INDIAN INSURANCE INDUSTRY

A PROJECT REPORT ON ?INDIAN INSURANCE INDUSTRY?

SUBMITTED BY BHAVSAR MANTHAN RAJENDRA THIRD YEAR (BANKING AND INSURANCE (SEMESTER VI) 2011-2012

MODEL COLLEGE DOMBIVLI

UNIVERSITY OF MUMBAI APRIL 2012

A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

A PROJECT REPORT ON ?INDIAN INSURANCE INDUSTRY?

SUBMITTED TO THE UNIVERSITY OF MUMBAI IN PARTIAL FULFILLMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF COMMERCE (BANKING AND INSURANCE) (VI SEMESTER)

BY BHAVSAR MANTHAN RAJENDRA MODEL COLLEGE DOMBIVLI APRIL 2012

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

TABLE OF CONTENTS

SR.NO. 1. 2. 3. 4. 5. 6. 7. 8.

DESCRIPTION DECLARATION ACKNOWLEDGEMENT CHAPTER 1: INTRODUCTION CHAPTER 2:THEORETICAL VIEW CHAPTER 3:COMPARATIVE STUDY CHAPTER 4: CONCLUSION BIBLOGRAPHY ANNEXURE

PAGE NO. 4 5 6-12 13-33 34-45 46-47 48 49-51

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DECLARATION

I, BHAVSAR MANTHAN RAJENDRA, STUDENT OF BANKING AND INSURANCE VI SEMESTER OF MODEL COLLEGE DOMBIVLI (E), HERE BY DECLARE THAT, I HAVE COMPLETED THIS PROJECT ON ?Indian Insurance Industry? FOR THE ACADEMIC YEAR 20112012 THE INFORMATION SUMBITTED IS TRUE AND ORIGINAL TO THE BEST OF MY KNOWLEDGE.

BHAVSAR MANTHAN RAJENDRA THIRD YEAR (BANKING AND INSURANCE)

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ACKNOWLEDGEMENT

I WOULD LIKE TO EXTEND MY SINCERE GRATITUDE TO ALL THOSE PEOPLE WHO HAVE HELPED ME IN THE SUCCESSFUL COMPLETION OF MY PROJECT ENTITLED ?Indian insurance industry? FIRST AND FOREMOST I WOULD LIKE TO THANK MY PROJECT GUIDE MRS.GAURI PATHAK FOR BEING KIND ENOUGH IN SPARING HER TIME AND ENERGY FROM HER BUSY SCHEDULE AND HELPING ME IN COLLECTING THE NECESSARY DATES. I WOULD ALSO LIKE TO EXPRESS MY SINCERE THANKS TO OUR PRINCIPLE, DR. M.R.NAIR FOR HIS CONSTANT MORAL SUPPORT AND VISION THIS PROJECT COULD NOT HAVE BEEN POSSIBLE WITHOUT HELP OF ENTIRE LIBRARY DEPARTMENT OF OUR

COLLEGE.THEY MAKE AS MUCH DATA, BOOKS, MAGAZINES, ETC. AVAILABLE AS THEY CAN TO FACILITATE THE EASY COLLECTION OF INFORMATION.

BHAVSAR MANTHAN RAJENDRA

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

CHAPTER 1 AN INTRODUCTION

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Introduction In 2003, the Indian insurance market ranked 19th globally and was the fifth largest in Asia. Although it accounts for only 2.5% of premiums in Asia, it has the potential to become one of the biggest insurance markets in the region. A combination of factors underpins further strong growth in the market, including sound economic fundamentals, rising household wealth and a further improvement in the regulatory framework.

The insurance industry in India has come a long way since the time when businesses were tightly regulated and concentrated in the hands of a few public sector insurers. Following the passage of the Insurance Regulatory and Development Authority Act in 1999, India abandoned public sector exclusivity in the insurance industry in favor of market-driven competition. This shift has brought about major changes to the industry. The inauguration of a new era of insurance development has seen the entry of international insurers, the proliferation of innovative products and distribution channels, and the raising of supervisory standards.

By mid-2004, the number of insurers in India had been augmented by the entry of new private sector players to a total of 28, up from five before liberalization. A range of new products had been launched to cater to different segments of the market, while traditional agents were supplemented by other channels including the Internet and bank

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branches. These developments were instrumental in propelling business growth, in real terms, of 19% in life premiums and 11.1% in non-life premiums between 1999 and 2003.

There are good reasons to expect that the growth momentum can be sustained. In particular, there is huge untapped potential in various segments of the market. While the nation is heavily exposed to natural catastrophes, insurance to mitigate the negative financial consequences of these adverse events is underdeveloped. The same is true for both pension and health insurance, where insurers can play a critical role in bridging demand and supply gaps. Major changes in both national economic policies and insurance regulations will highlight the prospects of these segments going forward.

Insurance or assurance, device for indemnifying or guaranteeing an individual against loss. Reimbursement is made from a fund to which many individuals exposed to the same risk have contributed certain specified amounts, called premiums. Payment for an individual loss, divided among many, does not fall heavily upon the actual loser. The essence of the contract of insurance, called a policy, is mutuality. The major operations of an insurance company are underwriting, the determination of which risks the insurer can take on; and rate making, the decisions regarding necessary prices for such risks. The underwriter is responsible for guarding against adverse selection, wherein there is excessive coverage of high risk candidates in proportion to the coverage of low risk candidates.

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In preventing adverse selection, the underwriter must consider physical, psychological, and moral hazards in relation to applicants. Physical hazards include those dangers which surround the individual or property, jeopardizing the well-being of the insured. The amount of the premium is determined by the operation of the law of averages as calculated by actuaries. By investing premium payments in a wide range of revenue-producing projects, insurance companies have become major suppliers of capital, and they rank among the nation's largest institutional investors.

GENERAL DEFINITION: The general definitions are given by the social scientists & they consider insurance as a device to protection against risks, or a provision against inevitable contingencies or a co-operative device of spreading risks. Some of such definitions are given below: ? In the words of John Magee, ?Insurance is a plan by which

large number of people associate themselves & transfer to the shoulder of all, risks that attach to individuals.? ? In the words of Sir William, ?The collective bearing of risks is insurance.?

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?

In the words of Boone & Kurtz, ?Insurance is a substitution for a

small known loss (the insurance premium) for a large unknown loss, which may or may not occur.? ? In the words of Thomas, ?Insurance is a provision, which a

prudent man makes against for the loss or inevitable contingencies, loss or misfortune.? ? In the words of Allen Z. Mayer, ?Insurance is a device for the

transfer to an insurer of certain risks of economic loss that would otherwise come by the insured.? ? In the words of Ghosh & Agarwal, ?Insurance is a co-operative

form of distributing a certain risk over a group of persons who are exposed to it.?

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ABOUT THE REPORT TITLE OF THE STUDY The present study is titled as ?INDIAN INSURANCE INDUSTRY? OBJECTIVES OF THE STUDY ? ? ? ? To Study the awareness of the insurance policies. To know what are the priorities of people of city for making investment in Insurance. To know what are the perception of the consumer about investments in insurance sector. To know the standing of the Indian insurance sector in global.

SCOPE OF THE STUDY ? ? It provides a complete knowledge of insurance sector in India. It provides a view in Indian insurance market.

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DATA AND METHODOLOGY:The data has been collected in two ways: PRIMARY DATA As far as primary data is concerned, a detailed study is done and a survey has been taken up; the carefully analysis of the data is done to arrive at conclusion. Hence, for this study, primary data has been collected directly from the respondents through an questionnaire.

SECONDARY DATA The secondary source of information has been collected from internet, books.

CHAPTER LAYOUT CHAPTER 1 – Introduction of the title ?Indian insurance industry? CHAPTER 2 – Theoretical view of Indian insurance industry. CHAPTER 3 – Survey. CHAPTER 4 – Summarizes the results of the study.

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CHAPTER 2 THEORETICAL VIEW

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HISTORY OF INSURANCE IN INDIA

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya (Arthasastra). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers’ contracts. Insurance in India has evolved over time heavily drawing from other countries, England in particular.

1818 saw the advent of life insurance business in India with the establishment of the Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870 saw the enactment of the British Insurance Act and in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in the Bombay Residency. This era, however, was dominated by foreign insurance offices which did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian offices were up for hard competition from the foreign companies.

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In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to collect statistical information about both life and nonlife business transacted in India by Indian and foreign insurers including provident insurance societies. In 1938, with a view to protecting the interest of the Insurance public, the earlier legislation was consolidated and amended by the Insurance Act, 1938 with comprehensive provisions for effective control over the activities of insurers.

The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a large number of insurance companies and the level of competition was high. There were also allegations of unfair trade practices. The Government of India, therefore, decided to nationalize insurance business. An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian, 16 nonIndian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.

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The history of general insurance dates back to the Industrial Revolution in the west and the consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of general insurance business. 1957 saw the formation of the General Insurance Council, a wing of the Insurance Association of India. The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also set up then.

In 1972 with the passing of the General Insurance Business (Nationalization) Act, general insurance business was nationalized with effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies, namely National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a company in 1971 and it commence business on January 1sst 1973.

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This millennium has seen insurance come a full circle in a journey extending to nearly 200 years. The process of re-opening of the sector had begun in the early 1990s and the last decade and more has seen it been opened up substantially. In 1993, the Government set up a committee under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations for reforms in the insurance sector. The objective was to complement the reforms initiated in the financial sector. The committee submitted its report in 1994 wherein, among other things, it recommended that the private sector be permitted to enter the insurance industry. They stated that foreign companies are allowed to enter by floating Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, in 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market.

The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has

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from 2000 onwards framed various regulations ranging from registration of companies for carrying on insurance business to protection of policyholders’ interests.

In December, 2000, the subsidiaries of the General Insurance Corporation of India were restructured as independent companies and at the same time GIC was converted into a national re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.

Today there are 24 general insurance companies including the ECGC and Agriculture Insurance Corporation of India and 23 life insurance companies operating in the country.

The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP. A well-developed and evolved insurance sector is a boon for economic development as it provides long- term funds for infrastructure development at the same time strengthening the risk taking ability of the country.

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Characteristics of Insurance:

?

Sharing of Risks

Insurance is a co-operative device to share the burden of risk, which may fall on happening of some unforeseen events, such as the death of head of the family, or on happening of marine perils or loss of by fire. ? Co-operative Device

Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it (Ghosh & Agarwal). A large number of persons share the losses arising from a particular risk. ? Evaluation of Risk

For the purpose of ascertaining the insurance premium, the volume of risk is evaluated, which forms the basis of insurance contract. ? Payment of happening of specified event

On happening of specified event, the insurance company is bound to make payment to the insured. Happening of the specified event is certain in life insurance, but in the case of fire, marine or accidental insurance, it is not necessary. In such cases, the insurer is not liable for payment of indemnity.

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?

Amount of payment

The amount of payment in indemnity insurance depends on the nature of losses occurred, subject to a maximum of the sum insured. In life insurance, however, a fixed amount is paid on the happening of some uncertain event or on the maturity of the policy. ? Large number of insured persons

The success of insurance business depends on the large number of persons insured against similar risk. This will enable the insurer to spread the losses of risk among large number of persons, thus keeping the premium rate at the minimum. ? Insurance is not a gambling

Insurance is not a gambling. Gambling is illegal, which gives gain to one party & loss to the other. Insurance is a valid contract to

indemnity against losses. Moreover, insurable interest is present in insurance contracts & it has the element of investment also. ? Insurance is not charity

Charity pays without consideration but in the case of insurance, premium is paid by the insured to the insurer in consideration of future payment.

?

Protection against risks

Insurance provides protection against risks involved in life, materials & property. It is a device to avoid or reduce risks. 20

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?

Spreading of risk

Insurance is a plan, which spread the risks & losses of few people among a large number of people. John Magee writes, ?Insurance is a plan by which large number of people associates themselves & transfer to the shoulders of all, risks attached to individuals.? ? Transfer of risk

Insurance is a plan in which the insured transfers his risk on the insurer. This may be the reason that Mayerson observes, that

insurance is a device to transfer some economic losses to the insurer, and otherwise such losses would have been borne by the insured themselves.

?

Ascertaining of losses

By taking a life insurance policy, one can ascertain his future losses in terms of money. This is done by the insurer to determining the rate of premium, which is calculated on the basis of maximum risks.

?

A contract

Insurance is a legal contract between the insurer & insured under which the insurer promises to compensate the insured financially within the scope of insurance policy, & the insured promises to pay a fixed rate of premium to the insurer.

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?

Based upon certain principle

Insurance is a contract based upon certain fundamental principles of insurance, which includes utmost good faith, insurable interest, contribution, indemnity, cause proximal, subrogation, etc., which are the basis for successful operation of insurance plan.

?

Utmost Good Faith

Insurance is a contract based on good faith between the parties. Therefore, both the parties are bound to disclose the important facts affecting to the contract before each other. Utmost good faith is one of the important principles of insurance. To conclude, insurance is a device for the transfer of risks from the insured to the insurers, who agree to it for a consideration (known as premium), & promises that the specified extent of loss suffered by the insured shall be compensated. It is a legal contract of a technical nature.

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Insurance Sector Reforms

In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included: i) Structure Government stake in the insurance Companies to be

brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. ii) Competition Private Companies with a minimum paid up capital

of Rs.1bn should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the rural market. Only one State

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Level Life Insurance Company should be allowed to operate in each state. iii) Regulatory Body The Insurance Act should be changed. An

Insurance Regulatory body should be set up. Controller of Insurancea part of the Finance Ministry- should be made independent iv) Investments Mandatory Investments of LIC Life Fund in

government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current holdings to be brought down to this level over a period of time) v) Customer Service LIC should pay interest on delays in beyond 30 days. Insurance companies must be

payments

encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry.

The committee emphasized that in order to improve the customer services and increase the coverage of insurance policies, industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and

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enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body- The Insurance Regulatory and Development Authority. Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

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MALHOTRA COMMITTEE :

In 1993, the first step towards insurance sector reforms was initiated with the formation of Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra. The committee was formed to evaluate the Indian insurance industry and recommend its future direction with the objective of complementing the reforms initiated in the financial sector.

Key Recommendations of Malhotra Committee: Structure • Government stake in the insurance Companies to be brought down to 50%. • Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. • All the insurance companies should be given greater freedom to operate.

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Competition • Private Companies with a minimum paid up capital of Rs.1billion should be allowed to enter the industry. • No Company should deal in both Life and General Insurance through a single Entity. • Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. • Postal Life Insurance should be allowed to operate in the rural market. • Only one State Level Life Insurance Company should be allowed to operate in each state.

Regulatory Body • The Insurance Act should be changed. • An Insurance Regulatory body should be set up. • Controller of Insurance should be made independent.

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Investments • Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. • GIC and its subsidiaries are not to hold more than 5% in any company.

Customer Service • LIC should pay interest on delays in payments beyond 30 days • Insurance companies must be encouraged to set up unit linked pension plans. • Computerisation of operations and updating of technology to be carried out in the insurance industry. Malhotra Committee also proposed setting up an independent regulatory body - The Insurance Regulatory and Development Authority (IRDA) to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives.

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Life Insurance Companies at a Glance:

a)

LIFE INSURANCE CORPORATION OF INDIA:

On January 19, 1956 the President of the Indian Union issued an ordinance, providing for the taking over, in public interest, of the management of life insurance pending nationalization of such business, & the then Finance Minister explained the objectives of nationalization of life insurance business. In June 1956, the parliament passed a bill for nationalization of life insurance business in India and for setting up a corporation as the sole agency for carrying on this business in India. The corporation, set up under this Act, is known as ?Life Insurance Corporation of India?, which started functioning on September 1, 1956. For the purpose of servicing of policies issued before September 1, 1956, some integrated head offices & integrated branch office units were created. These offices have nothing to do with the policies Corporation also took over foreign life

issued by the corporation.

business of the Indian insurers.

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? ?

Objectives of LIC: Maximize mobilization of people’s savings by making insurance

– linked savings adequately attractive. Conduct business with utmost economy & with the full realization that the moneys belong to the policyholders. ? ? ? ? ? ? ? ? ? To publicize & extent the insurance business specifically in rural & remote areas. To provide suitable financial security at reasonable cost. To make the investments more dynamic by popularizing the savings plans attached with insurance. To invest the insurance fund keeping with maximum benefit & interest of insured’s. To run the insurance business at minimum administrative costs. To function as trusts of the insured’s. To fulfill the needs of the society in a changing social and economic environment. To make the employees collectively responsible for providing efficient services to the insured’s. To develop work satisfaction among agents & employees.

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b)

HDFC STANDARD LIFE INSURANCE COMPANY:

HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC, India’s largest housing finance institution and Standard Life Assurance Company, Europe’s largest mutual life company. HDFC manages Rs. 21,450 Crores in assets and Standard Life manages over US $100 billion in assets. Both the promoters are well known for their ethical dealings, their financial strength and their commitment to be a long-term player in the life insurance industry.

c)

MAX NEW YORK LIFE INSURANCE COMPANY:

Max New York Life Insurance Company is a joint venture between New York Life International Inc. and Max India Limited. New York Life, a Fortune 100 Company, is one of the world’s experts in life insurance with over 156 years of experience in the business and over US$ 165 billion (Rs. 775,000 Crores) in assets under management. Max India Limited is a multi-business corporate, focused on the knowledge, people, and service-oriented business of life

insurance, healthcare and information technology.

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d)

OM KOTAK MAHINDRA LIFE INSURANCE:

Om Kotak Mahindra Life Insurance, a company under Kotak Mahindra Group is a 74:26 life insu rance joint venture between Kotak Mahindra Finance Limited with Old Mutual, U.K. The philosophy of Om Kotak Mahindra is helping their customers take financial decisions at every stage in life. Their aim is to consistently offer a wide range of innovative life insurance products, to help their customers remain financially independent, which is why they believe that freedom to take life on "Jeene Ki Aazadi" The alliance of Om Kotak Mahindra with Old Mutual has given it unmatched expertise in life insurance a rea. With

156 years of experience in life insurance business, Old Mutual is today an International Financial Service Group based in London.

e)

BIRLA SUN LIFE INSURANCE COMPANY:

It is a joint venture of Aditya Birla Group and Sun Life Financial Services with the objective that Insurance is not about something going wrong. It's often about things going right. One of the wonders of human nature is that we never believe anything can actually go wrong. Surely, life has its share of ifs. At Birla Sun Life however, we believe it has its

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equally pleasant share of buts as well. We at Birla Sun Life stand committed to helping you realize those happy

moments, which make a life. Be it living the same lifestyle in your post retirement days or providing a secure future for your loved ones, in case something happens to you.

f)

TATA AIG LIFE INSURANCE COMPANY:

Tata AIG is a joint venture that is backed by the Tata Group – India’s most respected industrial conglomerate, with revenues of more than US $8.4 billion, and American International Group, Inc. (AIG) – the leading US-based international insurance and financial services organization, with a presence in over 130 countries and jurisdictions throughout the world. Tata AIG offers a gamut of innovative products in the Life Insurance sector.

g)

SBI LIFE INSURANCE COMPANY:

SBI Life Insurance Company Ltd. is a joint venture between State Bank of India and Cardiff of France. SBI is the

largest bank in India and Cardiff is a leading insurance company in France operating in 29 countries. wholly owned European Bank. subsidiary of BNP Paribas, Cardiff is a the largest

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CHAPTER 3 SURVEY, DATA ANALYSIS

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Q.1.Do you have a Life Insurance Policy? Criteria No. Of Respondents Yes No 50 0

Q.2.Which Company’s Insurance Policies do you have? Company LIC Birla Sunlife SBI ICICI Pru. Life Kotak Mahindra Post Office HDFC No. of Respondents 50 2 3 10 3 15 3

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No. of Respondents 60 50 40 30 20 10 0

No. of Respondents

LIC

SBI

Kotak

HDFC

As from the above chart it is very clear the all of the respondents have an insurance of the LIC while some of them have an insurance of the other companies like post Office, ICICI Prudential Life insurance Co., HDFC Co. Etc. The reason behind this is that the LIC competitor since more than four decades and the Indian Govt. allowed the Introduction of private player in Insurance in the year 2000.

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Q.3What is amount of insurance premium you pay annually? Criteria Below Rs. 10,000 10,000 to 20,000 20,000 to 30,000 30,000 to 40,000 Above 40,000 No. of Respondents 11 18 6 5 10

The analysis of the above available data is merely to find out the percentage of income that one is willing to invest in insurance.

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Q.4What priorities would you consider most important, while purchasing a policy? Criteria/Rank Death Benefit Children’s Future Retirement Planning Tax Planning Financial Planning From the table and chart it can be say that most of the people rank death benefit first for the decision to make investment in Insurance. Their second priority is tax planning because the premium, which is paid by the people towards Insurance, is deductible up to certain limit from the income and also the maturity amount is also tax free. The third and fourth priorities are children’s future and retirement planning. 8 2 18 5 8 3 8 11 6 25 48 46 5 5 6 20 7 43 1 29 7 2 10 13 3 6 21 4 2 3 5 3 0 Total 50 44

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Q.5 Do you have any knowledge of the stock market? Criteria Yes No No. of Respondents 32 18

Q.6If “Yes” do you have any knowledge about unit linked insurance plans? Criteria Yes No No. of Respondents 25 7

The question number 5 and 6 are designed to know the awareness of people who have knowledge of share market or deals in shares also have the knowledge of the new modern insurance product i.e. Unit Linked Insurance Plan. From the available data it can be say that those who deal in shares are also aware of the ULIP.

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Q.7 If given a choice, where would you like to invest your money? (Please Rank Your Choice) Choice/Rank Mutual Fund Insurance Gold Equities Post Office Debenture Bank Deposit Other 1 0 4 4 17 22 0 0 10 2 1 12 8 3 12 2 6 5 3 5 14 1 0 12 4 12 0 4 1 4 2 5 2 10 19 2 5 25 8 2 2 2 1 1 1 6 12 3 5 6 0 14 0 0 7 5 0 13 1 0 2 3 0 8 1 0 13 0 0 0 1 2 Total 50 45 48 34 50 33 42 20

This question is mainly designed to know the investment priorities of the people of DOMBIVLI town.

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Q.8 According to you what are the factors that would affect your decision while purchasing an insurance policy? Criteria/Rank Premium Return Safety Liquidity Market Condition 1 12 21 20 1 1 2 15 17 14 1 2 3 15 8 15 9 0 4 6 2 1 18 16 5 2 2 0 21 21 50 50 50 50 50 40

The question No. 8 is designed to know which the factors are affecting the most to the prospect while making decision to invest in insurance. As far as investment in insurance is concerned most of the people want that it should be safe and at the same time giving the compatible returns because insurance is not only for death benefit it is also a saving tool for future. So the mix response of respondents is welcomed. Available data is such that there is a bit ambiguity.

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Q. 9 Are you or any of your family members are planning to buy an insurance policy in near future? Criteria Yes No No. of Respondents 13 37

This question is taken to collect the information of those respondents who are going to plan to purchase insurance within near future that is used by the company for making personal contact for sale.

Q. 10 Are your needs satisfied with your current investment in insurance? Criteria Yes No No. of Respondents 10 30

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

Q. 11 If “No”, then give reasons? Criteria High Premium Low Return Poor Services Others No. of Respondents 0 1 7 2

The question No.10 and 11 are designed to know the percentage of people who are not satisfied with the current investment in insurance and also to know the reasons behind it. So, that the company can focus on those areas where the competitors fail. Because now a days the competition is very stiff in the insurance industry. All companies are trying to attract more customers by anyhow. So it will be useful for designing the promotional schemes of the company. From the above table and chart it can be seen that the respondents who are dissatisfied give the main reason behind it are poor services. There are many others reasons like more time taken by the company for claim settlement, non-dispatchment of cheques and other important vouchers, etc. So the company can improve upon these and increase its market share by offering quality service to the customers.

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SWOT ANALYSIS

?

Strengths

1. 2. 3. 4. 5. 6. ?

Flexible Products Partners having experience in different markets of the world. Synergy with existing operations Expertise in the field of insurance Professional management Create a brand name

Weakness

1. 2. 3.

Low capital base Yet to build strong distribution network Cannot tap rural market

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

?

Opportunities

1. 2.

Untapped market Banks ready to tie up for as a readymade distribution network for a small fee.

?

Threats

1. 2. 3.

Large distribution network of LIC Decades of experience and brand name of LIC 5% service tax on investments.

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CHAPTER 4 CONCLUSION

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

India is among the most promising emerging insurance markets in the world. Its current premium volume of USD 18 billion has the potential to increase to USD 90 billion within the next decade. In particular, life insurance, which currently makes up 80% of premiums, is widely tipped to lead the growth. The major drivers include sound economic fundamentals, a rising middle-income class, an improving regulatory framework and rising risk awareness.

The groundwork for realizing potential was arguably laid in 2000 when India undertook to open the domestic insurance market to private-sector and foreign companies. Since then, 13 private life Insurers and eight general insurers have joined the Indian market. Significantly, foreign players participated in most of these new companies – despite the restriction of 26% on foreign ownership. Incumbent state-owned insurance companies have so far managed to hold their own and retain dominant market positions. Yet, their market share is likely to decline in the near to medium term. Important steps have thus been already taken, but there are still major hurdles to overcome if the market is to realize its full potential. To begin with, India needs to further liberalize investment regulations on insurers to strike a proper balance between insurance solvency and investment flexibility. Furthermore, both the life and non-life insurance sectors would benefit from less invasive regulations. In addition, price structures need to reflect product risk. Obsolete regulations on insurance prices will have to be replaced by riskdifferentiated pricing structures.

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BIBLOGRAPHY
WEBLIOGRAPHY

http://www.irda.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?pa ge=PageNo4&mid=2

http://en.wikipedia.org/wiki/Insurance#History_of_insurance

http://en.wikipedia.org/wiki/Insurance_in_India

BOOKS

Insurance Industry vol.3- edited by U. JAWAHARLAL

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

ANNEXURE

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A PROJECT REPORT ON INDIAN INSURANCE INDUSTRY

? Do you have a Life Insurance Policy? ? Yes ? No ?

? Which Company’s Insurance Policies do you have? ? (Tick where applicable) ? LIC ? SBI Life Insurance ? HFC Standard Life ? New York MaxLife ? Birla Sunlife ? Alliance Bajaj ? Cholamandalam ? ICICI Pru. Life Insurance ? TATA AIG Insurance? MetLife Insurance ? ING Vysya ? OM Kotak Mahindra ? AVIVA Life ? AMP Sanmar

? ? ? ? ? ? ?

? What is amount of insurance premium you pay annually?

? What priorities would you consider most important, while purchasing a policy? (Please Rank Your Choice) ? Death Benefit ? ? Children’s Education ? ? Retirements Benefit ? ? Tax Planning ? ? Financial Planning ?

? you have any knowledge of the stock market? ? Yes ? No ?

? If “Yes” do you have any knowledge about unit linked insurance plans? ? Yes ? No ?

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? If given a choice, where would you like to invest your money? ? (Please Rank Your Choice) ? Mutual Funds ? Post Office Schemes ? ? Insurance Policies ? Debentures ? ? Gold ? Banks (FD’s etc.) ? ? Equities ? If other (specify)___________

? According to you what are the factors that would affect you decision while purchasing an insurance policy? ? (Please Rank Your Choice) ? Premium ? ? Return ? ? Safety ? ? Liquidity ? ? Market Condition ?

? Are you or any of your family members are planning to buy an insurance policy in near future? ? Yes ? No ?

? Are your needs satisfied with your current investment in insurance? ? Yes ? No ?

? If “No”, then give reasons? ? High Premium ? Low Return

? ?

Poor Services ? Other Reasons__________

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