A Project Report
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A PROJECT REPORT ON “PROSPECTS AND FUTURE OF LIFE INSURAANCE BUSINESS IN INDIA” – A STUDY AT HDFC. Submitted to Bangalore University In fulfillment of the requirement of the post graduate Degree of Master of Business Administration (MBA) Submitted by: MUNESHA (Reg.No.06ATCM6029) Under the Guidance of: Dr. VENUGOPAL M.Com., Ph.D Government R.C. College of Commerce & 1
Transcript of A Project Report
A PROJECT REPORT
ON
“PROSPECTS AND FUTURE OF LIFE INSURAANCEBUSINESS IN INDIA” – A STUDY AT HDFC.
Submitted to Bangalore UniversityIn fulfillment of the requirement of the post graduate Degree of
Master of Business Administration (MBA)
Submitted by:
MUNESHA(Reg.No.06ATCM6029)
Under the Guidance of:
Dr. VENUGOPAL M.Com., Ph.D
Government R.C. College of Commerce &Management
Basaveshwara Circle, Palace Road, Bangalore-01.
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Certificate by Coordinator
This is to certify that the final project on “PROSPECTS AND
FUTURE OF LIFE INSURAANCE BUSINESS IN INDIA” – A
STUDY AT HDFV is completed under my guidance and
Supervision. It is submitted in fulfillment of the requirement for the
Degree of Master of Business Administration to Bangalore
University by MUNESHA Register No.06ATCM6029 and this has
not formed a basis for the award of any degree diploma or
fellowship by the any Institute or University.
Place: Dr. H. PrakashDate: Co-ordinator, MBA
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STUDENT DECLARATION
I hereby declare that the project report titled
“PROSPECTS AND FUTURE OF LIEF INSURAANCE
BUSINESS IN INDIA” – A STUDY AT HDFC
Submitted in partial fulfillment of requirements for the award of
degree in
Master of Business Administration Course,
Bangalore University
is my original work and has been submitted for the award of any
other Degree / Diploma / Fellowship or similar titles or prizes.
Place: MUNESHA
Date: Reg. No.06ATCM6029
3
CERTIFICATE BY THE PRINCIPAL
This is to certify that the dissertation titled, “PROSPECTS
AND FUTURE OF LIEF INSURAANCE BUSINESS IN INDIA”–
A STUDY AT HDFC Bearing Reg. no.06ATCM6029, a student of
4th Sem MBA during the academic year 2007-2008 has been
prepared under my guidance and supervision.
The work has been satisfactory and is recommended for
consideration towards fulfillment of requirement for the award of
master of business management (MBA). Degree.
Date: PRINCIPAL
Place: G.M.MAHADEVARAJU
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GUIDES DECLARATION
This is to certify that the report titled “PROSPECTS AND
FUTURE OF LIEF INSURAANCE BUSINESS IN INDIA”– A
STUDY AT HDFC submitted in partial fulfillment of requirements
for the award of degree in
Master of Business Administration work carried out by
MUNESHAReg. No.06ATCM6029
Under my guidance and no part has been submitted for the award of
any degree/diploma/fellowship or similar titles or prizes and that the
work has not been published in any scientific or popular magazines.
Project Guide : Dr. VENUGOPAL
Signature :
Qualification : M.com., Ph.D
Designation : FACULTY
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Date:
CERTIFICATE
TO WHOMSOEVER IT MAY CONCERN
This is to certify that Mr. MUNESHA. M.B.A. student of
Govt R.C. College of commerce and Management, Bangalore
University has successfully completed his Project report on
“PROSPECTS AND FUTURE OF LIEF INSURAANCE
BUSINESS IN INDIA” – A STUDY AT HDFC
The study was carried out in our bank from 23rd March, 2007
to 25th April 2008, under the guidance of Mr.SATISH KUMAR and
during this period his conduct and performance was good.
We wish him all the best in his future endeavors.
FOR HDFC BANK,
Mr.SATISH KUMAR(ASST GENERAL MANAGER)
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Executive Summary
The Indian insurance began as a freely competitive market. It was
subsequently nationalized and then recently liberalized again, coming full
circle.
Along with liberalization came a new regulator, the Insurance
Regulatory and Development Authority (“IRDA”), which was established
in April 2000. Prior to the IRDA, The Controller of Insurance was the
designate industry regulator. However, the latter was widely perceived as
having little effective Control and the GIC and Finance Ministry were the
de facto industry regulators.
Even though the LIC dominates three quarters of the life market,
the nimble private sector is fast increasing its share of a rapidly growing
pie.
Besides the high level of household savings of growing middle
class, one of the main Insurance policies (“ULIPs”).
These have proved the most popular and fastest growing the
products introduced since liberalization. ULIPs offer consumers the
option to invest, according to their risk appetite, in debt, equity or a
balance of the two. Some insurers also offer capital guarantees on ULIPs.
Life Insurance
2000 2001 2002 2003 2004 2005 2006
Public 1 1 1 1 1 1 1
Private 3 10 12 12 13 16 18
The Indian insurance industry currently comprises 19 players in the
life business sectors, of which only one (all Indian private sector players,
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albeit in joint ventures with different foreign partners) are involved in the
life business. The LIC is the public sector giant in the life business.
The life insurance sector has grown by 35 per cent in terms of new
business premium last fiscal. The new premium pie has grown to
Rs.35,898 crore, from Rs.26,602 crore in the previous year.
LIC’s market share has been further reduced to 71.4 per cent from
78.1 percent. Among the private players, Bajaj Allianz Life has edged out
ICICI Prudential Life at the number one Position. Bajaj Allianz Life grew
by 216 percent and clocked in new business premium of Rs.2,715.6 crore.
The company cornered a market share of 7.56 percent. ICICI Prudential
on the other hand garnered premium of Rs.2,637 crore and holds a market
share of 7.35 percent.
The other private player that registered significant growth in the
fiscal 2005-06 was HDFC Standard Life. The compnay’s new business
has grown by 122 percent of Rs.1,029 crore. The market share of HDFC
Standard Life has jumped from 1.92 percent in 04-05 to 8.7 per cent in
05-06
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INTRODUCTION
WHAT IS INSURANCE?
Life insurance in India made its debut well over 100 years ago. In
our country, which is one of the most populated in the world, the
prominence of insurance I note as widely understood, as it ought to be.
What follows is an attempt to acquaint readers with some of the concepts
of life insurance, with special reference to HDFC.
Life insurance is a contract that pledges payment of an amount to
the person assured *or his nominee) on the happening of the event
insured against. The contract is valid for payment of the insured amount
during: The date of maturity, or Specified dates at periodic intervals, or
Unfortunate death, if it occurs earlier.
Among other things, or contract also provides for the payment of
premium periodically to the Corporation by the policyholder. Life
insurance is universally acknowledged to be an institution, which
eliminates ‘risk’. Substituting certainty for uncertainty and comes to the
timely aid of the family in the unfortunate event of death of the
breadwinner.
By and large, life insurance is civilization’s partial solution to the
problems caused by death. Life insurance, in short, is concerned with two
hazards that stand across the life path of every person.
That of dying prematurely is leaving a dependent family to fend for
itself. That of living till old age without visible means of support
All assets carry the risk of being destroyed or damaged. But all
assets may not necessarily get destroyed or damaged. Only in a few
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instance, the probability turns out to be true and the asset gets actually
lost or destroyed life time. The owner and those deriving benefits from
the asset will suffer because the arrangement to make available its
substitute is not yet ready.
Insurance is helpful in mitigating such adverse consequences. To
sum, assets are insured as they are likely to be lost or made non
functional through an accidental occurrence. Insurance dose not protect
the assets. This means that insurance cannot prevent loss to the assets due
to perils. Nor can insurance avoid the occurrence of perils. It only
compensates may not fully, the economic or financial loss resulting to the
asset from such damage or destruction
PURPOSE AND NEED FOR INSURANCE
To provide statistics on insurance industry growth.
To provide a view of the insurance development.
To highlights the picture of insurance sector, in simple words the
challenges faced by insurance sector.
To understand the satisfaction level of customer in terms of service
To make the customers understand the benefits offered by the company
with regard to their policies.
Insurance becomes relevant only if there are uncertainties of
occurrence of event leading to losse/es. Insurance is done against
the contingency of the happening of such events.
No Uncertainty No Insurance
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INSURANCE PRODUCTS AT VARIOUS LIFE STAGES:
Your insurance need will change as your life does, from starting to work
to enjoying your golden years and all the stages in between. Each one of
these stages may pose a different insurance need/cover for you. In this
section, we have drawn up the basic life stages and help you analyze
various insurance needs accordingly.
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STAGE 1
Young and Single
An important stage where one lays down the foundation of a
successful life ahead. Take advantage of the time and power of
compounding to ensure that you build up your dreams. Start saving early.
Yours needs
Save for a home and wedding
Tax Planning
Save for Golden years
STAGE 2
Just Married
Marriage brings about a significant change. New dreams and new
opportunities also bring in additional responsibilities. While both of you
look forward to a happy and secure life, it is equally important to ensure
that eventualities don’t come in the way of shaping your dreams.
Your needs
Planning for home / securing your home loan liability
Save for vacation
Save for your first child
STAGE 3
Proud Parents
Once you have children, your need for life insurance is even more. You
need to protect your family from an untoward incident. Ensure your
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protection umbrella takes into account the future cost of securing you
child’s dream. You will want life to go on for your loved ones, and
having enough life insurance is a way to help ensure that.
Your needs
Provide for children’s education
Safeguarding family against loan liabilities
Savings for post-retirement
STAGE 4
Planning for Retirement
While your are busy climbing the ladder of success today, it is important
for your to take time and plan for your life after retirement. Having an
early start for retirement planning can make a significant difference to
your savings. Think about your golden years even before you have
reached them. The key is to think ahead and plan well using your time
and money
Your Needs
Provide for regular income post retirement
Immediate Tax benefits
Lead a secure, independent and comfortable life style in your
retirement years.
INSURANCE AS A SOCIAL SECURITY TOOL
United Nations Declaration of Human Rights 1948 provides:
“Every one has a right to a standard of living adequate for health and
well being of himself and his family, including food, clothing,
housing and medical care and necessary social service and the right
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the security in the event of unemployment, sickness, widowhood,
disability or other lack of livelihood in circumstances beyond his
control.”
Where the bread winner of a family dies, family’s income stops to
that extent, affecting the economic condition.
Life insurance helps in restoration of the adverse economic condition
thus caused.
Thus life insurance business is complementary to the State’s efforts in
social management.
Social security is now a growing concern for all countries, however
the provision made in this field vary from country to country.
In India, Article 41 of our Constitution requires the State(within
limits of its economic capacity and development) to make effective
provision for securing right to work, to education and to provide
public assistance in case of unemployment, old age, sickness and
disablement.
Parts of obligation under Article 41 are met by the State the
mechanism of Life Insurance.
Some social security schemes have been made by the State for
economically weaker sections of the society. L.I.C has been directed
to create funds for such schemes.
ADVANTAGES OF LIFE INSURANCE:
Life insurance is not merely an investment or a saving device- much
more than that.
In any other investment or saving avenue, like bank deposits, savings
certificates or mutual fund or shares and stocks etc. amount of funds
available at any time will not be more than the amount saved,
appreciation or interest earned till then that one wished to have at the
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end of the savings period which may range up to 30 or even more
years.
Life insurance has advantages over the other forms of savings;
Facility of nomination and assignment makes the claim
settlement easy on death
Life insurance involves compulsory savings.
Tax benefits – on premium paid as well as the amount
received by way of claim
Loans can be raised against a life Insurance policy.
Insurance is a mechanism that provides compensation for the
financial value of the asset in case of loss or damage.
LIMITATION OF INSURANCE
Some limitations to insurance are listed below:
All risks cannot be insured
There must be insurable interest
Insurance is limited to the financial value
There must be large number of similar risks
It must be possible to calculate the risk of loss
Losses should not be catastrophic
Losses must not be too small
Losses must be reasonably unexpected
Losses must be accidental
It must be consistent with public policy.
BRIEF HISTROY OF INSURANCE
Life insurance in the modern form was first set up in India through
a British company called the Oriental Insurance Company in 1818
followed by the Bombay Assurance company in 1823 and the Madras
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Equitable Life Insurance Society in 1829. all of these companies operated
in India but did not insure the life of Indian Citizes. They were insuring
the lives of Europeans living in India.
Some of the companies that started later did provide insurance for
Indians. But, they were treated as “substandard”. Substandard in
insurance parlance refers to lives with physical disability. In this case, the
common adjustment made was a “rating up” of five to seven years to
normal British life in India. The first company to sell policies to Indians
with “fair value” was the Bombay Mutual Life Assurance Society starting
in 1871.
Insurance business was conducted in India without any specific
regulation for the insurance business. They were subject of Indians
Companies Act of 1866. after the start of the “Be Indian Buy Indian
Movement” (Swadeshi Movement) in 1905, indigenous enterprises
sprang up in many industries. In 1912. two sets of legislation were
passed: The Indian Life Assurance Companies Act and The Provident
Insurance Societies Act. The only significant legislative change before
the Insurance Act of 1938 was Act XX of 1928. It enabled the
Government of India to collect information of
(1) Indian insurance companies operating in India
(2) Foreign insurance companies operating in India
(3) Indian insurance companies operating in foreign countries.
A comprehensive regulatory scheme came into place in 1938. This
was disabled through nationalization of life insurance business in India in
1956. Nationalization was justified on the grounds that it would create
much needed funds for raped industrialization. This was in conformity
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with the Government’s chosen path of State lead planning and
development.
In 1956 life insurance business was nationalized and L.I.C of India
came into beings on September 1st, 1956. The government took over the
business of 245 companies who were transacting life insurance business
at that time. There after L.I.C got the exclusive privilege to transact life
insurance business in India.
When the market was opened again to private participation in
1999, the earlier insurance Act of 1938 was reinstated as the backbone of
the current legislation of insurance companies, as the Insurance
Regulatory and Development Authority Act of 1999 was superimposed
on the 1938 Insurance Act.
INSURANCE IN INDIA
The insurance sector in Indian has come a full circle from being
and open competitive market to nationalization and back to a liberalized
market again. Tracing the developments in the Indian insurance sector
reveals the 360-degree turn witnessed over a period of almost two
centuries.
A brief history of the Insurance sector
The business of life insurance in India in its existing form started in
India in the year 1818 with the establishment of the Oriental Life
Insurance Company in Calcutta. Some of the important milestones in the
life insurance business in India are:
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1912: The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and non-life
insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance
Act with the objective of protecting the interests of the insuring public.
In 1956-245 Indian and foreign insurers and provident societies were
taken over by the central government and nationalized. LIC formed by an
Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5
crores from the Government of India. The General insurance business in
India, on the other hand, can trace its roots to the Triton Insurance
Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business
in India are:
1907: The Indian Mercantile Insurance Ltd. Set up, the first company to
transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of
India, frames a code of conduct for ensuring fair conduct and sound
business practices.
1968: The Insurance Act amended to regulate investments and set
minimum solvency Margins and Tariff advisory committee set up.
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1972: The General Insurance Business (Nationalization) Act, 1972
nationalized the General insurance business in India with effect from 1 st
January 1973.
107 insurers amalgamated and grouped into four companies viz. the
National Insurance Company Ltd., the New India Assurance Company
Ltd., the Oriental Insurance Company Ltd, and the United India Insurance
Company Ltd. GIC incorporated as a company.
INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee headed by former Finance Secretary and
RBI Governor R. N.Malhotra, was formed to evaluate the Indian
insurance industry and recommend its future direction.
The Malhotra committee was set up with the objective of complementing
the reforms initiated in the financial sector.
The reforms were aimed at “creating a more efficient and competitive
financial system suitable for the requirements of the economy keeping in
mind the structural changes currently underway and recognizing that
insurance is an important part of the overall financial system where it was
necessary to address the need for similar reforms…”
In 1994, the committee submitted the report and some of the key
recommendations included:
i) Structure
Government stake in the insurance companies to brought down to
50%
Government should take over the holdings of GIC and its subsidiaries
so that these subsidiaries can act as independent corporations
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All the insurance companies should be given grater freedom to
operate
ii) Competition
Private Companies with a minimum pad up capital of Rs.1bn should
be allowed to enter the industry
No Company should deal in both Life and General Insurance through
a single entity
Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies
Postal Life Insurance should be allowed to operate in the rural market
Only one State Level Life Insurance Company should be allowed to
operate in each state.
iii) Regulatory Body:
The Insurance Act should be changed
An Insurance Regulatory body should be set up
Controller of Insurance (Currently a part from the Finance Ministry)
should be made independent.
iv) Investments:
Mandatory Investments of LIC Life Fund in government securities to
be reduced From 75% to 50%
GIC and its subsidiaries are not to hold more than 5% in any
company (There Current holdings to be brought down to this level
over a period of time)
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v) Customer Service:
LIC should pay interest on delays in payments beyond 30 days
Insurance companies must be encouraged to set up unit linked
pension plans
Computerization of operations and updating of technology to be
carried out in the Insurance industry
The committee emphasized that in order to improve the customer
services and increase
The coverage of the insurance industry should be opened up to
competition. But at the same time, the committee felt the need to
exercise caution as any failure on the part of New players could ruin
the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by
stipulating the minimum capital requirement of Rs.100 crores. The
committee felt the need to provide greater Autonomy to insurance
companies in order to improve their performance and enable them
To act as independent companies with economic motives. For this
purpose, it has proposed setting up an independent regulatory body.
The Insurance Regulatory and Development Authority
Reforms in the Insurance sector were initiated with the passage of
the IRD Bill in Parliament in December 1999. The 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.
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The other decisions taken simultaneously to provide the supporting
systems to the Insurance sector and in particular the life insurance
companies was the launch of the
IRDA’s online service for issue and renewal of licenses to agents.
The approval of institutions for imparting training to agents has also
ensured that the Insurance companies would are expected to be
introduced by early next year. Since being set up as an independent
statutory body the IRDA has put in a framework of globally Compatible
regulations. In the private sector 12 life insurance and 6 general insurance
companies have been registered.
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CHAPTER - 2
DESIGN OF THE STUDY
DESIGN OF THE STUDY
TITLE OF THE STUDY:
A study on “PROSPECTS AND FUTURE OF LIFE
INSURAANCE BUSINESS IN INDIA” – A STUDY AT HDFC
STATEMENT OF PROBLEM:
To bring out an idea of the insurance industry and its importance in
the present scenario. This study mainly on the emerging growth in the
insurance sector and its contribution to the economy.
To show how the insurance sector channelized the savings of the
people to long term investment. This sector is to secure the life and
unexpected happening to minimize the risk. The main purpose is to study
about the policies and to link with the growth of the sector
OBJECTIVES OF THE STUDY:
To provide statistic on insurance industry growth.
To provide a view of the insurance developments.
To highlights the picture of insurance sector, in simple words the
challenges faced by insurance sector.
To understand the satisfaction level of customer in terms of
service.
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CHAPTER - 3
METHODOLOGY OF STUDY
To make the customers understand the benefits offered by the
company with regard to their policies.
DATE COLLECTION:
a) PRIMARY DATE:
In the study the primary data is collected from the agents and
through questionnaire.
b) SECONDARY DATE:
It is the data that have collected and completed previously for other
purpose. They are 2 types
1. Internal source: company brochure, formal and informal records.
2. External source: internet, websites, text books etc…
SCOPE OF THE STUDY:
This study contains current growth insurance industry specially
regard to private insurance companies. Study specifically explains about
how insurance growth takes place in Indian economy. It also covers
growth comparison between various companies. It also explain what is
the contribution of insurance towards gross domestic product (GDP). The
information enlighten how people showing interest rapidly to take
insurance and investments.
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METHODOLOGY OF STUDY:
Sample size:
Sample size is limited to 100 customers.
Sample frame:
Customers are randomly taken as the sample and framed for the
purposed of the study.
Sample technique :
The sampling technique adopted for the study is simple random. A
process that not only give to each element chance of being include in the
sample but also makes the selection of every possible combination of
cases in the desire size equally likely selected random sample.
LIMITATATIONS:
The study of growth prospects of insurance is a vast subject, which
requires a good deal of time and money. But there was a little time lag for
collection of data, analysis of collected data, and for presentation.
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CHAPTER 4
COMPANY PROFILE
COMPANY PROFILE
VISION
“The most successful and admired life insurance company, which
mean 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. In short,
“The most obvious choice for all.”
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 solution. 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 well 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.
HDFC and Standard Life first came together for a possible joint venture,
to enter the life insurance market, in January 1995. In October 1995 the
companies signed a 3 years joint venture agreement. Around this time
standard life purchased a 5% stake in HDFC, further strengthening the
relationship.
The next three years were filled with uncertainty, due to changes in
government and ongoing delays in getting the IRDA (Insurance
Regulatory and Development Authority)
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Act passed in the parliament. Despite this both companies remained
firmly committed to the venture.
In October 1998, the joint venture was renewed and additional
resource made available. Around this time standard life purchased 2% of
Infrastructural Development Finance Company Limited (IDFC). Standard
Life also started to use the service of the HDFC Treasury department to
advice them upon their investments in India.
Towards the end of 1999, the opening of the market looked very
promising and both companies agreed the time was right to move the
operation to the next level. Therefore, in January 2000 an expert team
from the UK joined a hand picked team from HDFC to form the core
project team based in Mumbai, India.
Around this time Standard Life purchased a further 5% stake in
HDFC and a 5% stake in HDFC Bank in a further development Standard
Life agreed to participate in the Asset Management Company promoted
by HDFC to enter the mutual fund market. The Mutual Fund was
launched on 20th July 2000. The company was incorporated on
14th August 2000 under the name of
HDFC STANDARD LIFE INSURANCE COMPANY LIMITED
Their ambition from as far back as October 1995 was to be the first
private company to re enter the life insurance market in India. On the 23 rd
October, 2000 this ambition was realized when HDFC Standard Life was
the only life insurance company to be granted a certificate of registration.
The company was incorporated on 14th August, 2000 under the name of .
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HDFC STANDARD LIFE INSURANCE COMPANY LIMITED
HDFC are main shareholders in HDFC Standard Life with 81.4%,
while Standard life owns 18.6% Given Standard Life’s existing
investment in the HDFC Group, this is the maximum investment allowed
under current regulations
HDFC Standard Life have a long and close relationship built upon
shared values and trust. Their ambition of HDFC Standard Life is the
mirror to the success of parent companies and be the yardstick by which
all other insurance company’s in India are measured.
HDFC STANDARD LIFE COMPANY’S CORE VALUES
Integrity
Innovation
Customer centric
People care
Team work
Joy & simplicity
PRODUCTS
INDIVIDUAL PRODUCTS
We at HDFC Standard Life realize that not everyone has the same
kind of needs. Keeping this in mind, we have a varied range of Products
that you can choose from to suit all your needs. These will help secure
your future as well as the future of your family.
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PROTECTION PLANS
You can protect your family against the loss of your income or the burden
of a loan in the even of your 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
Single Premium whole of Life plan is well suited to meet your long term
investment needs. We provide you with attractive long term returns
through regular bonuses.
Savings Plans
Savings plans offer you flexible options to build savings for your
future needs such as buying a dram home or fulfilling your children’s
immediate and future needs.
Saving range includes:
Endowment Assurance Plan
Unit Linked Endowment Assurance Plan
Money Back plan,
Children’s Plan,
Unit Linked young Star plan
Pension Plans
Pension Plan help you secure your financial independence even after
retirement.
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Pension range includes our personal pension plan and Unit Linked
Pension Plan
BOARD MEMBERS of HDFC – SLIC
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 a senior management as its Executive Chairman in
1993. He is the Chief Executive Officer of HDFC Limited. Mr. Prakash is
a Fellow of the Institute of Chartered Accountants (England & Wales).
Mr. Keki M Mistry jointed the Board of Directors of the Company in
December 2000 He is currently the Managing Director of HDFC Limited.
He joined HDFC Limited in 1981 and became an Executive Director of
HDFC Limited. He joined HDFC Limited in 1981and become an
Executive Director in 1993. He was appointed as its Managing Director
in November 2000 Mr. Mistry is a Fellow of the Institute of Chartered
Accountants of India and a member of the Michigan Association of
Certified Public Accounts.
Mr. Alexander M Crombie joined the Board of Directors of the Company
in April, 2002, He has been with the Standard Life Group for 34 years
holding various management positions. He was appointed as the Group
Chief Executive of the Standard Life Group in March 2004 and is also the
Chief Executive of Standard Life Investments Limited Mr. Crombie is a
fellow of the Faculty of Actuaries in Scotland.
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Ms. Marcia D Campbell is currently the Group Operations Director in the
standard life assurance company and is responsible for Group operations,
Asia Pacific Development, Strategy & Planning, Corporate
Responsibility and Shared Services Centre. Ms. Campbell joined the
Board of Directors in November 2005.
Mr. Keith N Skeoch is currently the chief Executive in Standard life
investments limited and is responsible for overseeing Investment Process
& Chief Executive Officer
Function. Prior to this, Mr. Skeoch was working with M/s. James Caple
& Co. holding the positions of UK Economist, Chief Economist,
Executive Director, Director of Controls and Strategy HSBS Securities
and Managing Director International Equities.
He was also responsible for Economic and Investment Strategy research
produced on a worldwide basis. Mr. Skeoch Joined the Board of
Directors in November 2005.
Mr. G N Bajpai was the former chairman of Life Insurance Corporation
of India and Securities and Exchange Board of India. Mr. Bajapi retired
from Life Insurance Corporation of India with more than 3 decades of
experience and further served SEBI as its chairman for 3 years, during
which time he had strengthened the compliance enforcement in SEBI.
Mr. Gautam R Divan is a practicing Chartered Accountant and is a
Fellow of the Institute of Chartered Accountants of India. Mr. Divan was
the Former Chairman and Managing committee member of Midsnell
Group International, an International Association of Independent
Accounting Firms and has authored several papers of professional
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interest. Mr. Devan has wide experience in auditing accounts of large
public limited companies and nationalized banks, financial and taxation
planning of individuals and limited companies and also has substantial
experience in structuring oversea investments to and from India.
Mr. Ranjan pant is a global Management Consultant advising
CEO/Boards on Strategy and Change Management. Mr. Pant, until 2002
was a partner & Vice-President at Bain & Company, Inc., Boston, where
he led the worldwide Utility Practice. He was also Director, Corporate
Business Development at General Electric headquarters in Fairfield,
USA. Mr. Pant has an MBA from The Wharton School and BE
( Honours) from Birla Institute of Technology and Sciences
Mr. Ravi Narain is the Managing Director & CEO of National Stock
Exchange of India Limited. Mr. Ravi Narain was a member of the core
team to set-up the Securities & Exchange Board of India (SEBI) and is
also associated with various committee of SEBI and the Reserve Bank of
India (RBI).
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 Institution to
Technology, Bombay and a Masters Degree in Business Administration
from The American University, Washington DC.
STRENGTHS:
1. As on today especially in ULIP they have been generated
constantly average return 48%
2. HDFC Slice is offering loyalty bonus points, for loyalty customers.
32
3. HDFC Slice is more transparent in respect of showing charges.
4. FMC charges are least in the industry i..e.0.8% on existing fund, 3rd
year on wards Initial charges are 1%
WEAKNESS:
1. HDFC Slic management is very consisted oriented mind to spend
money to bring new development, strategies and advertise and
literature.
2. They are very good planners and good implements but they have
lacking aggressiveness to go ahead in business.
OPPORTUNIES;
1. It has very good opportunity to become number one in the industry
if it can utilized its man power of sales, management and technical
staff.
2. HDFC Slic will become household name because of constant
returns to investors with very good plans, especially children plans.
3. It has an opportunity to become one of the biggest insurance
companies in India, due to their concentrating and targeting on
rural market.
THREATS:
1. They are not showing we are first in innovating of new strategies
like other counter parts.
2. They are having targeting on other one leading company, rather
than whole industry.
GROUP COMPANIES UNDER THE UMBRELLA OF HDFC BANK
HDFC STANDARD LIFE INSURANCE COMPANY
33
Milestones:
Partnership discussions with Standard Life Commenced in January
1995
It resulted into the signing of Joint Venture agreement in October
1995, the agreement was later renewed in October 1998
With Government clearing the decks, a project team was
established in Mumbai in January 2000
Company got Certificate of Incorporation 14th August 2000
HDFC- SLIC became the first private sector life insurance
company when certificate of registration was granted on 23rd
October 2000
The initial shareholding were HDFC 81.4% and Standard Life
18.6%
Performance Highlights:
HDFC –SLIC have covered over 1.6 million individuals out of
which 5,00,000 lives have been covered through company’s tie-
ups.
HDFC-SLIC is the first private insurance company to declare the
bonus. It makes HDFC –SLIC the only private company to have
declared bonuses for 4 consecutive years.
Winner of OUTLOOK money award for 2 years.
The company with largest distribution network among the private
life insurers.
HDFC-SLIC claims experience has been best so far across the
industry.
Business world recently voted HDFC-SLIC as “India’s most
respected private insurance company”.
34
HDFC-SLIC’S cumulative premium income, including the 1st year
premiums and renewal premiums is Rs.1532.21 crores during
April-March 2005-06.
35
PROFILE OF THE ECONOMY
3.1 Indian Economy an Overview:
India’s economy is on the fulcrum of an ever increasing growth
curve. With positive indicators such as a stable 8-9 per cent annual
growth, rising foreign exchange reserves of close to US$ 180 billion, a
booming capital market with the popular “Sensex” index topping the
majestic 14,000 mark, the Government estimating FDI flow of US$ 12
billion in this fiscal, and a more than 35 per cent surge in exports, it is
easy to understand why India is a leading destination for foreign
investment.
Economies Survery 2006-07 says:
The advance estimates of gross domestic product (GDP) for 2006-
07, released by the Central Statistical Organization place the growth of
GDP at factor cost at constant (1999-2000) prices in the current year at
9.2 per cent. While services maintained its vigorous growth performance,
there were distinct signs of sustained improvements on the industrial
front. The overall macroeconomic fundamentals are roust, particularly
with tangible progress towards fiscal consolidation and a strong balance
of payments position. With an upsurge in investment, the outlook is
distinctly upbeat.
The growth rate has been spurred by the manufacturing sector,
which has logged an 11.3 per cent rise in Q1 ’06-07, according to the
GDP data released by the central statistical Organization. It was 10.7 per
cent in the corresponding period of the last fiscal year. The GDP number
come just weeks after the monthly IIP growth figures have touched 12.4
per cent.
36
Agriculture, which accounts for nearly a quarter of the GDP, has also
grown by a healthy 3.4 per cent, unchanged from the corresponding
period of last fiscal. Other propellers of GDP growth for the first quarter
this fiscal have been the trade, hotels, transport and communications
sector which grew by 9.5 per cent and construction, which grew by 13.2
per cent. In the corresponding period of last fiscal, these sectors grew by
11.7 per cent and 12.4 per cent, respectively.
Some highlights :
India has more billonaires than China. This there were 15
billionaires in China but last year in India. There were 20 billionaires,
according to Forbes magazine. India has emerged as the world’s fastest
growing wealth creator, thanks to a buoyant stock marked and higher
earnings.
A number of India companies surpassed last years net profit in just
six months of the current fiscal, reflecting an accelerated growth in
corporate earnings. Forty-four per cent Top 100 Fortune 500 companies
are present in India. With its manufacturing and services sector on a
searing growth path, India’s economy may soon touch the coveted 10 per
cent growth figure.
India is one of the most powerful military and economic powers of
the world. India, the world’s largest democracy, has the world’s second
highest population of about 1 billion.
37
Fundamental Strengths of India :
A strong, vibrant and growing economy
Self-sufficiency in agriculture
Buoyant industrial growth (0.6% in 1991 to almost 10% in 2007)
Well developed banking system and financial markets
World’s Biggest Democracy High domestic savings and investment
Strong and mature private sector Comfortable balance of payments situation
High exports growth rate Low inflation
Strong legal and accounting system Established independent judiciary
Large and diversified infrastructure and industry
A free and vibrant press
Use of English as the language Current account convertibility
38
CHAPTER 5
DATA ANALYSIS & INTERPRETATION
After Liberalization and globalization government has been open
the doors for private players in insurance industry. Before private players
the public insurance company dominates in India especially with
traditional investments plans, where people couldn’t get any flexible
opportunities to have control over their investment plans. Every thing is
designed and developed the investment plans which have been favor of
company (LIC). But the private players have been designed the
investment plans where people could enjoy investment cum insurance,
more over people were having their own control or owner ship on their
plans. So that public would like to invest their money in such plans. It
leads growth and development of insurance industry. Naturally GDP
growth will takes place in Indian economy. The reason beings the plans
which offered by insurance companies are more transparent and tangible
to the customers in respect of returns.
According to government sources, the insurance and banking
services’ country’s gross domestic product (GDP) is 7% out of which the
gross premium collection forms a significant part. The funds available
with the state-owned Life Insurance Corporation (LIC) for investments
are 8% of GDP.
Taking into account the changing socio-economic demographics,
rate of GDP growth, changing consumer behavior and occurrences of
natural calamities at regular intervals, the Indian life insurance market is
expected to reach the value of around Rs.1683 Billion in the year 2009.
The market is expected to grow at a CAGR of more than 200% YOY
from the year 2006.
39
In 2006-07, pension premium contributed about 22.11% to total premium
income of insurers. Interestingly, the figure in the first nine months to
December 2005 was 25.22%.
GROWTH OF THE INSURANCE INDUSTRY. 2
The life insurance industry records a premium income of
Rs.82854.80 crore during the financial year 2004-05 as against
Rs.66653.75 crore in the previous financial years, recording a growth of
24.31 per cent. The contribution of first year premium. Single premium
and renewal premium to the total premium was Rs.15881.33 crore (19.16
per cent); Rs.10336.30 crore (12.47 per cent; and Rs.46637.16 crore
(68.36 percent), respectively. In the year 2000-01, when the industry was
opened up to the private players, the life insurance premium was
Rs.34,898.48 crore which constituted of Rs.6996.95 crore of first year
premium, Rs.25191.07 crore of renewal premium and Rs.2740.45 crore
of single premium. Post opening up, single premium had declined from
Rs.9,194.07 crore in the year 2001-02 to Rs.5674.14 crore in 2002-03
with the withdrawal of the guaranteed return policies. Though it went up
marginally in 2003-04 to Rs.5936.50 crore (4.62 per cent growth) 2004-
05, however, witnessed a significant shift with the single premium
income resing to Rs.10336.30 crore showing 74.11 per cent growth over
2003-04
40
PREMIUM UNDERWRITTEN BY LIFE INSURERS
(Rs.lakh)
Insurer 2003-04 2004-05
First year premium including Single premiumLIC 1734761.74
(6.34)2065306.36
(19.05)Private Sector 244070.58
(152.74)556457.34(127.99)
Total 1978832.32(14.68)
2621763.70(32.49)
Renewal PremiumLIC 4618580.96
(19.47)5447422.62
(17.95)Private Sector 67962.05
(343.12)216293.48(218.26)
Total 4686543.01(20.75)
5663716.10(20.85)
Total PremiumLIC 6353342.70
(15.63)7512728.98
(18.25)Private Sector 312032.63
(178.83)7512728.98
(18.25)Total 6665375.33
(18.91)8285479.80
(24.31)The life insurance industry underwrote first year premium
(inclusive of single premium) of Rs.26217.64 during 2004-05 as against
Rs.19788.32 crore in 2003-04. The industry clocked a growth of 32.49
percent driven by a significant jump in unit-linked business. Interestingly,
the growth in the first year premium (other than single premium) came on
the policies issued by the private insurance with a growth rate of 106.46
per cent as against a negative growth exhibited by LIC at 1.25 percent.
As against this, the private insurers and LIC reported single premium
growth of 239.46 per cent and 62.32 percent, respectively.
41
CHALLENGES ARE FACING BY THE INDUSTRY:
1. Many players in the industry which result strong competition in the
market.
2. insurance companies are facing competition mutual fund
investment option
3. People till now they are looking towards public sector insurance
company rather than private sector.
4. Many rules and regulations adopted to run insurance from
Insurance Regulatory development Authority (IRDA).
5. Due to many players in industry it is very difficulty to recruit the
agents, whom consider as a key persons bringing business to the
company
42
MERITS OF THE HDFC SLIC:
HDFC Slic offering very good plans which could benefited to the
customers in lot in terms of service, charges returns on investment. The
following are merits of the company.
1. FMC charges are least in the industry i.e.0.8% on existing fund, 3 rd
year on wards Initial charges are 1%
2. As on today especially in ULIP they have been generated
constantly average return 48%
3. HDFC Slic is offering loyalty bonus points, for loyalty customers
4. HDFC Slic is offering quarterly mode of payment.
5. HDFC Slic in more transparent in respect of showing charges.
6. HDFC Slic is purely profit oriented company specially customer
point of view.
43
GROWTH OF HDFC SLIC:
ParametersApr-Mar 2005-06 (Rs.Cr.)
Apr-Mar 2006-07 (Rs.Cr.)
% Growth
Total received premium 668.40 1532.21 129.23
i. New Business 486.15 1028.94 111.65
ii. Renewal 182.25 503.27 176.14
Inference:
HDFC Standard Life has recorded a strong year on year growth of
1125 for the period April-March 2005-06
44
0
50
100
150
200
CHART REPRESENTING THE GROWTH OF HDFC
Series1 111.65 176.14
NEW BUSINESS RENEWAL PREMIUM
LIFE FIRST YEAR PREMIUM RENEWAL PREMIUM
ICICI 67.6 33
HDFC 72.4 29.2
BIRLA 71 32.1
45
PERCENTAGE CONTRIBUTION OF RESPECTIVE PREMIUMS
67.6 72.4 71
33 29.2 32.1
0%
20%
40%
60%
80%
100%
ICICI HDFC BIRLA
FIRST YEAR PREMIUM RENEWAL PREMIUM
HDFC Standard Life has recorded a strong year on year growth of 112%
for the period April-March 2005-06, in comparison with the same period
2004-05, with new business first year premium of Rs.1029 crores. The
growth achieved by the company was considerably higher than the
private sector industry average of 84% for 2005-06. In terms of effective
premium income (EPI), WHICH gives a 10% value to as Single premium
policy, and is an internationally accepted indicator of an insurance
company’s performance, the EPI grew by 103% from Rs.436 Cr. to
Rs.887 Cr.
HDFC Standard Life’s growth in new business is a result of
number of lives insured as well as, an increase in the average premium.
For the individual business, volume measured by the number of lives
insured, witnessed a 32% growth. The average premium also increased by
62& from Rs.17,000 in 2004-05 to Rs.27,500 in 2005-06
The GDP has been growing over 8% per annum and 47% of all
savings are now in financial saving forms; 16% of savings is in the form
of insurance premiums and another 16% is in Provident Fund and
Pensions i.e., 32% of India’s financial savings of the household sector are
available to be tapped. Therefore, growth for the private life insurance
industry is inevitable and HDFC Standard Life is confident of
maintaining a steady growth pace.”
“HDFC has the most competitive fund management charge, which
is the lowest in equity based products. Our fund management charge is as
low as 0.8% per annum, the key to enhancing long-term returns. Our
other differentiator is that we believe in offering life insurance solutions
to customers based clearly on their needs, and ‘Disha’ is the way it is
done.”
46
‘Disha’ is a Professional Sales Skills Training Program. The
delegates in this program are introduced to a ‘Need-based’ selling
approach, which can cater to all our clients opting for the insurance
solutions. ‘Disha’ is aimed at providing a good service to the client and
building long-term relationship.
The benefit to premium ratio varies significantly among the
players. While ICICI Prudential has maintained this ratio at a consistently
low level for the last three years, some of the other players have seen
significant rises. Benefits paid to premiums have risen for HDFC
Standard Life, Birla Sun Life, and Bajaj Allianz. For HDFC Standard,
this increase is attributable to a sharp jump in surrender payments, while
Birla Sun Life and Bajaj Allianz both saw a steep increase in withdrawal
payments during the current fiscal year 27. benefits paid as a percentage
of premiums written usually increase as the market matures.
47
LIFE FIRST YEAR PREMIUM RENEWAL PREMIUM
ICICI 67.6 33
HDFC 72.4 29.2
BIRLA 71 32.1
PERCENTAGE CONTRIBUTION OF RESPECTIVE PREMIUMS
67.6 72.4 71
33 29.2 32.1
0%
20%
40%
60%
80%
100%
ICICI HDFC BIRLA
FIRST YEAR PREMIUM RENEWAL PREMIUM
Inference :
In case of first year premium the HDFC is having 72.4%. In the
private sector HDFC is having highest growth.
48
EQUITY AS A% OF INVESTMENT OF POLICY HOLDER FUNDS
BANK FY04 FY05
ICICI 22.6 26.8
HDFC 10.2 28.2
BIRLA 19 22.6
Inference :
In the financial year the HDFC is having 28.2% growth in case of
policy holder’s fund.
49
22.6
26.8
10.2
28.2
19
22.6
0
5
10
15
20
25
30
FY04 FY05
ICICI HDFC BIRLA
(1) Chart representing the age of respondents
0
5
10
15
20
25
30
35
Series1 35 29 24 10 2
20-30 YRS
30-40 YRS
40-50 YRS
50-60 YRS
60-70 YRS
Frequency Percent20-30 YRS 35 3530-40 YRS 29 2940-50 YRS 24 2450-60 YRS 10 1060-70 YRS 2 2
Total 100 100
Inference:
Majority of respondents belong to the age group 20-30, followed by
the age group 30-40 years.
50
(2) Chart representing Gender
MALE 75%
FEMALE 25%
Frequency Percent
MALE 75 75
FEMALE 25 25
Total 100 100
Inference:
About 75% of the respondents are male and the rest are females
who account to 25%.
51
(3) Chart representing occupation of respondents
0
10
20
30
40
Series1 40 30 20 10
SALARIED EMPLOYE
PROFESSIONAL
BUSINESS OTHERS
Frequency Percent
SALARIED EMPLOYEE 40 40
PROFESSIONAL 30 30
BUSINESS 20 20
OTHERS 10 10
Total 100 100
Inference:
Majority of respondents are salaried employees, which is closely
followed by professional.
52
(4) Chart showing the income group distribution
0
5
10
15
20
25
30
35
40
Series1 15 40 30 15
1-2 lakhs 2-3 lakhs 3-4 lakhs 4-5 lakhs
Frequency Percent
1-2 lakhs 15 15
2-3 lakhs 40 40
3-4 lakhs 30 30
4-5 lakhs 15 15
Total 100 100
Inference:
Most respondents fall into the income group of Rs.2,00,000/-
Rs.3,00,000. The middle class are more interested to invest in this sector.
53
(5) Chart representing the aware of HDFC Slic
0
20
40
60
80
100
Series1 90 10
YES NO
Frequency Percent
YES 90 90
NO 10 10
Total 100 100
Inference:
Majority of the respondents are aware about the HDFC Slic but
10% of the people are aware about HDFC.
54
(6) Chart representing the aware of HDFC Slic
0
5
10
15
20
25
30
35
40
FRIENDS NEWSPAPER TV INSURANCEAGENTS
INTERNET
Frequency Percent
FRIENDS 15 15
NEWSPAPER 10 10
TV 30 30
INSURANCE AGENTS 40 40
INTERNET 5 5
Total 100 100
Inference:
Most of the respondents are aware through the insurance agents i.e.
405 And through advertisement 305 they got awareness.
55
(7) Chart representing the private company that comes to respondent’s mind first
0
5
10
15
20
25
30
Series1 30 25 10 12 7 16
HDFC ICICI BIRLA SUNLI
AVIVAMET LIFE
BAJAJ
Frequency Percent
HDFC 30 30
ICICI 25 25
BIRLA SUNLIFE 10 10
AVIVA 12 12
MET LIFE 7 7
BAJAJ 16 16
Total 100 100
Inference:
56
Based on multiple responses, we can see that maximum
respondents top of the mind company is HDFC which is followed by
ICICI.
(8) Chart represents the Preference of investment options
0
10
20
30
40
50
60
70
Series1 30 70
TRADITIONAL NON TRADITIONAL
Frequency Percent
TRADITIONAL 30 30
NON TRADITIONAL 70 70
Total 100 100
Inference:
Most of the respondents prefer for the non traditional plans,
because the ULIP is really performing good and they are providing good
return to the customers.
57
(9) Chart represents the rate of HDFC policies
0
10
20
30
40
50
60
Series1 30 60 8 2
HIGHLY SATISFIED
SATISFIED NOT SATISFIED DISSATISFIED
Frequency Percent
HIGHLY SATISFIED 30 30
SATISFIED 60 60
NOT SATISFIED 8 8
DISSATISFIED 2 2
Total 100 100
Inference:
Most of the people are satisfied by taking the insurance policies
and 30 % of the people highly satisfied.
58
(10) Chart represents the performance of HDFC
0
10
20
30
40
50
Series1 30 50 15 5
EXCELLENT GOOD SATISFACTORY BAD
Frequency Percent
EXCELLENT 30 30
GOOD 50 50
SATISFACTORY 15 15
BAD 5 5
Total 100 100
Inference:
The performance of the company is good because the level of
performance with the customers is good and excellent.
59
FINDINGS:
1. Till date, only 20% of the total insurable population of India is
covered under various life insurance schemes.
2. Insurance industry has been contributing its own share to GDP.
3. After LIC in private sector HDFC Slic only having constant growth in
aspects.
4. people who are interest in insurance are mostly salaried employees.
5. In private sector there is strong competition because there are more
players in the industry and there are many unique plans are offered by
various companies.
6. People are interested to take plans of HDFC Slic because its parent
wood company has been laid very good foundation in the minds of
public.
7. The younger generation would like to invest the money in industry
rather than other investment options.
8. The literate people are having more awareness sand idea about private
players.
9. The middle class people are attracted by private insurance companies,
because their ULIP performance is more competitive and excellent in
recent days.
10. The agents or advisers of private players highly qualified people than
LIC.
11. The private players are having very good knowledge and technique in
respect of generating the revenue for itself as well as to the
customers.
60
SUGGESTION
1) It is recommended to have a weekly or monthly update session to
the insurance agents to make them clear about the updates and new
policies introduced or going to be introduced.
2) It is recommended to conduct road shows and campaigns to
promote the importance of child insurance.
3) Career in the insurance industry needs to be explained to the agents
so as to make them feel proud to be a part of the industry that
would result in the efficiency of the insurance agent.
4) More no. of braches should be opened at Bangalore as it is a vast
market place and ore no. of customers are not aware of HDFC
insurance product.
5) Effective promotional measures should be takes up to expand
business
6) Stalls with experienced staff should be kept out side crowded area
like food world. HDFC ATM center business organization
7) Effective promotional measures should be take up to expand
business
8) Stalls with experienced staff should be kept out side crowded area
like food world. HDFC ATM Center business organization
9) Seminars should be conducted in business organization to bring
awareness about investment and financial plan for employees and
stimulating them to make investment
61
CONCLUSION
From the study I came to know that there is a lot of growth for the
life insurance and plays an important role by contributing the share to the
GDP. Private players are having the competition but they are having their
own strategy to survive in the market. Also, there is a high scope for Unit
Linked Insurance plan plus. It is the goodwill and the trust of the
company that people would go for an insurance plan. Insurance is seen as
a source of gaining tax benefits. HDFC Standard Life is second to Life
Insurance Corporation in the field of insurance, though it was LIC who
enjoyed monopoly in the industry.
62
