Insurance Sector
Content
A PROJECT ON INSURANCE SECTOR
SUBMITED BY:SATYANARAYAN PARIDA
1
Chapter 1:
Introduction
2
Executive Summary The service industry is one of the fastest growing sectors in India today. The upcoming sectors which are really showing the graph towards upwards are - Telecom, Banking, and Insurance. These sectors really have a lot of responsibility towards the economy. Amongst the above-mentioned areas insurance is one sector, which took a lot of time in positioning itself. The insurance business of non-life companies was not much in problems but the major problem was with life insurance. Life Insurance Corporation of India had monopoly for more than 45 years, but the picture then was completely different. Previously people felt that “Insurance is only for classes not for masses ” but now the picture is vice-versa. The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era – past few centuries – yet its beginnings date back almost 6000 years. Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and these companies were not insuring Indian natives. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was 3
also one of such companies inspired by nationalism. The Swadeshi movement of 19051907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage.
The formation of IRDA, entrance of private life insurance companies into India with one foreign partner, compulsory training of Insurance agents etc. developments started to take place. And this was the time when these companies started searching for proper channel partners who can help the organization in expanding its network and business in India. Channel partners are those who are going to be into direct selling of company’s products i.e. the insurance policies. They are the link between the customers and the management or company. These channel partners are people with different profiles. They are selected on some grounds like their network of people, their problem handling ability, convincing power and lot many things. The main idea behind company’s Questionnaire Survey is to find out and analyze the proper profile that can be recruited by company as a channel partner. Company has been focusing on some of the profile that can be very beneficial for the company. For example Chartered Accountants, Tax Consultants, Postal agents, Bank’s Daily Collection Agents
4
etc. the main idea behind targeting the above profile is strong client network which is really very important for an insurance company. The project title is “ Potential of Life Insurance Industry in Surat Market ”. This shows the scope for private insurance companies have great opportunities to cover the market and can insure the customer. With the initiation of the deregulation in the Indian insurance market, the monopoly of big public sector companies in life insurance market has been broken. New private players have entered the market and with their innovative approaches and better use of distribution channels and technology, they are eating in to the shares of established public sector companies in Indian Insurance Market. Since the deregulation has been put in to place, the market share of LIC has come down to 71.4% in life insurance market while the private players have captured around 17% market in the general insurance segment. This report includes the key private players in the insurance market such as ICICI Prudential, Kotak Life Insurance Bajaj Allianz, Birla Sun life, and TATA AIG. It also includes the leading competitors in the life insurance and general insurance segments along with their market shares.
5
Chapter 2
Objective Limitation Methodology Data collection
1.
Objective: Proper understanding and analysis of life insurance industry. To know about brand awareness of Kotak Life Insurance and customer’s preference about Kotak Life Insurance. Conduct market survey on a sample selected from the entire population and derived opinion on that research. According the market survey come know about how much potential of insurance market in our city. And base on analysis of the result thus obtained make a report on that research. 6
The main of the present study of is accomplish the following objective.
Training aims at recruiting maximum number of Life Advisors and to Sell the maximum policies for the company and bring the business for the company which ever is going at the particular point of time. Along with it I will be gaining the thorough knowledge of insurance sector. This will give me in more confidence in marketing products given to me. As the Kotak Life Insurance well reputed company in India it’s great chance for me to observed different products launch by other competitor companies like ICICI prudential, Bajaj alliance ,LIC, Max New York life etc. In all, it is to understand the overall working of the Life insurance sector. The objective behind the project is as follows: To find the right candidate. To about their family background, occupation, social relation, Qualification, Age. Finalize candidates for the IRDA training
7
Limitation: Some of the difficulties and limitations faced by me during my training are as follows:
Lack of awareness among the people – This is the biggest limitation found in this sector. Most of the people are not aware about the importance and the necessity of the insurance in their life. They are not aware how useful life insurance can be for their family members if something happens to them.
Perception of the people towards Insurance sector – People still consider insurance just as a Tax saving device. So today also there is always a rush to buy an Insurance Policy only at the end of the financial year like January, February and March making the other 9 months dry for this business.
Insurance does not give good returns – Still today people think that Insurance does not give good returns. They are not aware of the modern Unit Linked Insurance Plans which are offered by most of the Private sector players. They are still under the perception that if they take Insurance they will get only 5-6% returns which is not true nowadays. Nowadays most of the modern Unit Linked Insurance Plans gives returns which are many times more than that of bank Fixed deposits, National saving certificate, Post office deposits and Public provident fund.
Lack of awareness about the earning opportunity in the Insurance sector – People still today are not aware about the earning opportunity that the Insurance sector gives. After the privatization of the insurance sector many private giants have entered the insurance sector. These private companies in order to beat the competition and to increase their Insurance Advisors to increase their reach to the customers are giving very high commission rates but people are not aware of that.
8
Increased competition – Today the competition in the Insurance sector has became very stiff. Currently there are 14 Life Insurance companies working in India including the LIC (life insurance Corporation of India). Today each and every company is trying to increase their Insurance Advisors so that they can increase their reach in the market. This situation has created a scenario in which to recruit Life insurance Advisors and to sell life Insurance Policy has became very very difficult.
RESEARCH METODOLOGY Research always starts with a question or a problem. Its purpose is to question through the application of the scientific method. It is a systematic and intensive study directed towards a more complete knowledge of the subject studied. Marketing research is the function which links the consumer, customer and public to the marketer through information- information used to identify and define marketing opportunities and problems generate, refine, and evaluate marketing actions, monitor marketing actions, monitor marketing performance and improve understanding of market as a process. Marketing research specifies the information required to address these issues, designs, and the method for collecting information, manage and implemented the data collection process, analyses the results and communicate the findings and their implication.
I have prepared our project as descriptive type, as the objective of the study demands the answers of the question related to find the potentiality of life insurance in Surat: How much potential is there in Surat?
9
The Marketing Research Process As marketing research is a systemic and formalized process, it follows a certain sequence of research action. The marketing process has the following steps: Formulating the problems Developing objectives of the research Designing an effective research plan Data collection techniques Evaluating the data and preparing a research report
There are two types of data collection method use in my project report. – – Primary data Secondary data.
For my project, I decided on primary data collection method for observing working of company and approaching customers directly in the field, tele-calling, cold calling, campaigning and through references to know their interest in business with company in my project and also make questionnaire for creating database of business class people is Surat city for company. I decided on Secondary data collection method was used by referring to various websites, books, magazines, journals and daily newspapers for collecting information regarding project under study.
10
DATA COLLECTION After the research methodology, research problem in marketing has been identified and selected; the next step is together the requisite data. There are two types of data collection method – primary data and secondary data. In our live project, we decided primary data collection method because our study nature does not permit to apply observational method. In survey approach we had selected a questionnaire method for taking a customer view because it is feasible from the point of view of our subject & survey purpose. We conducted 200 sample of survey in our project.
11
Chapter: 3
important milestones in the life insurance business Insurance sector reforms
The Insurance Regulatory and
Development Authority (IRDA)
12
Some of the important milestones in the life insurance business in India are:
1850Non life insurance debuts with triton insurance company. 1870 1912
Bombay
mutual life assurance society is the first Indian owned life insurer The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928 The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938 Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956
245 Indian and foreign insurers and provident societies 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. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907 classes 1957 The Indian Mercantile Insurance Ltd. set up, the first company to transact all of general insurance business. General Insurance Council, a wing of the Insurance Association of India, frames a
13
code of conduct for ensuring fair conduct and sound business practices. 1968 1972 The Insurance Act amended to regulate investments and set minimum solvency and the Tariff Advisory Committee set up. The General Insurance Business (Nationalization) Act, 1972 nationalized the margins
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. GIC incorporated as a company.
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. 1997 2000 policy 2001 Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed to sell insurance plans. 14 Insurance regulator IRDA set up
IRDA starts giving licenses to private insurers: Kotak Life Insurance
ICICI prudential and HDFC Standard Life insurance first private insurers to sell a
The Insurance Regulatory and Development Authority (IRDA) The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to act as a strong and powerful supervisory and regulatory authority for insurance. Post nationalization, the role of Controller of Insurance diminished considerably in significance since the Government owned the insurance companies.
But the scenario changed with the private and foreign companies foraying in to the insurance sector. This necessitated the need for a strong, independent and autonomous Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment of a comprehensive legislation. The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and General Insurance Corporation and its subsidiaries (for general insurance business).
The act extends to the whole of India and will come into force on such date as the Central Government may, by notification in the Official Gazette specify. Different dates may be appointed for different provisions of this Act.
The Act has defined certain terms; some of the most important ones are as follows appointed day means the date on which the Authority is established under the act. Authority means the established under this Act. Interim Insurance Regulatory Authority means the Insurance Regulatory Authority set up
15
by the Central Government through Resolution No. 17(2)/ 94-lns-V dated the 23rd January, 1996.
Words and expressions used and not defined in this Act but defined in the Insurance Act, 1938 or the Life Insurance Corporation Act, 1956 or the General Insurance Business (Nationalization) Act, 1972 shall have the meanings respectively assigned to them in those Acts
A new definition of "Indian Insurance Company" has been inserted. "Indian insurance company" means any insurer being a company (a) which is formed and registered under the Companies Act, 1956 (b) in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed twenty-six per cent. Paid up capital in such Indian insurance company (c) whose sole purpose is to carry on life insurance business, general insurance business or re-insurance business.
16
Chapter: 4
Contribution of Life Insurance Sector in the Economy FLOW OF Insurance Industry in India STRUCTURE OF INSURANCE INDUSTRY: Snap Shot Industry Aggregation of Long Term Savings Spread of financial services in rural Areas
Long term funds for infrastructure Development of Capital Markets/ Economic Growth Employment generation Special Futures Growth Potential Phase of transition
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FLOW OF Insurance Industry in India
• Structure of Insurance Industry: Snap Shot • Contribution to Indian Economy • Special Features
STRUCTURE OF INSURANCE INDUSTRY: Snap Shot Historical Perspective (i) Prior to 1956 242 companies operating (ii) 1956 - 2001 Nationalization – LIC monopoly player – Government control (iii) 2001 -- Opened up sector
Industry Snap Shot - Contd. • (a) LIC – Fully owned by Government (b) Postal Life Insurance • (ii) Private players 1. Bajaj Allianz Life Insurance Co. Ltd. 2. Birla Sun Life Insurance Co. Ltd. (BSLI) 3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE) 4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU) 5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA) 6. Max New York Life Insurance Co. Ltd. (MNYL) 7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE)
18
8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd. 9. SBI Life Insurance Co. Ltd. (SBI LIFE) 10. TATA AIG Life Insurance Co. Ltd. (TATA AIG) 11. Reliance Life Insurance 12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA) 13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE) 14. Shriram Sunlam • (iii) Other likely players – PNB Life Insurance, Axa Bharti Enterprises
Potential of the Insurance sector: Total population Total population of Insurable class Total population insured 1.1 billion 253 millions 88.5 millions
Source: Financial Express-Delhi. Market share: 2001-02 LIC 98% 94% 87% 78% 72% 2002-03 2003-04 2004-05 2005-06
19
Private Players
2%
6%
13%
22%
28%
Industry growth rate at 36% (2004-05) with premium income From new business. Source: Financial Express- Delhi
Market Share Company
Indian Promoter/ Partner Dabur Bajaj Auto Aditya Birla group HDFC ICICI Bank Vysya Bank Kotak Mahindra Bank Max India Jammu & Kashmir Bank Sahara India SBI Tata Group
Foreign Insurance
Market share based on premium 1.12 6.12 1.84 2.96 7.11 0.63 0.71 1.32 0.40 0.80 1.52 1.78
Aviva life Bajaj Allianz Birla sun life HDFC Standard ICICI Prudential ING Vysya Kotak Mahindra, Old Mutual Max New York MetLife Sahara Life Insurance SBI Life Tata AIG
Aviva, UK Allianz, Germany Sun Life, Canada Standard Life, UK Prudential, UK ING Insurance, Netherlands Old Mutual South Africa New York Life, US MetLife, US None Cardiff, France AIG, US
20
CONTRIBUTION TO INDIAN ECONOMY (i) Life Insurance is the only sector which garners long term savings (ii) Spread of financial services in rural areas and amongst socially less privileged (iii) Long term funds for infrastructure (iv) Strong positive correlation between development of capital markets and insurance/ pension sector (v) Employment generation
21
Aggregation of Long Term Savings (i) Total Assets of Life Insurance Companies 2002-2003 2,80,450Cr 2003-2004 3,52,608Cr 2004-2005 4,23,000 Cr
(ii) Total Premium generated 2002-2003 57,708 Cr 2003-2004 66,278 Cr 2004-2005 79,000 Cr
(iii) Industry is growing @ 19 p.a. (iv) At this growth rate, the future premium will be 2005-2006 94,000 Cr 2006-2007 1,12000 Cr income generated 2007-2008 1,33,000 Cr
(v) Life Insurance funds account for 15% of household savings . (vi)The industry has the potential to increase the share to 20%.
Spread of financial services in rural areas and amongst socially underprivileged • IRDA Regulations provide certain minimum business to be done (i) In rural areas (ii) In the socially weaker sections • Life Insurance offices are spread over nearly 1400 centers. • Presence of representative in every tensile – deeper penetration in rural areas. • Insurance agents numbering over 6.24 lakhs 22
in rural areas. • Policies sold in rural areas (2004-05) - No. of policies - 55 lakhs Sum assured 46,000 cr • Social security - No. of lives covered 2003-04 17.4 lakhs 2004-05 42.1 lakhs
Long term funds for infrastructure • For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. • Estimates of funds required for development of infrastructure vary widely. • An investment of 6, 19,600 crore is anticipated in the next 5 years (Source : SSKI India) • Tenure of funding required for infrastructure normally ranges from 10 to 20 years. • Major portion of these funds are routed through debt/private participation equity
23
Development of Capital Markets/ Economic Growth •Industry also contributes in economic development through investments in capital market. Present level of investments is over Rs. 40,000 crore. (Mark to Market basis around 80,000 Crores). •Annual Investment of around 9000 Crores in capital markets. •Contribution to Five Year Plans9th Plan 2, 30,900 Crores Last Two Years 1, 70,900 Crores • Helps inculcate a sense of security by protecting earning of people in case of untimely death. Benefits to Policy Holders
2002-2003 20,800 Cr
2003-2004 24,200 Cr
2004-2005 28,700 Cr
EMPLOYMENT GENERATION • Life insurance industry provides increased employment opportunities. • Employees in insurance sector as on 31st March, 2005 is around 2 lakhs.
24
• Many agents depend on insurance for their Livelihood–No. of agents on 31st March 2004 – 15.59 lakhs •Brokers, corporate agents, training establishments provide extra employment opportunities. • Many of these openings are in rural sectors.
SPECIAL FEATURES • Tax clubbing of various savings short term and long term into same bracket have a bias towards short term savings. • Distinction between the short term savings and long term savings is critical from investor’s point of view. More prone to inflationary pressures • Clearly, long term savings more than 10 years deserve special consideration under tax regime.
25
GROWTH POTENTIAL At present insurance penetration in India is quite low – 2.26% of GDP.
PHASE OF TRANSITION • Life Insurance industry is under the phase of infancy after 50 years of monopoly • Competition from within and other sectors of financial market • Needs environmental support till it reaches a comfor
Chapter: 5
26
Age Wise Clasification
45 40 35 No. of Customers 30 25 20 15 10 5 0 18-25 26-30 Years 31-45 46 & Above
44
22 11
23
Data interpretation of the Survey
Graph analysis
27
Gender MALE FEMALE
No of Member 66 34
AGE 18-25 26-30 31-45 46 to above
No Of Members 11 22 44 23
28
Gender wise clasification
70 60 50 No. of Customers 40 30 20 10 0 MALE FEMALE Years
66
34
29
Members
50 45 40 35 No. of Customers 30 25 20 15 10 5 0 2 to 4 5 to 8 8 to aboce No of members
48 40
12
Family member 2-4 5-8 8 to above
No of Member 40 48 12
30
Income 40K -70K 70K-1 Lake 1 Lake to 3 Lakes 3 Lacks
No of Members 17 41 28 14
Income Wise Classification
45 40 35 30 25 20 15 10 5 0 40 k to 70k 70k to 1 Lake 1 Lake to 3 3 Lake to Lakes Above Income (P.A)
41 28 17
No. of Customers
14
31
Insurable Member 42%
Uninsurable member 58%
NO OF MEMBER HAVING INSURANCE
NO 58% YES 42%
Only 42%people having insurance in surat so it is potential for insurance company to capture to all that market
32
40 35 30 No. of Customers 25 20 15 10 5 0
40
28 21 18 11
Self
Spouse
Children
Parents
All
Among that 42% people who having insurance, they have insurance 40% for self 28%for spouse 21% for children and 18% for their parents and 11% for all family member.
Having insurance self spouse children parents all
No of members 40 28 21 18 11
Different policy bought bye customers
33
35
LIC
30
ICICI
No. of Customers
25 20 15 10 5 0
Birla Sunlife SBI HDFC Bajaj Alliance TATA AIG Kotak Mahindr a ING Vyasya Max Newyork Met Life
Term Plan
Endowment
Whole life
Money Back Retirement
Child Plan
Unit Link Plan
Different Plans
Under insurable persons 82%
Fully insurable persons 18%
34
Potential of life insurance
Under Insured 82%
Fully Insured 18%
Only 42 % people having life insurance but among them 82% people are underinsurance and only 18% people are fully insured according to them income
Insurance Plan Term Plan Money back Plan Endowment Plan Child Plan Unit link Plan
Market Share 39% 14% 15% 8% 24%
35
Market share of diffrent Insurance plan
Unitlink plan 24%
Child Plan 8% Endownment Plan 15%
Term Plan 39%
Moneyback Plan 14%
36
Chapter 6: Finding Suggestion
Finding and Suggestion • According the survey only 42% people are insured in Surat so reaming other part is potential for insurance sector.
37
•
Among that 42% people who having insurance, they have insurance 40% for self 28%for spouse 21% for children and 18% for their parents and 11% for all family member, also its very help full for insurance sector so they should take necessary step for capture this potential.
•
Only 42% people having insurance in Surat in that 42% there are 82 % people are under insured and other 18% people are fully insured according to their income so that is also plus point for insurance sector to capture the market
Chapter 7
Conclusion All the insurance company must advertise more in the market because not all people know more about life Insurance policy. Most number of people wants Guaranteed Returns so company must focus on this for the customer investment. Make insurance policy which can buy any one so we can insured them through this type of life insurance policy.
38
8 References In order to obtain more information regarding the present study and to substantiate it with theoretical proof, the following references were made: -
Insurance chronicle, January 2006 Special issue “Insurance Industry 2006”. Websites visited: www.kotaklifeinsurance.com www.google .com
39
40
SUBMITED BY:SATYANARAYAN PARIDA
1
Chapter 1:
Introduction
2
Executive Summary The service industry is one of the fastest growing sectors in India today. The upcoming sectors which are really showing the graph towards upwards are - Telecom, Banking, and Insurance. These sectors really have a lot of responsibility towards the economy. Amongst the above-mentioned areas insurance is one sector, which took a lot of time in positioning itself. The insurance business of non-life companies was not much in problems but the major problem was with life insurance. Life Insurance Corporation of India had monopoly for more than 45 years, but the picture then was completely different. Previously people felt that “Insurance is only for classes not for masses ” but now the picture is vice-versa. The story of insurance is probably as old as the story of mankind. The same instinct that prompts modern businessmen today to secure themselves against loss and disaster existed in primitive men also. They too sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent past, particularly after the industrial era – past few centuries – yet its beginnings date back almost 6000 years. Life Insurance in its modern form came to India from England in the year 1818. Oriental Life Insurance Company started by Europeans in Calcutta was the first life insurance company on Indian Soil. All the insurance companies established during that period were brought up with the purpose of looking after the needs of European community and these companies were not insuring Indian natives. However, later with the efforts of eminent people like Babu Muttylal Seal, the foreign life insurance companies started insuring Indian lives. But Indian lives were being treated as sub-standard lives and heavy extra premiums were being charged on them. Bombay Mutual Life Assurance Society heralded the birth of first Indian life insurance company in the year 1870, and covered Indian lives at normal rates. Starting as Indian enterprise with highly patriotic motives, insurance companies came into existence to carry the message of insurance and social security through insurance to various sectors of society. Bharat Insurance Company (1896) was 3
also one of such companies inspired by nationalism. The Swadeshi movement of 19051907 gave rise to more insurance companies. The United India in Madras, National Indian and National Insurance in Calcutta and the Co-operative Assurance at Lahore were established in 1906. In 1907, Hindustan Co-operative Insurance Company took its birth in one of the rooms of the Jorasanko, house of the great poet Rabindranath Tagore, in Calcutta. The Indian Mercantile, General Assurance and Swadeshi Life (later Bombay Life) were some of the companies established during the same period. Prior to 1912 India had no legislation to regulate insurance business. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed. The Life Insurance Companies Act 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. But the Act discriminated between foreign and Indian companies on many accounts, putting the Indian companies at a disadvantage.
The formation of IRDA, entrance of private life insurance companies into India with one foreign partner, compulsory training of Insurance agents etc. developments started to take place. And this was the time when these companies started searching for proper channel partners who can help the organization in expanding its network and business in India. Channel partners are those who are going to be into direct selling of company’s products i.e. the insurance policies. They are the link between the customers and the management or company. These channel partners are people with different profiles. They are selected on some grounds like their network of people, their problem handling ability, convincing power and lot many things. The main idea behind company’s Questionnaire Survey is to find out and analyze the proper profile that can be recruited by company as a channel partner. Company has been focusing on some of the profile that can be very beneficial for the company. For example Chartered Accountants, Tax Consultants, Postal agents, Bank’s Daily Collection Agents
4
etc. the main idea behind targeting the above profile is strong client network which is really very important for an insurance company. The project title is “ Potential of Life Insurance Industry in Surat Market ”. This shows the scope for private insurance companies have great opportunities to cover the market and can insure the customer. With the initiation of the deregulation in the Indian insurance market, the monopoly of big public sector companies in life insurance market has been broken. New private players have entered the market and with their innovative approaches and better use of distribution channels and technology, they are eating in to the shares of established public sector companies in Indian Insurance Market. Since the deregulation has been put in to place, the market share of LIC has come down to 71.4% in life insurance market while the private players have captured around 17% market in the general insurance segment. This report includes the key private players in the insurance market such as ICICI Prudential, Kotak Life Insurance Bajaj Allianz, Birla Sun life, and TATA AIG. It also includes the leading competitors in the life insurance and general insurance segments along with their market shares.
5
Chapter 2
Objective Limitation Methodology Data collection
1.
Objective: Proper understanding and analysis of life insurance industry. To know about brand awareness of Kotak Life Insurance and customer’s preference about Kotak Life Insurance. Conduct market survey on a sample selected from the entire population and derived opinion on that research. According the market survey come know about how much potential of insurance market in our city. And base on analysis of the result thus obtained make a report on that research. 6
The main of the present study of is accomplish the following objective.
Training aims at recruiting maximum number of Life Advisors and to Sell the maximum policies for the company and bring the business for the company which ever is going at the particular point of time. Along with it I will be gaining the thorough knowledge of insurance sector. This will give me in more confidence in marketing products given to me. As the Kotak Life Insurance well reputed company in India it’s great chance for me to observed different products launch by other competitor companies like ICICI prudential, Bajaj alliance ,LIC, Max New York life etc. In all, it is to understand the overall working of the Life insurance sector. The objective behind the project is as follows: To find the right candidate. To about their family background, occupation, social relation, Qualification, Age. Finalize candidates for the IRDA training
7
Limitation: Some of the difficulties and limitations faced by me during my training are as follows:
Lack of awareness among the people – This is the biggest limitation found in this sector. Most of the people are not aware about the importance and the necessity of the insurance in their life. They are not aware how useful life insurance can be for their family members if something happens to them.
Perception of the people towards Insurance sector – People still consider insurance just as a Tax saving device. So today also there is always a rush to buy an Insurance Policy only at the end of the financial year like January, February and March making the other 9 months dry for this business.
Insurance does not give good returns – Still today people think that Insurance does not give good returns. They are not aware of the modern Unit Linked Insurance Plans which are offered by most of the Private sector players. They are still under the perception that if they take Insurance they will get only 5-6% returns which is not true nowadays. Nowadays most of the modern Unit Linked Insurance Plans gives returns which are many times more than that of bank Fixed deposits, National saving certificate, Post office deposits and Public provident fund.
Lack of awareness about the earning opportunity in the Insurance sector – People still today are not aware about the earning opportunity that the Insurance sector gives. After the privatization of the insurance sector many private giants have entered the insurance sector. These private companies in order to beat the competition and to increase their Insurance Advisors to increase their reach to the customers are giving very high commission rates but people are not aware of that.
8
Increased competition – Today the competition in the Insurance sector has became very stiff. Currently there are 14 Life Insurance companies working in India including the LIC (life insurance Corporation of India). Today each and every company is trying to increase their Insurance Advisors so that they can increase their reach in the market. This situation has created a scenario in which to recruit Life insurance Advisors and to sell life Insurance Policy has became very very difficult.
RESEARCH METODOLOGY Research always starts with a question or a problem. Its purpose is to question through the application of the scientific method. It is a systematic and intensive study directed towards a more complete knowledge of the subject studied. Marketing research is the function which links the consumer, customer and public to the marketer through information- information used to identify and define marketing opportunities and problems generate, refine, and evaluate marketing actions, monitor marketing actions, monitor marketing performance and improve understanding of market as a process. Marketing research specifies the information required to address these issues, designs, and the method for collecting information, manage and implemented the data collection process, analyses the results and communicate the findings and their implication.
I have prepared our project as descriptive type, as the objective of the study demands the answers of the question related to find the potentiality of life insurance in Surat: How much potential is there in Surat?
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The Marketing Research Process As marketing research is a systemic and formalized process, it follows a certain sequence of research action. The marketing process has the following steps: Formulating the problems Developing objectives of the research Designing an effective research plan Data collection techniques Evaluating the data and preparing a research report
There are two types of data collection method use in my project report. – – Primary data Secondary data.
For my project, I decided on primary data collection method for observing working of company and approaching customers directly in the field, tele-calling, cold calling, campaigning and through references to know their interest in business with company in my project and also make questionnaire for creating database of business class people is Surat city for company. I decided on Secondary data collection method was used by referring to various websites, books, magazines, journals and daily newspapers for collecting information regarding project under study.
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DATA COLLECTION After the research methodology, research problem in marketing has been identified and selected; the next step is together the requisite data. There are two types of data collection method – primary data and secondary data. In our live project, we decided primary data collection method because our study nature does not permit to apply observational method. In survey approach we had selected a questionnaire method for taking a customer view because it is feasible from the point of view of our subject & survey purpose. We conducted 200 sample of survey in our project.
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Chapter: 3
important milestones in the life insurance business Insurance sector reforms
The Insurance Regulatory and
Development Authority (IRDA)
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Some of the important milestones in the life insurance business in India are:
1850Non life insurance debuts with triton insurance company. 1870 1912
Bombay
mutual life assurance society is the first Indian owned life insurer The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928 The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938 Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.
1956
245 Indian and foreign insurers and provident societies 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. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907 classes 1957 The Indian Mercantile Insurance Ltd. set up, the first company to transact all of general insurance business. General Insurance Council, a wing of the Insurance Association of India, frames a
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code of conduct for ensuring fair conduct and sound business practices. 1968 1972 The Insurance Act amended to regulate investments and set minimum solvency and the Tariff Advisory Committee set up. The General Insurance Business (Nationalization) Act, 1972 nationalized the margins
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. GIC incorporated as a company.
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. 1997 2000 policy 2001 Royal Sundaram Alliance first non life insurer to sell a policy 2002 Banks allowed to sell insurance plans. 14 Insurance regulator IRDA set up
IRDA starts giving licenses to private insurers: Kotak Life Insurance
ICICI prudential and HDFC Standard Life insurance first private insurers to sell a
The Insurance Regulatory and Development Authority (IRDA) The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to act as a strong and powerful supervisory and regulatory authority for insurance. Post nationalization, the role of Controller of Insurance diminished considerably in significance since the Government owned the insurance companies.
But the scenario changed with the private and foreign companies foraying in to the insurance sector. This necessitated the need for a strong, independent and autonomous Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment of a comprehensive legislation. The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and General Insurance Corporation and its subsidiaries (for general insurance business).
The act extends to the whole of India and will come into force on such date as the Central Government may, by notification in the Official Gazette specify. Different dates may be appointed for different provisions of this Act.
The Act has defined certain terms; some of the most important ones are as follows appointed day means the date on which the Authority is established under the act. Authority means the established under this Act. Interim Insurance Regulatory Authority means the Insurance Regulatory Authority set up
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by the Central Government through Resolution No. 17(2)/ 94-lns-V dated the 23rd January, 1996.
Words and expressions used and not defined in this Act but defined in the Insurance Act, 1938 or the Life Insurance Corporation Act, 1956 or the General Insurance Business (Nationalization) Act, 1972 shall have the meanings respectively assigned to them in those Acts
A new definition of "Indian Insurance Company" has been inserted. "Indian insurance company" means any insurer being a company (a) which is formed and registered under the Companies Act, 1956 (b) in which the aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed twenty-six per cent. Paid up capital in such Indian insurance company (c) whose sole purpose is to carry on life insurance business, general insurance business or re-insurance business.
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Chapter: 4
Contribution of Life Insurance Sector in the Economy FLOW OF Insurance Industry in India STRUCTURE OF INSURANCE INDUSTRY: Snap Shot Industry Aggregation of Long Term Savings Spread of financial services in rural Areas
Long term funds for infrastructure Development of Capital Markets/ Economic Growth Employment generation Special Futures Growth Potential Phase of transition
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FLOW OF Insurance Industry in India
• Structure of Insurance Industry: Snap Shot • Contribution to Indian Economy • Special Features
STRUCTURE OF INSURANCE INDUSTRY: Snap Shot Historical Perspective (i) Prior to 1956 242 companies operating (ii) 1956 - 2001 Nationalization – LIC monopoly player – Government control (iii) 2001 -- Opened up sector
Industry Snap Shot - Contd. • (a) LIC – Fully owned by Government (b) Postal Life Insurance • (ii) Private players 1. Bajaj Allianz Life Insurance Co. Ltd. 2. Birla Sun Life Insurance Co. Ltd. (BSLI) 3. HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE) 4. ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU) 5. ING Vysya Life Insurance Co. Ltd. (ING VYSYA) 6. Max New York Life Insurance Co. Ltd. (MNYL) 7. MetLife India Insurance Co. Pvt. Ltd. (METLIFE)
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8. Kotak Mahindra Old Mutual Life Insurance Co. Ltd. 9. SBI Life Insurance Co. Ltd. (SBI LIFE) 10. TATA AIG Life Insurance Co. Ltd. (TATA AIG) 11. Reliance Life Insurance 12. Aviva Life Insurance Co. Pvt. Ltd. (AVIVA) 13. Sahara India Life Insurance Co. Ltd. (SAHARA LIFE) 14. Shriram Sunlam • (iii) Other likely players – PNB Life Insurance, Axa Bharti Enterprises
Potential of the Insurance sector: Total population Total population of Insurable class Total population insured 1.1 billion 253 millions 88.5 millions
Source: Financial Express-Delhi. Market share: 2001-02 LIC 98% 94% 87% 78% 72% 2002-03 2003-04 2004-05 2005-06
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Private Players
2%
6%
13%
22%
28%
Industry growth rate at 36% (2004-05) with premium income From new business. Source: Financial Express- Delhi
Market Share Company
Indian Promoter/ Partner Dabur Bajaj Auto Aditya Birla group HDFC ICICI Bank Vysya Bank Kotak Mahindra Bank Max India Jammu & Kashmir Bank Sahara India SBI Tata Group
Foreign Insurance
Market share based on premium 1.12 6.12 1.84 2.96 7.11 0.63 0.71 1.32 0.40 0.80 1.52 1.78
Aviva life Bajaj Allianz Birla sun life HDFC Standard ICICI Prudential ING Vysya Kotak Mahindra, Old Mutual Max New York MetLife Sahara Life Insurance SBI Life Tata AIG
Aviva, UK Allianz, Germany Sun Life, Canada Standard Life, UK Prudential, UK ING Insurance, Netherlands Old Mutual South Africa New York Life, US MetLife, US None Cardiff, France AIG, US
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CONTRIBUTION TO INDIAN ECONOMY (i) Life Insurance is the only sector which garners long term savings (ii) Spread of financial services in rural areas and amongst socially less privileged (iii) Long term funds for infrastructure (iv) Strong positive correlation between development of capital markets and insurance/ pension sector (v) Employment generation
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Aggregation of Long Term Savings (i) Total Assets of Life Insurance Companies 2002-2003 2,80,450Cr 2003-2004 3,52,608Cr 2004-2005 4,23,000 Cr
(ii) Total Premium generated 2002-2003 57,708 Cr 2003-2004 66,278 Cr 2004-2005 79,000 Cr
(iii) Industry is growing @ 19 p.a. (iv) At this growth rate, the future premium will be 2005-2006 94,000 Cr 2006-2007 1,12000 Cr income generated 2007-2008 1,33,000 Cr
(v) Life Insurance funds account for 15% of household savings . (vi)The industry has the potential to increase the share to 20%.
Spread of financial services in rural areas and amongst socially underprivileged • IRDA Regulations provide certain minimum business to be done (i) In rural areas (ii) In the socially weaker sections • Life Insurance offices are spread over nearly 1400 centers. • Presence of representative in every tensile – deeper penetration in rural areas. • Insurance agents numbering over 6.24 lakhs 22
in rural areas. • Policies sold in rural areas (2004-05) - No. of policies - 55 lakhs Sum assured 46,000 cr • Social security - No. of lives covered 2003-04 17.4 lakhs 2004-05 42.1 lakhs
Long term funds for infrastructure • For GDP to grow at 8 to 10%, qualitative improvement in infrastructure is essential. • Estimates of funds required for development of infrastructure vary widely. • An investment of 6, 19,600 crore is anticipated in the next 5 years (Source : SSKI India) • Tenure of funding required for infrastructure normally ranges from 10 to 20 years. • Major portion of these funds are routed through debt/private participation equity
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Development of Capital Markets/ Economic Growth •Industry also contributes in economic development through investments in capital market. Present level of investments is over Rs. 40,000 crore. (Mark to Market basis around 80,000 Crores). •Annual Investment of around 9000 Crores in capital markets. •Contribution to Five Year Plans9th Plan 2, 30,900 Crores Last Two Years 1, 70,900 Crores • Helps inculcate a sense of security by protecting earning of people in case of untimely death. Benefits to Policy Holders
2002-2003 20,800 Cr
2003-2004 24,200 Cr
2004-2005 28,700 Cr
EMPLOYMENT GENERATION • Life insurance industry provides increased employment opportunities. • Employees in insurance sector as on 31st March, 2005 is around 2 lakhs.
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• Many agents depend on insurance for their Livelihood–No. of agents on 31st March 2004 – 15.59 lakhs •Brokers, corporate agents, training establishments provide extra employment opportunities. • Many of these openings are in rural sectors.
SPECIAL FEATURES • Tax clubbing of various savings short term and long term into same bracket have a bias towards short term savings. • Distinction between the short term savings and long term savings is critical from investor’s point of view. More prone to inflationary pressures • Clearly, long term savings more than 10 years deserve special consideration under tax regime.
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GROWTH POTENTIAL At present insurance penetration in India is quite low – 2.26% of GDP.
PHASE OF TRANSITION • Life Insurance industry is under the phase of infancy after 50 years of monopoly • Competition from within and other sectors of financial market • Needs environmental support till it reaches a comfor
Chapter: 5
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Age Wise Clasification
45 40 35 No. of Customers 30 25 20 15 10 5 0 18-25 26-30 Years 31-45 46 & Above
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23
Data interpretation of the Survey
Graph analysis
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Gender MALE FEMALE
No of Member 66 34
AGE 18-25 26-30 31-45 46 to above
No Of Members 11 22 44 23
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Gender wise clasification
70 60 50 No. of Customers 40 30 20 10 0 MALE FEMALE Years
66
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Members
50 45 40 35 No. of Customers 30 25 20 15 10 5 0 2 to 4 5 to 8 8 to aboce No of members
48 40
12
Family member 2-4 5-8 8 to above
No of Member 40 48 12
30
Income 40K -70K 70K-1 Lake 1 Lake to 3 Lakes 3 Lacks
No of Members 17 41 28 14
Income Wise Classification
45 40 35 30 25 20 15 10 5 0 40 k to 70k 70k to 1 Lake 1 Lake to 3 3 Lake to Lakes Above Income (P.A)
41 28 17
No. of Customers
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31
Insurable Member 42%
Uninsurable member 58%
NO OF MEMBER HAVING INSURANCE
NO 58% YES 42%
Only 42%people having insurance in surat so it is potential for insurance company to capture to all that market
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40 35 30 No. of Customers 25 20 15 10 5 0
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28 21 18 11
Self
Spouse
Children
Parents
All
Among that 42% people who having insurance, they have insurance 40% for self 28%for spouse 21% for children and 18% for their parents and 11% for all family member.
Having insurance self spouse children parents all
No of members 40 28 21 18 11
Different policy bought bye customers
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35
LIC
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ICICI
No. of Customers
25 20 15 10 5 0
Birla Sunlife SBI HDFC Bajaj Alliance TATA AIG Kotak Mahindr a ING Vyasya Max Newyork Met Life
Term Plan
Endowment
Whole life
Money Back Retirement
Child Plan
Unit Link Plan
Different Plans
Under insurable persons 82%
Fully insurable persons 18%
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Potential of life insurance
Under Insured 82%
Fully Insured 18%
Only 42 % people having life insurance but among them 82% people are underinsurance and only 18% people are fully insured according to them income
Insurance Plan Term Plan Money back Plan Endowment Plan Child Plan Unit link Plan
Market Share 39% 14% 15% 8% 24%
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Market share of diffrent Insurance plan
Unitlink plan 24%
Child Plan 8% Endownment Plan 15%
Term Plan 39%
Moneyback Plan 14%
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Chapter 6: Finding Suggestion
Finding and Suggestion • According the survey only 42% people are insured in Surat so reaming other part is potential for insurance sector.
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•
Among that 42% people who having insurance, they have insurance 40% for self 28%for spouse 21% for children and 18% for their parents and 11% for all family member, also its very help full for insurance sector so they should take necessary step for capture this potential.
•
Only 42% people having insurance in Surat in that 42% there are 82 % people are under insured and other 18% people are fully insured according to their income so that is also plus point for insurance sector to capture the market
Chapter 7
Conclusion All the insurance company must advertise more in the market because not all people know more about life Insurance policy. Most number of people wants Guaranteed Returns so company must focus on this for the customer investment. Make insurance policy which can buy any one so we can insured them through this type of life insurance policy.
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8 References In order to obtain more information regarding the present study and to substantiate it with theoretical proof, the following references were made: -
Insurance chronicle, January 2006 Special issue “Insurance Industry 2006”. Websites visited: www.kotaklifeinsurance.com www.google .com
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