yogesh gandhi - market segmentation-aviva life insurance
TRANSCRIPT
IN-COMPANY TRAINING REPORT
ON“MARKET SEGMENTATION”
COMPLETED IN “AVIVA LIFE INSURANCE INDIA”
SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT OF BACHELOR OF BUSINESS ADMINISTRATION (B.B.A.) GURU JAMBHESHWAR UNIVERSITY OF SCIENCE & TECHNOLOGY,
HISAR
Training Supervisor: Submitted By:
Name: Name of Student
Designation Enrollment No.
SESSION – MARCH 2011
DIRECTORATE OF DISTANCE EDUCATIONGURU JAMBESHWAR UNIVERSITY OF SCEINCE & TECHNOLOGY,
HISAR-125001 (HARYANA)
ACKNOWLEDGMENT
I would like to thank my project guide Mr. _________________Aviva Life Insurance for
guiding me through my internship and research project. Her encouragement, time and
effort are greatly appreciated.
I would like to thank Mr.____________ for supporting me during this project and
providing us an opportunity to learn outside the class room. It was a truly wonderful
learning experience.
I would like to dedicate this project to my parents and brother. Without their help and
constant support this project would not have been possible.
Lastly I would like to thank all the respondents who offered their opinions and
suggestions through the survey that was conducted by me in South Delhi.
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TABLE OF CONTENTS
Executive Summary
Preface
1. Introduction to Insurance ……………………………………………………………4
2. Company Profile …………………………………………………………………….10
3. Research Design ……………………………………………………………………..33
a. Title ……………………….
……………………………………………………..34
b. Objective of the study
…………………………………………………………...34
c. Research Design
…………………………………………………………………35
d. Sample Methodology
……………………………………………………………35
a. Study area ……………………………………………………………….36
b. Plan of analysis ………………………………………………………….36
c. Sampling technique ……………………………………………………..36
d. Sample size ……………………………………………………………...36
e. Limitation of the study
…………………………………………………………..36
4. Marketing Problem ………………………………………………………………….37
5. Competitive Analysis ………………………………………………………………..43
6. Analysis and Interpretation ………………………………………………………...49
7. Conclusion …………………………………………………………………………...66
8. Bibliography …………………………………………………………………………68
9. Annexure ……………………………………………………………………………..70
Questioner …………………………………………………………………………...71
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EXECUTIVE SUMMARY
Aviva Life insurance is the oldest life insurance company in the world. It is the largest
insurer in the UK and is the 28th largest company in the world. In India, the company is
marketing life insurance products and unit linked investment plans. From my research at
Aviva, I found that the company has a lot of competition from other private insurers like
ICICI, HDFC, Birla Sun Life and Tata Aig. It also faces competition from LIC. To
compete effectively Aviva could launch cheaper and more reasonable products with
small premiums and short policy terms (the number of year’s premium is to be paid). The
ideal premium would be between Rs. 5000 – Rs. 25000 and an ideal policy term would
be 10 – 20 years.
Aviva must advertise regularly and create brand value for its products and services. Most
of its competitors like HDFC, ICICI, Reliance and LIC use television advertisements to
promote their products. The Indian consumer has a false perception about insurance –
they feel that it would not benefit them if they do not live through the policy term.
Nowadays however, most policies are unit linked plans where a customer is benefited
even if their death does not occur during the policy term. This message should be
conveyed to potential customers so that they readily invest in insurance.
Family responsibilities and high returns are the two main reasons people invest in
insurance. Optimum returns of 16 – 20 % must be provided to consumers to keep them
interested in purchasing insurance.
On the whole Aviva life insurance is a good place to work at. Every new recruit is
provided with extensive training on unit linked funds, financial instruments and the
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products of Aviva. This training enables an advisor/ sales manager to market the policies
better. Aviva was ranked 13 in the Best Places to Work survey. The company should try
to create awareness about itself in India. In the global market it is already very popular.
With an improvement in the sales techniques used, a fair bit of advertising and
modifications to the existing product portfolio, Aviva would be all set to capture the
insurance market in India as it has around the globe.
CHAPTER – 1
THE INSURANCE INDUSTRY IN INDIA
AN OVERVIEW
With the largest number of life insurance policies in force in the world, Insurance
happens to be a mega opportunity in India. It’s a business growing at the rate of 15-20 per
cent annually and presently is of the order of Rs 450 billion (for the financial year 2010 –
2011). Together with banking services, it adds about 7% to the country’s Gross Domestic
Product (GDP). The gross premium collection is nearly 2% of GDP and funds available
with LIC for investments are 8% of the GDP.
Even so nearly 80% of the Indian population is without life insurance cover while health
insurance and non-life insurance continues to be below international standards. A large
part of our population is also subject to weak social security and pension systems with
hardly any old age income security. This in itself is an indicator that growth potential for
the insurance sector in India is immense.
A well-developed and evolved insurance sector is needed for economic development as it
provides long term funds for infrastructure development and strengthens the risk taking
ability of individuals. It is estimated that over the next ten years India would require
investments of the order of one trillion US dollars. The Insurance sector, to some extent,
can enable investments in infrastructure development to sustain the economic growth of
the country. (Source: www.indiacore.com)
HISTORICAL PERSPECTIVE
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The history of life insurance in India dates back to 1818 when it was conceived as a
means to provide for English Widows. Interestingly in those days a higher premium was
charged for Indian lives than the non - Indian lives, as Indian lives were considered more
risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It
was the first company to charge the same premium for both Indian and non-Indian lives.
The Oriental Assurance Company was established in 1880. The General insurance
business in India, on the other hand, can trace its roots to Triton Insurance Company
Limited, the first general insurance company established in the year 1850 in Calcutta by
the British. Till the end of the nineteenth century insurance business was almost entirely
in the hands of overseas companies.
Insurance regulation formally began in India with the passing of the Life Insurance
Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the
1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance
companies.
The first comprehensive legislation was introduced with the Insurance Act of 1938 that
provided strict State Control over the insurance business. The insurance business grew at
a faster pace after independence. Indian companies strengthened their hold on this
business but despite the growth that was witnessed, insurance remained an urban
phenomenon.
The Government of India in 1956, brought together over 240 private life insurers and
provident societies under one nationalized monopoly corporation and Life Insurance
Corporation (LIC) was born. Nationalization was justified on the grounds that it would
create the much needed funds for rapid industrialization. This was in conformity with the
Government's chosen path of State led planning and development.
The non-life insurance business continued to thrive with the private sector till 1972. Their
operations were restricted to organized trade and industry in large cities. The general
insurance industry was nationalized in 1972. With this, nearly 107 insurers were
amalgamated and grouped into four companies- National Insurance Company, New India
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Assurance Company, Oriental Insurance Company and United India Insurance Company.
These were subsidiaries of the General Insurance Company (GIC).
KEY MILESTONES
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 by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers along with provident societies were taken over by
the central government and nationalized. LIC was formed by an Act of Parliament- LIC
Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.
INDUSTRY REFORMS
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously stuck to its schedule of framing regulations and registering
the private sector insurance companies. Since being set up as an independent statutory
body the IRDA has put in a framework of globally compatible regulations.
The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the
IRDA online service for issue and renewal of licenses to agents. The approval of
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institutions for imparting training to agents has also ensured that the insurance companies
would have a trained workforce of insurance agents in place to sell their products.
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PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA
The life insurance industry in India grew by an impressive 36%, with premium income
from new businesses at Rs. 253.43 billion during the fiscal year 2011-2010. Though the
total volume of LIC's business increased in the last fiscal year (2009-2010) compared to
the previous one, its market share came down from 87.04 to 78.07%.
The 14 private insurers increased their market share from about 13% to about 22% in a
year's time. The figures for the first two months of the fiscal year 2010-11 also speak of
the growing share of the private insurers. The share of LIC for this period has further
come down to 75 percent, while the private players have grabbed over 24 percent.
With the opening up of the insurance industry in India many foreign players have entered
the market. The restriction on these companies is that they are not allowed to have more
than a 26% stake in a company’s ownership.
Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7
billion have poured into the Indian market and 14 private life insurance companies have
been granted licenses.
Innovative products, smart marketing, and aggressive distribution have enabled fledgling
private insurance companies to sign up Indian customers faster than anyone expected.
Indians, who had always seen life insurance as a tax saving device, are now suddenly
turning to the private sector and snapping up the new innovative products on offer. Some
of these products include investment plans with insurance and good returns (unit linked
plans), multi – purpose insurance plans, pension plans, child plans and money back plans.
(www.wikipedia.com)
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CHAPTER - 2
COMPANY PROFILE
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COMPANY PROFILE
AVIVA LIFE INSURANCE
INTRODUCTION
Aviva plc was previously known as CGNU plc. The name change was effected on 1st July
2002. Prior to the re – branding, CGNU was using 50 trading names across the world.
The decision for the re – branding was taken with the objective of creating a strong and
powerful international services brand.
HISTORY OF THE AVIVA GROUP
1696 – The world’s oldest insurance company Hand in Hand formed in London
1797 – Norwich Union founded in London
1861 – Commercial Union founded in London
1885 – General Accident founded in Perth, Scotland
1998 – CGNU formed with the merger of Commercial Union and General
Accident
2000 – CGNU formed with the merger of CGU and Norwich Union
2002 – CGNU re - branded as Aviva plc on 1st July, 2002
KEY POINTS - AVIVA
5th largest insurance group in the world (Source: Fortune 500)
Largest insurer in the United Kingdom
28th largest company in the world
Premium income from new business 32 billion USD
Total premium income 36 billion pounds
Shareholders funds of 14.9 billion
Over 35 million satisfied customers worldwide
Listed on the London, Paris and Dublin stock exchanges
Top five positions in Holland, Ireland, Singapore, Spain, Turkey and Poland
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Long term savings and asset management account for 71% of premiums
KEY POINTS - AVIVA LIFE INSURANCE INDIA
Got licensed on 14th May 2002 and started operations on 6th June 2006
Pioneered the concept of indexation
Pioneered the concept of unitization
Tie - ups with ABM Amro, American Express, Canara Bank & Lakshmi Vilas
Bank
26 million customers and over 67734 crores in deposits
Paid up capital of Rs.559 crores
Growth of 118% since the last year from new business
VISION
“Aviva - Where exceeding expectations through innovative solutions is our way of
life”
CORE VALUES
Passion for winning
Integrity
Innovation
Customer centricity
Empowered Team
PRODUCTS & SERVICES
The right investment strategies won't just help plan for a more comfortable tomorrow --
they will help you get “Kal Par Control”. At Aviva, life insurance plans are created
keeping in mind the changing needs of you and your family. Our life insurance plans are
designed to provide you with flexible options that meet both protection and savings
needs. We offer our customers a full range of transparent, flexible and value for money
products. Aviva products are modern and contemporary unitized products that offer
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unique customer benefits like flexibility to choose cover levels, indexation and partial
withdrawals. (Source: www.avivaindia.com)
PLANS MAINLY FOR PROTECTION (LIFE COVER)
1) LIFE LONG
Life Long is designed to suit individual requirements, no matter which life stage you are
at, and changes as your needs change during your entire life. For the same premium, you
can opt for a higher life cover (protection) and lower savings or lower life cover and
higher savings. The choice of protection-savings mix is yours, and the decision can be
based on your priorities and age. You can also cover your spouse under the same policy
without any additional expense through a joint life policy (first death basis).
The entry age is 18 – 60 years. If any rider is opted the maximum entry age is 55 years
(last birthday). This is a whole life plan with premium payment age up to 85 years. The
minimum annual premium is Rs. 6000. The minimum sum assured is 0.5* (70 – entry
age) * Annual premium and the maximum sum assured is Annual premium * Cover
level, where the cover level ranges from 10 to 100, depending upon age at entry.
Sample Cover Level
Age 20 years 30 years 40 years 50 years
Cover Level 97 82 54 30
One can invest their monies in a With Profits Fund and 3 Unit Linked funds; Protector,
Growth and Balanced Funds. An individual can opt for riders like accidental death and
disbursement rider, critical illness and permanent total disability rider and hospital cash
benefit. There will be 5% extra allocation of units on the 15th policy year.
How is the money invested?
Life Long offers a With Profits Fund and 3 Unit Linked Funds which give you the
flexibility of choosing how your money should be invested in terms of the risk and the
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security of the return on the investment. You can invest 100% of your premiums either in
the With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in
each selected unit linked fund must be 10%.
With Profits Fund Unit Linked Funds
Protector Fund Growth Fund Balanced Fund
Fund Objective
Steady returns on your investments by smoothening market
volatility through crediting bonuses to your fund on a daily
basis
Progressive returns on your investment by investing higher element of assets in debt securities with minimum exposure
to equities
High Capital growth by
investing higher element of assets
in the equity market
Capital growth
by availing opportunities in debt and equity markets and providing you a
good balance between risk and return
Fund Composition (Range)
Debt securities:
70-100%
Equities: 0 – 20%
Money market & cash: 0 – 10%
Debt securities:
60 – 100%
Equities: 0 – 20%
Money market & cash: 0 – 20%
Debt securities:
0 – 50%
Equities:30-85%
Money market & cash: 0 – 20%
Debt securities:
50 – 90%
Equities: 0 – 45%
Money market & cash: 0 – 10%
Changing Allocation Proportions
You have the option to change the allocation proportion of your premiums to different
funds at anytime, up to 2 times a year, for all future premiums. The minimum allocation
in each selected fund must be 10%. A policy holder can switch accumulated funds from
one investment fund to another (either partly or fully). In case of a part switch, the
minimum amount switched should be Rs. 10,000 and the minimum balance in the fund
after the switch should be Rs. 5,000. The first 2 switches in a policy year are free of
charge.
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Allocation of Units
Units purchased with the first year’s premium and the first incremental regular
premium due to indexation and / or additional regular premium will be used to
allocate initial units. Units purchased from the second year’s premium onwards
and after the first incremental regular premium due to indexation and / or
additional regular premium will be used to allocate accumulation units
The unit price shall be calculated on a daily basis in accordance with Insurance
Regulatory and Development Authority (IRDA) guidelines from time to time. The
Unit Price will be calculated as follows: Unit price for Unit Linked Funds is
equal to the market value of assets held by the fund plus the value of current
assets and accrued income minus the value of current liabilities, fund
management charges and provisions, if any, divided by the total number of
units outstanding
Unit price for With Profits Fund is calculated by applying the equivalent daily
rate to the current unit price on a daily compounding basis. The equivalent daily
unit growth rate = (1 + annual regular bonus rate) ^ (1/365)*(1-fund
management charge per annum /365) - 1. Aviva guarantees that the unit
price in this fund will never fall
Units shall be allocated on the day the proposal is completed and results into a
policy by adjustment of application money towards premium. The premium shall
be adjusted on the due date even if it has been received in advance
In respect of premiums received within a time specified by IRDA through a local
cheque or a demand draft, payable at par, at the place where the premium is
received, the closing NAV of the day on which premium is received shall be
applicable. Currently, this time is 4:15 p.m.
In respect of premiums received after the time specified by IRDA through a local
cheque or a demand draft, payable at par, at the place where the premium is
received, the closing NAV of the next business day shall be applicable
In respect of premiums received through outstation cheque / demand draft, at the
place where the premium is received or through direct debit / ECS, the closing
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NAV of the day on which the cheque / demand draft / money is realized, shall be
applicable
Extra Allocation of Units
On the 15th policy anniversary, Life Long gives you a 5% Extra Allocation on existing
units. These units are given if all the due premiums have been paid. The additions will
apply to the units attributable to regular premiums existing at the end of the specified
policy anniversary. This benefit will not be applicable to units pertaining to the top-up
premiums or additional regular premiums.
Can I make lump-sum investments?
You have the flexibility of making lump-sum investments through top-up premiums to
increase the investment value of your policy without increasing the sum assured provided
all due premiums till date are paid. The minimum top-up premium is Rs. 1,500.
The total of top-up premiums cannot exceed 25% of the total regular premiums paid till
date at any point in time. Units purchased from top-up premiums will be used to allocate
accumulation units to various investment funds in the same proportion as selected by you
for your regular premiums
Can I increase the sum assured?
You can increase your sum assured anytime before age 67 or the 27th policy year,
whichever is earlier, provided that all due premiums have been paid. This is subject to the
maximum increase allowed at that age. The sum assured under the riders (except HCB)
will also increase up to the maximum limit allowed under each rider. Evidence of health
may be required before such an increase in sum assured is made.
Can I increase my regular premium?
You can increase your regular premiums through any of the 2 methods mentioned below:
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Indexation
You have the option to increase your regular premiums by an indexation rate at any
policy anniversary to protect the real value of your investment against inflation. The rate
of indexation will be in line with the increase in the Whole Sale Price Index (or in the
event that this Index ceases to be published such other index as the Company may select
for this purpose). The base sum assured and sum assured of any attached rider (except
HCB) would also be increased by the corresponding indexation increase.
The maximum sum assured limits under the riders for the purchased policy would not
apply in this case. You can opt for indexation at the inception of the plan only. Once
opted for, this will become a default option unless altered by you. The indexation benefit
is available till age 67 or the 27th policy year, whichever is earlier.
Additional Regular Premiums (ARP)
On every policy anniversary you have the option to increase the regular premium amount
through ARP at any time up to age 67 or the 27th policy year, whichever is earlier. The
minimum ARP is Rs. 1,000.
ARP will increase the sum assured automatically. The sum assured of any attached rider
(except HCB) would also increase provided the increased sum assured is within the
maximum limits allowed for the riders. Evidence of health may be required before such
an increase in sum assured is made.
When can I withdraw my money?
You have the flexibility of making partial withdrawals from accumulation units in respect
of regular premiums as well as top up premiums provided all due premiums till date are
paid. Any partial withdrawal will first be made from the top up premium account (if any
and if eligible for withdrawal) followed by the regular premium account, if required.
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Partial withdrawals from top-up premium account can be made after 3 years from
the allocation date of that top-up premium
Partial withdrawals from units pertaining to regular premiums can be made after
completion of 3 policy years
Only 4 partial withdrawals are allowed in a policy year.
The minimum partial withdrawal is Rs. 5,000 and the fund value should not be
less than two times the annual premium
Till age 58 years, the total partial withdrawal with respect to regular premiums in
a policy year should not exceed 25% of the fund value pertaining to regular
premiums at the beginning of the policy year.
Post age 58 years this restriction does not apply. There is no restriction on the
maximum amount of partial withdrawal with respect to top-up premiums.
What are the riders that I can opt for?
Apart from the death cover under the base plan, Life Long offers extra protection through
optional riders:
Accidental Death and Dismemberment Rider (AD&D): Coverage
from risk of death or dismemberment due to an accident
Critical Illness and Permanent Total Disability Rider (CI&PTD):
Coverage against contracting a critical illness or becoming totally and
permanently disabled due to a disease or an accident
Hospital Cash Benefit Rider (HCB): The Company will make fixed
cash payments for each day of hospitalization. These riders can be
attached to the base plan at inception only and the rider covers expire
at 60 years of age.
What happens if I die?
In the unfortunate event of your death or if your spouse dies before you (if jointly
assured) the following payments would be made:
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Higher of sum assured or fund value (value of initial and accumulation units in
respect of regular premiums) is payable
An additional sum assured would also be payable if AD&D rider has been opted
for and death is due to accident
The sum assured as well as the rider sum assured will be reduced by all partial
withdrawals made from regular premium account within the last 2 years prior to
death. If death occurs after age 60, the sum assured will be reduced by all partial
withdrawals made after age 58 till death
The value of units attributable to the top-up premiums, if any, would also be
payable
If you have invested in the With Profits fund, a final bonus, if any, will also be
payable
What are the charges on my policy?
Policy Administration Charge (PAC): Rs. 67 per month, which will increase by
5% p.a. on the 1st of January each year. PAC will be deducted monthly by
cancellation of units from the accumulation unit account. If premiums are
discontinued, this charge would reduce to 60% of the charge applicable for the
premium paying policies
Initial Management Charge (IMC): 10% p.a. of initial units during the first 30
years. IMC will be deducted monthly from initial units
Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a. on
Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund.
FMC will be applied on the fund while calculating NAV on a daily basis. The
maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA
Mortality Charge: The Mortality Charge will apply on the Sum at Risk (SAR =
Sum Assured less the Fund Value pertaining to regular premiums). It will be
deducted by monthly cancellation of units from the accumulation unit account.
The Mortality Charge shall remain guaranteed throughout the policy term.
Rider Premium Charges: Rider charges will be made by monthly cancellation
of units from the policy accumulation unit account. The AD&D rider charge will
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apply on Sum Assured; the CI&PTD rider charge will apply on the Sum at Risk,
while the HCB rider charge is a fixed amount.
Rider charges may change based on the Company’s claims experience and
approval by the IRDA. The Company shall charge the applicable service tax over
and above the mortality charge and rider premium charge mentioned above
Surrender Charge – on Initial Units: [1-(1/1.10^N)] * value of initial units, at
the unit price, on the date of surrender – on Accumulation Units pertaining to
regular premiums: [1-{1/(1 + x)}^N] * value of accumulation units, at their unit
price, on the date of surrender.
What are the tax benefits I get?
Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961.
Insurance is tax free up to Rs. 100000 per annum and the returns on investment on
maturity of the policy are also tax free.
2) LIFE SHIELD
Life Shield is an ideal life insurance plan that helps you protect your family's future.
While there can be no compensation for the loss of life, Life Shield ensures that your
family's financial needs are met should something unfortunate happen to you. Its aim is to
pay out a guaranteed cash amount in the unfortunate event of your death during the term
of the policy.
Key Features of Life Shield
Life Shield is a low cost life insurance plan which guarantees to pay a lump sum
amount in case of your death during the term of the policy.
Life Shield can be purchased for any life between 18 to 55 years of age. However,
the maximum age of the life insured at expiry of the policy is 65 years.
The minimum and maximum policy terms are 5 years and 40 years, respectively.
The minimum annual premium is Rs.2000 and the minimum sum insured is
Rs.500000.
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The sum insured of the policy can be increased (only up to 40 years of age) once
by 50% (subject to maximum increase of Rs.1,000,000) during the term of the
policy, without submitting any evidence of good health, if:
- You decide to increase the sum insured within three months of your
marriage.
- You decide to increase the sum insured within three months of the birth of
your child.
This option to increase the sum insured is available if the policy has been
accepted on standard rates. It can be exercised only when outstanding term of the
policy is at least 5 years and the policy is in force for full sum insured.
What are the benefits of this plan?
The plan pays out a sum insured in the unfortunate event of your death before the
maturity date.
We offer preferred rates to customers opting for higher sum insured and to
Pension Plus policyholders of Aviva.
- You will receive a discount of Rs. 0.50 per thousand of sum insured on
standard premium rates if you are opting for a sum insured of Rs.
1,000,000 and above.
- If you are a Pension Plus policyholder, you will get an additional discount
of 7.5% on the premium rate stated in the Premium Rate Table of Life
Shield, provided your Life Shield policy has been accepted on standard
rates.
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Illustration
This illustration is of a 30 year old, who pays premiums annually for a sum insured of Rs.
1,000,000.
Policy Term
(Years)
Base Annual
Premium (Rs.)
Base Annual Premium for Pension Plus Policyholder (with 7.5%
discount)(Rs.)
Discount* @50
paisa/'000 (Rs.)
Base Annual
Premium (Rs.)
Annual Premium
for Pension Plus
Policyholder (Rs.)
10 3160 2923 500 3160 2423
15 3390 3136 500 3390 2636
20 3620 3349 500 3620 2849
PLANS MAINLY FOR SAVINGS & INVESTMENT
1) EASY LIFE PLUS
Easy Life Plus is a simple unit linked endowment plan with the benefit of life protection.
By choosing an appropriate premium level and term, you can match the maturity date of
the plan to a specific savings need such as your child’s education, wedding or any other
financial need. Easy Life Plus also offers an extra protection against accident without
requiring you to undergo any medical examinations.
The entry age for the policy is 18 – 50 years. The policy term is 10, 15, 20 or 25 years.
Maximum age at maturity is 60 years. The minimum annual premium is Rs. 6000 and
maximum is Rs. 50000. Sum assured is calculated as higher of 10 times the annual
premium and 0.5 * policy term * annual premium subject to a minimum of Rs. 60,000
and a maximum of Rs. 50,000. The investment fund options available are protector,
growth and balanced funds.
On maturity, you can either take out the maturity proceeds (fund value in respect of
regular premiums) and terminate the policy or opt for a settlement option wherein all or
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part of maturity proceeds would be paid out to you as structured payouts in accordance
with the settlement option then offered by the Company. The settlement option is
available only on Unit Linked funds and only if all due premiums have been paid.
Sample Illustration: This illustration is for a 30 year old male who pays premiums annually
for a period of 20 years:
Annual Premium Sum Assured With Profits Fund Unit Linked (Balanced Fund)Projected Maturity Value (Rs.) assuming gross returns
6% 10% 6% 10%7500 75000 186041 263391 195678 30895615000 150000 398277 563041 421045 66223625000 250000 680616 961711 718325 112824450000 500000 1386459 1958382 1461524 2293258
What happens if I die?
In case of a non accidental death in the first policy year 50% of the sum assured or fund
value which ever is higher is paid. From the 2nd policy year, higher of sum assured or
fund value is payable. In case of accidental death an additional sum assured is payable.
What are the charges on my policy?
Policy Administration Charge (PAC): Rs. 43 per month, which will increase by
5% p.a. on the 1st of January each year. PAC will be deducted monthly by
cancellation of units from the accumulation unit account. If premiums are
discontinued, this charge will reduce to 60% of the charge applicable for the
premium paying policies
Initial Management Charge (IMC): 5% p.a. of initial units during the policy
term. IMC will be deducted monthly from initial units
Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a. on
Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund.
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FMC will be applied on the fund while calculating NAV on a daily basis. The
maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA
Mortality Charge: The Mortality Charge will apply on the Sum at Risk (SAR =
Sum Assured less the Fund Value). It will be deducted by monthly cancellation of
units from the accumulation unit account. The Mortality Charge shall remain
guaranteed throughout the policy term. The charge for the ADPTD benefit will
apply on Sum Assured and will remain flat throughout the term of the policy.
Premium Allocation Charge:
Allocation rate
Annual Premium Yearly and half yearly
premium frequencyQuarterly and Monthly
premium frequency
< Rs. 7500 93% 92%
Rs. 7500 – Rs. 9999 94% 93%
Rs. 10,000 and above 95% 94%
2) YOUNG ACHIEVER
Young Achiever is a regular premium life insurance product designed to meet the
financial needs of your children - be it higher education, marriage, starting a career or a
business, or any other need. The plan can be purchased on the life of any one of the
parents with the child as the nominee. Through this policy, you save regularly to meet
your children’s needs, and at the same time their financial needs are taken care of should
something unfortunate happen to you.
The entry age for this policy is 21 – 55 years. The term of the policy is 8 to 21 years
(maximum age at maturity 65 years). If your child’s age is between 0 – 13 years, the
policy term will be 21 minus the age of your child at entry. For example if the age of your
child is 10 years at the time of purchasing the policy, the policy term will be 11 years (21
– 10). The minimum annual premium payable is Rs. 6000. The minimum sum assured is
Rs. 36000 and maximum sum assured is Rs. 10,000,000. For each policy term there is a
23
low and high sum assured to choose from ranging from 6 to 21 times the annual
premium.
Can I withdraw my money during the policy term?
You have the flexibility of making partial withdrawals from accumulation units in respect
of regular premiums as well as top up premiums provided all due premiums till date are
paid. Any partial withdrawal will first be made from the top up premium account (if any
and if eligible for withdrawal) followed by the regular premium account, if required.
Time Frame Partial Withdrawals as a cumulative % of
Sum Assured
4th Last policy year Up to25 %
3th Last policy year Up to50 %
2th Last policy year Up to75 %
Last policy year Up to 100 %
Partial withdrawals from top-up premium account can be made after 3 years from
the allocation date of that top-up premium
Partial withdrawals from units pertaining to regular premiums can be made in the
last 4 policy years. There is no restriction on the maximum amount of partial
withdrawal with respect to top-up premiums
The minimum partial withdrawal is Rs. 5,000 and the fund value should not be
less than two times of annual premium
Only 4 partial withdrawals are allowed in a policy year
No partial withdrawal can be made from the initial units
What are the charges on my policy?
24
Policy Administration Charge (PAC): Rs. 57 per month, which will increase
by 5% p.a. on the 1st of January each year. PAC will be deducted monthly by
cancellation of units from the accumulation unit account. If premiums are
discontinued, this charge would reduce to 60% of the charge applicable for the
premium paying policies
Initial Management Charge (IMC): 10% p.a. of initial units during the
policy term. IMC will be deducted monthly from initial units
Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a.
on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth
Fund. FMC will be applied on the fund while calculating NAV on a daily
basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by
the IRDA
Mortality Charge: The Mortality Charge will apply on the Sum Assured. It
will be deducted by monthly cancellation of units from the accumulation unit
account. The Mortality Charge shall remain guaranteed throughout the policy
term.
Sample Mortality Charges
Age (Male) 25 years 35 years 45 years 55 years
Annual Mortality charges per 1000 sum assured
1.197 1.50675 3.4377 9.4731
3) LIFE SAVER
Life saver is a flexible endowment savings plan. Its entry age is 18 – 65 years. This
policy can be taken jointly with your spouse. The sum assured is calculated as annual
premium * cover level; where cover level ranges from 5 – 68 depending upon the age
at entry and the policy term. Since it is an endowment plan the sum assured is fixed
right from the acceptance of the policy. The minimum policy term is 5 years and
25
maximum age at maturity is 70 years. The policy term may be selected according to
the goals of the prospect.
The minimum premium payable is Rs. 6000 and there is no maximum limit. This is a
contribution based plan. It means that the customer can decide how much money he
wants to set aside in his investment. The premium payment term is the same as the
policy term and it encourages disciplined savings. Top up premiums are allowed with
a minimum top up of Rs. 1500 and a maximum of up to 25% of the total regular
premium paid. The allocation rate for the top up premium is 96%.
A policy holder can avail a premium holiday 6 months after the 5 th policy year for 4
times during the policy term. During this time the policy does not lapse. A grace
period of 30 extra days are given to the policy holder to pay premium beyond the
premium paying due date. On the death of the policy holder the higher of the sum
assured or fund value is paid. The sum assured protects the policy holder and their
corpus whereas invest able premiums grow the savings component.
The customer has the option to return the policy within 15 days and no surrender
penalty would be levied on the same. You can experience the service and if you are
not satisfied you have a chance to cancel the policy. This is called the free look
period. Tax free partial withdrawal is allowed after the three policy years. No
surrender value is payable in the first three policy years. If the policy has lapsed it can
be reinstated within two years from the date of the first unpaid premium. The
settlement option is available at maturity.
4) LIFE BOND
A wide age band can opt for this policy. The eligibility is 1 – 65 years. There are no riders
available with this policy. The minimum sum assured is Rs. 31,250 and there is no maximum
limit. The minimum premium payable is Rs. 25000 and there is no maximum limit. The
customer decides how much money he wants to set aside in this investment. Only single
premium is allowed. No additional regular premiums are allowed. The minimum top up
26
premium is Rs. 6250 and the maximum top up premium is 25% of the total regular premiums
paid. The allocation rate for top – ups is illustrated as below:
Premium amount (Rs.) Allocation Rate (%)
< Rs. 35000 97%
Rs. 35000 – Rs. 99999 99%
Rs. 100000 – Rs. 149999 101%
Rs. 150000 and above 102%
Policy Charges
Policy administration charge: 1.5% p.a. of the single premium for the first year
and 1% p.a. thereafter. This is also true for the top – up premiums.
Fund management charges: 1% on with profit and protector, 1.25% on the
balanced fund and 1.5% on the growth fund.
Mortality Charges: Apply on the sum at risk which is the sum assured less the
fund value
5) SAVE GUARD
This policy is a limited premium paying term whole life plan. The eligibility age for this
plan is 18 – 50 years. The minimum premium payable is Rs. 12000 and the maximum is
Rs. 360000. Annual premiums have to be multiples of 6000.
The sum assured is calculated as 0.5*PT*AP and the maximum is Rs. 18,00,000 for 10,
15 years term and 12,00,000 for 20, 25 and 30 years term. The premium paying term is
10, 15, 20, 25 and 30 years. The minimum policy term is 10 years and maximum is 30
years. The maximum age at maturity is 70 years. The three funds available for investment
are secure fund, balanced fund and growth fund.
Policy proceeds are tax free under the section 10 (10D) of the Income Tax Act, 1961
(provided the total premium paid in any policy year does not exceed 20% of the capital
sum assured). A tax deduction is also applicable under section 80C of the Income Tax
Act, 1961.
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6) TREASURE PLUS
Treasure plus is a savings cum protection plan. The entry age is 18 to 50 years. The
maximum age at maturity is 65 years. This policy has various premium payment terms of
10, 15 and 20 years. The minimum annual premium is Rs 12000/- and the minimum sum
assured is 10 times annual premium subject to a maximum of 6 lakhs. The investment
option available is 100% investment in secure fund. The composition of the fund is 0-
20% equity 50-100% debt and 0-20% money market.
The maturity benefit is higher of the fund value or minimum maturity value where
minimum maturity value is equal to annual premium into policy term. The administration
charges is Rs 38/- per month. The initial management charge of 7% per annum will be
charged on initial units during the premium paying term. Mortality charges are based on
gender, age and term of the policy.
7) FREEDOM LIFE PLAN
Freedom life plan is a limited payment term investment cum protection plan. The
eligibility age is 18 – 60 years. This policy can cover you and your spouse for the same
premium amount. The maximum age at maturity is 70 years. The policy term is 10 – 30
years. The minimum premium payable is Rs. 25000 p.a. for 10, 15, 20, 25 or 30 years and
a minimum of Rs. 200000 p.a. for 3 or 5 years.
The minimum sum assured is 0.5*PT*AP and the maximum sum assured is 1.25*PT*AP.
There is an option of increasing the sum assured before the age of 40 years by 50%,
within 3 months of marriage or within 3 months of the birth of the child. This feature
helps the policy holder to alter the policy to suit his life stage and need. There are
guaranteed loyalty additions of 5% on the 10th policy year and 3% on every subsequent
5th policy anniversary till the date of maturity. The HCB, CIPTD and ADD riders are
available.
Composition of funds
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Security Secure Balanced Growth
Equity 0% – 20% 0% - 45% 20% - 60%
Debt 50% - 100% 50% - 90% 0% - 50%
Money market 0% - 30% 0% - 30% 0% - 30%
8) PENSION PLUS
It is a regular savings personal pension plan. The eligibility age is 18 – 65 years. The
term of the policy is equal to the premium paying term (maximum up to the age of 70
years). You have the option to choose term based on retirement age. The minimum
premium is Rs. 6000 per annum for regular premium and Rs. 100,000 for single
premium.
The term of the policy is subject to a maximum of 70 years. The minimum vesting is 40
years and maximum vesting age is 70 years. You have the provision to start your pension
from as early as 40 years of age. The allocation rate is 98% for below Rs.500, 000 and
99% for above Rs. 500,000.
The maturity benefit is 100% of the corpus used to purchase regular pension from the
annuity options available and commutation of 33.33% and the balance for purchasing
pension from Aviva or the open market.
HUMAN RESOURCE
With a strong sales force of over 16,000 Financial Planning Advisers (FPA’s), Aviva has
initiated an innovative and differentiated sales approach to the business. Through the
“Financial Health Check” (FHC) Aviva’s sales force has been able to establish its
29
credibility in the market. The FHC is a free service administered by the FPA’s for a need-
based analysis of the customer’s long-term savings and insurance needs. Depending on
the life stage and earnings of the customer, the Financial Health Check assesses and
recommends the right insurance product for them.
ORGANIZATION STRUCTURE
At Aviva in South Delhi, the internal structure of the organization was as given above.
The branch manager was the next person in authority. All strategic decisions about the
firm’s future were taken by the branch manager. There job profile was to monitor the
performance of the organization and see that all the operations were going smoothly.
The HR department was responsible for recruiting new financial planning advisors. The
department was headed by a HR Manager. The main sales force comprised of the sales
managers and the advisors. The sales managers had to manage teams of 15 – 20 advisors.
They would help in filling out applications, providing relevant databases to prospect
customers, accompany advisors on their sales calls and make sure everyone in the team is
motivated.
30
Branch Manager
Sales Manager HR Department
Senior Sales Manager
Financial Planning Advisors (team)
OperationsDepartment
Tele callers(Recruiting)
General Staff
The financial planning advisors are the main link between the customer and the company.
They are the individuals who try to market the insurance policies to prospects. They are
provided training for the same. Every advisor must pass the insurance examination as
specified by the IRDA. Only a licensed advisor is allowed to procure business for the
firm. Apart from this training is provided on unit linked funds and the savings/ protection
products Aviva offer.
INTROUCTION TO UNIT LINKED FUNDS
Unit linked plans are based on the component of the premium or the contribution of the
customer towards the plan. This contribution can be in different modes like yearly, half
yearly, quarterly and monthly. Unit linked plans have multiple benefits like life
protection, rider protection, savings, transparency, investment choices, liquidity and
planning for taxes. These plans work like mutual funds.
The premium is collected from the policy holder. He is allotted a certain number of units
based of his contribution. The Net Asset Value is the value of each unit of the fund. It is
found by subtracting the charges and current liabilities from the current assets and
investments and dividing this number by the total number of outstanding units.
Let us take an example. There are 100 investors and each invests Rs. 10 in a fund. The
total value of the fund is Rs. 1000 and each person is allotted 1 unit of Rs 10. Now the
money (Rs. 1000) is invested in the debt or equity market. Suppose the fund value
increased by 20%. As a result the Rs. 1000 invested became Rs. 1200. Hence the value of
every investor is now Rs. 12 and not Rs. 10.
PICTORIAL REPRESENTATION
31
NATIONAL & INTERNATIONAL PRESENCE
Aviva has over 59000 employees serving 40 million customers worldwide. It is present in
the United Kingdom, Asia, Australia, Canada, China, France, Germany, Cyprus, Greece,
Hong Kong, Hungary, India, Ireland, Italy, Luxembourg, Netherlands, Poland, Romania,
Russia, Singapore, Spain, Sri Lanka, Turkey and USA. Aviva has 113 branches in India
supporting its distribution network. Aviva products are available is 497 towns and cities
across India thanks to the Bancassurance partner locations.
32
PREMIUM CONTRIBUTION
(LESS) CHARGES
(LESS) MORTALITY CHARGES
INVESTIBLE PREMIUM INVESTED AFTER
UNITIZATION
LIFE PROTECTION
FUND VALUE
CHAPTER – 3
RESEARCH DESIGN
33
RESEARCH DESIGN
INTRODUCTION
A Research Design is the framework or plan for a study which is used as a guide in
collecting and analyzing the data collected. It is the blue print that is followed in
completing the study. The basic objective of research cannot be attained without a proper
research design. It specifies the methods and procedures for acquiring the information
needed to conduct the research effectively. It is the overall operational pattern of the
project that stipulates what information needs to be collected, from which sources and by
what methods.
TITLE OF THE STUDY
“A Study on Market Segmentation of the Insurance Industry in India for Aviva Life
Insurance India Pvt. Ltd.”
a. Statement of the problem
This study was undertaken to identify which type of insurance plans Aviva should market
to particular market segments in India. A survey was undertaken to understand the
preferences of Indian consumers with respect to insurance. While marketing policies the
sole duty of an advisor/ agent is to provide insurance plans as per customer requirements.
In effect plans (insurance products) should be flexible to suit individual requirements.
This research tries to analyze some key factors which influence the purchase of insurance
like the term of the policy, the type of company, the amount of annual premium payable
(capacity and willingness to spend), risk taking ability and the influence of advertising.
Solutions and recommendations are made based on qualitative and quantitative analysis
of the data.
34
OBJECTIVES OF THE STUDY
To find the market share of various life insurers in India
To suggest additions to the current product portfolio
To recognize the popular insurance plans
To showcase the influence of advertising
To suggest ideal policy term and premium for insurance
To showcase the consumers’ willingness to spend on life insurance
To showcase the factors that motivate purchase of insurance policies
To understand the type of company preferred for investment
To understand the awareness level of consumers about unit linked insurance
plans
RESEARCH DESIGN
TYPE OF DATA COLLECTED
There are two types of data used. They are primary and secondary data. Primary data is
defined as data that is collected from original sources for a specific purpose. Secondary
data is data collected from indirect sources. (Source: Marketing Research, Sumathi and
Saranavel)
a. PRIMARY SOURCES
These include the survey or questionnaire method, telephonic interview as well as the
personal interview methods of data collection.
b. SECONDARY SOURCES
These include books, the internet, company brochures, product brochures, the company
website, competitor’s websites etc, newspaper articles etc.
35
SAMPLING METHODOLOGY
Sampling refers to the method of selecting a sample from a given universe with a view to
draw conclusions about that universe. A sample is a representative of the universe
selected for study.
Convenience sampling is used in exploratory research where the researcher is interested
in getting an inexpensive approximation of the truth. As the name implies, the sample is
selected because they are convenient. This non probability method is often used during
preliminary research efforts to get a gross estimate of the results, without incurring the
cost or time required to select a random sample. (Source: www.statpac.com)
a. Sample size
The sample size for the survey conducted was 130 respondents.
b. Sampling technique
Convenience sampling technique was used in the survey conducted.
c. Plan of analysis
Tables were used for the analysis of the collected data. The data is also neatly
presented with the help of statistical tools such as graphs and pie charts. Percentages
and averages have also been used to represent data clearly and effectively.
d. Study area
The samples referred to were residing in South Delhi .
LIMITATIONS OF THE STUDY
The study was limited only to the city of Delhi
The study was conducted only for a short period of one and a half month
The study is based on the assumption that information provided by the
respondents is true
36
CHAPTER - 4
MARKETING PROBLEMS
37
MARKETING PROBLEMS
The old and out dated technique of tele marketing is used to prospect customers. More
modern techniques must be adopted. The company must sponsor shows and give
presentations in corporate houses. The financial health check must be performed for
every prospect to assess his/her true financial position and needs. Some of the advisors
skip this vital step and the prospect ends up with a plan they do not appreciate and soon
surrender or discontinue.
Some of the main problems in marketing the policies are:
Large amount of competition (15 players in the market)
Other brands are well advertised and have higher recall value
LIC is considered a safer option
Face competition from banks and mutual funds
High premium policies are difficult to market
Incorrect perception about insurance
Interested prospects might have a lack of time and postpone investments
Customers get defensive if you could call
Short term plans are available only at large premium
Customers do not have risk appetite to invest in shares
Some prospects have already invested and are not interested in further
investments
Consumers don’t want to undertake medical examinations
Large amount of documentation
Customers do not like their money locked up for many years
Lack of awareness about the unit linked funds in the market
No money back plan present in the product portfolio
38
SUGGESTIONS FOR IMPROVEMENT
Advertise about the company and its products – it motivates individuals to
purchase insurance
Create a positive perception about insurance
Speak about the good features a plan offers like high returns, life cover, tax
benefits, indexation, accident cover while prospecting customers
Try to sell the product/plan which the consumer requires and not the plan where
the advisors benefit is higher
Improve the efficiency in operations
Bring out policies with small premiums payable for short periods of time – Rs.
5000 – Rs. 10000 per annum for 10 years
Attract the youth of India with higher returns on investment as returns are the
motivating factor which influence purchase of insurance
Promote insurance in colleges and corporate houses
Promote Aviva as an Indian Company to build trust
Aviva is actually Aviva Dabur – Dabur has a good brand name and this brand
name could be used to give a push to its products
Aviva could have a brand ambassador or a mascot to promote its services
Should have partial withdrawals from the first year onwards
Tap the rural market where there is large potential
Diversify product portfolio
Make products more straight forward – reduce complexities
39
FINANCIAL ANALYSIS
Aviva Life Insurance is listed on the Bombay stock exchange. The chart below gives the
companies performance from 31 Dec 2009 – 31 Dec 2010.
Net Sales 18.06 46.96 36.55 15.06
Other Income 0.02 0.04 - 10.5
Total Income 18.08 47 36.55 25.56
Expenditure -17.79 -46.79 -36.05 -14.9
Operating Profit 0.3 0.21 0.5 10.67
Interest - -0.01 - -
Gross Profit 0.29 0.2 0.5 10.67
Depreciation -0.06 0.15 -0.06 -
Profit before Tax 0.24 0.34 0.44 10.67
Tax -0.04 -0.1 -0.01 -
Profit after Tax 0.2 0.24 0.43 10.67
Net Profit 0.2 0.24 0.43 10.67
Equity Capital 14.99 14.99 14.99 14.99
Reserves - - - 14.71
EPS 0.13 0.16 0.29 7.12
The chart below gives the performance from 31 Dec 2008 – 31 Dec 2009:
Net Sales 15.06 - - - -
Other Income 10.5 0.21 2.45 - 0.02
Total Income 25.56 0.21 2.45 - 0.02
Expenditure -14.9 -0.13 -0.06 -0.35 -
Operating Profit 10.67 0.08 2.39 -0.35 0.02
Gross Profit 10.67 0.08 2.39 -0.35 0.02
Depreciation - - - -0.07 -
40
Profit before Tax 10.67 0.08 2.39 -0.42 0.02
Profit after Tax 10.67 0.08 2.39 -0.42 0.02
Net Profit 10.67 0.08 2.39 -0.42 0.02
Equity Capital 14.99 14.99 14.99 14.99 14.99
Reserves 14.71 - - - -
EPS 7.12 0.05 1.59 - -
The company’s total income is Rs. 18.06 million. Last year it was Rs. 25.56 million. This
means that net income or net premium collected has decreased since the last year. The
expenses have increased by 2.8 million but the net income has not. Hence the companies’
performance has fallen in the year 2009. Operating profits were only 0.3 million down
from 10.67 million last year. Earnings per share also fell from Rs. 7.12 to Rs. 0.13.
The company faces stiff competition from other private player like Bajaj Allianz, ICICI
Prudential, HDFC Standard Life Insurance, Tata Aig and SBI. Now it will face additional
competition from Bharti Axa and Reliance Life Insurance (both companies are into the
telecom sector as well). ICICI, HDFC and SBI are large banks which also provide the
service of insurance. Tata and Bajaj are mainly companies in the auto section and have
diversified into this field.
UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS
Parameters RBI Bonds Fixed Deposits Mutual Funds Unit linked
Safety High High Medium High
Liquidity None High High High
Returns Low Low High High
Life Cover 1 time amount 1 time amount 1 time amount 10 times
Tax benefits Tax free Taxed Taxed Tax free
We find that life insurance unit linked plans is a good area to invest money in as it
provides liquidity, safety, high returns, life cover and tax benefits in a single plan. Aviva
41
offers the option of indexation to beat inflation. Risk is reduced to a large extent as the
company invests in a diversified portfolio of stocks.
42
COMPETITIVE ANALYSIS
LIFE INSURANCE CORPORATION OF INDIA (LIC)
LIC has an excellent money back policy which provides for periodic payments of partial
survival benefits as long as the policy holder is alive. 20% of the sum assured is payable
after 5, 10, 15 and 20 years and the balance 40% is payable at the 20 th year along with
accrued bonus. (www.lic.com)
For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and 20 years
and the balance 40% plus the accrued bonus becomes payable at the 25 th year. An
important feature of these types of policies is that in the event of the death of the policy
holder at any time within the policy term the death claim comprises of full sum assured
without deducting any of the survival benefit amounts which have already been paid. The
bonus is also calculated on the full sum assured.
Aviva does not have a money back policy. It could offer a money back plan and capture
some portion of this market. While marketing insurance products I found that many
customers wanted to purchase these plans.
LIC offers 66 different plans; plans are formulated for specific occasions – whole life
plans, term assurance plans, money back plan for women, child plans, plans for the
handicapped individuals, endowment assurance plans, plans for high worth individuals,
pension plans, unit linked plans, special plans, social security schemes – diversified
portfolio of products. Aviva could diversify its product portfolio. It could add more plans
for high worth individuals and women.
The minimum premium payable for an LIC policy is Rs. 5000 p.a. It increases at Rs.
1000 per year. At Aviva minimum premium for easy life plus is Rs. 6000 which increases
in multiples of 6000 per year. Hence Aviva should reduce the minimum premium amount
43
payable to compete with LIC. The guaranteed sum assured in case of the death of the
policyholder is larger in LIC than in Aviva.
Switching from one fund to another is cheaper – for LIC it is only Rs. 100 to switch from
one fund to another whereas at Aviva it is Rs. 500. More number of switches is allowed
free per year in the case of LIC.
There are however some drawbacks to investing in LIC. The allocation charges are
higher. Therefore the money invested in the fund is lower than what Aviva will invest.
This is true across all policies. Aviva covers its costs over the policy term whereas LIC
charges a high amount for the first five years and then charges a very nominal amount
from the 6th year onwards. The investment benefit is not as high as Aviva.
ICICI PRUDENTIAL
ICICI Prudential is a stiff competitor for Aviva. The company is a merger between ICICI
Bank which is the biggest private bank in India and Prudential Plc which is a global life
insurance company.
The company has an investment plan which is market related – Invest Shield Life. In this
plan even if the market falls, the premium will be returned to investors. It is a guaranteed
plan which ensures the company carefully invests your money. The stock market
performance of ICICI Prudential is much better than Aviva. The returns on the growth
fund were 46.28% compared to the 39.59% offered by Aviva. Customers are attracted by
higher returns and this is a plus point for Prudential.
The company is very well advertised. The advertisements are showcased in movies,
television, newspapers, magazines, bill boards, radio etc. The company has an excellent
brand ambassador – Mr. Amitabh Bacchan. His promotion of the company builds trust
and faith in the minds of our people.
However the charges are very high in the plans offered by ICICI Prudential. It is 35%
during the first year, 15% in the next year and 3% from the third year onwards. Also a
44
higher minimum premium of Rs. 8000 is charged. Hence the policies are not accessible to
the lower strata of the society. (Source: www.iciciprulife.com)
BIRLA SUN LIFE
Birla Sun Life Insurance Company Limited is a joint venture between The Aditya Birla
Group, one of the largest business houses in India and Sun Life Financial Inc., a leading
international financial services organization. The local knowledge of the Aditya Birla
Group combined with the expertise of Sun Life Financial Inc., offers a formidable
protection for your future. (Source: www.birlasunlife.com)
The Aditya Birla Group has a turnover close to Rs. 33000 crores with a market
capitalization of Rs. 53400 crores (as on 31st March 2009). It has over 72000 employees
across all its units worldwide. It is led by its Chairman - Mr. Kumar Mangalam Birla.
Some of the key organizations within the group are Hindalco and Grasim.
Sun Life Financial Inc. and its partners today have operations in key markets worldwide,
including Canada, the United States, the United Kingdom, Hong Kong, the Philippines,
Japan, Indonesia, India, China and Bermuda. It had assets under management of over
US$343 billion, as on 31st March 2009. The company is a leading player in the life
insurance market in Canada.
Being a customer centric company, BSLI has invested heavily in technology to build
world class processing capabilities. BSLI has covered more than a million lives since
inception and its customer base is spread across more than 1000 towns and cities in India.
All this has assisted the company in cementing its place amongst the leaders in the
industry in terms of new business premium income. The company has a capital base of
520 crores as on 31st July, 2009.
Its Flexi Life Line Plan offers life long insurance cover till the policy holder is 100 years
of age. There are guaranteed returns of 3% p.a. net of policy charges after every 5 years
45
from the eleventh policy year onwards. However the charges are very high. The initial
charges for the first year are 65%. Hence the fund value is greatly reduced.
BAJAJ ALLIANZ
Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in
over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years in
the Indian market. Together they are committed to offering you financial solutions that
provide all the security you need for your family and yourself. Bajaj Allianz is the
number one private life insurer for the year 2008 – 2009. It is leading by 78 crores. It has
experienced a whopping growth of 216% in the last financial year.
The company has sold 13, 00,000 policies and is backed by 550 offices across India. It
offers travel insurance, motor insurance, home insurance, health and corporate insurance.
The mortality charges are lower than Aviva. The entry age could be zero years which
allow even new born babies to be insured. (Source: www.bajajallianz.com)
TATA AIG
Tata Aig is a joint venture between the Tata group and American International Group Inc.
In one of the plans the company offers hospital cash benefit wherein it will pay Rs. 2500
per day in case of hospitalization and Rs.12.5 lakhs in case the person suffers from any
critical illness. Annual premium is much less (about Rs. 6712) to avail such a good
benefit. Charges are relatively low compared to Aviva for some policies.
The company offers high coverage plans at low cost. There is a plan even for a policy
term of 1 year. Your family can continue to enjoy their current lifestyle even in the case
of something happening to you. These plans are very flexible and Aviva could adopt this
idea of insuring individuals for short periods of time. For example; there is a family of
four. The only earning member is the father.
He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is able to
repay the loan with his current salary in 15 years. The problem arises if something were
46
to happen to him within these fifteen years. Not only will the family face the emotional
and financial loss of their father but they will also have to repay the home loan or risk
being homeless. (Source: www.tataaig.com)
47
ANALYSIS & INTERPRETATION
1. AGE GROUP OF SURVEYED RESPONDENTS
Table 1:
Age group No. of Respondents
18 - 25 years 62
26 - 35 years 33
36 - 49 years 22
50 - 60 years 12
More than 60 years 2
Chart 1:
47%
25%
17%
9%
2%
18 - 25 years
26 - 35 years
36 - 49 years
50 - 60 years
More than 60 years
Analysis:
From the chart above we find that 47% of the respondents fall in the age group of 18 – 25
years, 25% fall in the age group of 26 – 35 years and 17% fall in the age group of 36 – 49
years.
48
Therefore most of the respondents are relatively young (below 26 years of age). These
individuals could be induced to purchase insurance plans on the basis of its tax saving
nature and as an investment opportunity with high returns.
Individuals at this age are trying to buy a house or a car. Insurance could help them with
this and this fact has to be conveyed to the consumer. As of now many consumers have a
false perception that insurance is only meant for people above the age of 50. Contrary to
popular belief the younger you are the more insurance you need as your loss will mean a
great financial loss to your family, spouse and children (in case the individual is married)
who are financially dependent on you.
2. GENDER CLASSIFICATION OF SURVEYED RESPONDENTS
Table 2:
Particulars No. of Respondents
Male 113
Female 17
Chart 2:
Gender of the respondents
17
113
0
20
40
60
80
100
120
Male Female
No
. o
f re
sp
on
de
nts
Male
Female
49
3. CUSTOMER PROFILE OF SURVEYED RESPONDENTS
Table 3:
Customer profile No. of respondents
Student 30
Housewife 3
Working Professional 55
Business 24
Self Employed 12
Government service employee 7
Chart 3:
23%
2%
43%
18%
9%
5%Student
Housewife
Working Professional
Business
Self Employed
Government serviceemployee
Analysis:
From the chart above it can clearly be seen that 43% of the respondents are working
professionals, 23% are students and 18% are into business. Therefore the target market
would be working individuals in the age group of 18 – 25 years having surplus income,
interested in good returns on their investment and saving income tax.
50
4. MARKET SHARE OF LIFE INSURANCE COMPANIES
Table 4:
LIFE INSURER NUMBER OF POLICIES
HDFC STANDARD LIFE 5
BIRLA SUN LIFE 4
AVIVA LIFE INSURANCE 8
BAJAJ ALLIANZ 9
LIC 64
TATA AIG 8
ICICI PRUDENTIAL 14
ING VYSYA 7
BHARTI AXA 3
OTHERS 2
Chart 4:
4% 3%
6%
7%
53%
6%
11%
6%2% 2%
HDFC STANDARD LIFE
BIRLA SUN LIFE
AVIVA LIFE INSURANCE
BAJAJ ALLIANZ
LIC
TATA AIG
ICICI PRUDENTIAL
ING VYSYA
BHARTI AXA
OTHERS
51
Analysis:
In India, the largest life insurance company is Life Insurance Corporation of India. It has
been in existence in India since 1956 and is completely owned by the Government of
India. Today the organization has grown to 2048 offices serving 18 crore policies and has
a corpus of over 340000 crore INR.
The largest private insurance company in India is ICICI Prudential. It is a joint venture
between ICICI Bank and Prudential plc, a leading international financial services group
headquartered in the UK. In just 4 years time (till March 31, 2009) the company has
successfully sold 430000 policies with a premium income in excess of 980 crores.
The second largest private life insurance company is Bajaj Allianz. It has more than 550
offices and over 60000 insurance consultants. It had a premium income of 221 crores as
on March 31, 2009. This year it has gone past ICICI Prudential to become the number
one private life insurance company in India with a premium of 3134 crores.
5. ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE
Table 5:
Premium paid (p.a.) No. of respondents
Rs. 5000 - Rs. 10000 45
Rs. 10001 - Rs. 15000 29
Rs. 15001 - Rs. 24900 19
Rs. 25000 - Rs. 50000 12
Rs. 50001 - Rs. 60000 5
Rs.60001 - Rs. 80000 2
Rs. 80001 - Rs. 100000 3
52
Chart 5:
39%
25%
17%
10%4% 2% 3%
Rs. 5000 - Rs. 10000
Rs. 10001 - Rs. 15000
Rs. 15001 - Rs. 24900
Rs. 25000 - Rs. 50000
Rs. 50001 - Rs. 60000
Rs.60001 - Rs. 80000
Rs. 80001 - Rs. 100000
Analysis:
From the chart above we find that, 39% of the respondents surveyed pay an annual
premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an
annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs.
25000. Hence we can safely say that Aviva Life insurance would be able to capture the
market better if it introduced products/plans where the minimum premium starts at Rs.
5000 p.a.
Only 19% of the respondents pay more than Rs. 25000 as premium and most products
sold by Aviva have Rs.25000 as the minimum annual premium amount. They should
introduce more products like Easy Life Plus and Safe Guard where the minimum
premium is Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase
their market share as more individuals would be able to afford the policies/plans offered.
53
6. POPULAR LIFE INSURANCE PLANS
Table 6:
Type of Plan No. of Respondents
Term Insurance Plans 53
Endowment Plans 62
Pension Plans 8
Child Plans 4
Tax Saving Plans 10
Chart 6:
39%
45%
6%
3%7%
Term Insurance Plans
Endowment Plans
Pension Plans
Child Plans
Tax Saving Plans
Analysis :
From the chart given above we can clearly see that 45% of the respondents hold
endowment plans and 39% of the respondents hold term insurance plans. Endowment
plans are very popular and serve two purposes – life cover and savings.
54
If the policy holder dies during the policy term the nominee gets the death benefit that is,
sum assured and accumulated bonus. On survival the policy holder receives the survival
benefit with a bonus.
A term plan is a pure risk cover plan wherein the insured pays a lower premium for a
higher sum assured. Term insurance is the cheapest form of insurance and helps the
policy holder insure himself for a relatively low premium. For the returns sensitive
investor term plans do not find favor as they do not offer a return in case the individual
does not die during the policy term.
7. AWARENESS OF UNIT LINKED INSURANCE PLANS
Table 7:
Awareness of Unit Linked Plans No. of Respondents
Yes 74
No 56
Chart 7:
57%
43%Yes
No
55
Analysis:
From the chart given above we find that 57% of the respondents are aware of unit linked
life insurance plans and 43% are not aware of such plans. These plans should be
promoted through advertising. The company can advertise through television, radio,
newspapers, bill boards and pamphlets. This would increase awareness and arouse
curiosity in the minds of the consumer which would enable the company to market its
products more effectively.
Unit – linked plans are those where the benefits are expressed in terms of number of units
and unit price. They can be viewed as a combination of insurance and mutual funds. The
number of units a customer would get would depend on the unit price when they pay the
premium.
When the policy matures the individual gets his fund value. The value of his fund is
calculated by multiplying the net asset value and number of units held by them on that
day.
8. CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM
Table 8:
Willingness to spend on premium No. of respondents Percentage
Less than Rs. 6000 20 15%
Rs. 6001 - Rs. 10000 35 27%
Rs. 10001 - Rs. 25000 54 41%
Rs. 25001 - Rs. 50000 20 15%
Rs. 50001 - Rs. 100000 2 2%
56
Chart 8:
0
10
20
30
40
50
60
Less than Rs.6000
Rs. 6001 - Rs.10000
Rs. 10001 - Rs.25000
Rs. 25001 - Rs.50000
Rs. 50001 - Rs.100000
Analysis:
From the graph above, we can clearly see that 41% of the respondents would be willing
to spend between Rs. 10001 – Rs. 25000 for life insurance. 27 % would be willing to
spend between Rs. 6001 – Rs. 10000 per annum. Only 15% would be willing to spend
more than Rs. 25000 per annum as life insurance premium.
We could say that the maximum premium payable by most consumers is less than Rs.
25000 p.a. This is further reduced as most customers have already invested with LIC,
ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.
Aviva is faced with a large amount of competition. There are 15 insurance companies in
India inclusive of LIC. Hence to capture a larger part of the market the company could
introduce more reasonable plans with lesser premium payable per annum.
57
9. CHART SHOWING IDEAL POLICY TERM
Table 9:
Ideal policy term No. of respondents
3 - 5 years 25
6 - 9 years 20
10 - 15 years 46
16 - 20 years 18
21 - 25 years 12
26 - 30 years 2
More than 30 years 1
Whole life Policy 6
Chart 9:
19%
15%
35%
14%
9%
2%
1%5%
3 - 5 years
6 - 9 years
10 - 15 years
16 - 20 years
21 - 25 years
26 - 30 years
More than 30 years
Whole life Policy
58
Analysis:
From the chart given above it can be seen that 35% of the respondents prefer a policy
term of 10 – 15 years, 19% prefer a term of 3 – 5 years and 15% prefer a term of 6 – 9
years. This means that Aviva could introduce more plans wherein the premium paying
term is less than 15 years.
The outlook of insurance as a product should be changed from something which you pay
for your whole life (whole life policy) and do not receive any benefit (the nominee only
receives the benefit in case of your death) to an extremely useful investment opportunity
with the prospects of good returns on savings, tax saving opportunities as well as
providing for every milestone in your life like marriage, education, children and
retirement.
10. FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE
INSURANCE
Table 10:
Parameter No. of Respondents
Advertisements 17
High returns 42
Advice from friends 23
Family responsibilities 45
Others 8
59
Chart 10:
13%
31%
17%
33%
6%
Advertisements
High returns
Advice from friends
Family responsibilities
Others
Analysis:
From the chart above it can be seen that 33% of the respondents purchase life insurance
to secure their families, 33% take life insurance to get high returns, 17% purchase
insurance on the advice of their friends and 13% purchase insurance because of the
influence of advertisements.
The main purpose of insurance is to cover the financial or economic loss that occurs to
the family in case of the uncertain death of the policy holder. But nowadays this trend is
changing. Along with protection (life cover), a savings element is being added to
insurance.
With the introduction of the new unit linked plans in the market, policy holders get the
option to choose where their money will be invested. They can invest their money in the
equity market, debt market, money market or a combination of these. The debt and
money markets usually have low risk attached whereas the equity market is a high risk
investment option.
60
11. PREFERRED COMPANY TYPE OF THE RESPONDENTS
Table 11:
Type of Company No. of Respondents Percentage
Government Owned Company 67 47%
Public Limited Company 33 23%
Private Company 26 18%
Foreign Company 17 12%
Chart 11:
0
10
20
30
40
50
60
70
80
Government OwnedCompany
Public LimitedCompany
Private Company Foreign Company
Analysis:
From the graph above we find that 47% of the respondents preferred to purchase
insurance from a government owned company, 23% of the respondents preferred to
purchase insurance from a public limited company and only 12% of the respondents
preferred a foreign based company. Aviva could be promoted as an essentially “Indian”
company with a foreign tie up. Its tie up with Dabur India, a trusted name in an Indian
household and a pharmaceutical giant, could be used to give a “push” to its products/
services.
61
Heavy advertising through television, newspapers, magazines and radio is required. Very
few people know that Aviva is one of the oldest insurance companies in the world. It was
started in the year 1696. The company is over 300 years old. These facts would surely
increase the customer base it currently possesses and thereby increase sales of Aviva
products in the Indian insurance market.
12. MINIMUM EXPECTED RETURN ON INVESTMENT
Table 12:
Expected Returns No. of respondents
Less than 5% 3
5% - 10% 20
11% - 15% 22
16% - 20% 23
21% - 25% 22
26% - 30% 13
31% - 40% 11
41% - 50% 7
More than 50% 10
Chart 12:
62
2%
15%
17%
18%17%
10%
8%
5%
8%
Less than 5%
5% - 10%
11% - 15%
16% - 20%
21% - 25%
26% - 30%
31% - 40%
41% - 50%
More than 50%
Analysis:
From the chart above it can clearly been seen that 18% of the respondents would like 16
– 20% returns, 17% would like returns between 21 – 25% and 17% would like returns of
11 – 15% on their investments. Therefore the average return on investment should be at
least 16 – 20 %.
Most consumers are willing to adapt to some amount of risk but still want some
guaranteed returns. Therefore the bulk of investment should be made in the balanced fund
with 50% debt and 50% equity. The returns on the Secure Fund are guaranteed as these
involve investment is government securities and the debt market. But the returns on these
instruments are low (8 – 10%). If the company invests in shares, returns are higher (39%)
but correspondingly risk borne by the policy holder is also higher. Therefore a good
combination of the two instruments is often a wise choice.
63
CHAPTER - 7
CONCLUSION
64
CONCLUSION
Aviva life insurance is one of the world’s largest and oldest life insurance companies. It
has businesses spread out across the globe. It came to India in the year 2002. It currently
ranks number 7 amongst the insurers in India (Source: annual premium provided by the
company)
The company faces a large amount of competition. To sustain itself it must promote its
products through advertising and improve its selling techniques. Consumers must be
aware of the new plans available at Aviva.
The medium of advertising used could be television since most of its competitors use this
tool to promote their products. The company must be promoted as an Indian company
since consumers seem to have more trust in investing in Indian firms. Hence its
association with Dabur should be showcased since Dabur is a trusted name in India and it
could be used to provide a push to the products Aviva has to offer.
The unit linked concept must be specifically promoted. The general perception of life
insurance has to change in India before progress is made in this field. People should not
be afraid to invest money in insurance and must use it as an effective tool for tax
planning and long term savings.
Aviva could tap the rural markets with cheaper products and smaller policy terms. There
are individuals who are willing to pay small amounts as premium but the plans do not
accept premiums below a certain amount. It was usually found that a large number of
males were insured compared to females. Individuals below the age of 30 (mostly male)
were interested in investment plans. This was a general conclusion drawn during
prospecting clients.
65
CHAPTER - 8
BIBLIOGRAPHY
66
BIBLIOGRAPHY
“Products and Services.” Aviva. <http://www.avivaindia.com>.
“Historical perspective.” Wikipedia. <http://www.wikipedia.com>.
“Overview." India core. <http://www.indiacore.com>.
“Reforms." Wikipedia. <http://www.wikipedia.com>.
“Unit Linked Plans." Life insurance Corporation of India. <http://www.lic.com>.
“Stock price of Aviva." Money Control. <http://www.money control.com>.
“Unit Linked Plans." Tata aig. <http://www.tataaig.com>.
“Life Insurance." Bajaj allianz. <http://www.bajajallianz.com/
BagicCorp/index.jsp>.
“Life Insurance." ICICI Prudential. <http://www.icici.prulife.com>.
Sumathi S., and Saranavel P. 2nd ed. New Delhi: Vikas Publishsing House, 2003. 85-172.
“Convenience Sampling.” Statpac. <http://www.statpac.com>.
67
CHAPTER - 9
ANNEXURE
68
QUESTIONNAIRE
Personal Details:
Name: ..........................................................................
Gender:
o Male
o Female
Age group:
o 18 – 25 years
o 26 – 35 years
o 36 – 49 years
o 50 – 60 years
o Above 60 years
Profile of respondent:
o Student
o Housewife
o Working Professional
o Business
o Self – Employed
o Government Service employee
1. Do you own a life insurance policy/investment plan in your name?
o Yes
o No
69
2. If yes which company/ company’s insurance policies do you hold?
o HDFC Standard
o Birla Sun Life
o Aviva Life Insurance
o Bajaj Allianz
o LIC
o Tata AIG
o ICICI Prudential
o ING Vysya
o Bharti Axa
o Others (specify name)
3. What is the approximate premium paid by you annually (in Rupees)?
o Rs. 5000 – Rs. 10000
o Rs. 10001 – Rs. 15000
o Rs. 15001 – Rs. 24900
o Rs. 25000 – Rs. 50000
o Rs. 50001 – Rs. 60000
o Rs. 60001 – Rs. 80000
o Rs. 80001 – Rs. 100000
o More than Rs. 100000 ( specify premium)
4. What kind of insurance policy would suit you best in your current stage of life?
o Life Insurance
o Life Insurance and Investment Plans
o Pension Plans
o Child Plans
70
o Tax saving plans
5. Are you aware of the new unit linked insurance plans in the market?
o Yes
o No
6. How much would you be willing to spend per annum if you were to go for an
investment/ insurance plan?
o Less than Rs. 6000
o Rs. 6001 – Rs. 10000
o Rs. 10001 – Rs. 25000
o Rs. 25001 – Rs. 50000
o Rs. 50000 – Rs. 100000
o More than Rs. 100000
7. Which according to you is an ideal policy term? (Number of years you would be
willing to pay premium)
o 3 to 5 years
o 6 to 9 years
o 10 to 15 years
o 16 to 20 years
o 21 to 25 years
o 26 to 30 years
o More than 30 years
o Whole life policy
8. What motivates you to purchase insurance/ investment plans?
o Advertisements
o High Returns
o Advice from friends
o Family responsibilities
71
o Others (specify)
9. In which kind of company would you prefer to make a purchase of insurance?
o Government owned company
o Public Limited Company
o Private Company
o Foreign based company
10. Typically what kind of returns would you look at from your investments?
(Please note: Higher returns involve greater risk)
o Less than 5%
o 5% - 10 %
o 11% - 15 %
o 16% - 20 %
o 21% - 25%
o 26% - 30%
o 31% - 40%
o 41% - 50%
o More than 50%
72