promote and ensure orderly growth of the insurance and re-insurance industries Minimum capital requirements for insurance license Rs 100 Crores ( 1 Crore = 1x107 ) ($22.22m) NB: No waivers are granted to microinsurers Other key requirements for an insurance license The IRDA distinguishes between life insurance that includes endowment and annuities, and insurance for all other risks that fall under a
general insurance category. In India, an insurer must form separate entities and cannot sell life insurance and general insurance together on the same policy. Foreign companies can only enter the industry in collaboration with the domestic companies Other key requirements for regulatory compliance Investment in the rural and social sectors (see Section 1.2) 3 A complete land up to date list can be obtained from the website of the IRDA – www.irdaindia.org 4 Swiss Re Sigma No.3 / 2004 Good and Bad Practices in Microinsurance TATA-AIG, India 3 Minimum capital requirement for a Reinsurer Rs 200 Crores (1 Crore = 1x107) ($44.44m) Number of regulated private insurers / value of annual premiums Life Insurance 13 / Rs 3 120.33 crores ($693.41 m) Non-Life 8 / Rs 2257.83 crores ($501.74 m) Number of regulated public insurers / value of total annual premiums Life Insurance 1 / Rs 63 167.60 crores ($14 037.24m) Non-Life 6 / Rs 15099.35 crores ($3355.41m) Number and type of other regulated insurance organizations
WHAT IS INSURANCE
1. The business of insurance is related to the protection of the economic values of assets. Every asset has a value. The asset would have been created through the efforts of the owner. The asset is valuable to the owner, because he expects to get some benefits from it. The benefit may be an income or some thing else. It is a benefit because it meets some of his needs. In the case of a factory or a cow, the product generated by is sold and income generated. In the case of a motor car, it provides comfort and convenience in transportation. There is no direct income. 2. Every asset is expected to last for a certain period of time during which it will perform. After that, the benefit may not be available. There is a life time for a machine in a factory or a cow or a motor car. None of them will last fro ever. The owner is aware of this and he can so manage his affairs that by the end of that period or life time, a substitute is made
available. Thus, he makes sure that the value or income is not lost. However, the asset may get lost earlier. An accident or some other unfortunate event may destroy it or make it non-functional. In that case, the owner and those deriving benefits there from, would be deprived of the benefit and the planned substitute would not have been ready. There is an adverse or unpleasant situation. Insurance is a mechanism that helps to reduce the effect of such adverse situations.
BRIEF HISTORY OF INSUREANCE
3. The business of insurance started with marine business. Traders, who used to gather in the Lloyd's coffee house in London, agreed to share the losses to their goods while being carried by ships. The losses used to occur because of pirates who robbed on the high seas or because of bad weather spoiling the goods or sinking the ship/ the first insurance policy was issued in 1583 in England. In India, insurance began in 1870 with life insurance being transacted by an English company was the Albert. The first Indian insurance company was the Bombay Mutual Assurance Society Ltd, formed in 1970. This was followed by the Oriental Life Assurance Co. 4. Later, the Hindustan Cooperative was formed in Calcutta, the United India in Madras, the Bombay Life in Bombay, the National in Calcutta, the New India in Bombay, the Jupiter in Bombay and the Lakshmi in New Delhi. These were all Indian companies, started as a result of the swadeshi movement in the early 1900s. By the year 1956, when the life insurance business was nationalized and the Life Insurance Corporation of India (LIC) was formed on 1st September 1956, there were 170 companies and 75 provident fund societies transacting life insurance business in India. After the amendments to the relevant laws in 1999, the L.I.C. did not have the exclusive privilege of doing life insurance business in India. By 31/3/2002, eleven new insures had been registered and had begun to transact life insurance business in India.
PURPOSE & NEED OF INSURACE
5. Assets are insured, because they are likely to be destroyed, through accidental occurrences. Such possible occurrences are called perils. Fire, floods, breakdowns, lightning, earthquakes, etc, are perils. If such perils cab case damage it the asset, we say that the asset is exposed to that risk. Perils are the events. Risks are the consequential losses or damages. The risk to an owner of a building, because of the peril of an earthquake, may be a few lakhs or a few crores of rupees, depending on the cost of the building and the contents in it. 6 . The risk only means that there is a possibility of loss or damage. The damage may or may not happen. Insurance is done against the contingence that it may happen. There has to be an uncertainty about the risk. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against. In the case of a human being, death is certain, but the time of death is uncertain. In the case of a person who is terminally ill, the time of earth is not uncertain, though not exactly known. He cannot be insured. 7. Insurance does not protect the asset. It does not prevent its loss due to the peril. The peril cannot be avoided through insurance. The peril can sometimes be avoided, through better safety and damage control management. Insurance only tries to reduce the impact of the risk on the owner of the asset and those who depend on that asset. It only compensates the losses- and that too, not fully. 8 . Only economic consequences can be insured. If the loss is not financial, insurance may not be possible. Examples of non-economic losses are love and affection of parents, leadership of managers, sentimental attachments to family heirlooms, innovative and creative abilities, etc. 9. The mechanism of insurance is very simple. People who are exposed to the same risks come together and agree
that, if any one of them suffers a loss, the others will share the loss and make good to the person who lost. All people who send goods by ship are exposed to these risks, which are related to water damage, ship sinking, piracy, etc. Those owning factors are not exposed to these risks, but they are exposed to different kinds of risks like, fire, hailstorms, earthquakes, lightning, burglary, etc. Like this, different kinds of risks can be identified and separate groups made, including those exposed to such risks. By this method, the heavy loss that any one of them may suffer (all of them may such losses at the same time) is divided into bearable small losses by all. In other words, the risk is spread among the community and the likely big impact on one is reduced to smaller manageable impacts on all. 10. If a Jumbo Jet with more than 350 passenger's crashes, the loss would run into crores of rupees. No airline would be able to bear such a loss. It is unlikely that many Jumbo Jets will crash at the same time. If 100 airline companies flying Jumbo Jets, come together into an insurance pool, whenever one of the Jumbo Jets in the pool crashes, the loss to be borne by each airline would come down to a few lakhs of rupees. Thus, insurance is a business of "haring". 11. There are certain principles, which make it possible for insurance to remain a fair arrangement. The first is that it is difficult for any one individual to bear the consequences of the risks that he is exposed to. It will become bearable when the community shares the burden. The second is that the peril should occur in an accidental manner. Nobody should be in a position to make the risk happen. In other words, none in the group should set fire to his assets and ask others to share the costs of damage. This would be taking unfair advantage of an arrangement put into place to protect people from the risks they are exposed to. The occurrence has to be random, accidental, and not the deliberate creation of the insured person. 12. The manner in which the loss is to be shared can be determined before-hand. It may be proportional to the risk
that each person is exposed to. This would be indicative of the benefit he would receive if he the peril befell him. The share could be collected from the members after the loss has occurred or the likely shares may be collected in advance, at the time of admission to the group. Insurance companies collect in advance and create a fund from which the losses are paid. 13. The collection to be made from each person in advance is determined on assumption. While it may not be possible to tell beforehand, which person will suffer, it may be possible to tell, on the basis of past experiences, how many person, on an average, may suffer losses.
RESEARCH OBJECTIVES AND APPROACH
The intended outcome of the research program is the provision of practical advice on financial sector policies and reforms relevant to the needs of policymakers in the low income economies. The research will provide policy advice on such issues as: strengthening the efficiency and regulation of the domestic financial sector; boosting domestic savings; enhancing the access of small and medium scale enterprises to credit; the provision of financial services to meet the needs of poor people. The main objective is to increase understanding of the crucial relationship between the parallel strategies of financial development and thereby improve the effectiveness of policy design and implementation.
The Approach
My approach to the research topic is premised on two propositions. The first is that a marked acceleration in higher levels of savings and investment, in particular, private investment. A key function of the financial system is to facilitate increased savings mobilization and to allocate the increased savings to those private investors capable of generating the highest returns to capital. The institutional features of the financial system are crucial for the efficient functioning of financial markets and their distributional impact.
My second premise is that the effectiveness of the financial system in stimulating overall savings and investment and the efficiency with which financial institutions allocate these resources across sectors, depend upon the regulatory regime for financial markets and institutions. Regulatory design, both internal incentive and governance structures and external monitoring and supervision, is a key instrument for financial development. The research program will cover a wide range of topics within the overall remit of financial sector development; various research methodologies will be employed. The focus and content of the research program have been designed to complement and extend the current body of knowledge in the area of development finance.
RESEARCH OBJECTIVE
To find out the expectations of an individual Customer about the Insurance Investment. And what should be done to fulfill the expectations of customers.
RESEARCH SCOPE
The study was conducted within the city limit of Bhavnagar. The aim was to cover as many geographical areas of Bhavnagar as possible and also to get varied demographics.
Sampling method and size
Research methodology states how the research study is under taken. It includes specification of research design source of data, method of primary data collection, sampling design and analysis procedure adopted. Research methodology states what procedures were employed to carry out the research study.
RESERCH FINDINGS About Investment Pattern
Investmenst Pattern
100% 80% 60% 40% 20% 0% 70% 80% 60% 20% Govt Bonds Shares Insurances Mutual Funds
Percentage
Investment AVenues
First of the respondents were asked that whether they are having insurance or not then it was explained that what is adequate Insurance or not on the basis of below formula. Adequate Insurance= (54 Years- present Age)* Yearly Income
Insurance
32%
Having Adequate Insurance Not Having Adequate Insurance
68%
About Private Insurance:
In the survey It was found out that 80% of the people believe in private insurance company as they are professionally and well managed.
About Private Insurance
20%
Believe In Private Insurance Does Not Believe In Private Insurance
80%
INSURANCE AS A SECURITY TOOLS
The United Nations Declaration of human Rights 1948 provides that "Everyone has a right to a standard of living adequate for the health and wellbeing of himself and his family, including food, clothing, housing and medical care and necessary social services and the right to security the event of unemployment, sickness, disability, widowhood or other lack of livelihood in circumstances beyond the control." When the bread winner dies, to that extent, the family's income dies. The economic condition of the family is affected, unless other arrangements come into being to restore the situation. Life insurance provides if this did not happen, another family would be pushed into the lower strata creates a cost on society. The lower strata create a cost on society. Poor people cost the nation by way of subsidies and doles and so on. Poor people also cost by way of larger growth in population, poor education and vagaries in behavior of children. Life insurance tends to reduce such costs. In this sense life insurance business is complementary to the state's efforts in social management.
Under a socialistic system the responsibility of full security would be placed upon the state to find resources for providing social security. In the capitalistic society, provisions of security are largely left to the individuals. The society provides instruments, which can be used in security this aim. Insurance is one of them. In a capitalistic society too, there is a tendency to provide some social security by the state under some schemes, where members are required to contribute e.g. Social Security Schemes in U.K. In India, social security finds a place in TATA constitution. Article 41 requires state, within the limits of its economic capacity and development, to make effective provisions for security right to work, to education and to provide public assistance incase of unemployment, old age, sickness, and disablement and in other cases of undeserved want. Part of the state's obligations to the poorer sections is met through the mechanism of life insurance.
Common Types of Insurance
Life insurance, originally conceived to protect a man's family when his death left them without income, has developed into a variety of policy plans. In a "whole life" policy, fixed premiums are paid throughout the insured's lifetime; this accumulated amount, augmented by compound interest, is paid to a beneficiary in a lump sum upon the insured's death; the benefit is paid even if the insured had terminated the policy. Under "universal life," the insured can vary the amount and timing of the premiums; the funds compound to create the death benefit. With "variable life," the fixed premiums are invested in a portfolio (with earning reinvested), and the death benefit is based on the performance of the investment. In "term life," coverage is for a specified time period (e.g., 5-10 years); such plans do not build up value during the term. Annuity policies, which pay the insured a yearly income after a certain age, have also been developed. In the 1990s, life insurance companies began to allow early payouts to terminally ill patients. Fire
insurance usually includes damage from lightning; other insurance against the elements includes hail, tornado, flood, and drought. Complete automobile insurance includes not only insurance against fire and theft but also compensation for damage to the car and for personal injury to the victim of an accident (liability insurance); many car owners, however, carry only partial insurance. In many states liability insurance is compulsory, and a number of states have instituted so-called no-fault insurance plans, whereby automobile accident victims receive compensation without having to initiate a liability lawsuit, except in special cases. Bonding, or fidelity insurance, is designed to protect an employer against dishonesty or default on the part of an employee. Title insurance is aimed at protecting purchasers of real estate from loss by reason of defective title. Credit insurance safeguards businesses against loss from the failure of customers to meet their obligations. Marine insurance protects shipping companies against the loss of a ship or its cargo, as well as many other items, and so-called inland marine insurance covers a vast miscellany of items, including tourist baggage, express and parcel-post packages, truck cargoes, goods in transit, and even bridges and tunnels. In recent years, the insurance industry has broadened to guard against almost any conceivable risk; companies like Lloyd's will insure a dancer's legs, a pianist's fingers, or an outdoor event against loss from rain on a specified day.
INDIAN INSURANCE INDUSTRY
Insurance
Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:
Life Insurers
•
Life Insurance Corporation of India (LIC) General Insurance Corporation of India (GIC) effect from Dec'2000, a National Reinsurer) (with
General Insurers
•
GIC had four subsidary companies, namely ( with effect from Dec'2000, these subsidaries have been de-linked from the parent company and made as independent insurance companies.
1. 2. 3. 4.
The Oriental Insurance Company Limited The New India Assurance Company Limited National Insurance Company Limited United India Insurance Company Limited.
Yr: 2000-2001 : ( From 2nd April '2000 to 31st December'2001) Insurance Industry in the year 2000-2001 had 16 new entrants, namely:
Life Insurance
S. Registratio Date of No. n Reg. Number 1 2 3 4 5 6 101 104 105 107 109 110 Name of the Company
23.10.200 HDFC Standard Life Insurance Company Ltd. 0 15.11.200 Max New York Life Insurance Co. Ltd. 0 24.11.200 ICICI Prudential Life Insurance Company Ltd. 0 10.01.200 Kotak Mahindra Old Mutual Life Insurance 1 Limited 31.01.200 Birla Sun Life Insurance Company Ltd. 1 12.02.200 TATA AIG Life Insurance Company Ltd. 1
7 8 9 10 11 12
111 114 116 117 133 135
30.03.200 SBI Life Insurance Company Limited . 1 02.08.200 ING Vysya Life Insurance Company Private 1 Limited 03.08.200 Bajaj Allianz Life Insurance Company Limited 1 06.08.200 Metlife India Insurance Company Ltd. 1 04.09.200 Future Generali India Life Insurance Company 7 Limited 19.12.200 IDBI Fortis Life Insurance Company Ltd. 7
General Insurance
S. Registrati Date of Name of the Company No. on Registrati Number on 1 2 3 4 5 6 7 102 103 106 108 113 115 131 23.10.2000 Royal Sundaram Alliance Insurance Company Limited 23.10.2000 Reliance General Insurance Company Limited. 04.12.2000 IFFCO Tokio General Insurance Co. Ltd 22.01.2001 TATA AIG General Insurance Company Ltd. 02.05.2001 Bajaj Allianz General Insurance Company Limited 03.08.2001 ICICI Lombard General Insurance Company Limited. 03-08-2007 Apollo DKV Insurance Company Limited
8 9
132 134
04-09-2007 Future Generali India Insurance Company Limited 16-11-2007 Universal Sompo General Insurance Company Ltd.
Yr: 2001-2002 : ( From 1st Jan 2001 to Dec. 2002) Insurance Industry in this year, so far has 5new entrants; namely
Life Insurance
S.No Registrati . on Number 1 121 Date of Reg. Name of the Company
03.01.200 Reliance Life Insurance Company 2 Limited. 14.05.200 Aviva Life Insurance Co. India Pvt. Ltd. 2
2
122
General Insurance
S.No Registrati . on Number 1 2. 3. 123 124 125 Date of Registration 15.07.2002 27.08.2002 27.08.2002 Name of the Company
Cholamandalam General Insurance Company Ltd. Export Credit Guarantee Corporation Ltd. HDFC-Chubb General Insurance Co. Ltd.
Yr: 2003-2004 : ( From 1st Jan 2003 till Date) Insurance Industry in this year, so far has 1new entrants; namely
Life Insurance
S.N o. 1 Registrati Date of on Reg. Number 127 Name of the Company
06.02.200 Sahara India Insurance Company 4 Ltd.
Yr: 2004-2005 : Insurance Industry in this year, so far has 1new entrants; namely
Life Insurance
S.No. Registration Date of Number Reg. 1 128 Name of the Company
17.11.2005 Shriram Life Insurance Company Ltd.
Yr: 2006-2007 : Insurance Industry in this year, had 1new entrants; namely
Life Insurance
S.N o. Registrati Date of on Reg. Number Name of the Company
1
130
14.07.200 Bharti AXA Life Insurance Company 6 Ltd.
Yr: 2007-2008 : Insurance Industry in this year, had 2 new entrants; namely
Life Insurance
S. Registrati Date of No on Reg. . Number 1 2 133 135 Name of the Company
04.09.200 Future Generali India Life Insurance Company 7 Limited 19.12.200 IDBI Fortis Life Insurance Company Ltd. 7
Yr: 2008-2009 : Insurance Industry in this year, so far has 3 new entrants in Life and 1 new entry in General ; namely
Life Insurance
S. No . 1 Registrati Date of Name of the Company on Reg. Number 136 08.05.2008 Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd. 138 27.06.2008 Aegon Religare Life Insurance Company Ltd.
2
3
140
27.06.2008 DLF Pramerica Life Insurance Company Ltd.
General Insurance
S.N o. 1 Registrati Date of on Reg. Number 139 Name of the Company
27.06.200 Bharti Axa General Insurance Company 8 Ltd.
INSURANCE BUSINEES:
Insurance business is divided into four classes : 1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Life Insurers transact life insurance business; General Insurers transact the rest. No composites are permitted as per law. LEGISLATION (as on 1.4.2000): Insurance is a federal subject in India. The primary legislation that deals with insurance business in India is: Insurance Act, 1938, and Insurance Development Authority Act, 1999. Regulatory &
INSURANCE PRODUCTS (as on 1.4.2000) (for latest information get in touch with the current insurers – website information of insurers is provided at the web page for insurers ):
Life Insurance
Popular Products: Endowment Assurance (Participating), and Money Back (Participating). More than 80% of the life insurance business is from these products.
General Insurance
Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory. Tariff Advisory Committee (TAC) lays down tariff rates for some of the general insurance products (please visit website of GIC for details ) 2001 New products have been launched by life insurers. These include linked-products. For details, please visit the websites of life insurers.
INFORMATION
About the insurance industry, the following documents may be helpful: Malhotra Committee Report (The Report of the Committee on Reforms in the Insurance Sector); IRDA's First Annual Report – 2001
MICRO INSURANCE
Micro insurance Legislation
As in much of the developing world, India has a large number of informal insurance schemes. These schemes are often run by cooperatives, NGOs, and other community organizations that pool their members’ premiums to create an insurance fund against a specific peril, for example funeral costs. In many countries, there is specific legislation to regulate these schemes, but in India no such law exists; any individual or institution conducting insurance has to comply with the stipulations of, among other regulations, the 1938 Indian Insurance Act as amended. Compliance with this Act requires, among other conditions, over $21 million of capital to get an insurance licence. Schemes that do not comply with the Act—such in-house insurance offered by MFIs, NGOs and trade unions—operate in a legal vacuum. At present, the IRDA has not taken action against these schemes. However, regulated insurers have expressed their unhappiness to the IRDA about needing to compete against non-regulated insurers. The situation may thus change if regulated insurers place sufficient pressure on the regulator to act. Two possible scenarios may occur: either the development of particular legislation to cater for
microinsurers or active closure of non-regulated insurers. The authors recommend that the IRDA takes the former approach i.e., the development of particular legislation to cater for and support currently unregulated microinsurers. Many unregulated insurance schemes are run by wellintentioned staff and confer positive social benefits. Indeed much of innovation in microinsurance has emerged from unregulated microinsurers. Moreover, informal insurers often sell insurance to clients that regulated insurers ignore. Unregulated microinsurers may hold significant funds on behalf of lowincome clients. The risk of working with these unregulated organisations is that there is no legal framework that ensures that they meet minimum prudential standards and other professional insurance qualifications. In addition, they do not have a statutory ombudsman or other feasible means of enforcing consumer rights.
Rural and Social Sector Obligations
There are two central regulations that have shaped microinsurance in India. The first is a set of regulations published in 2002 entitled the “Obligations of Insurers to Rural Social Sectors.” This is essentially a quota system. It compels insurers to sell a percentage of their policies to de facto low-income clients. It was imposed directly on insurers that entered after the market was liberalised. The old public insurance monopolies have no specified quotas, Good and Bad Practices in Microinsurance TATA-AIG, India 4 but have to ensure that the amount of business done with the specified sectors was not “less than what has been recorded by them for the accounting year ended 31st March, 2002.” Rural areas are all locations outside of officially classified urban areas. Life insurers must sell 7% of total policies by number (not value) in the first year, with increasing amounts of up to 16% in Year 5. With general insurance, 2% of gross premium income must come from rural areas in the first year, 3% in Year 2, and 5% thereafter. The regulations for the rural sector do not specify the income levels of clients directly. They specify that the clients must come from rural
areas. With the great majority of poverty in India located in rural areas, the effect of such a stipulation is to ensure that poor clients are sold policies. At present, the rural quotas are relatively low, so it is possible for many insurers to meet their rural sector targets by selling high value policies to wealthier residents of rural areas, but the quota rises each year. The targets for life insurance are likely to be easier to hit than for general insurance. Consider, for example, how many insurance policies covering huts need to be sold to equal 5% of the premium of a $100,000 house in Bangalore. This regulation has generated massive pressure on insurers to sell microinsurance. Without selling microinsurance, they cannot sell their more profitable products. To date the IRDA has fined a number of insurers for failing to meet their targets. Continued non-compliance to the rural and social obligations could result in suspension of license to operate. The social sector includes low-income groups consisting of unorganized workers and economically vulnerable or backward classes in urban and rural areas, for example Dalits or untouchables. Insurers must cover a specified number of new lives each year from these groups, from 5000 policies in Year 1, up to 20,000 policies in Year 5. It is difficult to assess the costs and benefits of the regulation without further research. On the one hand, the regulation has created a frenzy of interest by regulated insurers to enter into microinsurance. The regulation has also been the motor for important innovation. To date, much of the innovation in other countries has derived from donors, academics, or MFIs working on the issue. In India, in their drive to meet their rural and social sector targets, regulated insurers are developing innovative new products and delivery channels. They bring their considerable resources to this task. The impact of the quota is of course not all positive. There have been unverified reports that some insurers are dumping poorly serviced products on clients solely to meet their targets. As soon as they have met their targets, some have immediately stopped selling microinsurance. This practice is difficult to regulate, as it is harder to police the quality of insurance sold and serviced to
the poor than its quantity. It would certainly be socially unfortunate if the regulation resulted in a mass of poorly serviced products sold at a loss, to enable insurers to concentrate on their more profitable products. This situation would not result in meaningful sustainable financial deepening, but more akin to charity, forced on insurers to allow them to do business in India. Good and Bad Practices in Microinsurance TATA-AIG, India
Concept Paper for Microinsurance Regulation
The next central regulatory document, published by the IRDA in August of 2004, is entitled “Concept Paper on Need for Regulations on Micro-Insurance in India.” While not regulation, it nonetheless reflects the intentions of the regulator. Overall, the Concept Paper is commendable, but there are two significant concerns: 1) the implicit restriction of microinsurance to the partner-agent model; and 2) the lack of product flexibility. There are various models for selling and servicing microinsurance, for example cooperative insurance and NGOs or other institutions providing insurance on their own. These models all have strengths and weaknesses, but overall, with appropriate regulation, they expand the frontier microinsurance provision. By restricting microinsurance provision to the partner-agent model, the IRDA restricts the development of microinsurance. The concept paper also prescribes many of the products features, which may leave insurers with undesirable products that may not be bought by their clients.
Profile of Microinsurance in India
Prior to the passage of the Obligations of Insurers to the Rural and Social Sector, and its resultant partnerships between insurers and MFIs and NGOs, for the most part Indian microinsurance schemes were either some variant of a community-based model or managed by MFIs in-house. An
exception is the Self-employed Women’s Association based in Ahmedabad, one of the world’s microinsurance pioneers. In 1991, SEWA developed a relationship with LIC to act as an agent selling life insurance. In 1992, SEWA developed a health insurance scheme in partnership with the United India Insurance Company. Over the years, it has moved between partner-agent and in-house insurance, although now it only partners with insurance companies and provides integrated life, health and asset coverage for more than 90,000 adults.5 In the community-based model, a group of people get together and essentially develop their own insurance scheme in which they pool their own funds, develop their own rules, and run their own scheme. The Swayamkrushi / Youth Charitable Organization (YCO) is an example of a community-based model that still operates. Based in Andhra Pradesh, it is primarily a savings and credit association with an added insurance feature. The co-operative’s 8,100 members pay an annual insurance premium of Rs 100 ($2.20) and receive insurance cover for life and assets. Their life cover is Rs 15,000 ($333) in the event of a natural death and double that in the event of an accidental death. The fund’s premium pool is held and operated by members of the cooperative. In the in-house model, an MFI or NGO runs an insurance scheme for its microcredit borrowers. For example, SPANDANA, a large MFI also in Andra Pradesh, operates such a scheme. Although its principle business is lending, SPANDANA has introduced a compulsory life and hut insurance scheme. The MFI has dealt with co-variant risks primarily by excluding them. So far, it has made a profit on the scheme because transactions costs are very low. Premiums do not need to be physically collected; they are deduced from the loan amounts. Claims are easily verified by loan officers, and benefits are paid directly by loan 5 For more details, see Garand (2005), “VimoSEWA, India” CGAP Working Group on Microinsurance Good and Bad Practices Case Study No. 16. Geneva: International Labour Organization. Good and Bad Practices in Microinsurance TATA-AIG, India 6 officers. SPANDANA has used the profits from the scheme to provide bursaries for the children of its
clients.6 Although these informal schemes do, on the face it, provide a beneficial social service to lowincome people, they are strictly speaking unregulated. These schemes often circumvent regulations by giving their insurance policies names that do not use the word insurance. Whatever the name of the schemes, their practices contravene the Insurance Act of 1938 as Amended.
TATA AIG INSURACE PRODUCT Single premium unit linked plan
TATA AIG Life Insurance Company Limited (TATA AIG Life) announced the launch of its single premium unit linked plan InvestAssure Plus. This plan combines the security of a life insurance plan and provides the opportunity to earn higher, market linked returns. It is an easy investment policy option for those who are looking at investing lumpsum cash for long-term tenure of 15, 20, 25 and 30 years. The premium paid under this policy is eligible for tax deduction under Section 80C of the Income Tax Act, 1961.
InvestAssure Plus will provide the policyholder with the option of investing under the following five pure investment funds:
• • • • •
Equity Fund; Income Fund; Short Term Fixed Income Fund; Aggressive Growth Fund; Stable Growth Fund.
The policyholder has the option to choose from different investment funds depending on the prevailing market conditions and the risk appetite. According to Trevor Bull, managing director, TATA AIG Life, "The launch of this policy comes close on the heels of the new IRDA guidelines for unit-linked products and the addition of InvestAssure Plus to TATA AIG’S exciting product suite will enable us to fulfill the new needs of TATA AIG’S existing customers and meet the needs of fresh customer type." The new policy allows policyholders the choice to switch between various fund types - debt, equity and balanced depending on market conditions. "Due to its low charge patterns InvestAssure plus will also give the opportunity for higher investment returns," Apart from death and maturity benefits, the policy provides the flexibility of partial withdrawal from the third policy anniversary onwards. The policyholder also has an option to pay additional premiums as top-up premiums at any time with or without uplift on the prevailing sum assured. If during the term of the contract, the total amount of topup premiums paid is greater than 25 per cent of the single premium; then such excess amount of top-up premium will be used to provide additional sum assured subject to underwriting.
TATA AIG Life Insurance Company Ltd on launched its unit-linked insurance plans (ULIP) for superannuation and gratuity schemes in the city, making it the first private life insurance entity offering both traditional and ULIP products in the country. TATA AIG Life has entered into agreements with Franklin Templeton Investments (India) for their nondiscretionary investment advisory services and AIG Global Investment group for their investment advisory services, The ULIP superannuation scheme provides individual members the flexibility to decide on the allocation of their money based on their risk appetite. In case of the ULIP gratuity scheme, the employer or trustee has the flexibility to decide the ratio of investment. TATA AIG Life managing director said, “We are delighted to announce that corporates and institutions can now benefit from TATA AIG’S ULIP as they can invest for their superannuation and gratuity schemes. We are encouraged by TATA AIG’S early success, with millions being invested in this business by some of the big names in the corporate world.” Earlier TATA AIG Life Insurance Company had launched its ULIP - ‘investassure’ - a unit linked insurance plan for individuals.
Launches Insurance
New
Product
Travel
TATA AIG General Insurance Company Limited has launched a new product called TravInsure that can be purchased by customers while making their domestic airline bookings. The TravInsure policy can be purchased online at a price of INR 129 per round trip and covers travelers against
flight delays, medical expenses, lost baggage, flight cancellations. The TravInsure policy will cover damages ranging from INR 1,500 to INR 0.75 million.
CUSTOMER PROTECTION
Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is empowered to redress customer grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs. 20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained from the offices of LIC and other insurers.
Benefits
Before designing the social products, the preferences of the target market were determined. During the research, it was clear that the target market desired products with a savings element, but at the same time could not afford annual premiums in excess of US$25. It also became clear that the there were slightly wealthier households who, while still poor (with a monthly household income of less than US$125), could afford slightly more expensive products. This finding suggested to TATA-AIG that it needed a diverse portfolio of products to meet the preferences of this heterogeneous market. Unfortunately, it was not actuarially feasible to offer very significant returns to counter inflation at such low premium levels. The two “term return of premium products” (TROP) were designed to be sold for an annual premium of US$7 (Rs 300) and US$17 (Rs 720). These TROP products essentially return the cumulative premiums paid over 15 years plus 25 percent. A further issue emerged once the products were priced. The death cover at higher ages of entry worked out very low. To keep the premium low, it was decided to increase the death benefit and reduce the maturity benefit. This is the reason for the decreasing savings element for the Karuna and Jana Suraksha Yojana products (see Tables 4.3 and 4.4). The
agents have been trained to emphasize the death benefit while selling. The third social product is a 5-year term product where there is no return on maturity, but only a death cover capped at Rs 15000 ($333) with an entry age of between 18 and 40 and at Rs 10,000 ($222) if they enter the scheme in the more risky age group of 41to 55. This offering was designed to suit the needs of pure term cover at the lowest cost so that even the poorest could afford it. Part of the motivation for the product came not from client demand but rather from MFIs that wanted insurance to cover their loans. By far the most successful products have been those offering a TROP, perhaps indicating the importance that clients attach to savings.
TATA AIG Life Invest Assure II
TATA AIG Life Invest Assure II (Invest Assure II) is a unique, flexible insurance plan, which combines the security of a life insurance policy with the opportunity to exploit the upside of market returns by investing in different kinds of securities through multiple fund options. You can direct the investments by creating your own investment fund portfolio from a range of options to suit your needs and preferences.
Key features include
• • •
•
Policy terms of 15, 20 or 30 years. No penalty for surrendering the policy any time after the 6th year. The Sum Assured is a multiple of the Annual Regular Premium payable. The multiple varies according to age at entry and policy term. You have a choice of premium multiples to choose from. Any premium not deducted for coverage and charges may be invested in a wide range of investment
•
vehicles, including: an Equity Fund, Income Fund, Aggressive Growth Fund, Stable Growth Fund, a Short Term Fixed Income Fund and Select Equity Fund. InvestAssure II also offers the flexibility to switch between funds, premium top-ups, partial withdrawal, premium holiday, policy reinstatement, and multiple premium payment modes.
Tax Benefits, Riders and Age Eligibility
Premiums paid under this plan are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Any sum received under this plan is exempt from tax under section 10(10D) of the Income Tax Act, 1961.* Attach Accident, Waiver of premium, Payor Benefit (for juvenile policy) and Critical Illness riders to this policy at a nominal extra cost for added protection.
TATA AIG Life Invest Assure Care
An inspiration that translates into a host of innovative product solutions for you. TATA AIG Life introduces TATA AIG
Life Invest Assure Care (Invest Assure Care), a unique investment linked insurance plan with an in-built Critical Illness benefit for the first 5 years of the policy. Given a choice, most people would like to increase the earning potential of their insurance premium by deciding their own investment and risk limits. Invest Assure Care, a unique, flexible insurance plan combines the security of a life insurance policy with the opportunity to exploit the upside of market returns (however, with increased investment volatility) by providing an option to invest in different kinds of securities through a choice of five fund options. What's more, you can direct the investments by creating your own investment fund portfolio from a range of options to suit your needs and preferences.
Benefits
• • • •
Provides security to your family in case of your unfortunate demise. Gives you the flexibility to choose your funds based on your risk profile. Gives you Return of Premium guarantee on maturity incase you opt for Capital Guarantee Fund Enables you to enjoy market-linked returns with a potential for higher growth.
Provides Critical Illness cover for the first five years of the policy.
Key features include
•
Initial Sum Assured: You have an option to choose either the sum assured or premium you are willing to pay.
•
•
•
•
Top-Up: Single Premium top up is allowed anytime during the period. Minimum Single top-Up Premium is Rs. 5000/- and will be allowed a maximum of four times in a policy year. Top-Up Sum Assured: You have an option to choose an additional sum assured equal to 1.25 or 5 times Single Top-Up Premium, subject to underwriting. Critical Illness (CI) Benefit: InvestAssure Care offers inbuilt Critical Illness (Lumpsum) benefit equal to 50% of the basic Sum Assured for issue ages 18-45 years. This benefit is an integral part of the product and is mandatory. This benefit is applicable for the first 5 years of policy term. This Critical Illness covers the following Critical Illnesses and Surgeries: (a) Cancer (b) Stroke (c) Heart Attack (d) Coronary Bypass Graft Surgery (e) Kidney Failure (f) Major Organ Transplant like Heart, Lung, Liver, Kidney or Pancreas or Bone Marrow Transplant. Choice of Five Fund Options: Growth Maximizer Fund, Growth Enabler Fund, Short Term Fixed Income Fund,Capital Guarantee Fund and Select Equity Fund.
Eligibility
Term of Policy 15 years 20 years Minimum Age at Issue 30 days 30 days Maximum Age Minimum at Issue Annual Premium 45 years Rs.12,000 45 years Rs.12,000
TATA AIG Life Invest Assure Plus
TATA AIG Life Invest Assure Plus(Invest Assure Plus) is a single premium Unit Linked insurance plan especially designed for the investment-savvy. It gives you the flexibility of choosing your own investment strategy, besides providing protection to your loved ones in case of a misfortune. This plan gives you an opportunity to make the most of good market returns, albeit with an increased investment volatility. At the same time, it does not compromise the security that you want to provide to your loved ones.
Multiple benefits of InvestAssure Plus
• • •
Provides security to your family in case of your unfortunate death. Gives you the flexibility to choose your fund based on your risk profile. Enables you to enjoy market-linked returns with a potential for higher growth. Policy terms of 15, 20, 25 or 30 years. No penalty charges for surrendering the policy any time after the 3rd year. Flexibility to choose your Sum Assured, depending on your age profile and your needs. You have a choice of premium multiples to choose from. Any premium not deducted for coverage and charges will be invested in the funds chosen by you viz. Equity Fund, Income Fund, Aggressive Growth Fund, Stable Growth Fund ,a Short Term Fixed Income Fund and Select Equity Fund.
Key features include:
• • • • •
• •
Flexibility to switch between funds and partial withdrawal. InvestAssure Plus also offers Top-ups premiums and the facility to have a Sum assured on the Top-up premium as well.
Tax Benefits
•
Premiums paid under this plan are eligible for tax benefits under Section 80C of the Income Tax Act, 1961. Any sum received under this plan is exempt from tax under section 10(10D) of the Income Tax Act, 1961.*
Age Eligibility
Term of Policy 15 years 20 years 25 years 30 years Minimum Age 30 days 30 days 30 days 30 days Maximum Age 60 years 55 years 50 years 45 years Maturity and Death Benefits
Want to know more?
• • • •
Meet an Advisor Download the Product Brochure
Premium Calculator
View
Premium charges, Surrender charges and other charges
Disclaimer
Unit linked insurance plans are popular today. Why?
The demand for Unit Linked Insurance Plans is guided by the returns that the instrument generates and the
strengths of the insurance company. Awareness and knowledge of unit linked insurance plans have increased substantially today as compared to the time they were first launched. Unit Linked Insurance Plans primarily offer protection in the form of life insurance and along with it; also offer the opportunity to earn better returns on the premiums, thus helping the policy holder to accumulate savings. The Indian economy, growing at a brisk pace, has positively impacted the capital market sentiments and the overall investment climate. This has, in some measure, led to the increased popularity of unit linked insurance plans.
How many unit linked products have you launched?
TATA AIG has recently launched its first unit linked insurance produce called ‘Invest Assure”. TATA AIG offers the option of choosing among a variety of funds, which includes three pure funds - Equity, Income and Liquid Fund and two pre-packaged funds - Growth and Balanced Fund. The Equity Fund will invest in listed equity shares whereas the Income Fund will invest primarily in government bonds and fixed income instruments. The Liquid Fund will invest in a variety of liquid options such as treasury bills, short-term Government bonds, bank deposits, commercial papers and other money market securities. The Growth Fund will invest in the pure funds in proportions of 50% to 80% in Equity, 20% to 50% in Income and 0% to 25% in the Liquid Fund. The Balanced Fund will invest in the Equity, Income and Liquid Pure Funds in the proportions of 25% to 55% in Equity, 35% to 70% in Income and 5% to 35% in the Liquid Fund.
Is the Indian customer matured enough to understand the nuances of the product? Absolutely. Heavy consumers of insurance and mutual fund products have responded very favourably towards these products. They are able to immediately identify with the benefits offered. Who is your target audience in case of unit linked plans? Since unit-linked plans appeal to both, insurance and mutual fund consumers, TATA AIG is targeting heavy users in both categories of consumers. Does your product "Invest Assure" offer any minimum guarantee on the returns in case the market tanks out? Like all investment plans that are linked to equity or debt markets, investments in ‘Invest Assure’ are also subject to market risks. Investors are advised to understand the risks involved while choosing the investment options. ‘InvestAssure’, like any other unit linked insurance plan, doesn’t offer any minimum guarantee. How many free switches between funds do you allow in a year. What are the charges for more switches? Under the ‘InvestAssure’ plan investors have the freedom to move between funds and there is no restriction on the quantum of switching between funds. However, this will be without charges for the first FOUR switches in a policy year What are the points that a customer should take into account while purchasing unit-linked products? Investors should carefully consider what their investment priorities are and map them against what kind of risks they can take.
Since these products are directly related to the ups and downs associated with the stock market, when the market sees a downward phase, will the customer not lose? Customers have the flexibility of switching between investment options. These options should ideally be exercised in the event of changes in the market. While transparency is one thing, regularly monitoring the fund is an important aspect. How far will the common man be able to do so considering that insurance products hitherto did not have such features? Unit Linked Insurance Plans are quite transparent. NAVs will be declared on a regular basis enabling the policyholder to assess and monitor the growth of their investments regularly. Will it not make better sense and also mean better returns if an individual invests in mutual funds if returns are what he looks forward to instead of investing in unit linked risk plans since insurance should be for protecting risks? The first promise that a life insurance product makes is to insure life. Life insurance is one product that provides a guaranteed sum assured from the day the policy begins. This ensures that in the unfortunate event of demise of the policyholder, the income flow to his dependents does not cease. And no other financial product can compete with insurance companies in this aspect. In the case of unit linked insurance plans, they primarily offer protection in the form of life insurance and, along with it, also offer the opportunity to earn better returns on the premiums helping the accumulation of savings. A mutual fund, however, is a pure investment avenue, with no life
cover whatsoever. Further, mutual funds are short-term plans, whereas insurance plans have a long-term horizon. The decision to invest in either of the investment avenues would entirely vary from one individual to another. It will depend upon an individual’s financial need which can be assessed by an individual himself or with the help of a financial advisor. How much of the premium component goes into administration, fund management & other charges and how much of it actually constitutes the risk cover? A monthly administration fee, initially of Rs. 38, is automatically deducted from the account. This rate will be revised every 1st April in accordance with Retail Price Index changes. Besides the fund management fee can vary anywhere between 0.90%-1.75% depending on the fund chosen. The cost of insurance is also deducted every month from the InvestAssure account.
COMPARISION BETWEEN LIC & TATA AIG
SR FEATURES LIC KOMAL NO. JEEVAN 18-age of the child 1. Term
2.
TATA AIG MAHALIFE JR
12 years Rs.50,000/-
Minimum SA
3.
Mode of payment Loan Bonus
4. 5.
Min. SA 1,00,000 Mix. SA 25,00,000 (pol.will be issued only in multiples of Rs.25,000/Single premium, yearly, half-yearly, SSS and quarterly No loan can be granted
Annual, bi-annual, quarterly or mothly.
__
6.
Maturity benefit
Guaranteed additions
Eligible to avail a loan against Bonus from 6th years onwards. The bonus is declared based on company’s performance & has been assumed at the rate of 0.5% in the years 6-9, 1% in the years 10-19 & 1.5% from year 20 onwards. Payment of sum plus assured on
7.
Death benefit
loyalty addition if any (A)Before commencement of risk-refund of premium in full. (B)After commencement of risk-sum assured plus guaranteed addition plus loyalty additions without any deduction/adjustme nt of installment benefit received earlier. No medical examination of LA is required Under section 88 & section 10(10D) as per the prevailing income tax laws. Combination with jeevan chhaya would be an ideal product mix to receive the installments of cash flow before the attainment of majority for new born child. Similar combination at later stage would
maturity of policy at 100 years. Payment of SA on death.
8.
Medical examination Tax benefit
No medical tests All benefits tax – free. Premiums eligible for tax exemption as per current income Tax Act. Option to attach any of TATA AIG’s other benefit like Accident benefit, Disability benefit, Term benefit or critical illness to this plan.
9.
10.
Product Mix
supplement with cash flow during early settlement in career, and many other plan this product is mix.
LIFE INSURANCE & NON-LIFE INSURANCE COMPANY Life Insurance Companies
• • • • • • • • • •
AVIVA Life Insurance Bajaj Allianz Life Insurance ICICI Prudential Life Insurance Kotak Mahindra Old Mutual Life Insurance Life Insurance Corporation of India Life Insurance Council Max New York Life Insurance Reliance Life Insurance SBI Life Insurance TATA AIG Life Insurance
Non-Life Insurance Companies
Bajaj Allianz General Insurance • Cholamandalam MS General Insurance • ICICI Lombard General Insurance • IFFCO Tokio General Insurance • Reliance General Insurance • Royal Sundaram General Insurance • TATA AIG General Insurance Universal Sompo General Insurance
•
OVERALL SUGGESTION
TATA AIG’s is found to be a one very popular leading industry serving in insurance by joint venture of TATA AIG INSURANCE CO. LTD. It has been ranked 2 by the noted magazines in business worlds for TATA AIG there is some of suggestions like. The company should take advantage of all the favourable factors, which developing and expanding the activities and there by increasing the market share, which ultimately results into increasing turnover and profit. Company should make more flexible plans Company should use new techniques to analyse between competitor & Company should find more effective ways to grow in booming market.
OVARALL CONCLUSION
At summing up the report, I would like to highlight here that TATA AIG INSURANCE CO. LTD. has bright and pros porous future. After taking the training in this unit I find that following points; • TATA AIG makes excellent efforts for achiving the target market share • TATA AIG always invites suggestions form its employee to give a full opportunity to develop their carrier and human resource opportunity • TATA AIG INSURANCE CO. LTD. Has a very good public relation and maintains a very high reputation in insurance sector 7 • TATA AIG has a very wide international market.
BIBLIOGRAPHY
* PAMPLETS OF TATA AIG PRODUCTS • STFF GUINDANCE AT BHAVNAGAR BRANCH • WEBSITE :- WWW.TATAAIG.COM • WEBSITE :- WWW.HIESTORY OF INSURACE.COM • REPORTS BY AGENCIES
doc_794144504.doc