CHAPTER-1

INTRODUCTION

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INDUSTRY PROFILE

Insurance in India

The insurance sector in India has come a full circle from being an open competitive

market to nationalization and back to a liberalized market again. Tracing the

developments in the Indian insurance sector reveals the 360 degree turn witnessed over a

period of almost two centuries.

A brief history of the Insurance sector

The business of life insurance in India in its existing form started in India in the year

1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of

the important milestones in the life insurance business in India are:

1912: 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: The Indian Mercantile Insurance Ltd. set up, the first company to transact all

classes of general insurance business.

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1957: General Insurance Council, a wing of the Insurance Association of India,

frames a Code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum

solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the

general insurance business in India with effect from 1st January 1973. 107 insurers

amalgamated and grouped into four companies’ viz. the National Insurance

Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance

Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a

company.

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.

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’s 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, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework of

globally compatible regulations. In the private sector 12 life insurance and 6 general

insurance companies have been registered.

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ROLE OF IRDA

Section 14 of IRFDA Act, 1999 lays down the duties, powers & functions of IRDA. The

power & functions of the Authority shall include:

1. Issue to the applicant a certificate of registration, renew, modify,

withdraw, suspend or cancel such registration.

2. Protection of the interests of the policy holders, insurable interest,

settlement of insurance claim, surrender value of policy & other terms & conditions

of contracts of insurance.

3. Specifying requisite qualifications, code of conduct, & practical training

for intermediary or insurance intermediaries & agents;

4. Calling for information from, undertaking inspection of, conducting

enquiries & investigations including audit of the insurers, intermediaries, insurance

intermediaries & other organizations connected with the insurance businnes;

5. Control & regulations of the rates, advantages, terms & conditions that

may be offered by insurer in respect of general insurance business not so controlled &

regulated by the Tariff Advisory Committee under the section 64U of the Insurance

Act, 1938 (4 of 1938).

6. Adjudications of disputes between insurers & intermediaries or insurance

intermediaries.

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COMPANY PROFILE

Tata AIG Life Insurance Ltd.

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company,

formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Life

combines the Tata Group’s pre-eminent leadership position in India and AIG’s global

presence as one of the world’s leading international insurance and financial services

organization. The Tata Group holds 74 per cent stake in the insurance venture with AIG

holding the balance 26 per cent. Tata AIG Life provides insurance solutions to

individuals and corporates. Tata AIG Life Insurance Company was licensed to operate in

India on February 12, 2001 and started operations on April 1, 2001.

Company’s Mission

We focus on the needs of our customers and create confidence, trust and loyalty by

offering a wide range of innovative insurance solutions.

Strengthened by our commitment to professional management, we ensure the continued

growth and advancement of our employees.

Company’s Vision

Tata AIG Life Insurance has a deep rooted commitment to improve the quality of life

of its customers, employees and stakeholders. We aim to be the most preferred General

Insurance Company. We do this by our efforts which strives to make Tata AIG Life

Insurance a corporate with values.

Increase Customer Value.

Integrated efforts

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The TATA Group

Tata is a rapidly growing business group based in India with significant international

operations. Revenues in 2007-08 are USD 62.5 billion (around Rs. 251,543 crores), of

which 61% was from business outside India. The Group’s Net Profit for 2007-08 is USD

5.4 billion (around Rs. 21,578 crores). The Group employs around 350,000 people

worldwide. The business operations of the Tata Group currently encompass seven

business sectors - Communications and Information Technology, Engineering, Materials,

Services, Energy, Consumer Products and Chemicals. The Group's 28 publicly listed

enterprises have a combined market capitalisation of around $60 billion, among the

highest among Indian business houses, and a shareholder base of 2.9 million. The major

companies in the Group include Tata Steel, Tata Motors, Tata Consultancy Services

(TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels, Tata Teleservices and Tata

Communications.

AIG Group

American International Group, Inc. (AIG), a world leader in insurance and financial

services, is the leading international insurance organization with operations in more than

130 countries and jurisdictions. AIG companies serve commercial, institutional and

individual customers through the most extensive worldwide property-casualty and life

insurance networks of any insurer. In addition, AIG companies are leading providers of

retirement services, financial services and asset management around the world. AIG's

common stock is listed on the New York Stock Exchange, as well as the stock exchanges

in Ireland and Tokyo.

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SWOT ANALYSIS

Strengths

Disciplined fund management - Years of experience in asset management, and a

strong track record in managing funds.

Innovative - Known for being an innovator in providing world-class pragmatic

financial solutions, with a constant focus on customization and flexibility

Customer Satisfaction - A highly committed sales force, with customer

satisfaction as the key driving force.

Transparency in Services - Daily declaration of fund performances, regular

performance benchmarking, well regulated asset management, and monthly

newsletter on market updates.

Weaknesses-

Employees – Less number of personnel

Tata AIG Life Insurance employs around 4328 people in its various businesses

and has 112 branches across 134 cities as compared to ICICI Prudential has 735

offices, 22 Bank assurance partners and over 2.4 lakh advisors therefore it should

increase its offices.

Training Department – Tata AIG Life Insurance has a limited number of

trainers in its branches, because of which advisors are not properly trained, so it

should work on developing its training department.

Opportunities

India's economic development made it a most lucrative Insurance market in the

world and post liberalisation the entry of foreign partners has been allowed.

Life Insurance industry is growing at an unprecedent pace so to survive in the

Industry they should analyse the emerging requirements of the policyholders / 7

insurers and they are in the forefront in providing essential services and

introducing novel products. Thereby they can become niche specialists, who

provide the right service to the right person in right time

The impact of Information Technology in Insurance business is being felt at an

accelerating pace. In the initial years IT has been used more to execute back

office functions like maintenance of accounts, reconciling broker accounts, client

processing etc. With the advent of "database concepts", these functions are better

integrated in an administrative efficiency.

The real evolution is however emerged out of Internet boom. The Internet has

provided brand new distribution channels to the Insurers. The technology has

enabled the Insurer to innovate new products, provide better customer service and

deeper and wider insurance coverage to them.

In the present competitive scenario, a key differentiator is the professional

customer service in terms of quality of advice on product choice along with policy

servicing. Servicing focus is on enhancing the customer's experience and

maximizing his convenience. This calls the effective CRM system, which

eventually creates sustainable competitive advantage and enables to build long

lasting relationship.

Threats

Private and Foreign entrants in the Insurance Industry made others difficult to

retain their market. Higher customer aspirations lead to new expectations and

compel him to move towards the insurer who provides him the best service in

time. It becomes less viable for them even to maintain the functional networks or

competitive standards and services.

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With the entry of private and foreign players in the Insurance business, people

have got a lot of options to choose from. Radical changes are taking place in

customer profile due to the changing life style and social perception, resulting in

erosion of brand loyalty.

The conflict of IRDA and SEBI over certain products in recent time has made the

survival tough for some crucial products of Life Insurance. Some guidelines has

been changed like lock–in period, company’s margin, number of Life Advisers

etc. which is making the operation of this industry very tough.

Market share of various Life Insurance Companies

LIC (Life Insurance Corporation of India) still remains the largest life

insurance company accounting for 64% market share. Its share, however, has

dropped from 74% a year before, mainly owing to entry of private players with

innovative products and better sales force.

ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance

company in India. It experienced growth of 58% in new business premium,

accounting for increase in market share to 8.93% in 2007-08 from 6.97% in

2006-07.

Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its

market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company

ranked second (after LIC) in number of policies sold in 2007-08, with total

market share of 7.36%.

SBI Life Insurance Co Ltd in terms of new number of policies sold, the

company ranked 6th in 2007-08. New premium collection for the company was

Rs 4,792.66 crore in 2007-08, an increase of 87% over last year.

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Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its

market share went up to 2.96% from 1.23% a year back. It now ranks 5th in new

business premium and 4th in number of new policies sold in 2007-08.

HDFC Standard Life Insurance Co Ltd with an  income of Rs 2,680 crore in

FY2007-08, registering a year-on-year growth of 64%. Its market share is 2.88%

and it ranks 6 th among the insurance companies and 5th amongst the private

players.

 Birla Sun Life Insurance Co Ltd market share of the company increased from

1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08

from 8the a year before, pushing down Max New York Life insurance company.

 Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-

08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore.

The company was pushed down to the 8th position from 7th in 2007-08.

 Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the

company reported growth of 80%, moving from the 11th position to 9th. It

captured a market share of 1.19% in 2007-08. Last year the company doubled its

branch network to 150 from 74.

 Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08

from 9th last year. It has presence in more than 3,000 locations across India via

221 branches and close to 40 bancassurance partnerships. Aviva Life Insurance

plans to increase its capital base by Rs 344 crore. With the fresh investment, total

paid-up capital of the insurer would go up to Rs 1,348.8 crore.

MAJOR COMPETITORS

PRIVATE PLAYERS IN INSURANCE SECTORS

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India still has low insurance penetration of 1.95 percent, 51st in the world. Despite the

fact that India boosts a saving rate of around 25 percent, less than 5 percent is spent on

insurance. The insurance landscape in India is undergoing major changes. Close to

foreign competition since nationalization in 1956, the life insurance industry had been

protected from competitive pressures. Now, with the reopening of the sector, several new

players have entered the scene.

LIFE INSURANCE COMPANIES

S. No. Insurers Foreign PartnersYear of

Operation

1. HDFC Standard Life Insurance Co. Ltd.Standard Life Assurance,

UK2000-01

2. Max New York Life Insurance Co. Ltd. New York Life, USA 2000-01

3. ICICI-Prudential Life Insurance Co. Ltd. Prudential , UK 2000-01

4. Om Kotak Life Insurance Co. Ltd. Old Mutual, South Africa 2001-02

5. Birla Sun Life Insurance Co. Ltd. Sun Life, Canada 2000-01

6. Tata-AIG Life Insurance Co. Ltd.American International

Assurance Co., USA2000-01

7. SBI Life Insurance Co. Ltd.BNP Paribas Assurance

SA, France2001-02

8. ING Vysya Life Insurance Co. Ltd. ING Insurance

International B.V.,

2001-02

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S. No. Insurers Foreign PartnersYear of

Operation

Netherlands

9. Allianz Bajaj Life Insurance Co. Ltd. Allianz, Germany 2001-02

10. Metlife India Insurance Co. Ltd.Metlife International

Holdings Ltd., USA2001-02

11.

Reliance Life Insurance Co. Ltd. (Earlier

AMP Sanmar Life Insurance Co. from

3.1.2002 to 29.9.2005)--- 2001-02

12. AVIVAAviva International

Holdings Ltd., UK2002-03

13. Sahara Life Insurance Co. Ltd. --- 2004-05

14. Shriram Life Insurance Co. Ltd. Sanlam, South Africa 2005-06

15. Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France 2006-07

16.Future Generali India Life Insurance

Company Ltd.Generali, Italy 2007-08

17. IDBI Fortis Life Insurance Company Ltd. Fortis, Netherlands 2007-08

18.Canara HSBC OBC Life Insurance

Company Ltd.HSBC, UK 2008-09

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S. No. Insurers Foreign PartnersYear of

Operation

19.Aegon Religare Life Insurance Company

Ltd.Religare, Netherlands 2008-09

20. DLF Pramerica Life Insurance Co. Ltd.Prudential of America,

USA2008-09

21. Star Union Dai-ichiDai-ichi Mutual Life

Insurance, Japan2008-09

22. India First life insurance companyLegal & General Middle

East Limited, UK2009-10

23. Life Insurance Corporation of India --- 1956-57

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Chapter 2

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

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The research is carried on in a proper planned and systematic manner. This

methodology includes:

Familiarization with the concept of insurance and its various terms.

Thorough study of the information collected.

Conclusions based on findings.

The research methodology which is adopted to conduct this study are both qualitative as well as quantitative.

Qualitative

In order to identify the insurance needs of the Indian population with respect to their

emotional, physical & financial conditions and to match the needs of the population

with the products in hand require to conduct the qualitative study.

Quantitative

In order to understand the market segmentation of insurance products and to study the

various factors which influence the purchase decision of insurance products require the

quantitative study.

REVIEW OF LITERATURE

BACKGROUND OF THE PROBLEM

The entire Insurance sector is divided into 2 broad categories:

General Insurance

Life Insurance

Further Life Insurance is sub-divided into two categories:

TRADITIONAL INSURANCE PLANS

ULIPS (Unit Linked Insurance Plans)

Traditional products are basically the term plans and the whole life plans, in which risk

cover is the foremost objective of the customers. In case of term plans the sum assured is

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given to the nominee of the life to be insured in case of his death, there is no maturity

claim, whereas in case of whole life some amount is paid after a certain period of time.

ULIPS were introduced couple of years back in the Indian market. These include the

endowment policies and money back policies that have the investment benefit along with

the risk cover i.e. the certain portion of the premium paid by the customer is used for the

risk cover and rest is further invested in the funds offered by the company.

So when the private players entered the market they decided to introduce market driven

plans named ULIP which promised a very attractive return to the consumers. Birla Sun

Life was the first company to establish the concept of ULIP. Though this concept was

very attractive but still a number of policies got lapsed, then the private players came up

with an idea of 3 years lock in period, so that number of policies lapsing could be

reduced, which worked well.

Now since the expectations of investors have increased who are investing their money, so

the money flow in mutual funds and stock market has increased gradually because the

returns are as high as 25% - 30%. But still Life Insurance is Safe Avenue while

promising you good returns, this would be clear from the following points:

Returns in ULIPs are also as high as 25% - 30%, while it also gives life cover in

case of mishappening such as death, disability, etc.

Risk in ULIPs is less as compared to mutual funds and stock market, as ULIPs

offer different funds with different combinations of debt and equity.

Fund management fee in ULIPs is 1.25% as compared to the fee in mutual funds

2.5%.

The entire fund of the investor can be eroded under mutual fund if market crashes,

but under ULIPs at least principle amount plus bank rate is guaranteed.

ULIPs provide insurance cover as well as good returns.

Capital gains are not taxable under ULIPs.

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Most companies offering ULIPs provide a number of free switches to its

investors, if they would like to switch their funds, but these switches are

chargeable under mutual funds.

Most of the investors in the Indian market are not aware of these benefits of Life

Insurance, but as the awareness is increasing more and more investors are joining this

sector, resulting in increased turnover year over year.

OBJECTIVES OF THE STUDY

The objectives mark the right direction to carry out any study. So, the objectives of this

study are as under:-

To learn and understand the market segmentation of insurance products.

To identify the insurance needs of the Indian population with respect to their

emotional, physical and financial conditions.

To study the various factors which influence the purchase of insurance products

To match the needs of the population with the products in hand or else design a

new product.

RESEARCH DESIGN

DESCRIPTIVE RESEARCH

This study is based on a descriptive research design wherein the risks and returns

associated with the various products have been studied and the reasons for customer

perception regarding these products have been found out.

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UNIVERSE

The areas of North and West Delhi are selected as the Universe to conduct this study.

SAMPLE DESIGN

As the research is based on analyzing the consumer preference among various investment

avenues in the market such as stock market, mutual funds, life insurance, fixed

deposited., for that a sample size of 100 was taken , which was picked up on random

basis for the purpose of survey. Simple Random Sampling has been adopted to conduct

this study.

SAMPLE UNIT

The sample unit considered for this study is Investor who invests in various avenues

available in the market. The respondents have been selected from the Universe defined

above.

SOURCES OF DATA COLLECTION:

Both the Primary and Secondary sources have been used to collect the desired data for

the study.

Primary data collection has been done through the means of:

Questionnaires- In order to get the primary data, a close ended questionnaire has

been design to conduct the study.

Interviews- In addition to the questionnaire, some other relevant questions were

also asked to get the information regarding their marked choices.

.

Secondary data: These include books, the internet, company brochures, product

brochures, the company website, competitor’s websites etc, newspaper articles etc

DURATION

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The study has been conducted in the duration of 7 Weeks which is as follows:

Phase – I (3/06/10-08/06/10):- The first phase of training is all about the classroom

training in which they told about the general concepts about the insurance.

Phase – II (09/06/10-19/06/10):- The second phase of training is all about the company

profile and different operations.

Phase – III (19/06/10-30/06/10):- In the third phase market research was conducted.

Phase – IV (1/07/10-11/07/10):- Fourth Phase is about the data analysis and its

interpretation.

Phase – IV (12/06/10-21/07/10):- Documentation was done in the final phase.

SAMPLE SIZE :

Total sample of 100 was selected which is as follows:

West Delhi Area - 60

North Delhi Area - 40

SCOPE OF THE STUDY

In the present scenario as our economy is growing and the per capita income is rising

people at large have got more money with them to invest in the market, who according to

their choice invest in share market, government bonds, life insurance, mutual funds, real

estate. If a consumer chooses to invest in mutual funds there are 33 mutual fund

companies, if one chooses to invest in stock market there are hundreds of companies

listed on the stock exchange, if he chooses to invest in life insurance there are 16

companies present such as ICICI PRUDENTIAL., AVIVA LIFE INSURANCE, KOTAK

LIFE INSURANCE, SBI LIFE INSURANCE, TATA AIG LIFE INSURANCE, LIC,

BAJAJ ALLIANZ, etc.; so in order to study the consumer preferences, the various factors

that influence the buying behavior of a consumer buying life insurance, a sample of 100

was chosen from DELHI.

LIMITATIONS OF THE STUDY

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By working on this project, a lot of knowledge about the insurance sector in INDIA has

been gained. However, there were many limitations or problems that I faced while

working on this project. The following are the limitations:

Small Sample Size: The study was relied more on the primary data and the data

was collected from a small population of 100, therefore, the findings may not be

applicable in their true sense when it is applied in general.

Time Constraint: As the duration of internship was only 7 weeks, therefore, it was very difficult to conduct the entire study about the vast insurance sector

Small Universe: The study is restricted only to some areas of Delhi which ignores the entire public in general

Biased Responses: The answers of the customers could have been biased which may affect the analysis of the study.

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Chapter 3

CONCEPTUAL

DISCUSSION

THEORY & CONCEPTS USED IN THE PROJECT

WHAT IS AN INVESTMENT?

Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income {dividend}, or appreciation of the value of the instrument.It is related to saving or

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deferring consumption. Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time.

WHAT IS AN INSURANCE?

GENERAL DEFINITION:

In the words of John Magee, " Insurance is a plan by themselves which large number of

people associate and transfer to the shoulders of all, risks that attach to individuals. "

FUNDAMENTAL DEFINITION:

In the words of D.S.Hansell, “Insurance accumulated contributions of all parties

participating in the Scheme. "

CONTRACTUAL DEFINITION:

In the words of Justice Tindall,"Insurance is a contract in which a sum of money is paid

to the assured as consideration of insurer’s incurring the risk of paying a large sum upon

a given contingency."

CHARACTERISTICS OF INSURANCE

Sharing of risks

Cooperative device

Evaluation of risk

Payment on happening of a special event

The amount of payment depends on the nature of losses incurred.

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Insurance is a plan, which spreads the risk and losses of few people among a large

number of people.

The insurance plan is a plan in which the insured transfers his risk on the insurer.

FUNCTIONS OF INSURANCE

PRIMARY FUNCTIONS

1. Provide protection : - Insurance cannot check the happening of the risk, but can

provide for the losses of risk.

2. Collective bearing of risk : - Insurance is a device to share the financial losses of

few among many others.

3. Assessment of risk : - Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk.

4. Provide Certainty : - Insurance is a device, which helps to change from

uncertainty to certainty.

SECONDRY FUNCTIONS:

1. Prevention of losses : - Insurance cautions businessman and individuals to adopt

suitable device to prevent unfortunate consequences of risk by observing safety

instructions.

2. Small capital to cover large risks : - Insurance relives the businessman from

security investment, by paying small amount of insurance against larger risks and

uncertainty.

WHY WE NEED INSURANCE?

Premature Death

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1 out of 4 people don’t reach the age of 60.

You are providing your family with a lifestyle.

This lifestyle is dependent on your continued income generating capability.

If this income were to stop unfortunately, how would your family meet its

financial requirements?

My responsibility is to help you protect your family financially in event

something unfortunate happens…

Living too long

7 out of 10 people endure retirement instead of enjoying it.

Do you want financial independence post retirement?

Imagine living beyond your working years on a depleted income.

However, you would want to maintain your some living standards and be

financially independent.

My responsibility is to help you secure a financially stable future post retirement.

Children’s Future

To get a premier MBA degree in year 2015 will cost Rs. 18lakh.

It is your responsibility to provide your children with best possible education they

can have.

Do you want to compromise on their future?

My responsibility is to help you build financial assets for your children’s future.

DO I NEED INSURANCE?

HUMAN LIFE CONCEPT

Your life is your most valuable asset. This is easily proved if we were to assign a

monetary value to your life; this value depends on your income- earning potential or your

Human Life Value.

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Your income supports your family. Helps them to get the most out of life. Month after

month, year after year, you and your dependents live the best way you can use the money

you earn. This money enables your household to run smoothly, your children to college,

takes care of the medical bills, your vacations and helps maintain your lifestyle.

On the basis of your income or earning potential, we can calculate your Human Life

Value. A simple rule of thumb to compute it as follows: multiply your present annual

income by the number of years until you plan to retire.

This does not take in factors such as inflation or an increase in your income over time.

Therefore, your Human Life Value is a great deal higher than the amount calculated

above.

What if an unfortunate incident happens in your life and you were unable to work? Your

income would stop. Your family is then, at a risk of losing all your future income. The

potential cost of losing your income is too great to ignore.

PROTECTING YOUR MOST VALUABLE ASSET

If something were happen to you, here are a few possible ways of dealing with the

financial implications:

1. Draw from your savings: But how long would the funds last? A lifetime of

savings could be used up in a few months.

2. Borrow from others: Who will lend you the money? Even family and friends can

only help to an extent. And anyway, this would only be a short-term solution.

3. Sell your assets: What price will you get for your assets? Would you like to sell

your home? Your car?

4. Transfer the risk to an insurance company.

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We recommend that you transfer the risk to an insurance company. It’s cheaper, safer and

smarter in the long run.

If you insure the risk, your money outflow is actually miniscule. For the sake of

illustration, an annual premia payout of approx. Rs. 25 for 15 years guarantees your

family will receive Rs. 1000 – if something happens to you in that situation a small price

to pay for providing peace of mind to your family. A smaller sum is payable for

transferring the risk of disability.

Another advantage of transferring the risk is that you remove the uncertainty.

So do take care to protect your most valuable asset…..your life!

WHAT ARE MUTUAL FUNDS?

A mutual fund is a professionally managed type of collective investment scheme that

pools money from many investors and invests it in stocks, bonds, short-term money

market instruments and other securities. Mutual funds have a fund manager who

invests the money on behalf of the investors by buying / selling stocks, bonds etc. It is

a substitute for those who are unable to invest directly in equities or debt because of

resource, time or knowledge constraints. Benefits include professional money

management, buying in small amounts and diversification.

Mutual fund units are issued and redeemed by the Fund Management Company based

on the fund's Net Asset Value (NAV), which is determined at the end of each trading

session. NAV is calculated as the value of all the shares held by the fund, minus

expenses, divided by the number of units issued. Mutual Funds are usually long term

investment vehicle though there are some categories of mutual funds, such as money

market mutual funds which are short term instruments.

Currently, the worldwide value of all mutual funds totals more than $US 26 trillion.

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The United States leads with the number of mutual fund schemes. There are more

than 8000 mutual fund schemes in the U.S.A. Comparatively, India has around 1000

mutual fund schemes, but this number has grown exponentially in the last few years.

The Total Assets under Management in India of all Mutual funds put together touched

a peak of Rs. 5,44,535 crs. at the end of August 2008.

WHAT ARE GOVT. BONDS?

A bond is a debt investment in which an investor loans a certain amount of money, for a

certain amount of time, with a certain interest rate, to a company. A government bond is

a bond issued by a national government denominated in the country's own currency.

Bonds issued by national governments in foreign currencies are normally referred to as

sovereign bonds. The first ever government bond was issued by the English government

in 1693 to raise money to fund a war against France. It was in the form of a tontine.

Government bonds are usually referred to as risk-free bonds, because the government can

raise taxes to redeem the bond at maturity. Some counter examples do exist where a

government has defaulted on its domestic currency debt, such as Russia in 1998 (the

"ruble crisis"), though this is very rare. As an example, in the US, Treasury securities are

denominated in US dollars. In this instance, the term "risk-free" means free of credit risk.

However, other risks still exist, such as currency risk for foreign investors (for example

non-US investors of US Treasury securities would have received lower returns in 2004

because the value of the US dollar declined against most other currencies). Secondly,

there is inflation risk, in that the principal repaid at maturity will have less purchasing

power than anticipated if the inflation outturn is higher than expected. Many governments

issue inflation-indexed bonds, which should protect investors against inflation risk.

WHAT ARE FIXED DEPOSITS?

27

Fixed deposits are loan arrangements where a specific amount of funds is placed on

deposit under the name of the account holder. The money placed on deposit earns a fixed

rate of interest, according to the terms and conditions that govern the account. The actual

amount of the fixed rate can be influenced by such factors at the type of currency

involved in the deposit, the duration set in place for the deposit, and the location where

the deposit is made.

Fixed deposits are a credible way to make a return on investment that is somewhat higher

than a standard savings account. The use of fixed deposits can also be helpful when

working with various types of currency. By establishing what is known as a Foreign

Currency Fixed Deposit or FCFD, it is possible to choose the type of currency involved

in the deposit and lock in a rate of interest. If the choice of currency is a good one, this

means the investor can enjoy a healthy fixed deposit currency rate for the duration of the

deposit and earn more than with a standard fixed deposit strategy. However, going with

an FCFD does contain a slightly higher amount of risk, since the funds deposited must be

converted to the currency of choice and then converted back when the deposit is fulfilled.

If the currency did not fare well in the interim, there is some chance of obtaining a loss,

due to the changes in the rate of exchange from the time the fixed deposit was activated

until the time the deposit is considered complete.

28

Chapter 4

DATA ANALYSIS

&

INTERPRETATION

DATA ANALYSIS

1. What is your age?

Less Than 20

20-30

30-45

More Than 45

SAMPLE SIZE 100 FREQUENCY PERCENTAGELess than 20 yr 12 1220-30 yr 37 3730-45yr 33 33Above 45 yrs 18 18TOTAL 100 100

29

Inference: It can be observed from the pie-chart that:

12% of the investors are less than that of 20 years of age.

37% lie in the age group of 20-30 years as such investors are returns oriented

and are risk takers.

33% lie in the age group of 30-45 years as these investors want safe products.

Only 18% of the investors lie in the age group of more than 45 years. Such

investors are risk averse.

2. What is your marital status?

Married

Unmarried

MARITAL STATUS

30

SAMPLE SIZE 100 FREQUENCY PERCENTAGEMarried 82 82

Unmarried 18 14TOTAL 100 100

Inference- It can be seen from the pie-chart that:-

82% of the investors are married as they have dependents so they are more

conscious towards the health and life of their family members.

18% of the investors are unmarried.

31

3. What is your annual income?

Less than 1,00,000

1,00,000-2,50,000

2,50,000-5,00,000

More than 5,00,000

Inference- It can be derived from the pie-chart that

15% of the investors are in the income group of less than 1 lac.

36% of the investors lie in the income slab of 1-2.5 lacs.

40% of the investors are in the income group of 2.5-5 lacs.

32

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Income less than 1 Lac 15 15

1-2.5 Lac 36 36

2.5- 5 40 40

More than 5 Lac 9 9

TOTAL 100 100

9% of the investors lie in the age group of more than 5 lacs.

4. Which Avenues do you prefer for investment?

Stock Market

Mutual funds

Govt. Bonds

Fixed deposit

Inferences- It can be inferred from the pie-chart that

37% of the investors invest in stock market due to its high returns capability and

investors are risk takers as well.

22% of the investors invest in mutual funds as they are quite structured avenues,

offer good returns and are safe too.

33

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Stock Market 37 37Mutual Funds 22 22Govt. Bonds 32 32Fixed Deposit 9 9TOTAL 100 100

32% of the investors invest in govt. bonds as they are safe investment options and

risk associated is less.

9% of the investors invest in fixed deposits as they are the traditional investment

avenues.

5. Are you aware about the benefits of Insurance?

Yes No

Inference- It can be seen from the pie-chart that

91% of the investors are aware about the benefits of insurance.

7% of the investors are unaware of the benefits of insurance.

34

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Yes 91 91No 09 09

TOTAL 100 100

6. Are you and your family members insured?

All members including you

Only you

No

Inference- It can be derived from the pie-chart that

35

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

All members including you 77 77

Only you 13 13No one 10 10

TOTAL 100 100

77% of the investors have taken insurance plans for their family as well as

themselves as they are concerned about their dependents.

13% of the investors have taken insurance plans for themselves only.

10% of the investors have neither taken insurance plans for their family nor for

themselves.

7. If yes, from which company are you insured?

LIC

ICICI

HDFC

TATA AIG

OTHERS

Inference- It can be observed from the pie-chart that

47% of the investors invest in LIC insurance plans due to their good records of returns and safety.

27% the investors invest in ICICI as it holds a good record in private sector insurers and has a huge customer equity.

11% of the investors have taken insurance plans from HDFC due to their good experiences with it.

10% have taken plans from other insurance companies like birla sun life, SBI life

36

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

LIC 47 47ICICI 27 27HDFC 11 11TATA AIG 5 5Others 10 10Total 100 100

8. Which of the following features which affects your purchase?

Brand

Returns

EMI

Time Period

Inference- It can be seen from the pie-chart that

32% of the investors are affected by the brand image of the company in the

market as it reflects their past performances as well.

8% of the investors are affected by EMIs that is demanded by the plan.

43% are concerned with the returns offered by the plan.

17% are concerned with the tenure of the plans.

37

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Brand 32 32

EMI 08 08

Returns 43 43

Time period 17 17

TOTAL 100 100

9. What is the annual premium you are paying?

5000-10000

10000-25000

25000-50000

Above 50000

Inference- It can be seen from the pie-chart that

9% of the investors pay an annual premium between Rs.5000-10000.

36% pay an annual premium in the range of Rs.10000-25000.

38% pay an annual premium of Rs.25000-50000.

17% of the investors pay an annual premium above Rs.50000.

Q10.Which type of plan you prefer now?

38

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

5000-10000 09 9

10000-25000 36 36

25000-50000 38 38

Above 50000 17 17

TOTAL 100 100

Traditional plans

ULIPs

Inference: It can be observed from the pie-chart that

88% of the investors prefer ULIPs over Traditional plans due to several

benefits they offer.

12% of the investors still prefer Traditional plans over ULIPs due to

unawareness about the products and its benefits.

11. If your preferred avenue has been changed then please mentions the reason

39

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Traditional 12 12

ULIPs 88 88

TOTAL 100 100

Potential for better returns.

Greater transparency.

Flexibility in investment.

Higher liquidity

Inference- It can be seen from the pie-chart that

52% of the investors are interested in potential for better returns.

20% of the investors are prefer transparent services.

18% of the investors wants flexibility in investment..

10% of the investors investaccordig to the company’s liquidity.

40

SAMPLE SIZE 100 FREQUENCY PERCENTAGEPotential for better return 52 52

Greater transparency 20 20

Flexibility in investment 18 18

Higher liquidity 10 10

TOTAL 100 100

Chapter – 5

Findings,

Recommendatio

ns &

Conclusion

41

FINDINGS

After collecting primary data and analyzing them graphically it can be concluded that:

12% of the investors are less than that of 20 years of age.37% lie in the age group of

20-30 years as such investors are returns oriented and are risk takers.33% lie in the

age group of 30-45 years as these investors want safe products with assured

returns.Only 18% of the investors lie in the age group of more than 45 years. Such

investors are risk averse.

It was found that in a sample of 100, 36 (36%) of people had annual income between

Rs.100000-250000. Out of these 36, 14 people pay a premium below Rs. 10000, 22

pay premiums between Rs. 10000-20000.

In the same sample of 100, 40 (40%) people had annual income between Rs. 250000-

500000. Out of these 25, 7 people pay premium between Rs. 10000-20000, 14 people

pay premium between Rs. 20000-50000, and 9 of them pay premium above Rs.

500000.

The highest market share from the sample was of LIC with 47% respondents having

LIC policy, followed by ICICI PRUDENTIAL with a market share of 27%, HDFC

STANDARD LIFE with 11% share , TATA AIG with 5% and OTHERS with 10%

share.

Most people choose LIC for its Brand Image and since it is a PSU, also it offers to its

customers’ low EMIs, but on the other hand private players offer better returns.

It was found that most of the people considered “Returns 43%” as a major factor

while buying insurance with positive responses, 32% “Brand Image” as the prime

factor, 8(8%) prefer “EMI” and 17(14%) prefer “Time Period”.

42

The most preferred avenue for investment was found out to be Stock Market

preferred by 37% respondents, followed by Mutual Fund preferred by 22%

respondents, 32% preferred Govt. Bonds, 9% preferred Fixed Deposit.

Out of the entire sample of 100, 78(78%) preferred Traditional Insurance Plans, and

22(22%) preferred ULIPs 3 years ago but in present scenario 12% prefer Traditional

Plans and 88% prefer ULIPs. Among the reasons for this change 52(52%)

respondents prefer “Potential for better returns”, 20(20%) prefer “Greater

Transparency”, 18(18%) prefer “Flexibility in investment” and 10(10%) prefer

“Higher liquidity”.

Recommendations for whole Insurance Industry

As it can be seen that that most of the investors are inclined toward stock market and

mutual funds there is a strong need to take some important steps on the part of

government and insurance companies which would help this sector grow at a faster

pace.

The government should make life insurance mandatory, because most of the peole

live with the myth “I don’t need insurance”, so this myth should be eradicated from

the mind of the consumers by highlighting the benefits of life insurance, government

can launch campaigns to increase awareness especially in the rural sector.

The companies should highlight the advantages of life insurance in comparison to

other investment avenues such as mutual funds, stock market, as only ULIPs offer

returns plus life cover which other investment options do not provide, also capital

gains or maturity amount is exempted from tax under Section 10(10) D of the Income

Tax Act.

There should be strong distribution channel of the insurance companies so that they

are closely connected to consumers, distribution channel that is the agents of life

insurance companies are foundation of life insurance business, they must be properly

43

trained by the companies to sell products according to the needs of the customer, give

suitable suggestions to the customer to make his/her future secure.

Recommendations for Tata AIG Life Insurance

If Tata AIG Life Insurance wants to become a market leader it has to work on certain

areas:

Tata AIG Life Insurance employs around 4328 people in its various businesses

and has 112 branches across 108 cities as compared to ICICI Prudential has 735

offices, 22 Bank assurance partners and over 2.4 lakh advisors therefore KLI

should increase its offices.

Tata AIG Life Insurance has a limited number of trainers in its branches, because

of which advisors are not properly trained, so it should work on developing its

training department.

Increase expenditure on promotion and advertising to make people think of Tata

AIG Life Insurance whenever they think of insurance.

Transparency in the system i.e. conductance and training of Life Advisers, in

customer relationships, reporting should be there.

CONCLUSION

Earlier Life Insurance was taken as an option for risk cover or a tax saving by people. But

in the present scenario the mind set and outlook of people has changed a lot. They now

consider Life insurance as an investment opportunity in long run. Clients have also

shifted a lot from traditional plans to Unit linked insurance plan (ULIP). ULIP provide

the investor with benefits like Potential for better returns. Under IRDA guidelines,

44

traditional plans have to invest at least 85% in debt instruments which results in low

returns. On the other hand, Ulips invest in market linked instruments with varying debt

and equity proportions and if you wish you can even choose 100% equity option. There is

also Flexibility in investment. The top most advantage which ULIPs offer over traditional

plans is the flexibility offered to the customer to customise the product according to their

needs:

1. Flexibility to invest the money the way customer wants: Unlike traditional

plans, Ulips allow customer to full discretion to choose the fund option most

appropriate to their risk appetite.

2. Flexibility to change the fund allocation: Ulips also give the customer an

option to change the fund allocation at a later stage through fund switching facility.

Last but not least ULIP also provide investor with ;Higher Liquidity (Better exit

options), the possibility to withdraw your money before maturity (through surrender or

partial withdrawals) is higher in case of Ulips as compared to traditional plans and also

the exit costs are lower. Therefore In ULIPs, a part of the investment goes towards

providing a life cover and the residual portion of the ULIP is invested in a fund which in

turn invests in stocks or bond. The value of investments alters with the performance of

the underlying fund opted by the customer In short we can say that ULIP is managed

according to the customer’s specific needs and offers them unprecedented flexibility and

transparency.

45

BIBLIOGRAPHY

46

BIBLIOGRAPHY

BOOKS

1. Insurance Distribution – An Introduction, Insurance Series, ICFAI

University

2. Kothari, C.R: Research methodology,2nd edition,1990, New age

international (p) ltd,New delhi

3. IC-24, Legal Aspect of Life Insurance issued by IRDA

4. Marketing Management –Philip Kotler,13th edition

WEBSITES

http://www.tataAIGlifeinsurance.com

http://www.irdaindia.org/

www.google.com

http://economictimes.indiatimes.com

47

Annexure

48

Questionnaire

Contact Information

Name: Occupation:

Address: Phone No.:

Gender:

1. What is your age?

1. Less Than 20

2. 20-30

3. 30-45

4. More Than 45

2. What is your annual income?

1. Less than 1,00,000

2. 1,00,000-2,50,000

3. 2,50,000-5,00,000

4. More than 5,00,000

3. What is your marital status?

1. Married :

2. Unmarried:

4. Which Avenues do you prefer for investment?

1. Stock Market

2. Mutual funds

3. Govt. Bonds

4. Fixed deposits

49

5. Are you aware about the benefits of Insurance?

1. Yes

2. No

6. Are you and your family members insured?

1. All members including you

2. Only you

3. No one

7. If yes, from which company are you insured?

1. LIC

2. ICICI

3. HDFC

4. TATA AIG

5. Others

8.Which of the following features which affects your purchase?

Brand

EMI

Returns

Time Period

9. What is the annual premium you are paying?

1. 5000-15000

2. 15000-30000

3. 30000-50000

4. Above 50000

10. Which type of plan you prefer now?

1. Traditional plans

2. ULIPs

50

11. If your preferred avenue has been changed then please mentions the reason

1. Potential for better returns.

2. Greater transparency.

3. Flexibility in investment.

4. Higher liquidity.

(Signature)

51