History of Insurance Business Insurance probably made a beginning in the ancient land of Babylonia In the 18th century B.C; Babylonian king Hammurabi developed a code of law, known as the Code of Hammurabi, which codified many specific rules governing the practices of early risk-sharing activities. For instance, the code dictated that traders had to repay merchants who financed trading voyages unless thieves stole goods in transit, in which case debts would be cancelled. This was similar to the system of insurance known as bottomry which existed in Phoenicia in 1200 B.C. In this system, backers loaned money to merchants to finance voyages. Merchants offered their ships (the hull was known as the ship?s „bottom?) as collateral for such loans. When a trip succeeded, the merchant would pay the trip?s backer the original loan plus interest, the equivalent of a premium. If a ship went down on its voyage, the trip?s backer would cancel the merchant?s loan. The Greeks and Romans developed the earliest systems of life insurance. They formed societies which paid dues that went toward paying for the burial of members. Sometimes these societies also paid for the living expenses of deceased members? families. During the Middle Ages (5th to 15th centuries A.D.), workers joined together in craft. Many guilds, particularly in England and Italy, provided benefits to workers and their families in the event of illness or death. Insurance as we know it today took its shape in 17th century England. There was a place called Lloyd's Coffee House in London, owned by Edward Lloyd, where merchants, ship-owners and underwriters met to discuss and transact business. The Lloyd?s Act was passed in 1871 incorporating the members of the association into a single corporate body with perpetual succession and corporate seal. It extended from marine insurance to other insurance and guarantee business. Today, Lloyd's has become the world's best known insurance brand. It is commonly misunderstood that Lloyd's is an insurance company. Actually, it is a society of members, known as „underwriters?, both corporate and individual, who underwrite in syndicates on whose behalf professional underwriters accept risk. Thus, supporting capital is provided by
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investment institutions, specialist investors, international insurance companies and individuals. Any insurer who wants to become a member of the association has to deposit a certain fee as security for the regular payment of his liabilities. The association will inquire about the financial position of the concern, business reputation and experience. The business is conducted by these insurers called underwriters, syndicates etc. Anybody desirous of taking insurance will approach the „underwriters? and not the „association?. Each underwriter will be responsible for his business underwritten. Usually, the policy is underwritten by several underwriters and their share or portion is fixed individually. If there is claim on the policy, the insured gets the money from all the underwriters according to their respective shares. If an underwriter fails to pay, the amount is realized from the security taken at the time of enrolment from the underwriter. Lloyd?s as a corporation is never liable on any policy.
What is Insurance? Insurance is something that everyone will need sometime someday, and it's worth understanding it before you buy insurance. This includes vehicle insurance (which includes auto, motorcycle, and boat), health and life insurance, travel insurance, personal property or wealth insurance, home insurance and more. As the name spells, "insurance" provides to be a payment of some predictable sum of money, called as the premium which is used to safeguard against a huge unexpected loss or expense. Thus it transfers all the risk from the insured to the insurer or the insurance company for a certain amount of fee. Insurance policy allows individuals, businesses and other entities to protect themselves against significant potential losses and financial adversity at a reasonably affordable rate. If you need to safeguard your car, family and even home, it serves to be the best way possible that ensures that everything will be easily taken care of.
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What is Life Insurance? Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the assured. Life insurance is universally acknowledged to be an institution which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilization?s partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: that of dying prematurely leaving a dependent family to fend for itself and that of living to old age without visible means of support.
Why is it superior to other forms of Savings? Protection: Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable. Aid to Thrift: Life insurance encourages 'thrift'. Long term saving can be made in a relatively 'painless' manner because of the 'easy installment' facility built into the scheme (method of paying premium either monthly, quarterly, half yearly or yearly). Take, for example, our Salary Saving Scheme popularly known as SSS. This scheme provides a convenient method of paying premium each month by deduction from one's salary. The deducted premium is remitted by the employer to the LIC. The Salary Saving Scheme can be introduced in an institution or establishment subject to specified terms and conditions.
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Liquidity: Loans can be raised on the sole security of a policy which has acquired loan value. Besides, a life insurance policy is also generally accepted as security for even a commercial loan. Tax Relief: Tax relief in Income Tax and Wealth Tax is available for amounts paid by way of premium for life insurance subject to Income Tax rates in force. Assesses can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for his insurance than he would have to pay otherwise. Money When You Need It: A suitable insurance plan or a combination of different plans can be taken out to meet specific needs that are likely to arise in future, such as children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one's retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. Subject to certain conditions, loans are granted to policyholders for house building or for purchase of flats. Who Can Buy A Life Insurance Policy? Any person who has attained majority and is eligible to enter into a valid contract can take out a life insurance policy for himself and on those in whom he has insurable interest. Policies can also be taken out, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, factors such as the state of health of the life to be assured, the proponent's income and other relevant factors are considered by the Corporation. Insurance on Women: Prior to nationalization (1956), many of the private insurance companies used to offer insurance to female lives with some extra premium or on restrictive conditions. After nationalization of life insurance, the terms under which life insurance is granted to female lives have been reviewed from time to time. At present, women with earned income are treated on par with male lives. In other cases, a restrictive clause is imposed and that too only if age of the female is up to 30 years and if she does not have an income attracting Income Tax. 4
Medical and Non-Medical Schemes: Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also as a measure of relaxation, LIC has been extending insurance cover without any medical examination, subject to certain conditions. With Profit and Without Profit Plans: An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount. In 'without' profit plan the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is therefore higher than for a 'without' profit policy.
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Background: Insurance is an Rs 450 billion industry in India. The value of the market is determined by gross premium incomes. The life insurance segment writes about 80% of the overall market value. Indian Insurance market was at its all time high in 2003 with a growth of about 17.4% over the previous year. Since 2001 Insurance is growing at the rate of 15-20 % annually. The growth in the insurance industry is affected by volatility in real estate rates, GDP rates and long term interest rates. Fluctuations in exchange rates also affect the growth in this sector. The gross premium as a percentage of the GDP has gone up from 2.3 in the year 2000 to 4.8 in 2006. Together with banking services, it adds about 7% to the country?s GDP. Insurance Trends in India: With the de-regulation in Indian Insurance industry, the monopoly of public sector companies in life insurance and general insurance has come to an end. This has augmented the innovative practices initiated by the private players. Growth in the interactive technology such as internet has further created a wave of excitement in the insurance market. Indian economy and Indian Insurance sector is committed to a double digit growth. Here?s a glimpse of Insurance Industry over 190 years.
History of Indian Insurance: A] Ancient Historical Times: Insurance is as old as human society itself. The ancient origin of insurance is Emerigon, whose brilliant and learned Traite des Assurances, first published in 1783, is still read with respect and admiration. The result shows that insurances were known to the ancients such as Romans, Phoenicians Rhodians, although the business of underwriting commercial risks was probably not highly developed. The histories of Livy and Suetonius shows that the contractors who undertook to transport provisions and military stores to 6
the troops in Spain stipulated that the government should assume all risk of loss by reason of perils of the sea or capture and this was probably the first time when insurance process was known. There were friendly societies organized, for the purpose of extending aid to their unfortunate members from a fund made up of contributions from all. These societies undoubtedly existed in China and India in the earliest times. The earliest traces of Insurance in the ancient Indian history was in the form of marine trade loans or carrier?s contracts, which can be found in Kautilya?s Arthashastra, Yajnyavalkya?s Dharmashastra and Manu?s Smriti. These works show that the system of credit and the law of interest were well developed in India. They were based on clear appreciation of hazard involved and the means of safeguarding against it. B] British-India Period: Insurance in India without any regulations started in the nineteenth century. It was a typical story of a colonial era where a few British insurance companies dominated the market serving mostly large urban centers. Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. Bombay Mutual Life Assurance Society indicated the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. 1930s was the last of the old-style crises in the Indian economy because it marked the beginning of the end of the colonial state and an acceleration of the pace of industrialization as entrepreneurs moved their capital out of the countryside. Independent India reduced its vulnerability to external economic shocks by close control of foreign exchange and by promoting a massive change in the export schedule. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies.
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C] Nationalization Phase of Indian Insurance: 1956: 154 Indian insurance companies, 16 non-Indian companies and 75 provident societies were taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 Crore from the Government of India. 1972: The General Insurance Business (Nationalization) Act, which nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too was taken by means of a comprehensive bill. However, it was only in 1956, LIC was nationalized, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. And as of 2007, LIC is India?s leading Insurance company, with 2000 branches, which probably is the highest number of branches across India insurance sector. D] Liberalization of Indian Insurance: 1994: Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers. 1997: Insurance regulator IRDA was set up as there felt the need: a) To set up an independent regulatory body, that provides greater autonomy to insurance companies in order to improve their performance, b) To enable them to act as independent companies with economic motives. 8
c) To protect the interest of holders of insurance policies. d) To Amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 e) To end the monopoly of the Life Insurance Corporation of India and General Insurance Corporation and its subsidiaries. Thus in all there are 25 players (12-life insurance and 13-general insurance) in the Indian insurance industry till date. E] Indian Insurance in 21st Century: 2000: IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy 2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode 2007: First Online Insurance portal, www.insurancemall.in set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR 2000 million. In the 2004-05 budgets, the Government proposed for increasing the foreign equity stake to 49%, this is yet to be effected. Under the current guidelines, there is a 26 percent equity cap for foreign partners in direct insurance and reinsurance Company. (World Bank Economic Review-2000).
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The Insurance Regulatory and Development Authority (IRDA) Reforms were initiated with the passage of Insurance Regulatory and Development Authority (IRDA) Bill in 1999. IRDA was set up as an independent regulatory authority, which has put in place regulations in line with global norms. IRDA has been framing regulations and registering the private sector insurance companies. It launched of the IRDA online service for issue and renewal of licenses to agents. So far, there are 13 life insurance companies and 14 general insurance companies. Premium rates of most general insurance policies come under the purview of the government appointed Tariff Advisory Committee. Powers, Duties & Functions of IRDA The IRDA Act, 1999 lays down the duties, powers and functions of IRDA. The Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. The powers and functions of the Authority shall include, (a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; (b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; (c) specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; (d) specifying the code of conduct for surveyors and loss assessors; (e) promoting efficiency in the conduct of insurance business; (f) promoting and regulating professional organizations connected with the insurance and re-insurance business;
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PESTEL ANALYSIS:
PESTEL analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. A] Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation. B] Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. C] Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). D] Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and
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influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. E] Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones. F] Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.
TABLE: 2.1 NAME OF THE PLAYER MARKET SHARE (%) Name of the Player LIFE INSURANCE CORPORATION OF INDIA ICICI PRUDENTIAL BIRLA SUN LIFE BAJAJ ALLIANZ SBI LIFE INSURANCE HDFC STANDARD TATA AIG MAX NEW YORK AVIVA OM KOTAK MAHINDRA ING VYSYA MET LIFE Market share (%) 82.3 5.63 2.56 2.03 1.80 1.36 1.29 0.90 0.79 0.51 0.37 0.21
(Source -http://www.asiainsurancereview.com/edsynopsis.asp)
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A] Life Insurance Corporation of India: This leading Insurance Company of India was established in the year 1956 by the alliance of 16 non-Indian companies, 154 Indian Insurance Companies and 75 provident. It has 100 divisional offices, 2048 computerized branches, 7 zonal offices and the company's corporate office. It has introduced new strategies for the facilitation of the customers like the IVRS,ECS,ATM Premium payment facility and the company's Info centers in Mumbai, Delhi, Chennai, Kolkata and many others cities.
B] SBI Life: This renders premium Insurance solutions like SBI Life-Smart ULIP, SBI LifeGroup Criti9, SBI Life-Unit plus Child Plan etc. It also offers services like the NRI services, Premium Payment Procedure, ECS Facility, RPI/RFI and many others. SBI Life is a joint venture of BNP Paribas Assurance and SBI.
C] ICICI Prudential: This major Insurance Company in India provides health Insurance, life insurance, ULIPs, ULIP, Retirement Plans and many others. Life Insurance Plans of the company covers Premium Guarantee Plans, Education Insurance Plans etc. Pension Plans encompass Life Stage Pension, Forever Life. Health Insurance Plans cover Hospital Care, MediAssure D] HDFC Standard Life: This is one of the major market leaders in the insurance sector in India. The company offers Insurance services like the Group Plans, Health Plans, Protection Plans, Retirement Plans, Savings and Investment Plans etc. The customer base of the company is about more than 7 million who depend on the company for pension, investment, banking needs.
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INTRODUCTION Table: 3.1 Life Insurance Corporation of India (LIC) Parent Company Category Sector Tagline/ Slogan Government of India NBFC Insurance and finance Yogakshemam Vahamyaham (Your welfare is our responsibility) USP STP Segment Target Group Positioning India?s Largest Life Insurance Company Personal and Group Insurance Urban and Rural Investors Complete Insurance and financial solutions
Branches 8 Zonal Offices and 101 Divisional Offices OVERVIEW The largest life insurance company in India, Life Insurance Corporation is fully owned by the government. It provides individual life insurance, group insurance and pension plans. Its subsidiaries include Life Insurance Corporation of India International, LIC Nepal, LIC Lanka, LIC Housing Finance and LICHFL Care Homes. It has over 12 million policy holders and over 9 lakh agents. It has underwritten more than 120 million policies. LIC saw computers in 1964. Today the company is on the Internet and is utilizing Information Technology in servicing its clients. It has bagged various award including Loyalty Awards 2008 in Insurance Sector, NDTV Profit Business Leadership Award – 2007, CNBC Awaaz Consumer Awards 2007 and Outlook Money NDTV Profit Awards 2007. LIC provides a rewarding career as sales agents. It offers world class training, freedom to work and unmatched financial strength.
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Headquartered in Bombay, financial and commercial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns of India and has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public.
(TABLE: 3.2) NAME OF THE LIFE INSURANCE COMPANY AND THE SHARE HOLDING PATTEN Name of the company Nature of Holding Allianz Bajaj Life Insurance Co Aviva Life Insurance Birla Sun Life Insurance Co HDFC Standard Life Insurance Co ICICI Prudential Life Insurance Co ING Vysya Life Insurance Co. Life Insurance Corporation of India Max New York Life Insurance Co. MetLife Insurance Co. Om Kotak Mahindra Life Insurance Reliance insurance SBI Life Insurance Co TATA- AIG Life Insurance Company (Source-http://www.lic.wwindia.com/) Private Private Private Private Private Private Public Private Private Private Private Private Private
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OBJECTIVE OF LIC
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Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost.
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Maximize mobilization of people's savings by making insurance-linked savings adequately attractive.
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Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return.
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Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.
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Act as trustees of the insured public in their individual and collective capacities.
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Meet the various life insurance needs of the community that would arise in the changing social and economic environment.
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Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.
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Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective.
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MISSION AND VISION Mission "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."
Vision "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."
ORGANISATION/DIVISION OF LIC Chart: 3.1
(Source:http://info.shine.com/company/Life-Insurance-Corporation-ofIndia/348.aspx)
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LIC Products Table: 3.3 LIC products Retirement/Pension Plan Retirement/Pension Plan Retirement/Pension Plan Retirement/Pension Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Term Plan Pension Plus Jeevan Nidhi Jeevan Akshay- VI New Jeevan Dhara- I New Jeevan Suraksha- I Jeevan Anurag CDA Endowment Vesting at 21 CDA Endowment Vesting at 18 Jeevan Kishore Child Career Plan Child Fortune Plus Komal Jeevan Jeevan Chaya Child Future Plan Marriage Endowment Or Educational Annuity Plan Term plan Term Plan Term Plan Term Plan Savings & Investment Plan Two Year Temporary Assurance Plan The Convertible Term Assurance Plan Anmol Jeeval- I Amulya Jeevan- I Mortgage Redemption
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Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan
The Money Back Policy- 20 years The Money Back Policy- 25 years Jeevan Surabhi- 15 Years Jeevan Surabhi-20 Years Jeevan Surabhi- 25 Year Bima Bachat Jeevan Shree- I Jeevan Pramukh The Endowment Assurance Policy The Endowment Assurance Policy- Limited Payment
Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan
Jeevan Mitra (Double Cover Endowment Plan) Jeevan Mitra (Triple Cover Endowment Plan) Jeevan Anand New Janaraksha Plan Jeevan Amrit Endowment Plus The Whole Life Policy The Whole Life Policy- Limited Payment The Whole Life Policy- Single Premium Jeevan Anand Jeevan Tarang Jeevan Bharati-I
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Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Health Plan
Jeevan Aadhar Jeevan Vishwas New Bima Gold Bima Nivesh 2005 Jeevan Saral Jeevan Madhur Jeevan Mangal Health Protection Plus
(Source:http://info.shine.com/company/Life-Insurance-Corporation-ofIndia/348.aspx) Published in: Life Insurance
SWOT ANALYSIS A] Strength:1. Largest state-owned life insurance company in India, and also the country's largest investor because of it has a market share of 82.12%. 2. LIC has highest office location all over India. The Life Insurance Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns of India and has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public. 3. With Largest fund base it is the biggest investor in India. It has assets estimated of 13.25 trillion (US$ 251.75 billion). 20
4. According to The Brand Trust Report, LIC is the 8th most trusted all over sectors brand in India. 5. LIC has many of subsidiaries like LIC Housing Finance Limited, LIC Cards Services Limited, LIC Nomura Mutual Fund, LIC (Nepal)Ltd, LIC(Lanka)Ltd, LIC(International)BSC(C) . All are working well as profitable, efficiently, and fast growing.
B] Weakness:1. It has an image of a Government agency, so Indian people belive that it is working roughly with customers, and hence lacks innovation in the settlement process. 2. Being a Government agency, red tape and bureaucracy causes problems to the customers while claiming the return. 3. Managing a huge workforce during economic crisis meant overburdened due to salaries because all employee are selected permanent and they are very Lethargic Staff in performing their duties. 4. There is a lack of the control over office, so Large scale Corruption in Main Office and Ultra-Slow decision making process. 5. There is an internal problems between Top Management and lower cadre Employees in metter of salary, positions, performance etc.
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C] Opportunity:1. Use of Technology to provide effective services to cater to urban population. 2. Government Schemes implementation like tax saving scheme help to collecting more and more premium. 3. Pension Market & Health Insurance market are new so company can easily enter in it.
D] Threats:1. Economic crisis like 2008 world recession its growth goes down and premium reduce up to 15% during this period. 2. Entry of new NBFCs in the sector. Many of new companies enter in the insurance sector cause to reduce market share of LIC. 3. There is varying change in the Govt. policies like CRR. Repo rate, reveres rapo rate, open market operations, tax rates, interest rate etc. harmful to its growth rate.
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Private players eat up LIC's share in life insurance market The entry of private players in life insurance has resulted in a drop in the market share for Life Insurance Corporation. But what has perhaps been lost in all the heat and dust of market share and top line growth is that the Life Insurance Corporation has emerged as a regional giant with assets of over Rs 8-lakh crore, which has been providing consistent returns to the government and policyholders for 52 years. Life Insurance Corporation chairman TS Vijayan speaks of how LIC is a growing organization and the corporation's plans of regaining its lost market share. What is the impact of the financial crisis on Life Insurance Corporation? LIC is a public sector insurer and a domestic investor. As such, we are not directly affected by the global financial crisis. However, the volatility in Indian financial market due to the uncertainty in global markets may affect returns we get on our investments. But LIC has an indisputable record of prudently planning its investments and getting the maximum returns on the policyholders' money. We will continue to do that in any type of scenario. Liberalization of Insurance The comprehensive regulation of insurance business in India was brought into effect with the enactment of the Insurance Act, 1983. It tried to create a strong and powerful supervision and regulatory authority in the Controller of Insurance with powers to direct, advise, investigate, register and liquidate insurance companies etc. However, consequent upon the nationalization of insurance business, most of the regulatory functions were taken away from the Controller of Insurance and vested in the insurers themselves. The Government of India in 1993 had set up a high powered committee by R. N. Malhotra, former Governor, Reserve Bank of India, to examine the structure of the insurance industry and recommend changes to make it more efficient and competitive keeping in view the structural changes in other parts of the financial system on the country.
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Malhotra Committee's Recommendations The committee submitted its report in January 1994 recommending that private insurers be allowed to co-exist along with government companies like LIC and GIC companies. This recommendation had been prompted by several factors such as need for greater deeper insurance coverage in the economy, and a much a greater scale of mobilization of funds from the economy, and a much a greater scale of mobilization of funds from the economy for infrastructural development. Liberalization of the insurance sector is at least partly driven by fiscal necessity of tapping the big reserve of savings in the economy. Committee's recommendations were as follows: ? Raising the capital base of LIC and GIC up to Rs. 200 crores, half retained by the government and rest sold to the public at large with suitable reservations for its employees. ? ? Private sector is granted to enter insurance industry with a minimum paid up capital of Rs. 100 crores. Limited number of private companies to be allowed in the sector. But no firm is allowed in the sector. But no firm is allowed to operate in both lines of insurance (life or non-life). IRDA Act, 1999 Preamble of IRDA Act 1999 reads 'An Act to provide for the establishment of an authority to protect the interests of holders of insurance policies, to regulate, to promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Impact of Liberalization While nationalized insurance companies have done a commendable job in extending volume of the business opening up of insurance sector to private players was a necessity in the context of liberalization of financial sector. If traditional infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc. have significant private sector presence, 24
continuing state monopoly in provision of insurance was indefensible and therefore, the privatization of insurance has been done as discussed earlier. Its impact has to be seen in the form of creating various opportunities and challenges. Peter Drucker (1999) admitted that by “providing financial protection against the major eighteenth and nineteenth century risk of dying too soon, life insurance became the biggest financial industry of that century. Providing financial protection against the new risk of not dying soon enough may well become that next century?s major and most profitable financial industry”. TS Rama Krishna Rao (2000) opined, “1999-2000 were landmark years in the history of Indian insurance industry. The year 2007 is going to be another watershed for the industry. Detariffication from first January 2007 will totally change the complexion of the non-life industry. Financial conclusion is being emphasized in various fora. The insurance industry will have to play a vital role by providing health insurance and other insurance products for the poor”. Jain (2004) revealed, “Waves of liberalization have done wonders to raise the insurance occupation to the status of a career with a bright future. The average mindset, particularly of younger generation in India is very amenable to these changes in insurance, which is as an avenue where exhilarating opportunities are opened up in changed environment”. Sukla (2006) reviewed, “the euphoria is well earned and the economic measures of liberalization initiated in insurance sector are well looked at. Six years into competitive market, the Indian insurance industry exhibited a healthy growth trend of new business and market share. It grew from a total premium of Rs.34, 898 crore in the year 2000-2001 to Rs.66, 287.93 crore in 2003-2004, followed by the aggressive achievement posted at Rs.81301.40 crore in 2004-2005. The life insurance industry saw the new players stabilize their operations which were keenly matched by LIC and the premium numbers brought out the fact that the size of the insurance market grew over the six years of liberalization”. He also views that with liberalization, India is penning the script of insurance convergence (catch up) and not Insurance divergence
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(falling behind). Since the opening of insurance industry at 2003-2004, private players have brought 21.87% of their new business, through referrals and direct business, a sign of harnessing the strengths of the competitive market of the respective organization. It clearly indicates the comfort zone of operation of the players. But the real operational efficiency will emerge beyond the boundaries of comfort when they will try to expand the market share in the unfamiliar territory. Rao (2007) reported, “Insurance is a vital economic activity and there is an excellent scope for its growth in the emerging markets. The opening up of the insurance sector has raised high hopes among people both in India and abroad. The recent detarrification in the non-life domain has provided a great deal of operational freedom to the players”. Sabera (2007) indicated, “The Government of India liberalized the insurance sector in March 2000, which lifted the entry restrictions for private insurance players, allowing foreign players to enter into the market and start their operations in India. The entry of private players helps in spreading and keeping the operation in the Indian insurance sector which in turn results in restructuring and revitalizing of public sector companies”. From the above discussion we can conclude that the entry of private players in insurance business needful and justifiable in order to enhance the efficiency of operations, achieving greater density and insurance coverage in the country and for a greater mobilization of long term savings for long gestation infrastructure prefects. New players should not be treat as rivalries to government companies, but they can supplement in achieving the objective of growth of insurance business in India.
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Problem statement A study about LIC customers on the problem of “Impact of Private life Insurance Players on LIC” at (Nanpura Branch), Surat
Research objectives ? Primary Objective: To know the impact of private life insurance players on LIC ? Secondary Objectives: ? ? ? ? ? ? To compare the performance of LIC and private insurance companies in India. To analyze the life insurance services of LIC as well as private life insurance players. To know the consumer preference for buying life insurance policy for LIC against private life insurance players. To examine the current status, volume of competitions and challenges faced by the Life Insurance Corporation of India. To know various media or promotional tool those are affecting people for buying life insurance policy. To find out the performances of LIC and private insurance companies in each category (size. growth, productivity and efficiency)
Research Limitation ? ? ? Researcher is not going to take response from the every regions or part of the country for collecting the information to analyze data. Being student, Researcher is not master or expert of research activity hence it becomes limitations. This project report is based on the information given by the respondents. So researcher has to rely on the information provided by respondents. 27
Research design: Descriptive Research Design In the report the descriptive research design is used to find out the impact of the private players on LIC. It used so as to find out the difference experienced in terms of premiums, policies, establishments of branch offices etc.
Types of data used for this study Primarily it is being framed through using primary data for this research collected through questionnaire. It is necessary to note that researcher also used some secondary data from various sources for this project report.
Sampling method The Respondents were selected by the convenience sampling method. The selection of units from the population based on their easy availability and accessibility to the researcher is known as convenience sampling. Convenience sampling can be used as a part of a preliminary research that forms a basis for conducting the detailed research. Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating ideas and hypothesis. Researcher used the non probabilistic Sampling method for this project report.
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Questionnaire as a tool of collecting information Questionnaires have advantages over some other types of surveys in that they are cheap, do not require as much effort from the questioner as verbal or telephone surveys, and often have standardized answers that make it simple to compile data. However, such standardized answers may frustrate users. Questionnaires are also sharply limited by the fact that respondents must be able to read the questions and respond to them. Thus, for conducting a survey the questionnaire was used.
Sample: Clients and Policy Holders of various life insurance companies Sampling Method: Non probability sampling method Convenience Sampling Method Data Collection Tool Questionnaire Sample frame: Surat City. Research Design: Descriptive Research Design Data Sources: ? ? Primary Data with the help of Questionnaire Secondary data via Internet, Books, Magazines, Periodic Report of IRDA etc
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A. Secondary Data analysis
The structure of the insurance industry has undergone a drastic change since liberalization, privatization and globalization of Indian economy, in general and the insurance sector in particular. The Life Insurance public sector giant, i.e. LIC which never faced competition earlier, now has to compete with the private players who boast of the rich and long experience of their partners from the developed countries of the world. They are also coming up with different types of innovative policies and other strategic plans. So there is a need to study the impact of the entry of private players on the performance of LIC. Thus, the analysis covers a period of 2008-09 to 2010-11 The impact of privatization on the performance of LIC and Analysis of Performance of life Insurance Players has been done on the basis of the following parameters:
1. Insurance penetration and density in India 2. Market share 3. Total premium Underwritten 4. New policies issued 5. Individual and corporate agents 6. Expansion of offices 7. Analysis of death claims 8. Grievance handling 9. Size of balance sheet 10. Paid up capital 11. Dividends paid 12. Operating expenses ratio 13. Commission expenses ratio 14. Solvency ratio
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1. INSURANCE PENETRATION AND DENSITY IN INDIA
The measure of insurance penetration and density reflects the level of development of insurance sector in a country. While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium to population (per capita premium).
TABLE: 6.1 INSURANCE PENETRATION AND DENSITY IN INDIA YEAR LIFE INSURANCE DENSITY (USD) 2008 2009 2010 41.2 47.7 55.7 4 4.6 4.4 PENETRAION (%) INDUSTRY DENSITY (USD) 47.4 54.3 64.4 4.6 5.2 5.1 PENETRAION (%)
*Insurance density is measured as ratio of premium (in USD) to total population. *Insurance penetration is measured as ratio of premium (in USD) to GDP (in USD).
The insurance density of life insurance sector had gone up from USD 41.2 in 2008 to USD 55.7 in 2010. Similarly, insurance penetration had gone up from 4 per cent in 2008 to 4.60 in 2009, before slipping to 4.40 per cent in 2010.
The above table shows that since the total premium collected is just 4.4% of India?s GDP in 2010 as compared to France, Japan, and England which have very high penetration so there is a great scope for growth of life insurance in India.
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2. MARKET SHARE OF LIFE INSURERS
On the basis of total premium income, the market share of LIC declined marginally from 70.92 per cent in 2008-09 to 69.78 per cent in 2010-11. Accordingly, the market share of private insurers had gone up marginally from 29.08 per cent in 2008-09 to 30.22 per cent in 2010-11.
TABLE: 6.2 MARKET SHARE OF LIFE INSURERS (In per cent) INSURER LIC Private Sector Total 2008-09 70.92 29.08 100 2009-10 70.1 29.9 100 2010-11 69.78 30.22 100
Market Share of LIC has consistently decreased. But we know that and we should not forget that this calculation is out of the increased insurance cake. In comparison to total the LIC has been losing its market share due to advent of new companies.
If we look at total Rupee figures LIC has progressed on all fronts. LIC became aggressive after liberalization and targeted the market with a new and different focus namely- target the young populace, caring for retired, venturing into new ventures like housing and then the ULIPs.
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3. TOTAL PREMIUM
Total premium is the summation of regular, single, first year and renewal premium.
TABLE: 6.3 TOTAL PREMIUM UNDERWRITTEN BY LIFE INSURERS (Rs. Crore) INSURER LIC Growth % (LIC) Private Sector Growth % (P.S) Total Growth (%) 2008-09 157288 5.01 2009-10 2010-11 Average
186077.3 203473.4 182279.58 18.3 9.35 10.88 77332.99 19.73 259612.57 13.23
64497.44 79369.94 88131.6 25.09 23.06 11.04
221785.5 265447.3 291605 10.15 19.69 9.85
Life insurance industry recorded a premium income of Rs 2,91,605 crore during 2010-11 as against Rs 2,65,447 crore and Rs 2,21,785 crore in the previous financial year 200-10 and 2008-09 respectively.
The figures related to growth rate of premium in table indicate that there has been a tremendous growth in the business of LIC and private players, which also indicate the increase in total market of insurance in country. While private sector insurers posted average 19.73 per cent growth, LIC recorded average 10.88 per cent growth in last three years in their premium Income. That is indicating the private insurer concentrate on collection of premium and issue of new police for growing their business.
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?
Using the data of last seven years of both LIC and private insurer to predict the total premium income of both LIC and private insurer by applying the least square method of time series
YEAR
LIC PREMIUM ACTUAL Y^=a+bx 76652.25 98262.03 119871.8 141481.6 163091.4 184701.1 206310.9 227920.7 249530.5 271140.2 292750
PRIVATE PREMIUM ACTUAL 7727.508 15083.53 28218.75 51561.42 64497.44 79373.06 88131.6 y^=a+bx 4291.541 18794.04 33296.54 47799.04 62301.54 76804.05 91306.55 105809 120311.5 134814 149316.6
2005 2006 2007 2008 2009 2010 2011 2012 2013
75127.28 90792.22 127822.8 149790 157288 186077.3 203473.4
Y 2014 ^ 2015 = a + bx
?Y= na + b?x (n=7, x=Year, Y= actual premium) ?XY= a?x + ?bx2
Interpretation: As per the applied time series analysis with the help of Excel, it is observed that Total Premium Income of LIC in year 2015 will be 292750 Crore and in Private firms it will be approximately 149316 Crore.
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4. NEW POLICIES ISSUED BY LIFE INSURERS
TABLE: 6.4 NEW POLICIES ISSUED BY LIFE INSURERS (In lakh) INSURER LIC Growth (LIC) Private Sector Growth (P.S) TOTAL Growth 2008-09 359.13 (-4.52) 150.11 13.19 509.24 0.10 2009-10 388.63 8.21 143.62 (-4.32) 532.25 4.52 2010-11 370.38 (-4.70) 111.14 (-22.61) 481.52 (-9.53)
LIC reported continuously up and down in issue of new policy. During 201011, life insurers had issued 482 lakh new policies, out of which, LIC issued 370 lakh policies (76.91 per cent of total policies issued) and the private life insurers issued 111 lakh policies (23.09 per cent). While LIC suffered decline of 4.70 per cent (8.21 per cent increase in 2009-10, 4.52 percent decline in 2008-09) in the number of policies issued.
There is great variation (104.64 percent increase in 2006-07 and 22.61 percent decline in 2010-11) in private sector insurers in the number of new policies issued. Since last two year private insurer reported decline in issue of new police hence it is also difficult for them in snatching business from LIC.
Overall, the industry witnessed a 4.52 per cent increase in 2009-10 (0.10 per cent in 2008-09) in the number of new policies issued. Which is 9.53 per cent decline (4.52 per cent increase in 2009-10) in the number of new policies issued in 2010-11.
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5. INDIVIDUAL AND CORPORATE AGENTS The number of agents of insurance companies indicates their accessible, reach and coverage.
TABLE: 6.5 DETAILS OF INDIVIDUAL AGENTS (Number) Insurer Private Total LIC Industry Total 2009 1592579 1344856 2937435 2010 1575476 1402807 2978283 2011 1302328 1337064 2639392
DETAILS OF CORPORATE AGENTS (Number) Insurer Private LIC Industry Total 2009 2091 415 2506 2010 2420 510 2930 2011 1870 295 2165
LIC has more number of individual agents than all private life insurers put together. At the end of the year 2011, while the number of individual agents with LIC stood at 13.37 lakh, the corresponding number for private sector insurers was 13.02 lakh.
One major concern that emerges from the data is the high per cent of turnover of agents. In 2010-11, while the total number of agents appointed was 7.02 lakh, the number of agents terminated was as high as 10.40 lakh. The scenario was worse for private insurers as compared to LIC. While private insurers appointed 3.95 lakh agents, they terminated 6.69 lakh agents. On the other hand, LIC has terminated 3.72 lakh agents while it appointed 3.06 lakh agents. Such high turnovers may have negative consequences. ?
Firstly, it is a huge drain on the financials of the insurers who spend a lot of money and time on prospecting, appointing and training of these agents. 36
?
Secondly, the policies procured by these agents are rendered orphan on their termination and thereafter often result into lapsation due of lack of servicing support.
?
Thirdly, the image of the profession of agency too suffers a setback since the public in general and prospective agents in particular perceive it as lacking in stability,
?
Thus making it more difficult for insurers to find good agents. It is therefore in the interest of all stakeholders to work at reducing the turnover of agents.
6. Expansion of Offices
TABLE: 6.6 NUMBER OF LIFE INSURANCE OFFICES Insurer Private Total LIC Industry Total 2009 8785 3030 11815 2010 8768 3250 12018 2011 8175 3371 11546
During the year under review, there was a decrease in the number of life insurance offices in India. While private insurers closed 593 offices; the public sector insurer LIC established 121 new offices. With this, the number of offices of life insurers declined from 12,018 as on 31st March, 2010 to 11,546 as on 31st March, 2011
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7. ANALYSIS OF DEATH CLAIMS
TABLE: 6.7 INDIVIDUAL DEATH CLAIMS (In per cent)
INSURER CLAIM PAID CLAIM REPUDIATE CLAIM RETURN BACK CLAIM PENDING AT END OF YEAR
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
Private LIC Total
84.88 96.54 95.24
86.04 97.03 95.58
7.6 1.21 1.93
8.9 1 2.04
0.04 0.84 0.75
0.05 0.51 0.45
7.48 1.41 2.08
5.01 1.46 1.93
GROUP DEATH CLAIMS (In per cent)
INSURER CLAIM PAID CLAIM REPUDIATE CLAIM RETURN BACK CLAIM PENDING AT END OF YEAR
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
Private LIC Total
93.33 99.66 96.73
96.8 99.8 98.9
1.18 0.01 0.55
1.61 0.01 0.49
0.13 0 0.06
0.02 0 0.01
5.36 0.33 2.66
1.58 0.19 0.61
The claim settlement ratio of LIC was better than that of the private life insurers. For private insurers, settlement ratio has gone up to (86.04% in individual ,96.8% in group) during the financial year 2010-11 but it is quite lower than LIC that of (97.03% in individual ,99.8 in group). The percentage of repudiations for LIC was quite low that declined from 1.33 per cent in the 2008-09 to 1.00 per cent in 2010-11. Private insurers repudiated a larger number of claims when compared to LIC. The per cent of repudiations increased to 8.90 per cent in 2010-11 from 7.61 per cent in 2009-10.
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8. GRIEVANCE HANDLING
During 2010-11 Private life insurers resolved 97.42 per cent of the complaints registered (88.4 per cent in 2009-10), LIC resolved 97.58 per cent of the complaints (81.0 per cent in 2009-10) filed against them with the Authority. This shows that Insurers are very serious about their image and are working hard to provide the solution of the problems of the people as early as possible. The three major causes of grievances of the policyholders are sales related (23.83 per cent), non-payment of surrender value / claim / maturity benefit / survival benefit/annuities (21.71 per cent) and cancellation of policy (8.80 per cent).
9. SIZE OF BALANCE SHEET
TABLE: 6.8 SIZE OF BALANCE SHEET (Rs in lakh) INSURER LIC PRIVATE TOTAL 2011 2010 2009 84,127,287 13,486,507 97,613,794 AVERAGE 108,027,254 22528042 130555296.3
128,212,858 111,741,618 30,151,832 23,945,787
158,364,690 135,687,405
Total average size of balance sheet of LIC in the last three years is certainly higher than that of private insurance companies. There is a huge gap in this value. It is obvious that LIC has bigger balance sheet as being working in the insurance field for quite large time. As compared to average balance sheet size of Rs 22528042 lakh of private insurance companies, LIC as average balance sheet size goes to much high as that of 108,027,254 lakh.
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10. PAID UP CAPITAL
TABLE: 6.9 Paid-up capital (Rs. Crore) INSURER LIC Private Sector Total 2008-09 5 18249.77 18254.77 2009-10 5 21014.99 21019.99 2010-11 5 23656.85 23661.85
The total capital of the life insurance companies as on 31st March, 2011 was Rs 23,662 crore. During 2010-11, an additional capital of Rs 2,765 and Rs 2,642 crore was brought in 2008-09, 200-10 respectively by the industry. The incremental capital during 2010-11 was brought in by the private sector insurers as there was no addition in the capital of LIC, the public sector insurance company.
11. DIVIDENDS PAID
Out of the 23life insurers in operations during 2010-11, twelve companies reported profits as against 8 companies in 2009-10. They are LIC, ICICI Prudential, Birla Sunlife, Max New York, Bajaj Allianz, SBI, Kotak Mahindra, TATA AIG, MetLife, Aviva, SaharaIndia and Shriram.
TABLE: 6.10 DIVIDENDS PAID BY LIFE INSURERS Insurer LIC Private Total 2008-09 929.12 --929.12 2009-10 1030.92 --1030.92 2010-11 1138 --1138
For the year 2009-10, LIC has paid Rs 1,031 crore as dividend to Government of India. This is 97 per cent of its net profit earned during the year. LIC had paid the same per cent of its net profit as dividend during 2008-09 when it
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paid `929 crore as dividend to the ex-chequer. None of the private insurance companies paid dividends since last years. 12. OPERATING EXPENSES RATIO
Operating expenses ratio is the ratio of operating expenses to the premium underwritten by the life insurers.
TABLE: 6.11 OPERATING EXPENSES RATIO OF LIFE
INSURERS (In per cent)
INSURER LIC Private Sector Total
2008-09 5.76 25.99 11.65
2009-10 6.58 20.86 10.85
2010-11 8.34 18.11 11.3
Operating expenses, as a per cent of gross premium underwritten, increased for LIC from 5.76 per cent in 2008-09 to 8.34 per cent in 2010-11. However, the same declined marginally for private Insurers from 25.99 per cent in 200809 to 18.11 per cent in 2010-11. For the industry as a whole, the operating expenses ratio Decline slightly from 11.65 per cent in 2008-09 to 11.30 per cent in 2010-11.
As the initial set-up costs incurred by any insurance company is high, the Authority has granted exemption from the limits under Rule 17D to 22 private insurers in the first five years of commencement of their business operations. Out of the 23 life insurance companies (including 1 PSU) in 2010-11, nine companies were in the exemption period. Of the balance, twelve companies (including 1 PSU) were compliant with the limits under Rule 17D/directions of the Authority.
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13. COMMISSION EXPENSES RATIO Commission expenses ratio is the ratio between commission expenses and the premium underwritten by life insurers As per section 40B of the Insurance Act, 1938 no life insurer can spend as expenses of management in any year an amount in excess of the limits prescribed under Rule 17D of the Insurance Rules, 1939. Rule 17D takes into consideration the size and age of the insurer, while laying down the limits of such expenses. TABLE: 6.12 COMMISSION EXPENSES RATIO (%) Insurer LIC Private Total 2009 6.39 8.49 7 2010 6.52 7.63 6.85 2011 6.56 5.65 6.29
There is some variation in the position when compared between the private insurers and LIC, as reflected in above table, providing bifurcation of the commission ratios for both private and public sector life insurers.
14. SOLVENCY STATUS Every insurer is required to maintain a Required Solvency Margin (RSM) as per Section 64VA of the Insurance Act, 1938. Every insurer shall maintain an excess of the value of assets over the amount of liabilities of not less than an amount prescribed by the IRDA, which is referred to as a Required Solvency Margin. The IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations, 2000 describe in detail the method of computation of the Required Solvency Margin. At the end of March 2011, all the twenty three life insurers complied with the stipulated requirement of solvency ratio of 1.5. Life Insurance Corporation of India reported a solvency ratio of 1.54, the same as at the end of March 2010. Though solvency ratio of 14 out of 22 private life insurers declined during the year under review, all life insurance companies are compliant with the mandated solvency requirements. 42
B. Primary Data analysis
1. Which of these life insurance players are you aware of?(Multiple Tick mark possible) HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life max New York Tata AIG Bajaj Allianz LIC Birla Sun Aviva life all
HDFC standard 74
ICICI prudential 78
ING Vyasya 43
SBI life 77
Reliance Life 62
120 100 80 60 40 20 0
Max New Tata York AIG 50 60
Bajaj Allianz 59
LIC 96
Birla Sun 52
Avia Life 42
HDFC ICICI ING standa prude Vyasy rd ntial a 74 78 43
SBI life 77
Max Relian Tata Bajaj NewY ce Life AIG allianz ork 62 50 60 59
LIC 96
Birla Sun 52
Avia Life 42
Series1
Interpretation: LIC is the leader in their customer, here more of respondents having the awareness of all the insurance. The market of insurance is now having more strength so customers are aware about all the companies.
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2. From which Company you bought the life insurance policy? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life max New York Tata AIG Bajaj Allianz LIC Birla Sun Aviva life other
HDFC standard 2
ICICI prudential 18
ING Vyasya 5
SBI life 18
Reliance Life 5
Max New Tata York AIG 1 2
Bajaj Allianz 2
LIC 79
Birla Sun 1
Avia Life 0
90 80 70 60 50 40 30 20 10 0 HDFC ICICI Max ING Relian Tata Bajaj SBI life standa prude NewYo Vyasya ce Life AIG allianz rd ntial rk 2 18 5 18 5 1 2 2 Birla Sun 1 Avia Life 0
LIC 79
Series1
Interpretation: LIC is the leader in their customer, here more than 70% of respondents having the policy form LIC. Whereas almost 30% policy from Private Players. It is also the fact that the respondents have more than one policy.
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3. How long you have been investing in the life insurance policy? 0-3 year 3-5 year 5-7 year >7 year
0-3 Year 3
3-5 Year 23
5-7 Year 50
>7 Year 24
0-3 Year
3-5 Year 3%
5-7 Year
>7 Year
24%
23%
50%
Interpretation: There are 23% respondents who were investing money in life insurance since last 3-5 years followed by 50% since last 5-7 years & 24% respondents were investing since last more than 7 years.
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4. According to you, Life Insurance policies are for whom? Childs Adults Couples Old people
Childs Adults Couples Old People 35 67 44 37
20%
19% Childs
24% 37%
Adults Couples Old People
Interpretation: Out of the total response researchers found that many people 37 believe that the life insurance policy are basically form for old people at the same time 44 respondents also said the it is for couples & 67 was on the side of adults. Only 35 people said that life insurance policies are made for Childs.
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5. What are your motives or objectives behind buying of life insurance policy? Risk Protection Tax benefits Saving /Pension Child welfare Investment for return Business or Profession
Risk Protection 49
Tax Benefits 35
Savings/ pension 38
Child welfare 12
Investment for Business or return Profession 26 3
2% 16% 7% 30% Risk Protection Tax Benefits Savings/pension 23% Child welfare 22% Investment for return Business or Profession
Interpretation: Different people invest their money in life insurance for different purposes. Here it can Cleary see that 23% respondents are in favor of Savings, while 16% invest for return. The Motive of Risk Protection & Tax Benefits is 30% & 22% respectively.
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6. Are you believed that private insurance companies provide greater return over the LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Percent Valid Strongly Agree 15 Agree Neutral Disagree Strongly Disagree Total 37 26 18 4 100 15.0 37.0 26.0 18.0 4.0 100.0
Interpretation: It is seen from the responses that all are agree with the fact that private companies are providing greater return over LIC.
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7. Would you believe that private insurance companies have good brand name than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Valid Strongly Agree Agree Neutral Disagree Total 1 9 14 64 100
Percent 1.0 9.0 14.0 64.0 12.0 100.0
Strongly Disagree 12
Interpretation: According to the responses it is visible that the LIC have a good brand name over the private players.
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8. According to you, private insurance companies settled grievance faster than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Percent Valid Strongly Agree 14 Agree Neutral Disagree Strongly Disagree Total 22 40 20 4 100 14.0 22.0 40.0 20.0 4.0 100.0
Interpretation: The respondents are neutral about the fact that private insurance companies settled grievance faster than LIC.
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9. Would you believe that the agents of private company are explaining policy better than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Percent Valid Strongly Agree 10 Agree Neutral Disagree Strongly Disagree Total 45 26 13 6 100 10.0 45.0 26.0 13.0 6.0 100.0
Interpretation: As per the responses collected it is found that the Private life insurance companies? agents explain policies better than LIC. Majority of the respondents are agreeing with that fact also.
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10. According to you which company’s agent/employee/representatives are easily accessible? Private Life Insurance Players LIC
Frequency Valid Private Life Insurance 28 Players LIC Total 72 100
Percent 28.0 72.0 100.0
Interpretation: According to the responses it is found that the agents of LIC are easily accessible. It is because of the fact that LIC have greater market and wide numbers of agents.
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11. Have you ever received/meet any call/representative of private insurance company? Regularly Sometimes Not at All
Frequency Valid Regularly Not at All Total 21 12 100 Sometimes 67
Percent 21.0 67.0 12.0 100.0
Interpretation: All are agree with the fact that they received call from the insurance companies sometimes. Very rare cases are there who haven?t got any call from the company agents.
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12. Do you ever receive any benefits such like bonus, etc from your insurer? Regularly Sometimes Not at All
Frequency Percent Valid Regularly Not at All Total 27 27 100 27.0 46.0 27.0 100.0 Sometimes 46
Interpretation: According to the responses, they not at all received any bonus from the insurer. Some of respondents got a bonus from the insurer.
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13. If private insurance company and LIC both offering same policy with a different amount of cost, from whom you will prefer to buy? Private Life Insurance Players LIC Don?t Know
Frequency Percent Valid Private Life Insurance 20 Players LIC Don't Know Total 74 6 100 20.0 74.0 6.0 100.0
Interpretation: The respondents would prefer LIC if both the LIC and private sector insurance company would offer same policy.
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14. What is your opinion toward LIC? Less care of customer Large network (no of branch) too much documentation Safety other _____________
Frequency Valid Less Care of Customer Too much Documentation Safety Total 5 32 51 100 Large Network ( No. of Branches) 12
Percent 5.0 12.0 32.0 51.0 100.0
Interpretation: The more number of respondents believe that LIC offers safety to the investors. Some of them are also believe that there is too much documentation and less care of customers in LIC.
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15. What do you perceive about the quality of service provided by your life insurance company? Very good Good Average Bad Very Bad
Frequency Percent Valid Very Good 27 Good Average Total 48 25 100 27.0 48.0 25.0 100.0
Interpretation: When researchers are talking about Quality of services provided by LIC, 27% respondents said that it is Very Good. While 48% people are saying it is good. And only 25% people said it is Average. So it can analyze that LIC is Performing Well as far as Services is concerned.
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Test Analysis:
Test 1: Is there any Significance difference between Brand name of
company and Service provided by company?
Would you believe that private insurance companies have good brand name than LIC? * What do you perceive about the quality of service provided by your life insurance company? What do you perceive about the Total quality of service provided by your life insurance company? Very Good 0 4 2 14 7 27 Good 0 4 8 31 5 48 Average 1 1 4 19 0 25 1 9 14 64 12 100
Would you believe that private insurance companies have good brand name than LIC?
Strongly Agree Agree Neutral Disagree Strongly Disagree
Total
H0: There is no significance difference between Brand name of company and Service provided by company. H1: There is significance difference between Brand name of company and Service provided by company.
Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 14.537a 16.403 1.210 100 df 8 8 1 Asymp. Sig. (2sided) .069 .037 .271
a. 10 cells (66.7%) have expected count less than 5. The minimum expected count is .25.
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Interpretation: Since the asymptotic value is 0.069, which is greater than, 0.05, so I accept Ho. i.e. there is no significance difference between Brand name of company and Service provided by company.
Test
2:
Is
there
any Significance
difference between
explanation of policy and Service provided by company?
Would you believe that the agents of private company are explaining policy better than LIC? * What do you perceive about the quality of service provided by your life insurance company? What do you perceive about Total the quality of service provided by your life insurance company? Very Good Good Averag e Would you believe Strongly 2 6 2 10 that the agents of Agree private company are Agree 8 24 13 45 explaining policy Neutral 8 13 5 26 better than LIC? Disagree 5 3 5 13 Strongly 4 2 0 6 Disagree Total 27 48 25 100 H0: There is no significance difference between explanation of policy and Service provided by company. H1: There is significance difference between explanation of policy and Service provided by company.
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Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 11.565
a
df 8 8 1
Asymp. Sig. (2-sided) .172 .132 .064
12.468 3.423 100
a. 8 cells (53.3%) have expected count less than 5. The minimum expected count is 1.50. Interpretation: Since the asymptotic value is 0.172, which is greater than, 0.05, so I accept Ho. i.e. there is no significance difference between explanation of policy and Service provided by company.
Test 3: Is there any Significance opinion of people towards LIC and Service provided by company? What is your opinion toward LIC? * What do you perceive about the quality of service provided by your life insurance company? What do you perceive about the quality of service provided by your life insurance company? Very Good What is your opinion toward LIC? Less Care of Customer Large Network ( No. of Branches) Too much Documentation Safety Total 0 0 10 17 27 Good 2 9 13 24 48 Average 3 3 9 10 25 Total 5 12 32 51 100
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H0: There is no significance difference between opinion of people towards LIC and Service provided by company. H1: There is no significance difference between opinion of people towards LIC and Service provided by company.
Chi-Square Tests Value df
Pearson Chi10.991 6 a Square Likelihood Ratio 14.618 6 .023 Linear-by-Linear 6.074 1 .014 Association N of Valid Cases 100 a. 5 cells (41.7%) have expected count less than 5. The minimum expected count is 1.25. Interpretation: Since the asymptotic value is 0.089, which is greater than, 0.05, so I accept Ho. i.e. there is no significance difference between opinion of people towards LIC and Service provided by company.
Asymp. Sig. (2sided) .089
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? There are many private life insurance players about whom the
respondents are not properly aware or awareness is very less. So it is suggested that they should increase their awareness. They can use various media or tool to raise their awareness.
? It can say that both players sell majority of their life insurance policy
through Agent. So it is advisable to hire qualitative agents.
? LIC is a market leader but it is still not able to provide VERY GOOD
service to their customer. So it is suggested by researchers that LIC should improve their quality of services.
? Private life insurance players came up with innovative products in the life
insurance market. So it is necessary for LIC to adopt these changes in the business of LIC.
? There are certain numbers of people who can take risk for high return so it
is suggested that private life insurance players can focus on these type of customer.
? Indian economy is still developing and it has a potential of higher
development in the future, so income of Indian people will increase in the future by great extent. Thus it can recommend that for both players to increase their sell in the future.
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As compared to France, Japan, and England which have very high penetration so there is a great scope for growth of life insurance in India. The entry of private players in life insurance has resulted in a drop in the market share for Life Insurance Corporation. There is also evidence to show that the rate of growth of public sector undertaking has not shown any decline after the entry of the private sector companies. All of them are obviously having a share of a larger market. The growth rate of premium collection of private insurer is higher than LIC. Form the figure of total premium collection of industry is indicating overall the business of insurance industry increased. The last three years reported the declined in the issue of polices due to the various economic and international factors.
Distribution will be a key determinant of success of insurance. Indian Insurance companies should broaden their distribution network. As the product move towards the mature stages of commodization (increased awareness and popularity) they could then have a host of new channels like grocery stores, direct mails. Regulators must formulate strong and fair. Companies meanwhile must be prepared to set and meet high standards for themselves for solving the grievance and claim of client. As we know the underwriting is very risky business so that insurer should analyse all the fundamental parameters before developing new product.
Most of the opportunities and challenges that we have discussed apply equally to existing and new insurers. It must be emphasized that the opening of the insurance market is far from a bad thing for nationalized insurers. With a strong presence, a wide network and considerable brand equity, they are in a good position to tap the very same segments profitably, while improving their product and service offerings. The Indian Insurance companies should Leverage information technology to service large numbers of customers efficiently and bring down overheads. Technology can complement or supplement distribution channels cost-effectively. It can also help improve customer service levels considerably.
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The Credit for enlarging the market should however, go to the private sector as they came up with aggressive marketing strategies to establish their presence and public sector also followed suit.
? Out of the total respondents those who have Life insurance policy, most of
the people taken policy from LIC. Thus it can be concluded that LIC is the major player in the Life insurance Market.
? In the awareness of private life insurance player there are 2 companies
about customers are aware more than any other players. They are ICICI Prudential & SBI life insurance. Thus they have more benefits than other. The reason behind this is their presence in the market for long time than others.
? Researchers can conclude that different people investing in life insurance
policy for different purpose. But the common among them are Saving and Protection against risk of death. Few are in favor of investment for return.
? Most of the life insurance policies from private player as well as from the
LIC are sold through the medium of agent.
? From the respondent it is conclude that LIC is providing wide variety of
product then private life insurance players. So it can be said that customers of LIC has more option than private life insurance players.
?
More people perceive that private player?s services are VERY GOOD and next majority respondent perceive it is GOOD.
? More people want to buy life insurance policy from the LIC rather than
from private life insurance company.
? Respondent buy policy from LIC because it is a government company. So
it is a safe investment for the life insurance buyer.
? LIC has more number of agents compare to private players so it is an
advantage for LIC to sell its products.
64
?
http://articles.economictimes.india...emium-total-premium-life-insurancecorporation Mayur Shetty, ET Bureau Oct 6, 2008, 01.53am IST
? ? ?
http://answers.yahoo.com/question/index?qid=20080219022341AA1dN e8, vishal sanghavi news India Aug.2010http://ezinearticles.com/?Effect-of-Liberalisation-in-InsuranceIndustry&id=3760856http://sputnicproject.eu/docs/customer_relations/Vilnius SWOT.pdf swot analysis, June 18, 2009
? ? ? ? ? ? ?
Rao TSR “The Indian Insurance Industry the Road Ahead” J. Insurance Chronicle No.05 (December 2000) pp.3 (I): 31-43. Sabera K, “Changes in insurance sector “(A Study on Public Awareness). J. Insurance Chronicle (March 2006) pp.7 (1): 37. Sukla AK, ”The impact of public on life insurance”, J. Insurance Inst. India Number-32 (January 1998) pp. 10-15. Rao CS (2007). “The Regulatory Challenges Ahead” J. Insurance Chronicle 7: 10 Jain AK (2004). J. Insurance Inst. India 30: 53. Peter D (1999). “Innovate or Die”, J. Economist. 1(2): 41-55. Gulati, N. C., & Jain, C. (2011). Comparative Analysis of the Performance of All the Players of the Indian Life Insurance Industry. VSRD journal of business management and research , I (8), 561-569.
?
Rajendran, R., & Natarajan, B. (2010). The impact of liberalization, privatization, and globalization (LPG) on life insurance corporation of India (LIC). African Journal of Business Management , IV (8), 14571463.
?
IRDA annual report 2004-05 to 2010-11
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ANNEXURE
IMPACT OF PRIVATE LIFE INSURANCE PLAYERS ON THE “LIC” We, Hardik Sutariya & Ankit Sudani, are conducting survey on “Impact of private life insurance players on the life insurance corporation of India” This information are use for academic purpose only. Thank you for your precious time and cooperation.
1. Which of these life insurance players are you aware of?(Multiple Tick mark
possible)
HDFC Standard ICICI Prudential ING Vyasa
SBI Life Insurance Reliance life Max NewYork
Tata AIG Bajaj Allianz LIC
Birla Sun Aviva life all
2. From which Company you bought the life insurance policy? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life Max NewYork Tata AIG Bajaj Allianz LIC Birla Sun Aviva life other
3. How long you have been investing in the life insurance policy? 0-3 year 3-5 year 5-7 year >7 year
4. According to you, Life Insurance policies are for whom? Childs Adults Couples Old people
5. What are your motives or objectives behind buying of life insurance policy? Risk Protection Tax benefits Saving /Pension child welfare Investment for return Business or Profession
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6. Which of the following Life Insurance Players satisfied your objective? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life Max New York Tata AIG Bajaj Allianz LIC Birla Sun Aviva life other
7. Which of the following Life Insurance Players are offering the innovative products? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life Max New York Tata AIG Bajaj Allianz LIC other Birla Sun Aviva life
8. Are you believed that private insurance companies provide greater return over the LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
9. Would you believe that private insurance companies have good brand name than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
10. According to you, private insurance companies settled grievance faster than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
11. Would you believe that the agents of private company are explaining policy better than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
12. According to you which company’s agent/employee/representatives are easily accessible? Private Life Insurance Players LIC
13. Have you ever received/meet any call/representative of private insurance company? Regularly Sometimes Not at All
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14. Do you ever receive any benefits such like bonus, etc from your insurer? Regularly Sometimes Not at All
15. If private insurance company and LIC both offering same policy with a different amount of cost, from whom you will prefer to buy? Private Life Insurance Players LIC don?t Know
16. What is your opinion toward LIC? Less care of customer Large network (no of branches) too much documentation Safety other_____________
17. What do you perceive about the quality of service provided by your life insurance company? Very good Good Average Bad Very Bad
18. Responded information
1. Name: __________________________ Gender: Male / Female Age: ________ 2. Contact details: ___________________ Email ID: ______________________ 3. Marital Status: Unmarried / Married / Divorce / Widow 4. Occupation: Private Service / Govt. Service / Business / Profession / Retired 5. Personal Income (Annual) Rs. ____________
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doc_272911530.docx
1
investment institutions, specialist investors, international insurance companies and individuals. Any insurer who wants to become a member of the association has to deposit a certain fee as security for the regular payment of his liabilities. The association will inquire about the financial position of the concern, business reputation and experience. The business is conducted by these insurers called underwriters, syndicates etc. Anybody desirous of taking insurance will approach the „underwriters? and not the „association?. Each underwriter will be responsible for his business underwritten. Usually, the policy is underwritten by several underwriters and their share or portion is fixed individually. If there is claim on the policy, the insured gets the money from all the underwriters according to their respective shares. If an underwriter fails to pay, the amount is realized from the security taken at the time of enrolment from the underwriter. Lloyd?s as a corporation is never liable on any policy.
What is Insurance? Insurance is something that everyone will need sometime someday, and it's worth understanding it before you buy insurance. This includes vehicle insurance (which includes auto, motorcycle, and boat), health and life insurance, travel insurance, personal property or wealth insurance, home insurance and more. As the name spells, "insurance" provides to be a payment of some predictable sum of money, called as the premium which is used to safeguard against a huge unexpected loss or expense. Thus it transfers all the risk from the insured to the insurer or the insurance company for a certain amount of fee. Insurance policy allows individuals, businesses and other entities to protect themselves against significant potential losses and financial adversity at a reasonably affordable rate. If you need to safeguard your car, family and even home, it serves to be the best way possible that ensures that everything will be easily taken care of.
2
What is Life Insurance? Life Insurance is a contract for payment of a sum of money to the person assured (or failing him/her, to the person entitled to receive the same) on the happening of the event insured against. Usually the contract provides for the payment of an amount on the date of maturity or at specified dates at periodic intervals or at unfortunate death, if it occurs earlier. Among other things, the contract also provides for the payment of premium periodically to the Corporation by the assured. Life insurance is universally acknowledged to be an institution which eliminates 'risk', substituting certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the breadwinner. By and large, life insurance is civilization?s partial solution to the problems caused by death. Life insurance, in short, is concerned with two hazards that stand across the life-path of every person: that of dying prematurely leaving a dependent family to fend for itself and that of living to old age without visible means of support.
Why is it superior to other forms of Savings? Protection: Savings through life insurance guarantee full protection against risk of death of the saver. In life insurance, on death, the full sum assured is payable (with bonuses wherever applicable) whereas in other savings schemes, only the amount saved (with interest) is payable. Aid to Thrift: Life insurance encourages 'thrift'. Long term saving can be made in a relatively 'painless' manner because of the 'easy installment' facility built into the scheme (method of paying premium either monthly, quarterly, half yearly or yearly). Take, for example, our Salary Saving Scheme popularly known as SSS. This scheme provides a convenient method of paying premium each month by deduction from one's salary. The deducted premium is remitted by the employer to the LIC. The Salary Saving Scheme can be introduced in an institution or establishment subject to specified terms and conditions.
3
Liquidity: Loans can be raised on the sole security of a policy which has acquired loan value. Besides, a life insurance policy is also generally accepted as security for even a commercial loan. Tax Relief: Tax relief in Income Tax and Wealth Tax is available for amounts paid by way of premium for life insurance subject to Income Tax rates in force. Assesses can avail themselves of provisions in the law for tax relief. In such cases the assured in effect pays a lower premium for his insurance than he would have to pay otherwise. Money When You Need It: A suitable insurance plan or a combination of different plans can be taken out to meet specific needs that are likely to arise in future, such as children's education, start-in-life or marriage provision or even periodical needs for cash over a stretch of time. Alternatively, policy moneys can be so arranged to be made available at the time of one's retirement from service to be used for any specific purpose, such as for the purchase of a house or for other investments. Subject to certain conditions, loans are granted to policyholders for house building or for purchase of flats. Who Can Buy A Life Insurance Policy? Any person who has attained majority and is eligible to enter into a valid contract can take out a life insurance policy for himself and on those in whom he has insurable interest. Policies can also be taken out, subject to certain conditions, on the life of one's spouse or children. While underwriting proposals, factors such as the state of health of the life to be assured, the proponent's income and other relevant factors are considered by the Corporation. Insurance on Women: Prior to nationalization (1956), many of the private insurance companies used to offer insurance to female lives with some extra premium or on restrictive conditions. After nationalization of life insurance, the terms under which life insurance is granted to female lives have been reviewed from time to time. At present, women with earned income are treated on par with male lives. In other cases, a restrictive clause is imposed and that too only if age of the female is up to 30 years and if she does not have an income attracting Income Tax. 4
Medical and Non-Medical Schemes: Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also as a measure of relaxation, LIC has been extending insurance cover without any medical examination, subject to certain conditions. With Profit and Without Profit Plans: An insurance policy can be 'with' or 'without' profit. In the former, bonuses disclosed, if any, after periodical valuations are allotted to the policy and are payable along with the contracted amount. In 'without' profit plan the contracted amount is paid without any addition. The premium rate charged for a 'with' profit policy is therefore higher than for a 'without' profit policy.
5
Background: Insurance is an Rs 450 billion industry in India. The value of the market is determined by gross premium incomes. The life insurance segment writes about 80% of the overall market value. Indian Insurance market was at its all time high in 2003 with a growth of about 17.4% over the previous year. Since 2001 Insurance is growing at the rate of 15-20 % annually. The growth in the insurance industry is affected by volatility in real estate rates, GDP rates and long term interest rates. Fluctuations in exchange rates also affect the growth in this sector. The gross premium as a percentage of the GDP has gone up from 2.3 in the year 2000 to 4.8 in 2006. Together with banking services, it adds about 7% to the country?s GDP. Insurance Trends in India: With the de-regulation in Indian Insurance industry, the monopoly of public sector companies in life insurance and general insurance has come to an end. This has augmented the innovative practices initiated by the private players. Growth in the interactive technology such as internet has further created a wave of excitement in the insurance market. Indian economy and Indian Insurance sector is committed to a double digit growth. Here?s a glimpse of Insurance Industry over 190 years.
History of Indian Insurance: A] Ancient Historical Times: Insurance is as old as human society itself. The ancient origin of insurance is Emerigon, whose brilliant and learned Traite des Assurances, first published in 1783, is still read with respect and admiration. The result shows that insurances were known to the ancients such as Romans, Phoenicians Rhodians, although the business of underwriting commercial risks was probably not highly developed. The histories of Livy and Suetonius shows that the contractors who undertook to transport provisions and military stores to 6
the troops in Spain stipulated that the government should assume all risk of loss by reason of perils of the sea or capture and this was probably the first time when insurance process was known. There were friendly societies organized, for the purpose of extending aid to their unfortunate members from a fund made up of contributions from all. These societies undoubtedly existed in China and India in the earliest times. The earliest traces of Insurance in the ancient Indian history was in the form of marine trade loans or carrier?s contracts, which can be found in Kautilya?s Arthashastra, Yajnyavalkya?s Dharmashastra and Manu?s Smriti. These works show that the system of credit and the law of interest were well developed in India. They were based on clear appreciation of hazard involved and the means of safeguarding against it. B] British-India Period: Insurance in India without any regulations started in the nineteenth century. It was a typical story of a colonial era where a few British insurance companies dominated the market serving mostly large urban centers. Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. Bombay Mutual Life Assurance Society indicated the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. 1930s was the last of the old-style crises in the Indian economy because it marked the beginning of the end of the colonial state and an acceleration of the pace of industrialization as entrepreneurs moved their capital out of the countryside. Independent India reduced its vulnerability to external economic shocks by close control of foreign exchange and by promoting a massive change in the export schedule. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies.
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C] Nationalization Phase of Indian Insurance: 1956: 154 Indian insurance companies, 16 non-Indian companies and 75 provident societies were taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 Crore from the Government of India. 1972: The General Insurance Business (Nationalization) Act, which nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. Nationalization was accomplished in two stages; initially the management of the companies was taken over by means of an Ordinance, and later, the ownership too was taken by means of a comprehensive bill. However, it was only in 1956, LIC was nationalized, with the objective of spreading life insurance much more widely and in particular to the rural areas with a view to reach all insurable persons in the country, providing them adequate financial cover at a reasonable cost. And as of 2007, LIC is India?s leading Insurance company, with 2000 branches, which probably is the highest number of branches across India insurance sector. D] Liberalization of Indian Insurance: 1994: Insurance sector invited private participation to induce a spirit of competition amongst the various insurers and to provide a choice to the consumers. 1997: Insurance regulator IRDA was set up as there felt the need: a) To set up an independent regulatory body, that provides greater autonomy to insurance companies in order to improve their performance, b) To enable them to act as independent companies with economic motives. 8
c) To protect the interest of holders of insurance policies. d) To Amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 e) To end the monopoly of the Life Insurance Corporation of India and General Insurance Corporation and its subsidiaries. Thus in all there are 25 players (12-life insurance and 13-general insurance) in the Indian insurance industry till date. E] Indian Insurance in 21st Century: 2000: IRDA starts giving licenses to private insurers: ICICI prudential and HDFC Standard Life insurance first private insurers to sell a policy 2001: Royal Sundaram Alliance first non life insurer to sell a policy 2002: Banks allowed selling insurance plans. As TPAs enter the scene, insurers start setting non-life claims in the cashless mode 2007: First Online Insurance portal, www.insurancemall.in set up by an Indian Insurance Broker, Bonsai Insurance Broking Pvt Ltd. The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Minimum capital requirement for direct life and Non-life Insurance company is INR1000 million and that for reinsurance company is INR 2000 million. In the 2004-05 budgets, the Government proposed for increasing the foreign equity stake to 49%, this is yet to be effected. Under the current guidelines, there is a 26 percent equity cap for foreign partners in direct insurance and reinsurance Company. (World Bank Economic Review-2000).
9
The Insurance Regulatory and Development Authority (IRDA) Reforms were initiated with the passage of Insurance Regulatory and Development Authority (IRDA) Bill in 1999. IRDA was set up as an independent regulatory authority, which has put in place regulations in line with global norms. IRDA has been framing regulations and registering the private sector insurance companies. It launched of the IRDA online service for issue and renewal of licenses to agents. So far, there are 13 life insurance companies and 14 general insurance companies. Premium rates of most general insurance policies come under the purview of the government appointed Tariff Advisory Committee. Powers, Duties & Functions of IRDA The IRDA Act, 1999 lays down the duties, powers and functions of IRDA. The Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. The powers and functions of the Authority shall include, (a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; (b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; (c) specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; (d) specifying the code of conduct for surveyors and loss assessors; (e) promoting efficiency in the conduct of insurance business; (f) promoting and regulating professional organizations connected with the insurance and re-insurance business;
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PESTEL ANALYSIS:
PESTEL analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. A] Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads). Furthermore, governments have great influence on the health, education, and infrastructure of a nation. B] Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy. C] Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. For example, an aging population may imply a smaller and less-willing workforce (thus increasing the cost of labor). Furthermore, companies may change various management strategies to adapt to these social trends (such as recruiting older workers). D] Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and
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influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation. E] Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Furthermore, growing awareness of the potential impacts of climate change is affecting how companies operate and the products they offer, both creating new markets and diminishing or destroying existing ones. F] Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.
TABLE: 2.1 NAME OF THE PLAYER MARKET SHARE (%) Name of the Player LIFE INSURANCE CORPORATION OF INDIA ICICI PRUDENTIAL BIRLA SUN LIFE BAJAJ ALLIANZ SBI LIFE INSURANCE HDFC STANDARD TATA AIG MAX NEW YORK AVIVA OM KOTAK MAHINDRA ING VYSYA MET LIFE Market share (%) 82.3 5.63 2.56 2.03 1.80 1.36 1.29 0.90 0.79 0.51 0.37 0.21
(Source -http://www.asiainsurancereview.com/edsynopsis.asp)
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A] Life Insurance Corporation of India: This leading Insurance Company of India was established in the year 1956 by the alliance of 16 non-Indian companies, 154 Indian Insurance Companies and 75 provident. It has 100 divisional offices, 2048 computerized branches, 7 zonal offices and the company's corporate office. It has introduced new strategies for the facilitation of the customers like the IVRS,ECS,ATM Premium payment facility and the company's Info centers in Mumbai, Delhi, Chennai, Kolkata and many others cities.
B] SBI Life: This renders premium Insurance solutions like SBI Life-Smart ULIP, SBI LifeGroup Criti9, SBI Life-Unit plus Child Plan etc. It also offers services like the NRI services, Premium Payment Procedure, ECS Facility, RPI/RFI and many others. SBI Life is a joint venture of BNP Paribas Assurance and SBI.
C] ICICI Prudential: This major Insurance Company in India provides health Insurance, life insurance, ULIPs, ULIP, Retirement Plans and many others. Life Insurance Plans of the company covers Premium Guarantee Plans, Education Insurance Plans etc. Pension Plans encompass Life Stage Pension, Forever Life. Health Insurance Plans cover Hospital Care, MediAssure D] HDFC Standard Life: This is one of the major market leaders in the insurance sector in India. The company offers Insurance services like the Group Plans, Health Plans, Protection Plans, Retirement Plans, Savings and Investment Plans etc. The customer base of the company is about more than 7 million who depend on the company for pension, investment, banking needs.
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INTRODUCTION Table: 3.1 Life Insurance Corporation of India (LIC) Parent Company Category Sector Tagline/ Slogan Government of India NBFC Insurance and finance Yogakshemam Vahamyaham (Your welfare is our responsibility) USP STP Segment Target Group Positioning India?s Largest Life Insurance Company Personal and Group Insurance Urban and Rural Investors Complete Insurance and financial solutions
Branches 8 Zonal Offices and 101 Divisional Offices OVERVIEW The largest life insurance company in India, Life Insurance Corporation is fully owned by the government. It provides individual life insurance, group insurance and pension plans. Its subsidiaries include Life Insurance Corporation of India International, LIC Nepal, LIC Lanka, LIC Housing Finance and LICHFL Care Homes. It has over 12 million policy holders and over 9 lakh agents. It has underwritten more than 120 million policies. LIC saw computers in 1964. Today the company is on the Internet and is utilizing Information Technology in servicing its clients. It has bagged various award including Loyalty Awards 2008 in Insurance Sector, NDTV Profit Business Leadership Award – 2007, CNBC Awaaz Consumer Awards 2007 and Outlook Money NDTV Profit Awards 2007. LIC provides a rewarding career as sales agents. It offers world class training, freedom to work and unmatched financial strength.
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Headquartered in Bombay, financial and commercial capital of India, the Life Insurance Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns of India and has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public.
(TABLE: 3.2) NAME OF THE LIFE INSURANCE COMPANY AND THE SHARE HOLDING PATTEN Name of the company Nature of Holding Allianz Bajaj Life Insurance Co Aviva Life Insurance Birla Sun Life Insurance Co HDFC Standard Life Insurance Co ICICI Prudential Life Insurance Co ING Vysya Life Insurance Co. Life Insurance Corporation of India Max New York Life Insurance Co. MetLife Insurance Co. Om Kotak Mahindra Life Insurance Reliance insurance SBI Life Insurance Co TATA- AIG Life Insurance Company (Source-http://www.lic.wwindia.com/) Private Private Private Private Private Private Public Private Private Private Private Private Private
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OBJECTIVE OF LIC
?
Spread Life Insurance widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost.
?
Maximize mobilization of people's savings by making insurance-linked savings adequately attractive.
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Bear in mind, in the investment of funds, the primary obligation to its policyholders, whose money it holds in trust, without losing sight of the interest of the community as a whole; the funds to be deployed to the best advantage of the investors as well as the community as a whole, keeping in view national priorities and obligations of attractive return.
?
Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders.
?
Act as trustees of the insured public in their individual and collective capacities.
?
Meet the various life insurance needs of the community that would arise in the changing social and economic environment.
?
Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy.
?
Promote amongst all agents and employees of the Corporation a sense of participation, pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective.
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MISSION AND VISION Mission "Explore and enhance the quality of life of people through financial security by providing products and services of aspired attributes with competitive returns, and by rendering resources for economic development."
Vision "A trans-nationally competitive financial conglomerate of significance to societies and Pride of India."
ORGANISATION/DIVISION OF LIC Chart: 3.1
(Source:http://info.shine.com/company/Life-Insurance-Corporation-ofIndia/348.aspx)
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LIC Products Table: 3.3 LIC products Retirement/Pension Plan Retirement/Pension Plan Retirement/Pension Plan Retirement/Pension Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Child Plan Term Plan Pension Plus Jeevan Nidhi Jeevan Akshay- VI New Jeevan Dhara- I New Jeevan Suraksha- I Jeevan Anurag CDA Endowment Vesting at 21 CDA Endowment Vesting at 18 Jeevan Kishore Child Career Plan Child Fortune Plus Komal Jeevan Jeevan Chaya Child Future Plan Marriage Endowment Or Educational Annuity Plan Term plan Term Plan Term Plan Term Plan Savings & Investment Plan Two Year Temporary Assurance Plan The Convertible Term Assurance Plan Anmol Jeeval- I Amulya Jeevan- I Mortgage Redemption
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Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan
The Money Back Policy- 20 years The Money Back Policy- 25 years Jeevan Surabhi- 15 Years Jeevan Surabhi-20 Years Jeevan Surabhi- 25 Year Bima Bachat Jeevan Shree- I Jeevan Pramukh The Endowment Assurance Policy The Endowment Assurance Policy- Limited Payment
Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan
Jeevan Mitra (Double Cover Endowment Plan) Jeevan Mitra (Triple Cover Endowment Plan) Jeevan Anand New Janaraksha Plan Jeevan Amrit Endowment Plus The Whole Life Policy The Whole Life Policy- Limited Payment The Whole Life Policy- Single Premium Jeevan Anand Jeevan Tarang Jeevan Bharati-I
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Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Savings & Investment Plan Health Plan
Jeevan Aadhar Jeevan Vishwas New Bima Gold Bima Nivesh 2005 Jeevan Saral Jeevan Madhur Jeevan Mangal Health Protection Plus
(Source:http://info.shine.com/company/Life-Insurance-Corporation-ofIndia/348.aspx) Published in: Life Insurance
SWOT ANALYSIS A] Strength:1. Largest state-owned life insurance company in India, and also the country's largest investor because of it has a market share of 82.12%. 2. LIC has highest office location all over India. The Life Insurance Corporation of India currently has 8 zonal Offices and 113 divisional offices located in different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different cities and towns of India and has a network of 13,37,064 individual agents, 242 Corporate Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life insurance business from the public. 3. With Largest fund base it is the biggest investor in India. It has assets estimated of 13.25 trillion (US$ 251.75 billion). 20
4. According to The Brand Trust Report, LIC is the 8th most trusted all over sectors brand in India. 5. LIC has many of subsidiaries like LIC Housing Finance Limited, LIC Cards Services Limited, LIC Nomura Mutual Fund, LIC (Nepal)Ltd, LIC(Lanka)Ltd, LIC(International)BSC(C) . All are working well as profitable, efficiently, and fast growing.
B] Weakness:1. It has an image of a Government agency, so Indian people belive that it is working roughly with customers, and hence lacks innovation in the settlement process. 2. Being a Government agency, red tape and bureaucracy causes problems to the customers while claiming the return. 3. Managing a huge workforce during economic crisis meant overburdened due to salaries because all employee are selected permanent and they are very Lethargic Staff in performing their duties. 4. There is a lack of the control over office, so Large scale Corruption in Main Office and Ultra-Slow decision making process. 5. There is an internal problems between Top Management and lower cadre Employees in metter of salary, positions, performance etc.
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C] Opportunity:1. Use of Technology to provide effective services to cater to urban population. 2. Government Schemes implementation like tax saving scheme help to collecting more and more premium. 3. Pension Market & Health Insurance market are new so company can easily enter in it.
D] Threats:1. Economic crisis like 2008 world recession its growth goes down and premium reduce up to 15% during this period. 2. Entry of new NBFCs in the sector. Many of new companies enter in the insurance sector cause to reduce market share of LIC. 3. There is varying change in the Govt. policies like CRR. Repo rate, reveres rapo rate, open market operations, tax rates, interest rate etc. harmful to its growth rate.
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Private players eat up LIC's share in life insurance market The entry of private players in life insurance has resulted in a drop in the market share for Life Insurance Corporation. But what has perhaps been lost in all the heat and dust of market share and top line growth is that the Life Insurance Corporation has emerged as a regional giant with assets of over Rs 8-lakh crore, which has been providing consistent returns to the government and policyholders for 52 years. Life Insurance Corporation chairman TS Vijayan speaks of how LIC is a growing organization and the corporation's plans of regaining its lost market share. What is the impact of the financial crisis on Life Insurance Corporation? LIC is a public sector insurer and a domestic investor. As such, we are not directly affected by the global financial crisis. However, the volatility in Indian financial market due to the uncertainty in global markets may affect returns we get on our investments. But LIC has an indisputable record of prudently planning its investments and getting the maximum returns on the policyholders' money. We will continue to do that in any type of scenario. Liberalization of Insurance The comprehensive regulation of insurance business in India was brought into effect with the enactment of the Insurance Act, 1983. It tried to create a strong and powerful supervision and regulatory authority in the Controller of Insurance with powers to direct, advise, investigate, register and liquidate insurance companies etc. However, consequent upon the nationalization of insurance business, most of the regulatory functions were taken away from the Controller of Insurance and vested in the insurers themselves. The Government of India in 1993 had set up a high powered committee by R. N. Malhotra, former Governor, Reserve Bank of India, to examine the structure of the insurance industry and recommend changes to make it more efficient and competitive keeping in view the structural changes in other parts of the financial system on the country.
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Malhotra Committee's Recommendations The committee submitted its report in January 1994 recommending that private insurers be allowed to co-exist along with government companies like LIC and GIC companies. This recommendation had been prompted by several factors such as need for greater deeper insurance coverage in the economy, and a much a greater scale of mobilization of funds from the economy, and a much a greater scale of mobilization of funds from the economy for infrastructural development. Liberalization of the insurance sector is at least partly driven by fiscal necessity of tapping the big reserve of savings in the economy. Committee's recommendations were as follows: ? Raising the capital base of LIC and GIC up to Rs. 200 crores, half retained by the government and rest sold to the public at large with suitable reservations for its employees. ? ? Private sector is granted to enter insurance industry with a minimum paid up capital of Rs. 100 crores. Limited number of private companies to be allowed in the sector. But no firm is allowed in the sector. But no firm is allowed to operate in both lines of insurance (life or non-life). IRDA Act, 1999 Preamble of IRDA Act 1999 reads 'An Act to provide for the establishment of an authority to protect the interests of holders of insurance policies, to regulate, to promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Impact of Liberalization While nationalized insurance companies have done a commendable job in extending volume of the business opening up of insurance sector to private players was a necessity in the context of liberalization of financial sector. If traditional infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc. have significant private sector presence, 24
continuing state monopoly in provision of insurance was indefensible and therefore, the privatization of insurance has been done as discussed earlier. Its impact has to be seen in the form of creating various opportunities and challenges. Peter Drucker (1999) admitted that by “providing financial protection against the major eighteenth and nineteenth century risk of dying too soon, life insurance became the biggest financial industry of that century. Providing financial protection against the new risk of not dying soon enough may well become that next century?s major and most profitable financial industry”. TS Rama Krishna Rao (2000) opined, “1999-2000 were landmark years in the history of Indian insurance industry. The year 2007 is going to be another watershed for the industry. Detariffication from first January 2007 will totally change the complexion of the non-life industry. Financial conclusion is being emphasized in various fora. The insurance industry will have to play a vital role by providing health insurance and other insurance products for the poor”. Jain (2004) revealed, “Waves of liberalization have done wonders to raise the insurance occupation to the status of a career with a bright future. The average mindset, particularly of younger generation in India is very amenable to these changes in insurance, which is as an avenue where exhilarating opportunities are opened up in changed environment”. Sukla (2006) reviewed, “the euphoria is well earned and the economic measures of liberalization initiated in insurance sector are well looked at. Six years into competitive market, the Indian insurance industry exhibited a healthy growth trend of new business and market share. It grew from a total premium of Rs.34, 898 crore in the year 2000-2001 to Rs.66, 287.93 crore in 2003-2004, followed by the aggressive achievement posted at Rs.81301.40 crore in 2004-2005. The life insurance industry saw the new players stabilize their operations which were keenly matched by LIC and the premium numbers brought out the fact that the size of the insurance market grew over the six years of liberalization”. He also views that with liberalization, India is penning the script of insurance convergence (catch up) and not Insurance divergence
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(falling behind). Since the opening of insurance industry at 2003-2004, private players have brought 21.87% of their new business, through referrals and direct business, a sign of harnessing the strengths of the competitive market of the respective organization. It clearly indicates the comfort zone of operation of the players. But the real operational efficiency will emerge beyond the boundaries of comfort when they will try to expand the market share in the unfamiliar territory. Rao (2007) reported, “Insurance is a vital economic activity and there is an excellent scope for its growth in the emerging markets. The opening up of the insurance sector has raised high hopes among people both in India and abroad. The recent detarrification in the non-life domain has provided a great deal of operational freedom to the players”. Sabera (2007) indicated, “The Government of India liberalized the insurance sector in March 2000, which lifted the entry restrictions for private insurance players, allowing foreign players to enter into the market and start their operations in India. The entry of private players helps in spreading and keeping the operation in the Indian insurance sector which in turn results in restructuring and revitalizing of public sector companies”. From the above discussion we can conclude that the entry of private players in insurance business needful and justifiable in order to enhance the efficiency of operations, achieving greater density and insurance coverage in the country and for a greater mobilization of long term savings for long gestation infrastructure prefects. New players should not be treat as rivalries to government companies, but they can supplement in achieving the objective of growth of insurance business in India.
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Problem statement A study about LIC customers on the problem of “Impact of Private life Insurance Players on LIC” at (Nanpura Branch), Surat
Research objectives ? Primary Objective: To know the impact of private life insurance players on LIC ? Secondary Objectives: ? ? ? ? ? ? To compare the performance of LIC and private insurance companies in India. To analyze the life insurance services of LIC as well as private life insurance players. To know the consumer preference for buying life insurance policy for LIC against private life insurance players. To examine the current status, volume of competitions and challenges faced by the Life Insurance Corporation of India. To know various media or promotional tool those are affecting people for buying life insurance policy. To find out the performances of LIC and private insurance companies in each category (size. growth, productivity and efficiency)
Research Limitation ? ? ? Researcher is not going to take response from the every regions or part of the country for collecting the information to analyze data. Being student, Researcher is not master or expert of research activity hence it becomes limitations. This project report is based on the information given by the respondents. So researcher has to rely on the information provided by respondents. 27
Research design: Descriptive Research Design In the report the descriptive research design is used to find out the impact of the private players on LIC. It used so as to find out the difference experienced in terms of premiums, policies, establishments of branch offices etc.
Types of data used for this study Primarily it is being framed through using primary data for this research collected through questionnaire. It is necessary to note that researcher also used some secondary data from various sources for this project report.
Sampling method The Respondents were selected by the convenience sampling method. The selection of units from the population based on their easy availability and accessibility to the researcher is known as convenience sampling. Convenience sampling can be used as a part of a preliminary research that forms a basis for conducting the detailed research. Convenience sampling is at its best in surveys dealing with an exploratory purpose for generating ideas and hypothesis. Researcher used the non probabilistic Sampling method for this project report.
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Questionnaire as a tool of collecting information Questionnaires have advantages over some other types of surveys in that they are cheap, do not require as much effort from the questioner as verbal or telephone surveys, and often have standardized answers that make it simple to compile data. However, such standardized answers may frustrate users. Questionnaires are also sharply limited by the fact that respondents must be able to read the questions and respond to them. Thus, for conducting a survey the questionnaire was used.
Sample: Clients and Policy Holders of various life insurance companies Sampling Method: Non probability sampling method Convenience Sampling Method Data Collection Tool Questionnaire Sample frame: Surat City. Research Design: Descriptive Research Design Data Sources: ? ? Primary Data with the help of Questionnaire Secondary data via Internet, Books, Magazines, Periodic Report of IRDA etc
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A. Secondary Data analysis
The structure of the insurance industry has undergone a drastic change since liberalization, privatization and globalization of Indian economy, in general and the insurance sector in particular. The Life Insurance public sector giant, i.e. LIC which never faced competition earlier, now has to compete with the private players who boast of the rich and long experience of their partners from the developed countries of the world. They are also coming up with different types of innovative policies and other strategic plans. So there is a need to study the impact of the entry of private players on the performance of LIC. Thus, the analysis covers a period of 2008-09 to 2010-11 The impact of privatization on the performance of LIC and Analysis of Performance of life Insurance Players has been done on the basis of the following parameters:
1. Insurance penetration and density in India 2. Market share 3. Total premium Underwritten 4. New policies issued 5. Individual and corporate agents 6. Expansion of offices 7. Analysis of death claims 8. Grievance handling 9. Size of balance sheet 10. Paid up capital 11. Dividends paid 12. Operating expenses ratio 13. Commission expenses ratio 14. Solvency ratio
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1. INSURANCE PENETRATION AND DENSITY IN INDIA
The measure of insurance penetration and density reflects the level of development of insurance sector in a country. While insurance penetration is measured as the percentage of insurance premium to GDP, insurance density is calculated as the ratio of premium to population (per capita premium).
TABLE: 6.1 INSURANCE PENETRATION AND DENSITY IN INDIA YEAR LIFE INSURANCE DENSITY (USD) 2008 2009 2010 41.2 47.7 55.7 4 4.6 4.4 PENETRAION (%) INDUSTRY DENSITY (USD) 47.4 54.3 64.4 4.6 5.2 5.1 PENETRAION (%)
*Insurance density is measured as ratio of premium (in USD) to total population. *Insurance penetration is measured as ratio of premium (in USD) to GDP (in USD).
The insurance density of life insurance sector had gone up from USD 41.2 in 2008 to USD 55.7 in 2010. Similarly, insurance penetration had gone up from 4 per cent in 2008 to 4.60 in 2009, before slipping to 4.40 per cent in 2010.
The above table shows that since the total premium collected is just 4.4% of India?s GDP in 2010 as compared to France, Japan, and England which have very high penetration so there is a great scope for growth of life insurance in India.
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2. MARKET SHARE OF LIFE INSURERS
On the basis of total premium income, the market share of LIC declined marginally from 70.92 per cent in 2008-09 to 69.78 per cent in 2010-11. Accordingly, the market share of private insurers had gone up marginally from 29.08 per cent in 2008-09 to 30.22 per cent in 2010-11.
TABLE: 6.2 MARKET SHARE OF LIFE INSURERS (In per cent) INSURER LIC Private Sector Total 2008-09 70.92 29.08 100 2009-10 70.1 29.9 100 2010-11 69.78 30.22 100
Market Share of LIC has consistently decreased. But we know that and we should not forget that this calculation is out of the increased insurance cake. In comparison to total the LIC has been losing its market share due to advent of new companies.
If we look at total Rupee figures LIC has progressed on all fronts. LIC became aggressive after liberalization and targeted the market with a new and different focus namely- target the young populace, caring for retired, venturing into new ventures like housing and then the ULIPs.
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3. TOTAL PREMIUM
Total premium is the summation of regular, single, first year and renewal premium.
TABLE: 6.3 TOTAL PREMIUM UNDERWRITTEN BY LIFE INSURERS (Rs. Crore) INSURER LIC Growth % (LIC) Private Sector Growth % (P.S) Total Growth (%) 2008-09 157288 5.01 2009-10 2010-11 Average
186077.3 203473.4 182279.58 18.3 9.35 10.88 77332.99 19.73 259612.57 13.23
64497.44 79369.94 88131.6 25.09 23.06 11.04
221785.5 265447.3 291605 10.15 19.69 9.85
Life insurance industry recorded a premium income of Rs 2,91,605 crore during 2010-11 as against Rs 2,65,447 crore and Rs 2,21,785 crore in the previous financial year 200-10 and 2008-09 respectively.
The figures related to growth rate of premium in table indicate that there has been a tremendous growth in the business of LIC and private players, which also indicate the increase in total market of insurance in country. While private sector insurers posted average 19.73 per cent growth, LIC recorded average 10.88 per cent growth in last three years in their premium Income. That is indicating the private insurer concentrate on collection of premium and issue of new police for growing their business.
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?
Using the data of last seven years of both LIC and private insurer to predict the total premium income of both LIC and private insurer by applying the least square method of time series
YEAR
LIC PREMIUM ACTUAL Y^=a+bx 76652.25 98262.03 119871.8 141481.6 163091.4 184701.1 206310.9 227920.7 249530.5 271140.2 292750
PRIVATE PREMIUM ACTUAL 7727.508 15083.53 28218.75 51561.42 64497.44 79373.06 88131.6 y^=a+bx 4291.541 18794.04 33296.54 47799.04 62301.54 76804.05 91306.55 105809 120311.5 134814 149316.6
2005 2006 2007 2008 2009 2010 2011 2012 2013
75127.28 90792.22 127822.8 149790 157288 186077.3 203473.4
Y 2014 ^ 2015 = a + bx
?Y= na + b?x (n=7, x=Year, Y= actual premium) ?XY= a?x + ?bx2
Interpretation: As per the applied time series analysis with the help of Excel, it is observed that Total Premium Income of LIC in year 2015 will be 292750 Crore and in Private firms it will be approximately 149316 Crore.
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4. NEW POLICIES ISSUED BY LIFE INSURERS
TABLE: 6.4 NEW POLICIES ISSUED BY LIFE INSURERS (In lakh) INSURER LIC Growth (LIC) Private Sector Growth (P.S) TOTAL Growth 2008-09 359.13 (-4.52) 150.11 13.19 509.24 0.10 2009-10 388.63 8.21 143.62 (-4.32) 532.25 4.52 2010-11 370.38 (-4.70) 111.14 (-22.61) 481.52 (-9.53)
LIC reported continuously up and down in issue of new policy. During 201011, life insurers had issued 482 lakh new policies, out of which, LIC issued 370 lakh policies (76.91 per cent of total policies issued) and the private life insurers issued 111 lakh policies (23.09 per cent). While LIC suffered decline of 4.70 per cent (8.21 per cent increase in 2009-10, 4.52 percent decline in 2008-09) in the number of policies issued.
There is great variation (104.64 percent increase in 2006-07 and 22.61 percent decline in 2010-11) in private sector insurers in the number of new policies issued. Since last two year private insurer reported decline in issue of new police hence it is also difficult for them in snatching business from LIC.
Overall, the industry witnessed a 4.52 per cent increase in 2009-10 (0.10 per cent in 2008-09) in the number of new policies issued. Which is 9.53 per cent decline (4.52 per cent increase in 2009-10) in the number of new policies issued in 2010-11.
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5. INDIVIDUAL AND CORPORATE AGENTS The number of agents of insurance companies indicates their accessible, reach and coverage.
TABLE: 6.5 DETAILS OF INDIVIDUAL AGENTS (Number) Insurer Private Total LIC Industry Total 2009 1592579 1344856 2937435 2010 1575476 1402807 2978283 2011 1302328 1337064 2639392
DETAILS OF CORPORATE AGENTS (Number) Insurer Private LIC Industry Total 2009 2091 415 2506 2010 2420 510 2930 2011 1870 295 2165
LIC has more number of individual agents than all private life insurers put together. At the end of the year 2011, while the number of individual agents with LIC stood at 13.37 lakh, the corresponding number for private sector insurers was 13.02 lakh.
One major concern that emerges from the data is the high per cent of turnover of agents. In 2010-11, while the total number of agents appointed was 7.02 lakh, the number of agents terminated was as high as 10.40 lakh. The scenario was worse for private insurers as compared to LIC. While private insurers appointed 3.95 lakh agents, they terminated 6.69 lakh agents. On the other hand, LIC has terminated 3.72 lakh agents while it appointed 3.06 lakh agents. Such high turnovers may have negative consequences. ?
Firstly, it is a huge drain on the financials of the insurers who spend a lot of money and time on prospecting, appointing and training of these agents. 36
?
Secondly, the policies procured by these agents are rendered orphan on their termination and thereafter often result into lapsation due of lack of servicing support.
?
Thirdly, the image of the profession of agency too suffers a setback since the public in general and prospective agents in particular perceive it as lacking in stability,
?
Thus making it more difficult for insurers to find good agents. It is therefore in the interest of all stakeholders to work at reducing the turnover of agents.
6. Expansion of Offices
TABLE: 6.6 NUMBER OF LIFE INSURANCE OFFICES Insurer Private Total LIC Industry Total 2009 8785 3030 11815 2010 8768 3250 12018 2011 8175 3371 11546
During the year under review, there was a decrease in the number of life insurance offices in India. While private insurers closed 593 offices; the public sector insurer LIC established 121 new offices. With this, the number of offices of life insurers declined from 12,018 as on 31st March, 2010 to 11,546 as on 31st March, 2011
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7. ANALYSIS OF DEATH CLAIMS
TABLE: 6.7 INDIVIDUAL DEATH CLAIMS (In per cent)
INSURER CLAIM PAID CLAIM REPUDIATE CLAIM RETURN BACK CLAIM PENDING AT END OF YEAR
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
Private LIC Total
84.88 96.54 95.24
86.04 97.03 95.58
7.6 1.21 1.93
8.9 1 2.04
0.04 0.84 0.75
0.05 0.51 0.45
7.48 1.41 2.08
5.01 1.46 1.93
GROUP DEATH CLAIMS (In per cent)
INSURER CLAIM PAID CLAIM REPUDIATE CLAIM RETURN BACK CLAIM PENDING AT END OF YEAR
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
2009-10
2010-11
Private LIC Total
93.33 99.66 96.73
96.8 99.8 98.9
1.18 0.01 0.55
1.61 0.01 0.49
0.13 0 0.06
0.02 0 0.01
5.36 0.33 2.66
1.58 0.19 0.61
The claim settlement ratio of LIC was better than that of the private life insurers. For private insurers, settlement ratio has gone up to (86.04% in individual ,96.8% in group) during the financial year 2010-11 but it is quite lower than LIC that of (97.03% in individual ,99.8 in group). The percentage of repudiations for LIC was quite low that declined from 1.33 per cent in the 2008-09 to 1.00 per cent in 2010-11. Private insurers repudiated a larger number of claims when compared to LIC. The per cent of repudiations increased to 8.90 per cent in 2010-11 from 7.61 per cent in 2009-10.
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8. GRIEVANCE HANDLING
During 2010-11 Private life insurers resolved 97.42 per cent of the complaints registered (88.4 per cent in 2009-10), LIC resolved 97.58 per cent of the complaints (81.0 per cent in 2009-10) filed against them with the Authority. This shows that Insurers are very serious about their image and are working hard to provide the solution of the problems of the people as early as possible. The three major causes of grievances of the policyholders are sales related (23.83 per cent), non-payment of surrender value / claim / maturity benefit / survival benefit/annuities (21.71 per cent) and cancellation of policy (8.80 per cent).
9. SIZE OF BALANCE SHEET
TABLE: 6.8 SIZE OF BALANCE SHEET (Rs in lakh) INSURER LIC PRIVATE TOTAL 2011 2010 2009 84,127,287 13,486,507 97,613,794 AVERAGE 108,027,254 22528042 130555296.3
128,212,858 111,741,618 30,151,832 23,945,787
158,364,690 135,687,405
Total average size of balance sheet of LIC in the last three years is certainly higher than that of private insurance companies. There is a huge gap in this value. It is obvious that LIC has bigger balance sheet as being working in the insurance field for quite large time. As compared to average balance sheet size of Rs 22528042 lakh of private insurance companies, LIC as average balance sheet size goes to much high as that of 108,027,254 lakh.
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10. PAID UP CAPITAL
TABLE: 6.9 Paid-up capital (Rs. Crore) INSURER LIC Private Sector Total 2008-09 5 18249.77 18254.77 2009-10 5 21014.99 21019.99 2010-11 5 23656.85 23661.85
The total capital of the life insurance companies as on 31st March, 2011 was Rs 23,662 crore. During 2010-11, an additional capital of Rs 2,765 and Rs 2,642 crore was brought in 2008-09, 200-10 respectively by the industry. The incremental capital during 2010-11 was brought in by the private sector insurers as there was no addition in the capital of LIC, the public sector insurance company.
11. DIVIDENDS PAID
Out of the 23life insurers in operations during 2010-11, twelve companies reported profits as against 8 companies in 2009-10. They are LIC, ICICI Prudential, Birla Sunlife, Max New York, Bajaj Allianz, SBI, Kotak Mahindra, TATA AIG, MetLife, Aviva, SaharaIndia and Shriram.
TABLE: 6.10 DIVIDENDS PAID BY LIFE INSURERS Insurer LIC Private Total 2008-09 929.12 --929.12 2009-10 1030.92 --1030.92 2010-11 1138 --1138
For the year 2009-10, LIC has paid Rs 1,031 crore as dividend to Government of India. This is 97 per cent of its net profit earned during the year. LIC had paid the same per cent of its net profit as dividend during 2008-09 when it
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paid `929 crore as dividend to the ex-chequer. None of the private insurance companies paid dividends since last years. 12. OPERATING EXPENSES RATIO
Operating expenses ratio is the ratio of operating expenses to the premium underwritten by the life insurers.
TABLE: 6.11 OPERATING EXPENSES RATIO OF LIFE
INSURERS (In per cent)
INSURER LIC Private Sector Total
2008-09 5.76 25.99 11.65
2009-10 6.58 20.86 10.85
2010-11 8.34 18.11 11.3
Operating expenses, as a per cent of gross premium underwritten, increased for LIC from 5.76 per cent in 2008-09 to 8.34 per cent in 2010-11. However, the same declined marginally for private Insurers from 25.99 per cent in 200809 to 18.11 per cent in 2010-11. For the industry as a whole, the operating expenses ratio Decline slightly from 11.65 per cent in 2008-09 to 11.30 per cent in 2010-11.
As the initial set-up costs incurred by any insurance company is high, the Authority has granted exemption from the limits under Rule 17D to 22 private insurers in the first five years of commencement of their business operations. Out of the 23 life insurance companies (including 1 PSU) in 2010-11, nine companies were in the exemption period. Of the balance, twelve companies (including 1 PSU) were compliant with the limits under Rule 17D/directions of the Authority.
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13. COMMISSION EXPENSES RATIO Commission expenses ratio is the ratio between commission expenses and the premium underwritten by life insurers As per section 40B of the Insurance Act, 1938 no life insurer can spend as expenses of management in any year an amount in excess of the limits prescribed under Rule 17D of the Insurance Rules, 1939. Rule 17D takes into consideration the size and age of the insurer, while laying down the limits of such expenses. TABLE: 6.12 COMMISSION EXPENSES RATIO (%) Insurer LIC Private Total 2009 6.39 8.49 7 2010 6.52 7.63 6.85 2011 6.56 5.65 6.29
There is some variation in the position when compared between the private insurers and LIC, as reflected in above table, providing bifurcation of the commission ratios for both private and public sector life insurers.
14. SOLVENCY STATUS Every insurer is required to maintain a Required Solvency Margin (RSM) as per Section 64VA of the Insurance Act, 1938. Every insurer shall maintain an excess of the value of assets over the amount of liabilities of not less than an amount prescribed by the IRDA, which is referred to as a Required Solvency Margin. The IRDA (Assets, Liabilities and Solvency Margin of Insurers) Regulations, 2000 describe in detail the method of computation of the Required Solvency Margin. At the end of March 2011, all the twenty three life insurers complied with the stipulated requirement of solvency ratio of 1.5. Life Insurance Corporation of India reported a solvency ratio of 1.54, the same as at the end of March 2010. Though solvency ratio of 14 out of 22 private life insurers declined during the year under review, all life insurance companies are compliant with the mandated solvency requirements. 42
B. Primary Data analysis
1. Which of these life insurance players are you aware of?(Multiple Tick mark possible) HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life max New York Tata AIG Bajaj Allianz LIC Birla Sun Aviva life all
HDFC standard 74
ICICI prudential 78
ING Vyasya 43
SBI life 77
Reliance Life 62
120 100 80 60 40 20 0
Max New Tata York AIG 50 60
Bajaj Allianz 59
LIC 96
Birla Sun 52
Avia Life 42
HDFC ICICI ING standa prude Vyasy rd ntial a 74 78 43
SBI life 77
Max Relian Tata Bajaj NewY ce Life AIG allianz ork 62 50 60 59
LIC 96
Birla Sun 52
Avia Life 42
Series1
Interpretation: LIC is the leader in their customer, here more of respondents having the awareness of all the insurance. The market of insurance is now having more strength so customers are aware about all the companies.
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2. From which Company you bought the life insurance policy? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life max New York Tata AIG Bajaj Allianz LIC Birla Sun Aviva life other
HDFC standard 2
ICICI prudential 18
ING Vyasya 5
SBI life 18
Reliance Life 5
Max New Tata York AIG 1 2
Bajaj Allianz 2
LIC 79
Birla Sun 1
Avia Life 0
90 80 70 60 50 40 30 20 10 0 HDFC ICICI Max ING Relian Tata Bajaj SBI life standa prude NewYo Vyasya ce Life AIG allianz rd ntial rk 2 18 5 18 5 1 2 2 Birla Sun 1 Avia Life 0
LIC 79
Series1
Interpretation: LIC is the leader in their customer, here more than 70% of respondents having the policy form LIC. Whereas almost 30% policy from Private Players. It is also the fact that the respondents have more than one policy.
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3. How long you have been investing in the life insurance policy? 0-3 year 3-5 year 5-7 year >7 year
0-3 Year 3
3-5 Year 23
5-7 Year 50
>7 Year 24
0-3 Year
3-5 Year 3%
5-7 Year
>7 Year
24%
23%
50%
Interpretation: There are 23% respondents who were investing money in life insurance since last 3-5 years followed by 50% since last 5-7 years & 24% respondents were investing since last more than 7 years.
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4. According to you, Life Insurance policies are for whom? Childs Adults Couples Old people
Childs Adults Couples Old People 35 67 44 37
20%
19% Childs
24% 37%
Adults Couples Old People
Interpretation: Out of the total response researchers found that many people 37 believe that the life insurance policy are basically form for old people at the same time 44 respondents also said the it is for couples & 67 was on the side of adults. Only 35 people said that life insurance policies are made for Childs.
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5. What are your motives or objectives behind buying of life insurance policy? Risk Protection Tax benefits Saving /Pension Child welfare Investment for return Business or Profession
Risk Protection 49
Tax Benefits 35
Savings/ pension 38
Child welfare 12
Investment for Business or return Profession 26 3
2% 16% 7% 30% Risk Protection Tax Benefits Savings/pension 23% Child welfare 22% Investment for return Business or Profession
Interpretation: Different people invest their money in life insurance for different purposes. Here it can Cleary see that 23% respondents are in favor of Savings, while 16% invest for return. The Motive of Risk Protection & Tax Benefits is 30% & 22% respectively.
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6. Are you believed that private insurance companies provide greater return over the LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Percent Valid Strongly Agree 15 Agree Neutral Disagree Strongly Disagree Total 37 26 18 4 100 15.0 37.0 26.0 18.0 4.0 100.0
Interpretation: It is seen from the responses that all are agree with the fact that private companies are providing greater return over LIC.
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7. Would you believe that private insurance companies have good brand name than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Valid Strongly Agree Agree Neutral Disagree Total 1 9 14 64 100
Percent 1.0 9.0 14.0 64.0 12.0 100.0
Strongly Disagree 12
Interpretation: According to the responses it is visible that the LIC have a good brand name over the private players.
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8. According to you, private insurance companies settled grievance faster than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Percent Valid Strongly Agree 14 Agree Neutral Disagree Strongly Disagree Total 22 40 20 4 100 14.0 22.0 40.0 20.0 4.0 100.0
Interpretation: The respondents are neutral about the fact that private insurance companies settled grievance faster than LIC.
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9. Would you believe that the agents of private company are explaining policy better than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
Frequency Percent Valid Strongly Agree 10 Agree Neutral Disagree Strongly Disagree Total 45 26 13 6 100 10.0 45.0 26.0 13.0 6.0 100.0
Interpretation: As per the responses collected it is found that the Private life insurance companies? agents explain policies better than LIC. Majority of the respondents are agreeing with that fact also.
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10. According to you which company’s agent/employee/representatives are easily accessible? Private Life Insurance Players LIC
Frequency Valid Private Life Insurance 28 Players LIC Total 72 100
Percent 28.0 72.0 100.0
Interpretation: According to the responses it is found that the agents of LIC are easily accessible. It is because of the fact that LIC have greater market and wide numbers of agents.
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11. Have you ever received/meet any call/representative of private insurance company? Regularly Sometimes Not at All
Frequency Valid Regularly Not at All Total 21 12 100 Sometimes 67
Percent 21.0 67.0 12.0 100.0
Interpretation: All are agree with the fact that they received call from the insurance companies sometimes. Very rare cases are there who haven?t got any call from the company agents.
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12. Do you ever receive any benefits such like bonus, etc from your insurer? Regularly Sometimes Not at All
Frequency Percent Valid Regularly Not at All Total 27 27 100 27.0 46.0 27.0 100.0 Sometimes 46
Interpretation: According to the responses, they not at all received any bonus from the insurer. Some of respondents got a bonus from the insurer.
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13. If private insurance company and LIC both offering same policy with a different amount of cost, from whom you will prefer to buy? Private Life Insurance Players LIC Don?t Know
Frequency Percent Valid Private Life Insurance 20 Players LIC Don't Know Total 74 6 100 20.0 74.0 6.0 100.0
Interpretation: The respondents would prefer LIC if both the LIC and private sector insurance company would offer same policy.
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14. What is your opinion toward LIC? Less care of customer Large network (no of branch) too much documentation Safety other _____________
Frequency Valid Less Care of Customer Too much Documentation Safety Total 5 32 51 100 Large Network ( No. of Branches) 12
Percent 5.0 12.0 32.0 51.0 100.0
Interpretation: The more number of respondents believe that LIC offers safety to the investors. Some of them are also believe that there is too much documentation and less care of customers in LIC.
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15. What do you perceive about the quality of service provided by your life insurance company? Very good Good Average Bad Very Bad
Frequency Percent Valid Very Good 27 Good Average Total 48 25 100 27.0 48.0 25.0 100.0
Interpretation: When researchers are talking about Quality of services provided by LIC, 27% respondents said that it is Very Good. While 48% people are saying it is good. And only 25% people said it is Average. So it can analyze that LIC is Performing Well as far as Services is concerned.
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Test Analysis:
Test 1: Is there any Significance difference between Brand name of
company and Service provided by company?
Would you believe that private insurance companies have good brand name than LIC? * What do you perceive about the quality of service provided by your life insurance company? What do you perceive about the Total quality of service provided by your life insurance company? Very Good 0 4 2 14 7 27 Good 0 4 8 31 5 48 Average 1 1 4 19 0 25 1 9 14 64 12 100
Would you believe that private insurance companies have good brand name than LIC?
Strongly Agree Agree Neutral Disagree Strongly Disagree
Total
H0: There is no significance difference between Brand name of company and Service provided by company. H1: There is significance difference between Brand name of company and Service provided by company.
Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 14.537a 16.403 1.210 100 df 8 8 1 Asymp. Sig. (2sided) .069 .037 .271
a. 10 cells (66.7%) have expected count less than 5. The minimum expected count is .25.
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Interpretation: Since the asymptotic value is 0.069, which is greater than, 0.05, so I accept Ho. i.e. there is no significance difference between Brand name of company and Service provided by company.
Test
2:
Is
there
any Significance
difference between
explanation of policy and Service provided by company?
Would you believe that the agents of private company are explaining policy better than LIC? * What do you perceive about the quality of service provided by your life insurance company? What do you perceive about Total the quality of service provided by your life insurance company? Very Good Good Averag e Would you believe Strongly 2 6 2 10 that the agents of Agree private company are Agree 8 24 13 45 explaining policy Neutral 8 13 5 26 better than LIC? Disagree 5 3 5 13 Strongly 4 2 0 6 Disagree Total 27 48 25 100 H0: There is no significance difference between explanation of policy and Service provided by company. H1: There is significance difference between explanation of policy and Service provided by company.
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Chi-Square Tests Value Pearson Chi-Square Likelihood Ratio Linear-by-Linear Association N of Valid Cases 11.565
a
df 8 8 1
Asymp. Sig. (2-sided) .172 .132 .064
12.468 3.423 100
a. 8 cells (53.3%) have expected count less than 5. The minimum expected count is 1.50. Interpretation: Since the asymptotic value is 0.172, which is greater than, 0.05, so I accept Ho. i.e. there is no significance difference between explanation of policy and Service provided by company.
Test 3: Is there any Significance opinion of people towards LIC and Service provided by company? What is your opinion toward LIC? * What do you perceive about the quality of service provided by your life insurance company? What do you perceive about the quality of service provided by your life insurance company? Very Good What is your opinion toward LIC? Less Care of Customer Large Network ( No. of Branches) Too much Documentation Safety Total 0 0 10 17 27 Good 2 9 13 24 48 Average 3 3 9 10 25 Total 5 12 32 51 100
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H0: There is no significance difference between opinion of people towards LIC and Service provided by company. H1: There is no significance difference between opinion of people towards LIC and Service provided by company.
Chi-Square Tests Value df
Pearson Chi10.991 6 a Square Likelihood Ratio 14.618 6 .023 Linear-by-Linear 6.074 1 .014 Association N of Valid Cases 100 a. 5 cells (41.7%) have expected count less than 5. The minimum expected count is 1.25. Interpretation: Since the asymptotic value is 0.089, which is greater than, 0.05, so I accept Ho. i.e. there is no significance difference between opinion of people towards LIC and Service provided by company.
Asymp. Sig. (2sided) .089
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? There are many private life insurance players about whom the
respondents are not properly aware or awareness is very less. So it is suggested that they should increase their awareness. They can use various media or tool to raise their awareness.
? It can say that both players sell majority of their life insurance policy
through Agent. So it is advisable to hire qualitative agents.
? LIC is a market leader but it is still not able to provide VERY GOOD
service to their customer. So it is suggested by researchers that LIC should improve their quality of services.
? Private life insurance players came up with innovative products in the life
insurance market. So it is necessary for LIC to adopt these changes in the business of LIC.
? There are certain numbers of people who can take risk for high return so it
is suggested that private life insurance players can focus on these type of customer.
? Indian economy is still developing and it has a potential of higher
development in the future, so income of Indian people will increase in the future by great extent. Thus it can recommend that for both players to increase their sell in the future.
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As compared to France, Japan, and England which have very high penetration so there is a great scope for growth of life insurance in India. The entry of private players in life insurance has resulted in a drop in the market share for Life Insurance Corporation. There is also evidence to show that the rate of growth of public sector undertaking has not shown any decline after the entry of the private sector companies. All of them are obviously having a share of a larger market. The growth rate of premium collection of private insurer is higher than LIC. Form the figure of total premium collection of industry is indicating overall the business of insurance industry increased. The last three years reported the declined in the issue of polices due to the various economic and international factors.
Distribution will be a key determinant of success of insurance. Indian Insurance companies should broaden their distribution network. As the product move towards the mature stages of commodization (increased awareness and popularity) they could then have a host of new channels like grocery stores, direct mails. Regulators must formulate strong and fair. Companies meanwhile must be prepared to set and meet high standards for themselves for solving the grievance and claim of client. As we know the underwriting is very risky business so that insurer should analyse all the fundamental parameters before developing new product.
Most of the opportunities and challenges that we have discussed apply equally to existing and new insurers. It must be emphasized that the opening of the insurance market is far from a bad thing for nationalized insurers. With a strong presence, a wide network and considerable brand equity, they are in a good position to tap the very same segments profitably, while improving their product and service offerings. The Indian Insurance companies should Leverage information technology to service large numbers of customers efficiently and bring down overheads. Technology can complement or supplement distribution channels cost-effectively. It can also help improve customer service levels considerably.
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The Credit for enlarging the market should however, go to the private sector as they came up with aggressive marketing strategies to establish their presence and public sector also followed suit.
? Out of the total respondents those who have Life insurance policy, most of
the people taken policy from LIC. Thus it can be concluded that LIC is the major player in the Life insurance Market.
? In the awareness of private life insurance player there are 2 companies
about customers are aware more than any other players. They are ICICI Prudential & SBI life insurance. Thus they have more benefits than other. The reason behind this is their presence in the market for long time than others.
? Researchers can conclude that different people investing in life insurance
policy for different purpose. But the common among them are Saving and Protection against risk of death. Few are in favor of investment for return.
? Most of the life insurance policies from private player as well as from the
LIC are sold through the medium of agent.
? From the respondent it is conclude that LIC is providing wide variety of
product then private life insurance players. So it can be said that customers of LIC has more option than private life insurance players.
?
More people perceive that private player?s services are VERY GOOD and next majority respondent perceive it is GOOD.
? More people want to buy life insurance policy from the LIC rather than
from private life insurance company.
? Respondent buy policy from LIC because it is a government company. So
it is a safe investment for the life insurance buyer.
? LIC has more number of agents compare to private players so it is an
advantage for LIC to sell its products.
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?
http://articles.economictimes.india...emium-total-premium-life-insurancecorporation Mayur Shetty, ET Bureau Oct 6, 2008, 01.53am IST
? ? ?
http://answers.yahoo.com/question/index?qid=20080219022341AA1dN e8, vishal sanghavi news India Aug.2010http://ezinearticles.com/?Effect-of-Liberalisation-in-InsuranceIndustry&id=3760856http://sputnicproject.eu/docs/customer_relations/Vilnius SWOT.pdf swot analysis, June 18, 2009
? ? ? ? ? ? ?
Rao TSR “The Indian Insurance Industry the Road Ahead” J. Insurance Chronicle No.05 (December 2000) pp.3 (I): 31-43. Sabera K, “Changes in insurance sector “(A Study on Public Awareness). J. Insurance Chronicle (March 2006) pp.7 (1): 37. Sukla AK, ”The impact of public on life insurance”, J. Insurance Inst. India Number-32 (January 1998) pp. 10-15. Rao CS (2007). “The Regulatory Challenges Ahead” J. Insurance Chronicle 7: 10 Jain AK (2004). J. Insurance Inst. India 30: 53. Peter D (1999). “Innovate or Die”, J. Economist. 1(2): 41-55. Gulati, N. C., & Jain, C. (2011). Comparative Analysis of the Performance of All the Players of the Indian Life Insurance Industry. VSRD journal of business management and research , I (8), 561-569.
?
Rajendran, R., & Natarajan, B. (2010). The impact of liberalization, privatization, and globalization (LPG) on life insurance corporation of India (LIC). African Journal of Business Management , IV (8), 14571463.
?
IRDA annual report 2004-05 to 2010-11
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ANNEXURE
IMPACT OF PRIVATE LIFE INSURANCE PLAYERS ON THE “LIC” We, Hardik Sutariya & Ankit Sudani, are conducting survey on “Impact of private life insurance players on the life insurance corporation of India” This information are use for academic purpose only. Thank you for your precious time and cooperation.
1. Which of these life insurance players are you aware of?(Multiple Tick mark
possible)
HDFC Standard ICICI Prudential ING Vyasa
SBI Life Insurance Reliance life Max NewYork
Tata AIG Bajaj Allianz LIC
Birla Sun Aviva life all
2. From which Company you bought the life insurance policy? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life Max NewYork Tata AIG Bajaj Allianz LIC Birla Sun Aviva life other
3. How long you have been investing in the life insurance policy? 0-3 year 3-5 year 5-7 year >7 year
4. According to you, Life Insurance policies are for whom? Childs Adults Couples Old people
5. What are your motives or objectives behind buying of life insurance policy? Risk Protection Tax benefits Saving /Pension child welfare Investment for return Business or Profession
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6. Which of the following Life Insurance Players satisfied your objective? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life Max New York Tata AIG Bajaj Allianz LIC Birla Sun Aviva life other
7. Which of the following Life Insurance Players are offering the innovative products? HDFC Standard ICICI Prudential ING Vyasa SBI Life Insurance Reliance life Max New York Tata AIG Bajaj Allianz LIC other Birla Sun Aviva life
8. Are you believed that private insurance companies provide greater return over the LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
9. Would you believe that private insurance companies have good brand name than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
10. According to you, private insurance companies settled grievance faster than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
11. Would you believe that the agents of private company are explaining policy better than LIC? Strongly Agree Agree Neutral Disagree Strongly Disagree
12. According to you which company’s agent/employee/representatives are easily accessible? Private Life Insurance Players LIC
13. Have you ever received/meet any call/representative of private insurance company? Regularly Sometimes Not at All
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14. Do you ever receive any benefits such like bonus, etc from your insurer? Regularly Sometimes Not at All
15. If private insurance company and LIC both offering same policy with a different amount of cost, from whom you will prefer to buy? Private Life Insurance Players LIC don?t Know
16. What is your opinion toward LIC? Less care of customer Large network (no of branches) too much documentation Safety other_____________
17. What do you perceive about the quality of service provided by your life insurance company? Very good Good Average Bad Very Bad
18. Responded information
1. Name: __________________________ Gender: Male / Female Age: ________ 2. Contact details: ___________________ Email ID: ______________________ 3. Marital Status: Unmarried / Married / Divorce / Widow 4. Occupation: Private Service / Govt. Service / Business / Profession / Retired 5. Personal Income (Annual) Rs. ____________
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doc_272911530.docx