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MARKETING STRATEGY OF HDFC SLIC [pic] Summer Internship Project 1th April To 31st May 2010 Prepared By: Rishi Uppal PGDM (2009-2011): 09PGDM103 [pic] Executive summary of project A) Title of the project :- “Marketing strategy of HFC STANDARD LIFE INSURANCE CO. LTD. ” B) Objective of the project:- HDFC Standard Life insurance Company was a strategic merger of HDFC(banking powerhouse in India) and Standard Life ??? largest insurer in the UK and is also 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). Insurance sector has become more dynamic and critical for thriving existence in today’s uncertain world.
Selling insurance as a product is a lot difficult in practicality as it looks theortically. One has to get an insight into this field to resolve it. Working for such objective will definitely hone us and once accomplished it provides a great satisfaction of fulfillment. It also helps us to understand the real organizational problems, perceptions and challenges. This will add a very useful knowledge to our repertoire in the form of knowledge about the nitty-gritty of one of the most promising sectors in India i. the banking and insurance sector. C) Scope of the project:- The scope of this project is analysis of marketing strategies of other insurance companies with HDFC’s marketing strategy and is limited to Indian sector. D) Limitations of the project :- ? Insurance companies are analyzed for the purpose of study out of the banking & insurance sector. ? Only listed insurance companies on NSE or BSE were compared for analyzing the insurance industry. ? Marketing analysis involves lots of tools, but only selected tools were employed. The data used is secondary data. E) Research Methodology :- Research refers to the systemic method consisting of enunciating the problem, a hypothesis, collecting the facts, analyzing the facts and reaching the certain conclusion either in form of solution towards the concerned problem or for some theoretical formulation. Considering the objective, scope, limitation of study for completing the research there are methods of collection of data. Therefore collection of data plays a very important role in research.
The study is based on the facts collected by observation and internet. Method of Data collection ? Primary data: – The data which is collected afresh by the researcher himself solely for the specific research purpose at hand by different research techniques like focus group discussion, internet and field survey, personal and group interview etc. Primary data is collected generally in two phases of the research: exploratory and conclusive phase. Conclusions on the findings are generally drawn at end depending on outcome at the exploratory phase.
In this paper I have used only secondary data as primary data collection adds no special value since only listed companies are going to be covered and under the SEBI guidelines these companies are believed to have published authenticated data. Collecting primary data about the non-listed companies would off course be beyond the scope of this paper. ? Secondary data: – It is the data which is already present in the secondary form like press releases, magazines, newspaper, journals, news letters which are derived by any other person or institute. It was already exists and it is in processed form.
The researcher has only to decide that how it will be handled to appraise the project. Sources of secondary data:- ??? Reference Books ??? Internet & Websites ??? Business Magazines. ??? Annual reports of company. (Detailed references is appended at the end) Here in this project, as I stated earlier, I have adopted the descriptive research approach. This project involves mainly secondary data, which has been collected from the above mentioned sources. G) Findings :- i. The net equity of all companies are growing in this much growing sector. ii. Profits of the companies are also increasing. ii. But still this sector is bit unexplored in India with 65 % of people without it. iv . Fundamentals of all the companies are very strong. H) Suggestions :- i. On the basis of company analysis, people opting for insurance can choose based on their preferences. ii. The industry analysis is also in favour of the growth in the insurance sector. iii. This sector is still very much unexplored in most rural areas in India. CONTENTS |Chapter |Particular |Page No. | |Executive summary |2 ??? 4 | |1 |Introduction |6 – 12 | | |Introduction to Insurance Industry | | | |Industry reforms | | | |IRDA | | | |Present scenario ???Life Insurance Industry in India | | |2 |Research methodology |13 – 16 | |3 |Analysis and Interpretation |17 ??? 50 | | |3. Company Profile of HDFC SLIC | | | |3. 2 Company Profile of TATA AIG LIC | | | |3. 3 POP’s and POD’s | | | |3. 4 Competitive analysis | | | |3. 5 Marketing problems | | | |3. Analysis | | |4 |Recommendations |51 ??? 52 | |5 |Conclusion |53 ??? 54 | |6 |References |55 | ACKNOWLEDGMENT I would like to thank my project guide Mr. Bhawesh Kumar, Sales Development Manager HDFC Standard Life Insurance, SDA Branch, New Delhi for guiding me through my summer internship and research project. His encouragement, time and effort are greatly appreciated. It was a truly wonderful learning experience in gaining valuable insight to the insurance industry by training in HDFC STANDARD LIFE INSURANCE CO. LTD. I would like to dedicate this project to everyone who made it possible. Without their help and constant support this project would not have been possible.
Lastly I would like to thank all the respondents who offered their opinions and suggestions through the survey that was conducted by me in Malviya Nagar, New Delhi. CHAPTER I INTRODUCTION THE INSURANCE INDUSTRY IN INDIA Insurance happens to be a mega opportunity in India with the largest number of life insurance policies in force in the world 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.
But even still 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) HISTORY OF LIFE INSURANCE IN INDIA The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non – Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880.
The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920’s and 1930’s sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence.
Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government’s chosen path of State led planning and development. The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972.
With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC). KEY MILESTONES 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public. 956: 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. IRDA(INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY) IRDA is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements.
Mission of IRDA as stated in the act is “to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. ” In 2010, the Government of India ruled that the Unit Linked Insurance Plans (ULIPs) will be governed by IRDA, and not the market regulator Securities and Exchange Board of India. The law of India has following expectations from IRDA 1. To protect the interest of and secure fair treatment to policyholders. 2. To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man, and to provide long term Funds for accelerating growth of the economy. 1.
To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates. 2. To ensure that insurance customers receive precise, clear and correct information about products and services and make them aware of their responsibilities and duties in this regard. 3. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redresses machinery. 4. To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players. 5.
To take action where such standards are inadequate or ineffectively enforced. 6. To bring about optimum amount of self-regulation in day to day working of the industry consistent with the requirements of prudential regulation. PRESENT SCENARIO – LIFE INSURANCE INDUSTRY IN INDIA 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) CHAPTER II RESEARCH DESIGN RESEARCH DESIGN INTRODUCTION A Research Design is the framework or plan for a study which is used as a guide in collecting and analyzing the data collected. It is the blue print that is followed in completing the study.
The basic objective of research cannot be attained without a proper research design. It specifies the methods and procedures for acquiring the information needed to conduct the research effectively. It is the overall operational pattern of the project that stipulates what information needs to be collected, from which sources and by what methods. TITLE OF THE STUDY “To Compare the products of HDFC Standard Life Insurance Company Limited and Tata AIG Life Insurance Company Limited for HDFC Standard Life Insurance Company Ltd. ” 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. RESEARCH METHODOLOGY 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 Jodhpur excluding people below age of 18 years. 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 New Delhi. The areas covered were Malviya Nagar, Shivalik, Begumpur, Hauz Rani, Khirki Extention and Saket. CHAPTER III ANALYSIS AND INTERPRETATION COMPANY PROFILE OF HDFC STANDARD LIFE INSURANCE COMPANY LIMITED 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 ??? 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 %. ? 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%. 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 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. ??? 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. JOINT VENTURE [pic] 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% 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. 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. 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) 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. | 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: | |[pic] | |Group Term Insurance | | | |[pic] | |Group Variable Term Insurance | | | |[pic] | |Group Unit-Linked Plan | | | |?? | |[pic] | | | |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 | | | |[pic] | |Also suitable for other employee benefit schemes such as salary saving schemes and wealth management schemes | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 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. 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 ??? 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. Points of Parity Funds available with ULIP Plans |General Description |Nature of Investments |Risk Category | |Equity Funds |Primarily invested in company |High | | |stocks with the general aim of capital ppreciation | | |Income, Fixed Interest |Invested in corporate bonds, |Medium | |and Bond Funds |government securities and other fixed income instruments | | |Cash Funds |Sometimes known as Money |Low | | |Market Funds ??? invested in cash, bank deposits and money | | | |market instruments | | |Balanced Funds |Combining equity investment |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. Riders and Bonuses ?? |HDFC Standard Life Insurance |Tata AIG Life Insurance | |Free Look Period |15 days |15 days | |Reversionary Bonus |Based on company’s |Based on company’s | | |performance |performance | |Terminal Bonus |Based on company’s |Based on company’s | | |performance |performance | |TOP UP |Minimum Rs. 5000 |Minimum Rs. 000 | |?? | |Riders |?? |?? | |Critical Illness (CI) Benefit |Gives on diagnosis of anyone |Gives on diagnosis of anyone | | |of 6 critical illness |of 12 critical illness | |Additional Term Benefit (ATB) |Provides |Provides | |Accidental Death Benefit (ADB) |Provides |Provides | |Double Benefit |Provides |Does not provide | |Triple Benefit |Provides |Does not provide | |Payer Benefit Rider (PBR) |Does not provide |Provides | |Waiver of Premium (WOP) Benefit |Provides |Provides | Points of Difference ?? |HDFC Standard Life Insurance |Tata AIG Life Insurance | |Grace Period |15 days |31 days | |Policy Administration Charge |Rs. 60 per month |Rs. 55 per month | |Guaranteed Bonus |Does not give |10% on sum-assured after 10 year | |Loyalty Bonus |0. 1% every year |0. 5% after every 4th year | | Fund Switching Charge |Total 24 free switches in a policy |4 free switches per year after this | | |after this Rs. 100 per Switch |Rs. 250 per switch | |Guaranteed Surrender value |50% of all premium |30% of all premium | | |paid excluding 1st premium |paid excluding 1st premium | |Fund Management Charge |0. 80% per annum |1. 5% per annum | | |on the fund value |on the fund value | |Premium Redirection Charge |Total 12 free Premium Redirection |First 2 Premium Redirection in a | | |in a policy after this Rs. 250 per Premium |year is free after this Rs. 1000 | | |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. 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. 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 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) 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)
MARKETING PROBLEMS The old and out dated technique of telephonic 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 ? 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 ? 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 ANALYSIS & INTERPRETATION AGE GROUP OF SURVEYED RESPONDENTS TABLE 1: |Age group |No. f Respondents | |18 – 25 years |127 | |26 – 35 years |67 | |36 – 49 years |46 | |50 – 60 years |24 | |More than 60 years |6 | CHART 1: [pic] Analysis:
From the chart above we find that 47% of the respondents fall in the age group of 18 ??? 25 years, 25% fall in the age group of 26 ??? 35 years and 17% fall in the age group of 36 ??? 49 years. 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 | CHART 2: [pic] CUSTOMER PROFILE OF SURVEYED RESPONDENTS TABLE 3: |Customer profile |No. f respondents | |Student |62 | |Housewife |5 | |Working Professional |116 | |Business |49 | |Self Employed |24 | |Government service employee |14 | CHART 3: [pic] Analysis: From the chart above it can clearly be seen that 43% of the respondents are working professionals, 23% are students and 18% are into business. Therefore the target market would be working individuals in the age group of 18 ??? 25 years having surplus income, interested in good returns on their investment and saving income tax. No. f Respondents who have life insurance policy in their name TABLE 4: |Person who have life insurance policy | |Yes |103 | |No |167 | CHART 4: [pic] ANALYSIS: 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: [pic] Analysis: In India, the largest life insurance company is Life Insurance Corporation of India. It has been in existence in India since 1956 and is completely owned by the Government of India. Today the organization has grown to 2048 offices serving 18 crore policies and has a corpus of over 340000 crore INR. 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. 0000 |4 | |Rs. 60001 – Rs. 80000 |2 | |Rs. 80001 – Rs. 100000 |3 | CHART 6: ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE [pic] Analysis: From the chart above we find that, 39% of the respondents surveyed pay an annual premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs. 25000.
Hence we can safely say that 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. f Respondents | |Term Insurance Plans |105 | |Endowment Plans |122 | |Pension Plans |16 | |Child Plans |8 | |Tax Saving Plans |19 | CHART 7: POPULAR LIFE INSURANCE PLANS [pic] Analysis:
From the chart given above we can clearly see that 45% of the respondents hold endowment plans and 39% of the respondents hold term insurance plans. Endowment plans are very popular and serve two purposes ??? life cover and savings. 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. 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 [pic] Analysis:
From the chart given above we find that 57% of the respondents are aware of unit linked life insurance plans and 43% are not aware of such plans. These plans should be promoted through advertising. The company can advertise through television, radio, newspapers, bill boards and pamphlets. This would increase awareness and arouse curiosity in the minds of the consumer which would enable the company to market its products more effectively. Unit ??? linked plans are those where the benefits are expressed in terms of number of units and unit price. They can be viewed as a combination of insurance and mutual funds. The number of units a customer would get would depend on the unit price when they pay the premium.
When the policy matures the individual gets his fund value. The value of his fund is calculated by multiplying the net asset value and number of units held by them on that day. CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM TABLE 9: |Willingness to spend on premium |No. of respondents |Percentage | |Less than Rs. 6,000 |41 |15% | |Rs. 6,001 – Rs. 10,000 |73 |27% | |Rs. 10,001 – Rs. 5,000 |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 [pic] Analysis: From the graph above, we can clearly see that 41% of the respondents would be willing to spend between Rs. 10001 ??? Rs. 25000 for life insurance. 27 % would be willing to spend between Rs. 6001 ??? Rs. 10000 per annum.
Only 15% would be willing to spend more than Rs. 25000 per annum as life insurance premium. We could say that the maximum premium payable by most consumers is less than Rs. 25000 p. a. This is further reduced as most customers have already invested with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc. HDFC SLIC is faced with a large amount of competition. There are 18 insurance c