A

Project Study Report

On
Titled
“COMPARATIVE STUDY OF HDFC STANDARD LIFE WITH TATA
-AIG LIFE INSURANCE”

Submitted in partial fulfillment for the

Award of degree of

Master of Business Administration

Submitted to: - Submitted by:-

Col. C.D. Sharma (Dean) Sandeep Jangid
Mrs.Shikha Sharma MBA iv Sem
2007-2009
Faculty of Management Studies,
Maharishi Arvind Institute Of Engineering &

Technology,
Jaipur(raj.)
 Preface

This project report has been prepared as per the requirement of the syllabus of
MBA course structure under which the students are the required to undertake
industrial internship. We look our project study of HDFC SLIC.

It was a firsthand experience for us as that we were exposed to the professional

set-up and were facing the market, which was really a great experience.

During project period, I had very touching experiences. When business is

involved, experiences counts a lot, as we know, experience are an instrument,
which leads towards success. As we all know that working in market on the
grass route level has always been a pleasure.

Now I take this opportunity to present the project report and sincerely hope that it
will be as much knowledge enhancing to the readers as it was to use during the
fieldwork and the completion of the report.

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 Acknowledgement

I express my sincere thanks to my project guide, Mrs Shikha Designation Senior

Lecturer and Col. C.D. Sharma (Dean), Faculty of management studies, for
guiding me right from the inception till the successful completion of the project. I
sincerely acknowledge her for extending their valuable guidance, support for
literature, critical reviews of project and the report and above all the moral
support she had provided to me with all stages of this project.

I would also like to thank the supporting staff of MAIET management

Department, for their help and cooperation throughout our project.

SANDEEP JANGID

3
 EXECUTIVE SUMMARY
HDFC Standard 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 HDFC SLIC, I found that the company
has a lot of competition from other private insurers like ICICI, Aviva, Birla Sun
Life and Tata AIG. It also faces competition from LIC. To compete effectively
HDFC SLIC 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.

HDFC must advertise regularly and create brand value for its products and
services. Most of its competitors like Aviva, ICICI, Max, 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 HDFC standard 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 products of HDFC. This training enables an advisor/sales

4
manager to market the policies better. HDFC 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, HDFC would be all set to capture the insurance market in India
as it has around the globe.

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 TABLE OF CONTENTS

Introduction to Insurance

Research Design

Company Profile of HDFC SLIC

Company Profile of Tata AIG LIC

POP’s and POD’s

Competitive analysis

Analysis and Interpretation

Facts and findings

SWOT analysis

Future line of research

Conclusion

Suggestions and recommendations

Appendix

Bibliography

6
INDIAN INSURANCE
INDUSTRY
“AN OVERVIEW”

7
 THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

Insurance is a federal subject in India and has a history dating back to 1818. Life and
general insurance in India is still a nascent sector with huge potential for various global
players with the life insurance premiums accounting to 2.5% of the country's GDP while
general insurance premiums to 0.65% of India's GDP.[1]. The Insurance sector in India
has gone through a number of phases and changes, particularly in the recent years
when the Govt. of India in 1999 opened up the insurance sector by allowing private
companies to solicit insurance and also allowing FDI up to 26%. Ever since, the Indian
insurance sector is considered as a booming market with every other global insurance
company wanting to have a lion's share. Currently, the largest life insurance company in
India is still owned by the government

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 1560.41 billion (for the financial
year 2006 – 2007). 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 65% 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)

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 INSURANCE
INDUSTRY AND ITS
CHRACTERISTICS

Nature of the Industry

Goods and services. The insurance industry provides protection against financial
losses resulting from a variety of perils. By purchasing insurance policies, individuals
and businesses can receive reimbursement for losses due to car accidents, theft of
property, and fire and storm damage; medical expenses; and loss of income due to
disability or death.

Industry organization. The insurance industry consists mainly of insurance carriers (or
insurers) and insurance agencies and brokerages. In general, insurance carriers are
large companies that provide insurance and assume the risks covered by the policy.
Insurance agencies and brokerages sell insurance policies for the carriers. While some
of these establishments are directly affiliated with a particular insurer and sell only that
carrier’s policies, many are independent and are thus free to market the policies of a
variety of insurance carriers. In addition to supporting these two primary components,
the insurance industry includes establishments that provide other insurance-related
services, such as claims adjustment or third-party administration of insurance and
pension funds.

These other insurance industry establishments also include a number of independent

organizations that provide a wide array of insurance-related services to carriers and their
clients. One such service is the processing of claims forms for medical practitioners.
Other services include loss prevention and risk management. Also, insurance
companies sometimes hire independent claims adjusters to investigate accidents and
claims for property damage and to assign a dollar estimate to the claim.

Insurance carriers assume the risk associated with annuities and insurance policies and
assign premiums to be paid for the policies. In the policy, the carrier states the length
and conditions of the agreement, exactly which losses it will provide compensation for,

9
and how much will be awarded. The premium charged for the policy is based primarily
on the amount to be awarded in case of loss, as well as the likelihood that the insurance
carrier will actually have to pay. In order to be able to compensate policyholders for their
losses, insurance companies invest the money they receive in premiums, building up a
portfolio of financial assets and income-producing real estate which can then be used to
pay off any future claims that may be brought. There are two basic types of insurance
carriers: primary and reinsurance. Primary carriers are responsible for the initial
underwriting of insurance policies and annuities, while reinsurance carriers assume all
or part of the risk associated with the existing insurance policies originally underwritten
by other insurance carriers.

Primary insurance carriers offer a variety of insurance policies. Life insurance provides
financial protection to beneficiaries—usually spouses and dependent children—upon the
death of the insured. Disability insurance supplies a preset income to an insured person
who is unable to work due to injury or illness, and health insurance pays the expenses
resulting from accidents and illness. An annuity (a contract or a group of contracts that
furnishes a periodic income at regular intervals for a specified period) provides a steady
income during retirement for the remainder of one’s life. Property-casualty insurance
protects against loss or damage to property resulting from hazards such as fire, theft,
and natural disasters. Liability insurance shields policyholders from financial
responsibility for injuries to others or for damage to other people’s property. Most
policies, such as automobile and homeowner’s insurance, combine both property-
casualty and liability coverage. Companies that underwrite this kind of insurance are
called property-casualty carriers.

Some insurance policies cover groups of people, ranging from a few to thousands of
individuals. These policies usually are issued to employers for the benefit of their
employees or to unions, professional associations, or other membership organizations
for the benefit of their members. Among the most common policies of this nature are
group life and health plans. Insurance carriers also underwrite a variety of specialized
types of insurance, such as real-estate title insurance, employee surety and fidelity
bonding, and medical malpractice insurance.

Other organizations in the industry are formed by groups of insurance companies, to

perform functions that would result in a duplication of effort if each company carried

10
them out individually. For example, service organizations are supported by insurance
companies to provide loss statistics, which the companies use to set their rates.

Recent developments. Congressional legislation now allows insurance carriers and

other financial institutions, such as banks and securities firms, to sell one another’s
products. More insurance carriers now sell financial products such as securities, mutual
funds, and various retirement plans. This approach is most common in life insurance
companies that already sold annuities, but property and casualty companies also are
increasingly selling a wider range of financial products. In order to expand into one
another’s markets, insurance carriers, banks, and securities firms have engaged in
numerous mergers, allowing the merging companies access to each other's client base
and geographical markets.

Insurance carriers have discovered that the Internet can be a powerful tool for reaching
potential and existing customers. Most carriers use the Internet simply to post company
information, such as sales brochures and product information, financial statements, and
a list of local agents. However, an increasing number of carriers are starting to expand
their Web sites to enable customers to access online account and billing information,
and some carriers even allow claims to be submitted online. Many carriers also provide
insurance quotes online based on the information submitted by customers on their
Internet sites. In fact, some carriers will allow customers to purchase policies through
the Internet without ever speaking to a live agent.

In addition to individual carrier-sponsored Internet sites, several “lead-generating” sites

have emerged. These sites allow potential customers to input information about their
insurance policy needs. For a fee, the sites forward customer information to a number of
insurance companies, which review the information and, if they decide to take on the
policy, contact the customer with an offer. This practice gives consumers the freedom to
accept the best rate.

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Working Conditions

Hours. Many workers in the insurance industry—especially those in administrative

support positions—work a 5-day, 40-hour week. Those in executive and managerial
occupations often put in more than 40 hours. There are several occupations in the
insurance industry where workers may work irregular hours outside of office settings.
Those working in sales jobs need to be available for their clients at all times. This
accommodation may result in these individuals working 50 to 60 hours per week. Also,
call centers operate 24 hours a day, 7 days a week, so some of their employees must
work evening and weekend shifts. The irregular business hours in the insurance industry
provide some workers with the opportunity for part-time work. Part-time employees
make up 8 percent of the workforce.

Work environment. Insurance employees working in sales jobs often visit prospective
and existing customers’ homes and places of business to market new products and
provide services. Others working in the industry may need to frequently leave the office
to inspect damaged property, and at times can be away from home for days, traveling to
the scene of a disaster—such as a tornado, flood, or hurricane—to work with affected
policyholders and government officials.

A small, but increasing, number of insurance employees spend most of their time on the
telephone working in call centers, answering questions and providing information to
prospective clients or current policyholders. These jobs may include selling insurance,
taking claims information, or answering medical questions.

As would be expected in an industry dominated by office and sales employees, the

incidence of occupational injuries and illnesses among insurance workers is low. In
2006, only 1.3 cases per 100 full-time workers were reported among insurance carriers,
while just 0.7 cases per 100 full-time workers were reported among agents and brokers.
These figures compare with an average of 4.4 for all private industry.

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Employment

The insurance industry had about 2.3 million wage and salary jobs in 2006. Insurance
carriers accounted for 62 percent of jobs, while insurance agencies, brokerages, and
providers of other insurance-related services accounted for 38 percent of jobs.

The majority of establishments in the insurance industry were small; however, a few
large establishments accounted for many of the jobs in this industry. Insurance carriers
tend to be large establishments, often employing 250 or more workers, whereas
agencies and brokerages tend to be much smaller, frequently employing fewer than 20
workers (chart 1).

Many insurance carriers’ home and regional offices are situated near large urban
centers. Insurance workers who deal directly with the public are located throughout the
country. Almost all of those working in sales work out of local company offices or

13
independent agencies. Many others in the industry work for independent firms in small
cities and towns throughout the country.

Occupations in the
Industry

About 44 percent of insurance workers are in office and administrative support jobs such
as those found in every industry (table 1). Many office and administrative support
positions in the insurance industry, however, require skills and knowledge unique to the
industry. About 29 percent of insurance workers are in management or business and
financial operations occupations. About 16 percent of wage and salary employees in the
industry are sales workers, selling policies to individuals and businesses. Several others
are employed in computer and mathematical science occupations.

Office and administrative support occupations. Office and administrative support

occupations in this industry include secretaries, typists, word processors, bookkeepers,
and other clerical workers. Secretaries and administrative assistants perform routine
clerical and administrative functions such as drafting correspondence, scheduling
appointments, organizing and maintaining paper and electronic files, or providing
information to callers. Bookkeeping, accounting, and auditing clerks handle all financial
transactions and recordkeeping for an insurance company. They compute, classify,
update, and record numerical data to keep financial records complete and accurate.
Insurance claims and policy processing clerks process new policies, modifications to
existing policies, and claims forms. They review applications for completeness, compile
data on policy changes, and verify the accuracy of insurance company records.
Customer service representatives have duties similar to insurance claims and policy
processing clerks, except they work directly with customers by processing insurance
policy applications, changes, and cancellations over the phone. They may also process
claims and sell new policies to existing clients. These workers recently are taking on
increased responsibilities in insurance offices, such as handling most of the continuing
contact with clients. A growing number of customer service representatives work in call
centers that are open 24 hours a day, 7 days a week, where they answer clients’

14
questions, update policy information, and provide potential clients with information
regarding the types of policies the company issues.

Management, business, and financial operations occupations. Top executives

direct the operations of an independent insurance agency, brokerage, or a large
insurance carrier. Marketing managers direct carriers’ development of new types of
policies that might appeal to the public and strategies for selling them to customers.
Sales managers direct the activities of the sales workers in local sales offices of
insurance carriers and independent agencies. They sell insurance products, work with
clients, and supervise staff. Other managers who work in their companies' home offices
are in charge of functions such as actuarial calculations, policy issuance, accounting,
and investments.

Claims adjusters, appraisers, examiners, and investigators decide whether claims are
covered by the customer’s policy, estimate and confirm payment, and, when necessary,
investigate the circumstances surrounding a claim. Claims adjusters work for property
and liability insurance carriers or for independent adjusting firms. They inspect property
damage, estimate how much it will cost to repair, and determine the extent of the
insurance company’s liability; in some cases, they may help the claimant receive
assistance quickly in order to prevent further damage and begin repairs. Adjusters plan
and schedule the work required to process claims, which may include interviewing the
claimant and witnesses and consulting police and hospital records. In some property-
casualty companies, claims adjusters are called claims examiners, but in other
companies, a claims examiner’s primary job is to review claims to ensure that proper
guidelines have been followed. Only occasionally—especially when disasters suddenly
increase the volume of claims—do these examiners aid adjusters with complicated
claims.

In the offices of life and health insurance carriers, claims examiners are the counterparts
of the claims adjuster who works in a property and casualty insurance firm. Examiners in
the health insurance carriers review health-related claims to see whether the costs are
reasonable based on the diagnosis. Examiners check claim applications for
completeness and accuracy, interview medical specialists, and consult policy files to
verify information on a claim. Claims examiners in the life insurance carriers review
causes of death and also may review new applications for life insurance to make sure

15
that the applicants have no serious illnesses that would prevent them from qualifying for
insurance.

Insurance investigators handle claims in which companies suspect fraudulent or criminal

activity, such as suspicious fires, questionable workers’ disability claims, difficult-to-
explain accidents, and dubious medical treatment. Investigators usually perform
database searches on suspects to determine whether they have a history of attempted
or successful insurance fraud. Then, the investigators may visit claimants and witnesses
to obtain a recorded statement, take photographs, inspect facilities, and conduct
surveillance on suspects. Investigators often consult with legal counsel and are
sometimes called to testify as expert witnesses in court cases.

Auto damage appraisers usually are hired by insurance companies and independent
adjusting firms to inspect the damage to a motor vehicle after an accident and to provide
unbiased estimates of repair cost. Claims adjusters and auto damage appraisers can
work for insurance companies, or they can be independent or public adjusters.
Insurance companies hire independent adjusters to represent their interests while
assisting the insured, whereas public adjusters are hired to represent the insured’s
interests against insurance carriers.

Management analysts, often called loss control representatives in the insurance

industry, assess various risks faced by insurance companies. These workers inspect the
business operations of insurance applicants, analyze historical data regarding workplace
injuries and automobile accidents, and assess the potential for natural hazards,
dangerous business practices, and unsafe workplace conditions that may result in
injuries or catastrophic physical and financial loss. They might then recommend, for
example, that a factory add safety equipment, that a house be reinforced to withstand
environmental catastrophes, or that incentives be implemented to encourage automobile
owners to install air bags in their cars or take more effective measures to prevent theft.
Because the changes they recommend can greatly reduce the probability of loss, loss
control representatives are increasingly important to both insurance companies and the
insured.

Underwriting is another important management and business and financial occupation in

insurance. Underwriters evaluate insurance applications to determine the risk involved in

16
issuing a policy. They decide whether to accept or reject an application, and they
determine the appropriate premium for each policy.

Sales and related occupations. Insurance sales agents, also referred to as producers,
may work as exclusive agents, or captive agents, selling for one company, or as
independent agents selling for several companies. Through regular contact with clients,
agents are able to update coverage, assist with claims, ensure customer satisfaction,
and obtain referrals. Insurance sales agents may sell many types of insurance, including
life, annuities, property-casualty, health, and disability insurance. Many insurance sales
agents are involved in “cross-selling” or “total account development,” which means that,
besides offering insurance, they have become licensed to sell mutual funds, annuities,
and other securities. These agents usually find their own customers and ensure that the
policies sold meet the specific needs of their policyholders.

Professional and related occupations. The insurance industry employs relatively few
people in professional and related occupations, but they are essential to company
operations. For example, insurance companies’ lawyers defend clients who are sued,
especially when large claims may be involved. These lawyers also review regulations
and policy contracts. Nurses and other medical professionals advise clients on wellness
issues and on medical procedures covered by the company’s managed-care plan.
Computer systems analysts, computer programmers, and computer support specialists
are needed to analyze, design, develop, and program the systems that support the day-
to-day operations of the insurance company.

Actuaries represent a relatively small proportion of employment in the insurance

industry, but they are vital to the industry’s profitability. Actuaries study the probability of
an insured loss and determine premium rates. They must set the rates so that there is a
high probability that premiums paid by customers will cover claims, but not so high that
their company loses business to competitors.

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Table 1. Employment of wage and salary workers in insurance by occupation, 2006
and projected change, 2006-2016.
(Employment in thousands)
Employment, Percent
2006
Occupation change,
Number Percent

2006-16
All occupations 2,316 100.0 7.4

Management, business, and financial occupations 661 28.6 8.3

General and operations managers 41 1.8 -1.9
Marketing and sales managers 20 0.9 7.2
Computer and information systems managers 14 0.6 5.9
Financial managers 24 1.0 6.6
Claims adjusters, examiners, and investigators 218 9.4 10.8
Insurance appraisers, auto damage 12 0.5 12.0
Human resources, training, and labor relations
28 1.2 10.9
specialists
Management analysts 29 1.2 5.4
Accountants and auditors 40 1.7 7.8
Financial analysts 16 0.7 16.9
Insurance underwriters 91 3.9 5.6

Professional and related occupations 258 11.2 8.6

Computer programmers 21 0.9 -15.1
Computer software engineers 28 1.2 24.7
Computer support specialists 19 0.8 6.8
Computer systems analysts 33 1.4 15.5
Actuaries 11 0.5 5.4
Market research analysts 12 0.5 6.5
Lawyers 12 0.5 5.6
Title examiners, abstractors, and searchers 23 1.0 -5.5
Registered nurses 25 1.1 6.2

Sales and related occupations 367 15.8 14.4

First-line supervisors/managers of non-retail sales
18 0.8 3.8
workers
Insurance sales agents 313 13.5 15.7

Office and administrative support occupations 1,009 43.6 4.0

First-line supervisors/managers of office and
62 2.7 -6.0
administrative support workers
Billing and posting clerks and machine operators 18 0.8 -2.5

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Table 1. Employment of wage and salary workers in insurance by occupation, 2006
and projected change, 2006-2016.
(Employment in thousands)
Employment, Percent
Occupation 2006
Number Percent
change,
Bookkeeping, accounting, and auditing clerks 47 2.0 8.9
Customer service representatives 266 11.5 19.2
File clerks 15 0.7 -45.3
Receptionists and information clerks 24 1.0 10.0
Executive secretaries and administrative assistants 57 2.4 8.2
Secretaries, except legal, medical, and executive 62 2.7 -1.5
Data entry keyers 22 0.9 -13.5
Insurance claims and policy processing clerks 222 9.6 -2.6
Mail clerks and mail machine operators, except postal
14 0.6 -21.0
service
Office clerks, general 106 4.6 7.8

Note: Columns may not add to totals due to omission of occupations with small
employment

Training and
Advancement

A few jobs in the insurance industry, especially in office and administrative support
occupations, require no more than a high school diploma. However, employers prefer to
hire workers with a college education for most jobs, including sales, managerial, and
professional jobs. When specialized training is required, it usually is obtained on the job
or through independent study during work or after-work hours. Many insurance
companies expect their employees to take continuing education courses to improve their
people skills and their knowledge of the industry. Opportunities for advancement are
relatively good in the insurance industry.

Office and administrative support occupations. Graduation from high school or a 2-

year postsecondary business program is adequate preparation for most beginning office
and administrative support jobs. Courses in word processing and business math are

19
assets, and the ability to operate computers is essential. On-the-job training usually is
provided for clerical jobs such as customer service representatives. Because
representatives in call centers must be knowledgeable about insurance products in
order to provide advice to clients, more States are requiring customer service
representatives to become licensed. Several years of experience and training can help
beginners advance to higher paying positions. Office and administrative support workers
may also advance to higher paying claims adjusting positions and entry-level
underwriting jobs.

Management, business, and financial operations occupations. Management,

business, and financial jobs require the same college training as similar jobs in other
industries. Managerial positions usually are filled by promoting college-educated
employees from within the company. However, some companies prefer to hire liberal
arts graduates at a lower cost, and many insurers send them to company schools or
enroll them in outside institutes for professional training. A master’s degree, particularly
in business administration or a related field, is an asset for advancement into higher
levels of management.

For beginning underwriting jobs, many insurance companies prefer college graduates
who have a degree in business administration or a related field. As an underwriter’s

Career develops; it becomes beneficial to earn one of the voluntary professional

certifications in underwriting. For example, the National Association of Health
Underwriters offers two certification programs: the Registered Health Underwriter (RHU)
designation and the Registered Employee Benefits Consultant (REBC) designation.

The American Institute for Chartered Property-Casualty Underwriters (AICPU) offers the
CPCU program, which includes courses covering a broad range of insurance, risk
management, and general business topics involving both personal and commercial loss
exposures. Earning the CPCU designation requires passing 8 exams, meeting a
requirement of at least three years of insurance experience, and abiding by the AICPU’s
and CPCU Society’s code of professional ethics. In conjunction with the Insurance

20
Institute of America, the AICPCU offers 22 insurance-related educational programs,
including claims, underwriting, risk management, and reinsurance.

In almost every State, those working as a claims examiner or adjuster must obtain a
license. Licensing requirements for these workers vary by State and can include
prelicensing education or passing a licensing exam. In some cases, professional
designations may be substituted for the exam requirement. Separate or additional
requirements may apply to public adjusters. For example, some States may require
public adjusters to file a surety bond. Often, claims adjusters working for companies can
work under the company license and not need to become licensed themselves. Most
companies prefer to hire college graduates and those with previous experience or who
have obtained licensure for claims adjuster and examiner positions. No specific college
major is required, although most workers in these positions have a business,
accounting, engineering, legal, or medical background. In addition, many adjusters and
examiners choose to pursue certain certifications and designations to distinguish
themselves. Many State licenses and professional designations require continuing
education for renewal. Continuing education is important because adjusters and
examiners must be knowledgeable about changes in the laws, recent court decisions,
and new medical procedures.

Auto damage appraisers typically begin as auto body repairers and then are hired by
insurance companies or independent adjusting firms. Most companies prefer auto

damage appraisers to have formal training, and many vocational colleges offer 2-year
programs on how to estimate and repair damaged vehicles. Some States require them
to be licensed, and certification may be required or preferred. Computer skills also are
an important qualification for many auto damage appraiser positions. As with adjusters
and examiners, continuing education is important for appraisers, because many new car
models and repair techniques are introduced each year.

Licensing requirements to become an insurance investigator may vary among States.

Most insurance companies prefer to hire former law enforcement detectives or private
investigators as insurance investigators. Many experienced claims adjusters or

21
examiners also can become investigators. Most employers look for individuals with
ingenuity and who are persistent and assertive. Investigators must not be afraid of
confrontation, should communicate well, and should be able to think on their feet. Good
interviewing and interrogation skills also are important and usually are developed in
earlier careers in law enforcement.

Sales and related occupations. Although some employers hire high school graduates
with potential or proven sales ability for entry-level sales positions, most prefer to hire
college graduates.

All insurance sales agents must obtain licenses in the States in which they plan to sell
insurance. In most States, licenses are issued only to applicants who complete specified
courses and pass written examinations covering insurance fundamentals and State
insurance laws. New agents receive training from their employer, either at work or at the
insurance company’s home office. Sometimes, entry-level employees attend company-
sponsored classes to prepare for examinations. The National Alliance for Insurance
Education and Research offers a wide variety of courses in health, life, and property and
casualty insurance for independent insurance agents. Others study on their own and, as
on-the-job training, accompany experienced agents when they meet with prospective
clients. After obtaining a license, agents must earn continuing education credits
throughout their careers in order to remain licensed insurance sales agents.

Insurance sales agents wishing to sell securities and other financial products must meet
State licensing requirements in these areas. Specifically, they must pass an additional
examination—either the Series 6 or Series 7 licensing exam, both of which are
administered by the Financial Industry Regulatory Authority (FINRA). The Series 6 exam
is for individuals who wish to sell only mutual funds and variable annuities; the Series 7
exam is the main FINRA series license and qualifies agents as general securities
representatives. To demonstrate further competency in financial planning, many agents
also find it worthwhile to obtain a certified financial planner (CFP) or chartered financial
consultant (ChFC) designation.

22
Sales workers may advance by handling greater numbers of accounts and more
complex commercial insurance policies. They may also choose to start an independent
insurance agency. Many also obtain related designations such as the CPCU
underwriting designation, offered by the AICPCU.

Professional and related occupations. For actuarial jobs, companies prefer

candidates to have degrees in actuarial science, mathematics, or statistics. However,
candidates with degrees in business, finance, or economics are becoming more
common. Actuaries must pass a series of national examinations to become fully
qualified. Completion of all the exams takes from 5 to 10 years. Some of the exams may
be taken while an individual is in college, but most require extensive home study. Many
companies grant study time to their actuarial students to prepare for the exams.

Outlook

Demand for insurance will increase, but employment in the insurance industry will
increase more slowly than employment growth across all industries.

Employment change. Wage and salary employment in the insurance industry is

projected to grow about 7 percent between 2006 and 2016, compared to the 11 percent
growth projected for wage and salary employment in all industries combined. While
demand for insurance is expected to rise, job growth will be limited by corporate

downsizing, productivity increases due to new technology, and increasing use of direct
mail, telephone, and Internet sales. However, some job growth will result from the
industry’s expansion into the broader financial services field, new types of insurance
entering the market, and growth in demand for medical service and health insurance.

Medical service and health insurance is the fastest growing segment of the insurance
industry. Significant growth is expected over the long term, even though increasing
health insurance premiums have recently become difficult for some people to afford. As
the members of the baby boom generation grow older and a growing share of the

23
Nation’s population moves into the older age groups, more people are expected to buy
health insurance and long-term-care insurance, as well as annuities and other types of
pension products sold by insurance sales agents. If legislation is enacted that makes
health insurance affordable to more people, even greater increases in demand for this
type of insurance should result.

Population growth also will stimulate demand for auto insurance and homeowners
insurance. Also, population growth will create additional demand for businesses to
service the needs of more people, and these businesses will need insurance as well. In
addition, growing numbers of individuals and businesses are purchasing liability policies
to protect against possible large liability awards from lawsuits brought by people
claiming injury or damage from a product.

Many successful insurance companies will recognize the Internet’s potential as a

powerful marketing tool, increasing employment growth of some occupations while
slowing growth of others. Growing use of the Internet might reduce costs for insurance
companies, but it also could enable many clients to turn first to the Internet to get
information on their policies, obtain price quotes on possible new policies, or submit
claims. As insurance companies begin to offer more information and services on the
Internet, employment in some occupations, such as insurance sales agents, could be
adversely affected.

Productivity gains caused by the greater use of computer software will continue to limit
the growth of certain jobs within the insurance industry. For example, the use of

Underwriting software that automatically analyzes and rates insurance applications will
limit the employment growth of underwriters. Workers in claims now may not have to
visit the site of customers’ damage; they may use satellite imagery to inspect the
damage from their computers. In addition, the Internet allows insurance investigators to
handle an increasing number of cases by drastically reducing the amount of time it takes
them to perform background checks, limiting the additional investigators that must be
hired to handle a growing workload. Also, computers have made communications easier
among sales agents, adjusters, and insurance carriers—making all much more

24
productive—by linking them directly to the databases of insurance carriers and other
organizations. Furthermore, insurance carriers contain costs by increasing using
customer service representatives to deal with the day-to-day processing of policies and
claims.

Job prospects. Workers in property and casualty insurance, particularly in auto

insurance, will be most affected by increasing reliance on the Internet. Auto policies are
relatively straightforward and can be issued more easily without the involvement of a live
agent. Also, auto premiums tend to cost more per year than do other types of policies,
so people are more likely to shop around for the best price—and the Internet makes it
easier to compare rates among companies.

Insurance companies will continue to face increased competition from banks and
securities firms entering the insurance markets. As more of these firms begin to sell
insurance policies, they will employ increasing numbers of insurance sales agents. In
order to stay competitive, more insurance companies are expanding the range of
financial products and services they offer, or are establishing partnerships with banks or
brokerage firms.

Although employment in the insurance industry is expected to grow slowly, thousands of

openings are expected to arise in this large industry to replace workers who leave the
industry, retire, or stop working for other reasons. Despite the fact that the internet
allows many people to buy policies online, many sales agents still will be needed to
meet face-to-face with clients; some customers prefer to talk directly with an agent,
especially regarding complicated policies. Opportunities will be best for sales agents
who sell more

than one type of insurance or financial service. Opportunities should be good for
adjusters because they will still be needed to inspect damage and interview witnesses
as the insurance industry, the Nation’s population, and the number of claims all grow.
Opportunities likewise should be good for actuaries, even though the number of
available jobs will small, because many people are discouraged from following this
career path due to the stringent qualifying requirements of the examination system.

25
Earnings

Industry earnings. Weekly earnings of nonsupervisory workers in the insurance

industry averaged $798 in May 2006, considerably higher than the average of $568 for
all private industry. Earnings of the largest occupations in insurance in May 2006,
appear in table 2

Table 2. Median hourly earnings of the largest occupations in insurance, May 2006
All
Occupation Insurance
industries
General and operations managers $53.02 $40.97
Insurance underwriters 25.29 25.17
First-line supervisors/managers of office and
24.36 20.92
administrative support workers
Claims adjusters, examiners, and investigators 23.42 24.36
Executive secretaries and administrative assistants 18.70 17.90
Bookkeeping, accounting, and auditing clerks 15.55 14.69
Insurance claims and policy processing clerks 14.97 14.96
Customer service representatives 14.79 13.62
Secretaries, except legal, medical, and executive 12.65 13.20
clerks, general 11.38 11.40

The method by which insurance sales agents are paid varies greatly. Most independent
sales agents own their own businesses and are paid a commission only. Sales agents
who Office are employees of an agency may be paid a salary only, a salary plus
commission, or a salary plus a bonus. An agent’s earnings usually increase rapidly with
experience. Many agencies also pay an agent’s expenses for automobiles and
transportation, travel to conventions, and continuing education.

Benefits and union membership. Insurance carriers offer attractive benefits packages,
as is frequently the case with large companies. Yearly bonuses, retirement investment
plans, insurance, and paid vacation often are standard. Insurance agencies, which
generally are smaller, offer less extensive benefits.

Unionization is not widespread in the insurance industry. In 2006, 3 percent of all

insurance workers were union members or were covered by union contracts, compared
with 12 percent of workers throughout private industry

26
 HISTORICAL PERSPECTIVE

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.

27
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 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.

28
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
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

Most of the present day Life Insurance Companies in India are joint ventures between
Indian groups and conglomerates and global insurance companies. The terms of the
joint ventures include a majority stake holding of Indian partner in the JV. The life
insurance deals include a detail information guide to the customer from the insurance
agent or broker citing the various insurance plans and policies available, the insurance

29
premium estimates and estimate of the prices of the insurance policy short listed, the
guidelines and terms of the insurance company and many such info.

The life insurance companies work in close association with the life insurance agents and
brokers. Special training and education is provided to each insurance agent or broker
about the facts of life insurance, how it works, industry info, insurance leads, types of
insurance policies on offer, claims settlements, life insurance laws in India, knowledge
about the return of premium procedure of the life insurance company and the tax savings
the insurance policy would provide.

Besides the usual life insurance services covering individual insurance, group life
insurance, family insurance, health insurance and medi claims, Life insurance products in
India are also designed for special target groups like:

• For seniors over 50, over 65 etc

• For kids or children
• For diabetics
• For the elderly

• For HIV patients

The ratings and reviews of the Life Insurance Companies in India are available
online where you can check the rankings and rating of the insurance company
you wish to buy a policy from. You can make comparison among the various life
insurance policies on offer by the life insurance companies of India.
A comprehensive list of the major insurance companies has been provided here
with compete profile of the company, their insurance products and policies, the
terms and statistics of the insurance providers etc.

Every company has different policy to offer. You just need to choose which is the
best for you. The amount for which you want to take the policy, the tenure of
policy and the amount you want to pay in each installments, all these factors you
need to keep in mind and then choose the company which fulfills all your needs
and provides full transparency

30
PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN
INDIA

The life insurance industry in India grew by an impressive 47.38%, with premium income
at Rs. 1560.41 billion during the fiscal year 2006-2007. Though the total volume of LIC's
business increased in the last fiscal year (2006-2007) compared to the previous one, its
market share came down from 85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about 19% in a
year's time. The figures for the first two months of the fiscal year 2007-08 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 19 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)

31
RESEARCH DESIGN

32
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.

RESEARCH METHODOLOGY

TITLE OF THE STUDY

“Comparative study of the products of HDFC Standard Life Insurance Company

Limited and Tata AIG Life Insurance Company Limited for HDFC Standard Life
Insurance Company Ltd.”

33
DURATION OF THE PROJECT
3 months

STATEMENT OF THE PROBLEM

This study was undertaken to identify which type of insurance plans HDFC SLIC should
market to beat Tata AIG LIC 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.

OBJECTIVES OF THE STUDY

 To analysis the product details of HDFC Standard life Insurance Company

limited and Tata AIG life Insurance Company Limited.

 To find ‘Points of Parity’ and ‘Points of Difference’ of HDFC Standard Life

Insurance Company Limited and Tata AIG Life Insurance Company Limited.

 To find out factors that influence customers to purchase insurance policies

and give suggestions for further improvement.

34
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: Research Methodology, By C. R.
Kothari)

PRIMARY SOURCES
These include the survey or questionnaire method, telephonic interview as well as the
personal interview methods of data collection.

SECONDARY SOURCES
These include books, the internet, company brochures, product brochures, the company
website, competitor’s websites etc, newspaper articles etc.

SAMPLING
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.

SAMPLE SIZE
The sample size for the survey conducted was 270 respondents. This sample size was
taken on 95% confidence level and 6 significant level. Data universe for this sample is
10,00,000 which is approx population of Jaipur excluding people below age of 18 years.

35
SAMPLING TECHNIQUE
Random sampling technique was used in the survey conducted.

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.

STUDY AREA
The samples referred to were residing in Jaipur City. The areas covered were Sitapura,
Mansarovar , Sanganer , Vaishali Nagar , Badi Choppad , Malviya Nagar.

Introduction to insurance - An overview of the industry, history, key milestones,

reforms in the industry, present scenario in India.

Research Design - Introduction, Research methodology, title of the study, duration

of the project, statement of the problem, objectives of the study, sampling, plan of
analysis and study area.

36
 Company profile of HDFC SLIC – Introduction of HDFC SLIC, products and
services, vision and core values, human resource, organizational structure,
introduction to unit linked funds, national & international presence of the
organization.

Company profile of Tata AIG – Introduction of Tata AIG, products and services,
vision and core values. The advantages of investing in HDFC SLIC compared to
other financial instruments.

Points of Parity and Points of Difference between HDFC SLIC and Tata AIG LIC
– Comparison between different plans, charges, fees, deductions and riders
available with HDFC SLIC and Tata AIG LIC

Competitive analysis – Information about the plans offered by LIC and other private
insurers in India. Comparisons between the plans to find the most popular and
beneficial plans which HDFC SLIC can incorporate into their product portfolio.

Analysis and Interpretation – A survey on factors that influence people to

purchase Life Insurance Policy.

Facts and findings- Facts about the survey

Swot analysis- Description of strength, weakness, opportunity and threats to HDFC

SLIC

Problems requiring more research – Future line of work

Conclusion

37
Suggestions and recommendations - The techniques used to market insurance
and their advantages and disadvantages along with suggestions for improvement.

Appendices
Bibliography

COMPANY PROFILE

OF

HDFC STANDARD LIFE

INSURANCE COMPANY
LTD.
38
HDFC STANDARD LIFE INSURANCE COMPANY
LIMITED

Life insurance

Life insurance or life assurance is a contract between the policy owner and the
insurer, where the insurer agrees to pay a sum of money upon the occurrence of the
insured individual's or individuals' death or other event, such as terminal illness or critical
illness. In return, the policy owner agrees to pay a stipulated amount called a premium
at regular intervals or in lump sums. There may be designs in some countries where bills
and death expenses plus catering for after funeral expenses should be included in
Policy Premium. In the United States, the predominant form simply specifies a lump sum
to be paid on the insured's demise.

As with most insurance policies, life insurance is a contract between the insurer and the
policy owner whereby a benefit is paid to the designated beneficiaries if an insured
event occurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the
value derived from the 'peace of mind' experienced by the policyholder, due to the
negating of adverse financial consequences caused by the death of the Life Assured.

To be a life policy the insured event must be based upon the lives of the people named
in the policy.

Insured events that may be covered include:

• Serious illness

39
Life policies are legal contracts and the terms of the contract describe the limitations of
the insured events. Specific exclusions are often written into the contract to limit the
liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil
commotion.

Life-based contracts tend to fall into two major categories:

• Protection policies - designed to provide a benefit in the event of specified event,

typically a lump sum payment. A common form of this design is term insurance.
• Investment policies - where the main objective is to facilitate the growth of capital
by regular or single premiums. Common forms (in the US anyway) are whole life,
universal life and variable life policies.

Overview

Parties to contract

There is a difference between the insured and the policy owner (policy holder), although
the owner and the insured are often the same person. For example, if Joe buys a policy
on his own life, he is both the owner and the insured. But if Jane, his wife, buys a policy
on Joe's life, she is the owner and he is the insured. The policy owner is the guarantee
and he or she will be the person who will pay for the policy. The insured is a participant
in the contract, but not necessarily a party to it.

The beneficiary receives policy proceeds upon the insured's death. The owner
designates the beneficiary, but the beneficiary is not a party to the policy. The owner can
change the beneficiary unless the policy has an irrevocable beneficiary designation.
With an irrevocable beneficiary, that beneficiary must agree to any beneficiary changes,
policy assignments, or cash value borrowing.

In cases where the policy owner is not the insured (also referred to as the celui qui vit or
CQV), insurance companies have sought to limit policy purchases to those with an
"insurable interest" in the CQV. For life insurance policies, close family members and
business partners will usually be found to have an insurable interest. The "insurable
interest" requirement usually demonstrates that the purchaser will actually suffer some
kind of loss if the CQV dies. Such a requirement prevents people from benefiting from

40
the purchase of purely speculative policies on people they expect to die. With no
insurable interest requirement, the risk that a purchaser would murder the CQV for
insurance proceeds would be great. In at least one case, an insurance company which
sold a policy to a purchaser with no insurable interest (who later murdered the CQV for
the proceeds), was found liable in court for contributing to the wrongful death of the
victim (Liberty National Life v. Weldon, 267 Ala.171 (1957)).

Contract terms

• Special provisions may apply, such as suicide clauses wherein the policy
becomes null if the insured commits suicide within a specified time (usually two
years after the purchase date; some states provide a statutory one-year suicide
clause). Any misrepresentation by the insured on the application is also grounds
for nullification. Most US states specify that the contestability period cannot be
longer than two years; only if the insured dies within this period will the insurer
have a legal right to contest the claim on the basis of misrepresentation and
request additional information before deciding to pay or deny the claim.

The face amount on the policy is the initial amount that the policy will pay at the death of
the insured or when the policy matures, although the actual death benefit can provide for
greater or lesser than the face amount. The policy matures when the insured dies or
reaches a specified age (such as 100 years old).

Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with intent to fund
claims to be paid and administrative costs, and to make a profit. The cost of insurance is
determined using mortality tables calculated by actuaries. Actuaries are professionals
who employ actuarial science, which is based in mathematics (primarily probability and
statistics). Mortality tables are statistically-based tables showing expected annual
mortality rates. It is possible to derive life expectancy estimates from these mortality
assumptions. Such estimates can be important in taxation regulation

The three main variables in a mortality table have been age, gender, and use of
tobacco. More recently in the US, preferred class specific tables were introduced. The

41
mortality tables provide a baseline for the cost of insurance. In practice, these mortality
tables are used in conjunction with the health and family history of the individual
applying for a policy in order to determine premiums and insurability. Mortality tables
currently in use by life insurance companies in the United States are individually
modified by each company using pooled industry experience studies as a starting point.
In the 1980s and 90's the SOA 1975-80 Basic Select & Ultimate tables were the typical
reference points, while the 2001 VBT and 2001 CSO tables were published more
recently. The newer tables include separate mortality tables for smokers and non-
smokers and the CSO tables include separate tables for preferred classes.

Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males
aged 25 will die during the first year of coverage after underwriting. Mortality
approximately doubles for every extra ten years of age so that the mortality rate in the
first year for underwritten non-smoking men is about 2.5 in 1,000 people at age
65.Compare this with the US population male mortality rates of 1.3 per 1,000 at age 25
and 19.3 at age 65 (without regard to health or smoking status).

The mortality of underwritten persons rises much more quickly than the general
population. At the end of 10 years the mortality of that 25 year-old, non-smoking male is
0.66/1000/year. Consequently, in a group of one thousand 25 year old males with a
$100,000 policy, all of average health, a life insurance company would have to collect
approximately $50 a year from each of a large group to cover the relatively few expected
claims. (0.35 to 0.66 expected deaths in each year x $100,000 payout per death = $35
per policy). Administrative and sales commissions need to be accounted for in order for
this to make business sense. A 10 year policy for a 25 year old non-smoking male
person with preferred medical history may get offers as low as $90 per year for a
$100,000 policy in the competitive US life insurance market.

The insurance company receives the premiums from the policy owner and invests them
to create a pool of money from which it can pay claims and finance the insurance
company's operations. Contrary to popular belief, the majority of the money that
insurance companies make comes directly from premiums paid, as money gained
through investment of premiums can never, in even the most ideal market conditions,
vest enough money per year to pay out claims

42
Rates charged for life insurance increase with the insurer's age because, statistically,
people are more likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer's financial
situation, the insurer investigates each proposed insured individual unless the policy is
below a company-established minimum amount, beginning with the application process.
Group Insurance policies are an exception.

This investigation and resulting evaluation of the risk is termed underwriting. Health and
lifestyle questions are asked. Certain responses or information received may merit
further investigation. Life insurance companies in the United States support the Medical
Information Bureau (MIB), which is a clearinghouse of information on persons who have
applied for life insurance with participating companies in the last seven years. As part of
the application, the insurer receives permission to obtain information from the proposed
insured's physicians.[5]

Underwriters will determine the purpose of insurance. The most common is to protect
the owner's family or financial interests in the event of the insurer's demise. Other
purposes include estate planning or, in the case of cash-value contracts, investment for
retirement planning. Bank loans or buy-sell provisions of business agreements are
another acceptable purpose.

Life insurance companies are never required by law to underwrite or to provide

coverage to anyone, with the exception of Civil Rights Act compliance requirements.
Insurance companies alone determine insurability, and some people, for their own
health or lifestyle reasons, are deemed uninsurable. The policy can be declined (turned
down) or rated Rating increases the premiums to provide for additional risks relative to
the particular insured

Many companies use four general health categories for those evaluated for a life
insurance policy. These categories are Preferred Best, Preferred, Standard, and
Tobacco

Preferred Best is reserved only for the healthiest individuals in the general population.
This means, for instance, that the proposed insured has no adverse medical history, is
not under medication for any condition, and his family (immediate and extended) has no

43
history of early cancer, diabetes, or other conditions. Preferred means that the proposed
insured is currently under medication for a medical condition and have a family history of
particular illnesses

Most people are in the Standard category. Profession, travel, and lifestyle factor into
whether the proposed insured will be granted a policy, and which category the insured
falls. For example, a person who would otherwise be classified as Preferred Best may
be denied a policy if he or she travels to a high risk country.Underwriting practices can
vary from insurer to insurer which provide for more competitive offers in certain
circumstances.

Life insurance contracts are written on the basis of utmost good faith. That is, the
proposer and the insurer both accept that the other is acting in good faith. This means
that the proposer can assume the contract offers what it represents without having to
fine comb the small print and the insurer assumes the proposer is being honest when
providing details to underwriter.

Death proceeds

Upon the insured's death, the insurer requires acceptable proof of death before it pays
the claim. The normal minimum proof required is a death certificate and the insurer's
claim form completed, signed (and typically notarized If the insured's death is suspicious
and the policy amount is large, the insurer may investigate the circumstances
surrounding the death before deciding whether it has an obligation to pay the claim.

Proceeds from the policy may be paid as a lump sum or as an annuity, which is paid
over time in regular recurring payments for either a specified period or for a beneficiary's
lifetime.

Insurance vs Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In
general, in these jurisdictions "insurance" refers to providing cover for an event that
might happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an
event that is certain to happen. "Insurance" is the generally accepted term, however,
people using this description are liable to be corrected. In the United States both forms

44
of coverage are called "insurance", principally due to many companies offering both
types of policy, and rather than refer to themselves using both insurance and assurance
titles, they instead use just one.

Types of life insurance

Life insurance may be divided into two basic classes – temporary and permanent or
following subclasses - term, universal, whole life and endowment life insurance.

TEMPORARY TERM

Term assurance: provides for life insurance coverage for a specified term of years for a
specified premium. The policy does not accumulate cash value. Term is generally
considered "pure" insurance, where the premium buys protection in the event of death
and nothing else.

The three key factors to be considered in term insurance are: face amount (protection or
death benefit), premium to be paid (cost to the insured), and length of coverage (term).

Various insurance companies sell term insurance with many different combinations of
these three parameters. The face amount can remain constant or decline. The term can
be for one or more years. The premium can remain level or increase. A common type of
term is called annual renewable term. It is a one year policy but the insurance company
guarantees it will issue a policy of equal or lesser amount without regard to the
insurability of the insured and with a premium set for the insured's age at that time.
Another common type of term insurance is mortgage insurance, which is usually a level
premium, declining face value policy. The face amount is intended to equal the amount
of the mortgage on the policy owner’s residence so the mortgage will be paid if the
insured dies.

45
A policy holder insures his life for a specified term. If he dies before that specified term is
up, his estate or named beneficiary receives a payout. If he does not die before the term
is up, he receives nothing. In the past these policies would almost always exclude
suicide. However, after a number of court judgments against the industry, payouts do
occur on death by suicide (presumably except for in the unlikely case that it can be
shown that the suicide was just to benefit from the policy). Generally, if an insured
person commits suicide within the first two policy years, the insurer will return the
premiums paid. However, a death benefit will usually be paid if the suicide occurs after
the two year period.

Permanent Life Insurance

Permanent life insurance is life insurance that remains in force (in-line) until the policy
matures (pays out), unless the owner fails to pay the premium when due (the policy
expires OR policies lapse). The policy cannot be canceled by the insurer for any reason
except fraud in the application, and that cancellation must occur within a period of time
defined by law (usually two years). Permanent insurance builds a cash value that
reduces the amount at risk to the insurance company and thus the insurance expense
over time. This means that a policy with a million dollar face value can be relatively
expensive to a 70 year old. The owner can access the money in the cash value by
withdrawing money, borrowing the cash value, or surrendering the policy and receiving
the surrender value.

The four basic types of permanent insurance are whole life, universal life, limited pay
and endowment.

Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the
policy guaranteed by the company. The primary advantages of whole life are
guaranteed death benefits, guaranteed cash values, fixed and known annual premiums,
and mortality and expense charges will not reduce the cash value shown in the policy.
The primary disadvantages of whole life are premium inflexibility, and the internal rate of
return in the policy may not be competitive with other savings alternatives. Riders are

46
available that can allow one to increase the death benefit by paying additional premium.
The death benefit can also be increased through the use of policy dividends. Dividends
cannot be guaranteed and may be higher or lower than historical rates over time.
Premiums are much higher than term insurance in the short-term, but cumulative
premiums are roughly equal if policies are kept in force until average life expectancy.

Cash value can be accessed at any time through policy "loans". Since these loans
decrease the death benefit if not paid back, payback is optional. Cash values are not
paid to the beneficiary upon the death of the insured; the beneficiary receives the death
benefit only. If the dividend option: Paid up additions is elected, dividend cash values will
purchase additional death benefit which will increase the death benefit of the policy to
the named beneficiary.

Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide
permanent insurance coverage with greater flexibility in premium payment and the
potential for a higher internal rate of return. There are several types of universal life
insurance policies which include "interest sensitive" (also known as "traditional fixed
universal life insurance"), variable universal life insurance, and equity indexed universal
life insurance.

A universal life insurance policy includes a cash account. Premiums increase the cash
account. Interest is paid within the policy (credited) on the account at a rate specified by
the company. Mortality charges and administrative costs are then charged against
(reduce) the cash account. The surrender value of the policy is the amount remaining in
the cash account less applicable surrender charges, if any.

With all life insurance, there are basically two functions that make it work. There's a
mortality function and a cash function. The mortality function would be the classical
notion of pooling risk where the premiums paid by everybody else would cover the death
benefit for the one or two who will die for a given period of time. The cash function
inherent in all life insurance says that if a person is to reach age 95 to 100 (the age
varies depending on state and company), then the policy matures and endows the face
value of the policy.

47
Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to
age 95, then the mortality function alone will not be able to cover the cash function. So
in order to cover the cash function, a minimum rate of investment return on the
premiums will be required in the event that a policy matures.

Universal life insurance addresses the perceived disadvantages of whole life. Premiums
are flexible. Depending on how interest is credited, the internal rate of return can be
higher because it moves with prevailing interest rates (interest-sensitive) or the financial
markets (Equity Indexed Universal Life and Variable Universal Life). Mortality costs and
administrative charges are known. And cash value may be considered more easily
attainable because the owner can discontinue premiums if the cash value allows it. And
universal life has a more flexible death benefit because the owner can select one of two
death benefit options, Option A and Option B.

Option A pays the face amount at death as it's designed to have the cash value equal
the death benefit at maturity (usually at age 95 or 100). With each premium payment,
the policy owner is reducing the cost of insurance until the cash value reaches the face
amount upon maturity.

Option B pays the face amount plus the cash value, as it's designed to increase the net
death benefit as cash values accumulate. Option B offers the benefit of an increasing
death benefit every year that the policy stays in force. The drawback to option B is that
because the cash value is accumulated "on top of" the death benefit, the cost of
insurance never decreases as premium payments are made. Thus, as the insured gets
older, the policy owner is faced with an ever increasing cost of insurance (it costs more
money to provide the same initial face amount of insurance as the insured gets older).

Limited-pay

Another type of permanent insurance is Limited-pay life insurance, in which all the
premiums are paid over a specified period after which no additional premiums are due to
keep the policy in force. Common limited pay periods include 10-year, 20-year, and
paid-up at age 65.

Endowments

48
Endowments are policies in which the cash value built up inside the policy, equals the
death benefit (face amount) at a certain age. The age this commences is known as the
endowment age. Endowments are considerably more expensive (in terms of annual
premiums) than either whole life or universal life because the premium paying period is
shortened and the endowment date is earlier.

In the United States, the Technical Corrections Act of 1988 tightened the rules on tax
shelters (creating modified endowments). These follow tax rules as annuities and IRAs
do.

Endowment Insurance is paid out whether the insured lives or dies, after a specific
period (e.g. 15 years) or a specific age (e.g. 65).

Accidental Death

Accidental death is a limited life insurance that is designed to cover the insured when
they pass away due to an accident. Accidents include anything from an injury, but do not
typically cover any deaths resulting from health problems or suicide. Because they only
cover accidents, these policies are much less expensive than other life insurances.

It is also very commonly offered as "accidental death and dismemberment insurance",

also known as an AD&D policy. In an AD&D policy, benefits are available not only for
accidental death, but also for loss of limbs or bodily functions such as sight and hearing,
etc.

Accidental death and AD&D policies very rarely pay a benefit; either the cause of death
is not covered, or the coverage is not maintained after the accident until death occurs.
To be aware of what coverage they have, an insured should always review their policy
for what it covers and what it excludes. Often, it does not cover an insured who puts
themselves at risk in activities such as: parachuting, flying an airplane, professional
sports, or involvement in a war (military or not). Also, some insurers will exclude death
and injury caused by proximate causes due to (but not limited to) racing on wheels and
mountaineering.

49
Accidental death benefits can also be added to a standard life insurance policy as a
rider. If this rider is purchased, the policy will generally pay double the face amount if the
insured dies due to an accident. This used to be commonly referred to as a double
indemnity coverage. In some cases, some companies may even offer a triple indemnity
cov

INTRODUCTION
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has since
emerged as the largest residential mortgage finance institution in the country. The
corporation has had a series of share issues raising its capital to Rs. 119 Crores. The
gross premium income for the year ending March 31, 2007 stood at Rs. 2,856 Crores
and new business premium income at Rs. 1,624 Crores. The company has covered
over 8,77,000 lives year ending March 31, 2007.

HDFC operates through almost 450 locations throughout the country with its corporate
head quarters in Mumbai, India. HDFC also has an International Office in Dubai, UAE
with service associates in Kuwait, Oman and Qatar. HDFC is the largest housing
company in India for the last 27 years.

SNAPSHOT-I

• Incorporated in 1977 as the first specialized Mortgage Company in India.

• Almost 90% of initial shareholding in the hands of domestic institutes and retail
investors. Current 77% of shares held by foreign institutional investors.
• Besides the core business of mortgage HDFC has evolved into a financial
conglomerate with holdings In:
 HDFC Standard Life insurance Company- HDFC holds 78.07 %.

50
  HDFC Asset Management Company – HDFC holds 50.1%
 HDFC Bank- HDFC holds 22.25%.
 Intelenet Global (Business Process Outsourcing) – HDFC holds 50%.
 HDFC Chubb General Insurance Company – HDFC holds 74%.

SNAPSHOT-II

• Loan Approvals Rs. 805 billion.

(up to Dec 2007) (US $ 18.30 bn.)
• Loan Disbursements Rs.669 billion
(up to Dec. 2007) (US $ 15.20 bn)
• Housing Units Financed 2.5 million.
• Distribution
 Offices 181
 Outreach Programs 90

KEY PLAYERS

Mr. Deepak S Parekh is the Chairman of the Company. He is also the Executive
Chairman of Housing Development Finance Corporation Limited (HDFC Limited). He
joined HDFC Limited in a senior management position in 1978. He was inducted as a
whole-time director of HDFC Limited in 1985 and was appointed as its Executive
Chairman in 1993. He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is a
Fellow of the Institute of Chartered Accountants (England & Wales).

Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company since
November, 2000. Prior to this, he was the Managing Director of HDFC Limited since
1993. Mr. Satwalekar obtained a Bachelors Degree in Technology from the Indian

51
Institute of Technology, Bombay and a Masters Degree in Business Administration from
The American University, Washington DC.

GROUP COMPANIES

HDFC Bank: World Class Indian Bank- among the top private banks in India.
HDFC AMC: One of the top 3 AMCs in India- Preferred investment manager.
Intelenet Global: BPO services for international customers.
CIBIL: Credit Information Bureau India Limited.
HDFC Chubb: Upcoming Private companies in the field of General Insurance.
HDFC Mutual Fund
HDFC reality.com: Helps to search properties in all major cities in India
HDFC securities

52
 STANDARD LIFE

Standard Life is Europe’s largest mutual life assurance company. Standard Life, which
has been in the life insurance business for the past 175 years is a modern company
surviving quite a few changes since selling its first policy in 1825. The company
expanded in the 19th century from kits original Edinburgh premises, opening offices in
other towns and acquitting other similar businesses.

Standard Life Currently has assets exceeding over £ 70 billion under its management
and has the distinction of being accorded “AAA” rating consequently for the six years by
Standard and Poor.

SNAPSHOT

• Founded in 1875, company supporting generation for last 179 years.

• Currently over 5 million Policy holders benefiting from the services offered.
• Europe’s largest mutual life insurer.

53
 JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first companies to be
granted license by the IRDA to operate in life insurance sector. Reach of the JV player is
highly rated and been conferred with many awards. HDFC is rated ‘AAA ’ by both
CRISIL and ICRA. Similarly, Standard Life is rated ‘AAA’ both by Moody’s and Standard
and Poor’s. These reflect the efficiency with which HDFC and Standard Life manage
their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14th August 2000.
HDFC is the majority stakeholder in the insurance JV with 81.4% staple and Standard of
as a staple 18.6% Mr. Deepak Satwalekar is the MD and CEO of the venture.
HDFC Standard Life Insurance Company Ltd. Is one of India’s leading Private Life
Insurance Companies, which offers a range of individual and group insurance solutions.
It is a joint venture between Housing Development Finance Corporation Limited (HDFC
Ltd.) India’s leading housing finance institution and the Standard Life Assurance
Company, a leading provider of financial services from the United Kingdom. Both the
promoters are will known for their ethical dealings and financial strength and are thus
committed to being a long-term player in the life insurance industry- all important factors
to consider when choosing your insurer.

54
 BUSINESS GROWTH
Track Record so far
The gross premium income of HDFC, for the year ending March 31, 2007 stood at Rs.
2,856 crores and new business premium income at Rs. 1,624 crores.

The company has covered over 8,77,000 lives year ending March 31, 2007. Company
also declared our 5th consecutive bonus in as many years for our ‘with profit’
policyholders.

KEY STRENGTH
Financial Expertise
As a joint venture of leading financial services groups. HDFC standard Life has the
financial expertise required to manage long-term investments safely and efficiently.

Range of Solutions
HDFC SLIC has a range of individual and group solutions, which can be easily
customized to specific needs. These group solutions have been designed to offer
complete flexibility combined with a low charging structure.

Strong Ethical Values:

HDFC SLIC is an ethical and Cultural Organization. False selling or false commitment
with the customers is not allowed.

Most respected Private Insurance Company

HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the World Class
Magazine Business World for Integrity, Innovation and Customer Care.

55
 CORPORATE OBJECTIVE

Vision
'The most successful and admired life insurance company, which means that we are the
most trusted company, the easiest to deal with, offer the best value for money, and set
the standards in the industry'.

'The most obvious choice for all'.

Values
.Integrity
.Innovation
.Customer centric
.People Care One for all
.Teamwork
.Joy and Simplicity

PRODUCTS & SERVICES

The right investment strategies won't just help plan for a more comfortable tomorrow --
they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life insurance plans are created
keeping in mind the changing needs of family. Its life insurance plans are designed to
provide you with flexible options that meet both protection and savings needs. It offers a
full range of transparent, flexible and value for money products. HDFC SLIC products
are modern and contemporary unitized products that offer unique customer benefits like
flexibility to choose cover levels, indexation and partial withdrawals. (Source:
www.hdfcslic.com)

56
 PLANS THAT ARE OFFERED BY HDFC STANDARDS
LIFE INSURANCE

Individual Products
Protection Plans
A person can protect his family against the loss of his income or the burden of a loan
in the event of his unfortunate demise, disability or sickness. These plans offer
valuable peace of mind at a small price. Protection range includes our Term
Assurance Plan & Loan Cover Term Assurance Plan.

Investment Plans

HDFC SLIC’s Single Premium Whole of Life plan is well suited to meet long term
investment needs. This provides attractive long term returns through regular
bonuses.

Pension Plans
Pension Plans help to secure financial independence even after retirement. Pension
range includes Personal Pension Plan, Unit Linked Pension, Unit Linked
Pension Plus.

Savings Plans

Savings Plans offer a flexible option to build savings for future needs such as buying
a dream home or fulfilling your children’s immediate and future needs.

Savings range includes Endowment Assurance Plan, Unit Linked Endowment,

Unit Linked Endowment Plus, Unit Linked Endowment Plus II, Money Back,
Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked Young
Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus II.

57
 Group Products

One-stop shop for employee-benefit solutions

HDFC Standard Life has the most comprehensive list of products for progressive
employers who wish to provide the best and most innovative employee benefit solutions
to their employees. It offers different products for different needs of employers ranging
from term insurance plans for pure protection to voluntary plans such as superannuation
and leave encashment.
HDFC SLIC offers the following group products to esteemed corporate clients:

Group Term Insurance

Group Variable Term Insurance
Group Unit-Linked Plan

An investment solution that provides funding vehicle to manage corpuses with

Gratuity, Defined Benefit or Defined Contribution Superannuation or Leave
Encashment schemes of your company
Also suitable for other employee benefit schemes such as salary saving schemes
and wealth management schemes

Social Product

Development Insurance Plan

Development Insurance plan is an insurance plan which provides life cover to members of a
Development Agency for a term of one year. On the death of any member of the group insured
during the year of cover, a lump sum is paid to those member beneficiaries to help meet some
of the immediate financial needs following their loss.

58
Eligibility

Members of the development agency and their spouses with:

- Minimum age at the start of the policy 18 years last birthday
- Maximum age at the start of policy 50 years last birthday
Employees of the Development Agency are not eligible to join the group. The group to be
covered is only eligible if it contains more than 500 members.

Premium Payments
The premium to be paid will be quoted per member in the group and will be the same for all
members of the group.
The premium can only be paid by the Development Agency as a single lump sum that
includes all premiums for the group to be covered. Cover will not start until the premium and
all the member information in our specified format has been received.

Benefits
On the death of each member covered by the policy during the year of cover a lump sum
equal to the sum assured will be paid to their beneficiaries or legal heirs. Where the death is
as a result of an accident, an additional lump sum will be paid equal to half the sum assured.
There are no benefits paid at the end of the year of cover and there is no surrender value
available at any time.

The role of the Development Agency

Due to the nature of the groups covered, HDFC Standard Life will be passing certain
administrative tasks onto the Development Agency. By passing on these tasks the premium
charged can be lower. These tasks would include:
Submission of member data in a specified computer format
Collection of premiums from group members
Recording changes in the details of group members
Disbursement of claim payments and the mortality rebate (if any) to group members
These tasks would be in addition to the usual duties of a policyholder such as:
Payment of premiums
Reporting of claims
Keeping policy holder information up to date

59
Training and support will be available to give guidance on how to complete the tasks
appropriately. Since these additional tasks will impose a burden on the Development Agency,
the Development Agency may charge a Rs. 10 administration fee to their members.

Prohibition of rebates
Section 41 of the Insurance Act, 1938 states
No person shall allow or offer to allow, either directly or indirectly, as an inducement to any
person to take out or renew or continue an insurance in respect of any kind of risk relating
to lives or property in India, any rebate of the whole or part of the commission payable or
any rebate of the premium shown on the policy, nor shall any person taking out or renewing
or continuing a policy accept any rebate, except such rebate as may be allowed in
accordance with the published prospectus or tables of the insurer
If any person fails to comply with sub regulation (previous point) above, he shall be liable to
payment of a fine which may extend to rupees five hundred

INTRODUCTION 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.

60
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.

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. HDFC SLIC 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.

61
 Tax Benefits

INCOME TAX GROSS ANNUAL HOW MUCH TAX HDFC STANDARD

SECTION SALARY CAN YOU SAVE? LIFE PLANS

Sec. 80C Across All income Upto Rs. 33,990 All the life insurance
Slabs saved on plans.
investment of
Rs. 1,00,000.

Sec. 80 CCC Across all income Upto Rs. 33,990 All the pension plans.
slabs. saved on
Investment of
Rs.1,00,000.

Sec. 80 D Across all income Upto Rs. 3,399 All the health insurance
slabs saved on riders available with the
Investment of conventional plans.
Rs. 10,000.

TOTAL SAVINGS
Rs37,389
POSSIBLE
Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399
under Sec. 80 D, calculated for a male with gross annual income
exceeding Rs. 10,00,000.

Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are completely tax-
free, subject to the conditions laid down therein.

62
 COMPANY PROFILE

OF

TATA AIG LIFE

INSURANCE COMPANY
LTD.

63
 TATA AIG LIFE INSURANCE COMPANY LIMITED

Introduction
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 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 percent. Tata AIG Life provides insurance solutions to individuals
and corporate. Tata AIG Life Insurance Company was licensed to operate in India on
February 12, 2001 and started operations on April 1, 2001.

THE TATA GROUP

The Tata Group is one of India's largest and most respected business conglomerates,
with revenues in 2004-05 of $17.8 billion (Rs. 799,118 million), the equivalent of about
2.8 per cent of the country's GDP. Tata companies together employ some 215,000
people. The Group's 32 publicly listed enterprises - among them standout names such
as Tata Steel, Tata Consultancy Services, Tata Motors and Tata Tea - have a combined
market capitalization that is the highest among Indian business houses in the private
sector, and a shareholder base of over 2 million. The Tata Group has operations in more
than 40 countries across six continents, and its companies export products and services
to 140 nations.

AIG
American International Group, Inc. (AIG), world leaders 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 London, Paris, Switzerland and Tokyo.

64
Tata AIG has strong brand name and recall factor which most of its competitors lack in.
Other than the public behemoth Life Insurance Corporation (LIC) of India which has a
major hold in the market share (of approximately 79%), the private players too are
having more and more opportunities to tighten their hold of the market. Of the private
players, ICICI Prudential comes first with an almost 4.50% of the market share followed
by Tata AIG with about 2.10% of the pie. The private players have everything to work
for, especially with LIC not meeting the needs of its clientele with respect to the services
they need. This provides a prospect for the private sector players to increase their share
of the market. Companies with a familiarity such as Tata AIG can especially achieve
their targets due to the brand image that the Tata group has.
(Source: www.tata-aig-life.com)

A recent survey conducted by the Voluntary Organization in Interest of Consumer

Education (VOICE) revealed Tata AIG Life Insurance Company (Tata AIG Life) as the
clear winner in terms of customer satisfaction in the life insurance category. This
is India's first-ever customer satisfaction study for the insurance sector.

The survey also revealed that Tata AIG Life had a high recall as a reputed brand name.
The ability to provide innovative and customer-focused service such as allowing the
maximum grace period for premium payment has not only further distinguished Tata AIG
Life from other life insurance companies but also appealed to consumers.

PRODUCTS & SERVICES:

Corporate life insurance products:
• Employee Benefits
• Credit Life
• Group Pensions
• Workplace Solutions
Individual life insurance products:
• Health First

65
 • Health Protector
• Mahalife
• InvestAssure II, InvestAssure Gold
• Shubh life, Nirbhay life

With respect to individual life insurance products, Tata AIG has an array of policies to
suit the needs and requirements of all age groups viz, children, students, adults, retirees
etc.

The ‘SUPPORT’ arm of Tata AIG Life is constituted of Operations, Human Resources,
Marketing, Corporate Training, Finance and Compliance.

Tata AIG Life possesses the philosophy and drive to customize retirement obligations
(for the company) which occur in the form of cash outflows, for the maximum benefit of
both the employer and the departing employee.

66
 POINTS OF PARITY
AND
POINTS OF
DIFFERENCE
BETWEEN
HDFC SLIC AND TATA
AIG

67
 Points of Parity

Funds available with ULIP Plans

General Description Nature of Investments Risk Category

Primarily invested in company
Equity Funds stocks with the general aim of capital High
appreciation
Invested in corporate bonds,
Income, Fixed Interest
government securities and other fixed Medium
and Bond Funds
income instruments
Sometimes known as Money
Market Funds — invested in cash,
Cash Funds Low
bank deposits and money market
instruments
Combining equity investment
Balanced Funds Medium
with fixed interest instruments

Generally all life insurance companies have three types of fund which are Equity fund,
Debt fund and Balance fund. These fund have different risk profile. Equity fund has high
risk but it gives high return, Debt fund has low risk so it gives low return and Balanced
fund is combination of both Equity and Debt fund so risk is medium and return is also
low.
Both HDFC SLIC and Tata AIG LIC have 7 types of funds based on combination of
Debt–Equity fund. These are liquid fund, stable managed fund, secure managed fund,
defensive managed fund, balanced managed fund, equity managed fund, growth fund.

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
would also be increased by the corresponding indexation increase.

68
 Charges, Fees and Deductions in ULIP

• Premium Allocation Charge

This is a premium-based charge. After deducting this charge from premiums, the
remainder is invested to buy units. The Allocation charges are guaranteed for the entire
duration of policy term.

• 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.

• Fund Management Charge

1% p.a. on With Profits Fund, 1% p.a. on Debt 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.

• Policy Administration Charge

Rs. 60 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

• Surrender Charge

69
This is the charge that applies when the policy is surrendered. It is equal to 50% of the
difference between regular premiums expected and those paid in the first year of the
contract.

• Service Tax Deductions

12.36% service tax is applicable on the first premium of life insurance policy.

Tax Benefits

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.

Riders and Bonuses

HDFC Standard Life

Tata AIG Life Insurance
Insurance
Free Look Period 15 days 15 days
Based on company's Based on company's
Reversionary Bonus
performance performance
Based on company's Based on company's
Terminal Bonus
performance performance
TOP UP Minimum Rs. 5000 Minimum Rs. 5000

Riders
Gives on diagnosis of Gives on diagnosis of
Critical Illness (CI) Benefit anyone anyone
of 6 critical illness of 12 critical illness
Additional Term Benefit
Provides Provides
(ATB)
Accidental Death Benefit
Provides Provides
(ADB)
Double Benefit Provides Does not provide
Triple Benefit Provides Does not provide
Payer Benefit Rider (PBR) Does not provide Provides
Waiver of Premium (WOP)
Provides Provides
Benefit

70
 Points of Difference

HDFC Standard Life

Tata AIG Life Insurance
Insurance
Grace Period 15 days 31 days
Policy Administration Charge Rs. 60 per month Rs. 55 per month
10% on sum-assured after
Guaranteed Bonus Does not give
10 year
Loyalty Bonus 0.1% every year 0.25% after every 4th year
Total 24 free switches in a 4 free switches per year
Fund Switching Charge policy after this
after this Rs. 100 per Switch Rs. 250 per switch
30% of all premium
50% of all premium
Guaranteed Surrender value paid excluding 1st
paid excluding 1st premium
premium
0.80% per annum 1.75% per annum
Fund Management Charge
on the fund value on the fund value
First 2 Premium
Total 12 free Premium
Redirection in a
Redirection
Premium Redirection Charge year is free after this Rs.
in a policy after this Rs. 250
1000
per Premium Redirection
per Premium Redirection
Last Year Return 42.70% 72%

We see that both the life insurance companies’ products are almost same. They have
same charges, fees and deductions. There is slightly difference in charges and
maximum limits of all charges are fixed by IRDA. Before buying any life insurance policy
one should check charges and fees on policy and company’s overall performance and
return given to its consumer.

71
COMPETITIVE

ANALYSIS

72
 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 20th 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 25th 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.

HDFC SLIC 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. HDFC SLIC could diversify its product portfolio. It could add more
plans for high worth individuals and women.

73
ICICI PRUDENTIAL
ICICI Prudential is a stiff competitor for HDFC SLIC. 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 HDFC SLIC. The returns on the
growth fund were 46.28% compared to the 42.70% offered by HDFC SLIC. 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
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 2007). It has over 72000
employees across all its units worldwide. It is led by its Chairman - Mr. Kumar

74
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 2007. 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, 2007.

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 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 2005 – 2006. 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 HDFC SLIC. The entry age could be
zero years which allow even new born babies to be insured. (Source:
www.bajajallianz.com)

75
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 HDFC SLIC 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 HDFC SLIC 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
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)

76
 ANALYSIS

&

INTERPRETATION

77
 ANALYSIS & INTERPRETATION

“A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA”

AGE GROUP OF SURVEYED RESPONDENTS

TABLE 1:

Age group No. of Respondents

18 - 25 years 127
26 - 35 years 67
36 - 49 years 46
50 - 60 years 24
More than 60 years 6

CHART 1:

INTERPRETATION:

78
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.

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.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTS

TABLE 2:

Particulars No. of Respondents

Male 193
Female 77

79
CHART 2:

CUSTOMER PROFILE OF SURVEYED RESPONDENTS

TABLE 3:

Customer profile No. of respondents

Student 62
Housewife 5
Working Professional 116
Business 49
Self Employed 24
Government service employee 14

80
CHART 3:

INTERPRETATION:
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.

NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE POLICY IN THEIR NAME

TABLE 4:

Person who have life insurance policy

Yes 103
No 167

81
CHART 4:

INTERPRETATION:
This graph shows that out of total 270 respondents only 103 or 38% respondents have
life insurance policy in their name. Rest all don’t have a single policy in their name. So
there is a very big scope for life insurance companies to cover these people. So in future
business of life insurace will gro further.

MARKET SHARE OF LIFE INSURANCE COMPANIES

TABLE 5:

LIFE INSURER NUMBER OF POLICIES

HDFC STANDARD LIFE 4
BIRLA SUN LIFE 3
AVIVA LIFE INSURANCE 6
BAJAJ ALLIANZ 7
LIC 55
TATA AIG 6
ICICI PRUDENTIAL 12
ING VYSYA 6
BHARTI AXA 2
OTHERS 2

CHART 5:

82
INTERPRETATION:
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.

83
 ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

TABLE 6:

Premium paid (p.a.) No. of respondents

Rs. 5000 - Rs. 10000 40

Rs. 10001 - Rs. 15000 26

Rs. 15001 - Rs. 24900 18

Rs. 25000 - Rs. 50000 10

Rs. 50001 - Rs. 60000 4

Rs.60001 - Rs. 80000 2

Rs. 80001 - Rs. 100000 3

CHART 6:

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

84
INTERPRETATION:
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 HDFC SLIC would be able to capture the market
better if it introduced products/plans where the minimum premium starts at Rs. 5000 per
annum.
Only 19% of the respondents pay more than Rs. 25000 as premium and most products
sold by HDFC SLIC have Rs.12000 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.

POPULAR LIFE INSURANCE PLANS

TABLE 7:

Type of Plan No. of Respondents

Term Insurance Plans 105
Endowment Plans 122
Pension Plans 16
Child Plans 8
Tax Saving Plans 19

85
CHART 7:

POPULAR LIFE INSURANCE PLANS

INTERPRETATION:
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.
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.

86
 AWARENESS OF UNIT LINKED INSURANCE PLANS

TABLE 8:

Awareness of Unit Linked Plans No. of Respondents

Yes 154
No 116

CHART 8:

AWARENESS OF UNIT LINKED INSURANCE PLANS

INTERPRETATION:
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.

87
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.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

TABLE 9:

No. of
Willingness to spend on premium respondents Percentage

Less than Rs. 6,000 41 15%

Rs. 6,001 - Rs. 10,000 73 27%

Rs. 10,001 - Rs. 25,000 110 41%

Rs. 25,001 - Rs. 50,000 41 15%

Rs. 50,001 - Rs. 1,00,000 5 2%

CHART 9:

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

88
INTERPRETATION:
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.

HDFC SLIC is faced with a large amount of competition. There are 18 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.

CHART SHOWING IDEAL POLICY TERM

89
TABLE 10:

Ideal policy term No. of respondents

3 - 5 years 51
6 - 9 years 41
10 - 15 years 95
16 - 20 years 38
21 - 25 years 24
26 - 30 years 5
More than 30 years 3
Whole life Policy 13

CHART 10:

CHART SHOWING IDEAL POLICY TER

90
INTERPRETATION:
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 HDFC SLIC 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.

FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE

TABLE 11:

91
 Parameter No. of Respondents
Advertisements 35
High returns 84
Advice from friends 46
Family responsibilities 89
Others 16

CHART 11:

INTERPRETATION:
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 now a days this trend is
changing. Along with protection (life cover), a savings element is being added to
insurance.

92
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.

PREFERRED COMPANY TYPE OF THE RESPONDENTS

TABLE 12:

Type of Company No. of Respondents Percentage

Government Owned
Company 127 47%

Public Limited Company 62 23%

Private Company 49 18%

Foreign Company 32 12%

CHART 12:
PREFERRED COMPANY TYPE OF THE RESPONDENTS

93
INTERPRETATION:
From the graph above we find that 60% of the respondents preferred to purchase
insurance from a government owned company, 29% of the respondents preferred to
purchase insurance from a public limited company and only 4% of the respondents
preferred a foreign based company. Heavy advertising through television, newspapers,
magazines and radio is required.

MINIMUM EXPECTED RETURN ON INVESTMENT

TABLE 13:

Expected Returns No. of respondents

Less than 5% 5
5% - 10% 39
11% - 15% 46
16% - 20% 49
21% - 25% 46
26% - 30% 27
31% - 40% 22
41% - 50% 14
More than 50% 22

CHART 13:

94
INTERPRETATION:
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.

95
FACTS AND FINDINGS

FACTS AND FINDINGS

96
 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. 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.

 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 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.

 HDFC SLIC is faced with a large amount of competition. There are 18 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.

97
SWOT ANALYSIS

98
 Swot Analysis Of Hdfc Standard Life Insurance

Analysis of the industry’s environment

(SWOT Analysis)
HDFC and Standard Life first came together for a possible joint venture, to enter the life
Insurance market, in January 1995. It was clear from the outset that both companies
shared similar values and beliefs and a strong relationship quickly formed. In October
1995, the companies signed a 3-year joint venture agreement.

STRENGTH
1. Domestic image of HDFC supported by Prudential’s international image is strength of
the company.
2. Strong and well spread network of qualified intermediaries and sales person.

3. Strong capital and reserve base.

4. The company provides customer service of the highest order.

5. Huge basket of product range which are suitable to all age and income groups.

6. Large pool of technically skilled manpower with in depth knowledge and

understanding of the market.

7. The company also provides innovative products to cater to different needs of different
customers.

WEAKNESS
1. Heavy management expenses and administrative costs.

2. Low customer confidence on the private players.

3. Vertical hierarchical reporting structure with many designations and cadres leading to
power politics at all levels without any exception.

4. Poor retention percentage of tied up agents.

99
 OPPORTUNITIES
1. Insurable population †According to ING only 10% of the population is insured, which
represents around 30% of the insurable population. This suggests more than 300m
people, with the potential to buy insurance, remain uninsured.

2. There will be inflow of managerial and financial expertise from the world’s leading
insurance markets. Further the burden of educating consumers will also be shared
among many players.

3. International companies will help in building world class expertise in local market by
introducing the best global practices.

THREATS
1. Legislation could impact.
2. Great risk involved.
3. Very high competition prevailing in industry.
4. Lack of infrastructure in rural areas could constrain investment.

100
FUTURE LINE OF

RESEARCH

101
 FUTURE LINE OF RESEARCH

The future topics for research in the organization could be setting up of an appropriate
ad campaign. It is very vital to the companies’ success that the people of India know
about HDFC SLIC, its products and their special features and how insurance in general
can help them in their future. The advertisements have to be emotionally appealing.
They might also include a celebrity. The brand name of HDFC could be used to give a
push to HDFC SLIC and its products. The general perception of insurance as
“inauspicious” should be done away with and individuals and corporations accept
insurance on power with other investment opportunities.

The other area of research could be in the management of funds HDFC SLIC possesses
and how it can maximize returns for its investors. A research project could be
undertaken on how to ensure that the money gets invested in the right companies and
earns a medium – high return on investment. Another area of research could be an
analysis of the sales and marketing techniques used by HDFC SLIC. A large number of
changes could be introduced and this would help in saving operating costs and
improving the efficiency of the firm.

102
CONCLUSION

103
 CONCLUSION

HDFC standard life insurance is first life insurance Company in India. It has businesses
spread out across the globe. It was registered on 23rd December 2000. It currently ranks
number 4 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 HDFC SLIC. 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.

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.

HDFC SLIC 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.

104
 SUGGESTIONS

AND

RECOMMENDATIONS

105
 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 (18 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 cold 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

106
  Lack of awareness about the unit linked funds in the market

 No money back plan present in the product portfolio

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 HDFC SLIC as an Indian Company to build trust

 HDFC SLIC 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

107
 APPENDIX

A SURVEY ON ‘INSURANCE INDUSTRY’

Dear Sir/Madam

Do you have a life insurance policy/investment plan in

your name?

o Yes o No

If yes which company’s insurance policies do you

hold?
o Aviva Life
o HDFC Standard Insurance
Life Insurance o Bajaj Allianz Life
o Birla Sun Life Insurance
Insurance o LIC
o Tata AIG Life o ING Vysya Life
Insurance Insurance
o ICICI Prudential o Bharti Axa Life
Life Insurance Insurance
o Others (specify name)

What is the approximate premium paid by you annually

(in Rupees)?

o Rs. 5,000 – Rs. o Rs. 25,001 – Rs.

10,000 50,000
o Rs. 10,001 – Rs. o Rs. 50,001 – Rs.
15,000 60,000
o Rs. 15,001 – Rs. o Rs. 60,001 – Rs.
25,000 80,000

108
 o Rs. 80,001 – Rs.
1,00,000
o More than Rs. 1,00,000 (specify premium)

What kind of insurance policy would suit you best in

your current stage of life?
o Life Insurance o Pension Plans
o Life Insurance and o Child Plans
Investment Plans
o Tax saving plans

Are you aware of the new unit linked insurance plans

in the market?

o Yes o No

How much would you be willing to spend per annum if

you were to go for an investment/insurance plan?

o Less than Rs. o Rs. 25,001 – Rs.

6,000 50,000
o Rs. 6,001 – Rs. o Rs. 50,000 – Rs.
10,000 1,00,000
o Rs. 10,001 – Rs. o More than Rs.
25,000 1,00,000
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 21 to 25 years
o 6 to 9 years o 26 to 30 years
o 10 to 15 years o More than 30
o 16 to 20 years years

109
 o Whole life policy

What motivates you to purchase insurance/investment

plans?

o Advertisements o Advice from

o High Returns friends
o Family
responsibilities
o Others (specify)

In which kind of company would you prefer to make a

purchase of insurance?

o Government o Private Company

owned company o Foreign based
o Public Limited company
Company

Typically what kind of returns would you look at from

your investments? (Please note: Higher returns involve
greater risk)

o Less than 5% o 26% - 30%

o 6% - 10 % o 31% - 40%
o 11% - 15 % o 41% - 50%
o 16% - 20 % o More than 50%
o 21% - 25%

110
Personal Details:

Name:

Address:

Age: Contact No. :

Profile of respondent:
• Student • Business
• Housewife • Self – Employed
• Working • Government
Professional Service Employee

BIBLIOGRAPHY

www.hdfcslic.com

111
www.tata-aig-life.com

www.irdaindia.com

www.lic.com

www.money control.com

www.bajajallianz.com

www.icici.prulife.com

Magazine –

Insurance World

The Outlook Money

Secrets of Successful Insurance Sales by Mr. Jack

Kinder

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