Najma Project

8/19/2019 Najma Project

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A Project Report On

“A COMPARATIVE STUDY OF LIFE INSURANCE WITH

REFERENCE TO LIC AND HDFC LIFE

INDEX

Srno. Chapter names

Pageno.

1 Introduction 6-17

1.1 Brief history of Insurance 9

1.2 Principles of Insurance 1

1.! "unctions of Insurance 16

2 #egulatory $uthority of Insurance

18-23

2.1 %alhotra Committee 19

2.2 Insurance $ct 21

2.! Insurance #egulatory and &e'elopment $uthority 22

! (ife Insurance

24-32

!.1 (ife Insurance in India 25

!.2 "eatures of (ife Insurance Contract 28

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!.! )ypes of (ife Insurance Policies 29

!.* Profile of (ife Insurance Companies in India 32

* (ife Insurance Corporation of India 33-36 +Pu,lic sector company

HDFC Life Insurance37

39

+Pri'ate sector company

6 &ata $nalysis of (ife Insurance Companies

4056

6.1 %ar/et share ,ased on Premium and Policies

41

48 6.1.1 %ar/et share ,ased on )otal Premium 41

6.1.2 %ar/et share ,ased on #ene0al Premium 43

6.1.! %ar/et share ,ased on )otal Policies 45

6.1.* %ar/et share ,ased on e0 Business 47

6.2 Prediction of e0 Business )otal Premium

4955

6.2.1 Prediction of e0 Business for Pu,lic Sector 49

6.2.2 Prediction of e0 Business for Pri'ate Sector 50

6.2.! Prediction of )otal Premium for Pu,lic Sector 52

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6.2.* Prediction of )otal Premium for Pri'ate Sector 54

6.! Cost efficiency of (ife insurnce Companies 56

7 S0ot $nalysis of Insurance Industry in India

5759

7.1 Strengths 3 opportunities of Insurance Industry 58

7.2 4ea/ness 3 Challenges of Insurance Industry 59

5 Conclusion 60

Bi,lography 61

CHAPTER 1

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INTRODUCTION

Insurance is a mechanism of collecting money from a larger group in small amounts

called premium and compensating fe0 people 0ho are 'ictims of losses and damages. )he

concept of insurance in'ol'es paying a premium to the insurance company to pro'ide co'er on a

certain ris/.

In!"r#nce refers to the mar/et for insurance in India 0hich co'ers ,oth the pu,lic and pri'ate

sector organisations. It is listed in the Constitution of India on the in the Se'enth Schedule

meaning it can only ,e legislated ,y the central go'ernment.

4

The insurer agrees

t !a" a s!eci#e$

a%unt f %ne" in

In$i'i$ua& !a"s a

!re%iu% t the

insurance

(n in$i'i$ua&

)u"s an

insurance

http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Constitution_of_Indiahttp://en.wikipedia.org/wiki/Constitution_of_Indiahttp://en.wikipedia.org/wiki/Central_government_of_Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Constitution_of_Indiahttp://en.wikipedia.org/wiki/Central_government_of_Indiahttp://en.wikipedia.org/wiki/Insurance


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In!"r#nce is the euita,le transfer of the ris/ of a loss from one entity to another in e8change

for payment. It is a form of ris/ management primarily used to hedge against the ris/ of a

contingent uncertain loss.

$n insurer or insurance carrier is a company selling the insurance the insured or policyholder

is the person or entity ,uying the insurance policy. )he amount of money to ,e charged for a

certain amount of insurance co'erage is called the premium. #is/ management the practice

of appraising and controlling ris/ has e'ol'ed as a discrete field of study and practice.

)he transaction in'ol'es the insured assuming a guaranteed and /no0n relati'ely small loss in

the form of payment to the insurer in e8change for the insurer:s promise to compensate

+indemnify the insured in the case of a financial +personal loss. )he insured recei'es a contract

called the insurance policy 0hich details the conditions and circumstances under 0hich the

insured 0ill ,e financially compensated.

)he insurance sector has gone through a num,er of phases ,y allo0ing pri'ate companies to

solicit insurance and also allo0ing foreign direct in'estment. India allo0ed pri'ate companies in

insurance sector in 2 setting a limit on "&I to 26; 0hich 0as increased to *9; in 21*.

o0e'er the largest life-insurance company in India (ife Insurance Corporation of India is

still o0ned ,y the go'ernment and carries a so'ereign guarantee for all insurance policies issued

,y it.

De$%n%t%on

In $%n#nc%#& !en!e'

$ccording to Ree(e& #n) M%&&er ?Insurance is a social de'ice 0here,y the uncertain ris/s

of indi'iduals may ,e com,ined in a group and thus made more certainsmall periodical

contri,utions ,y the indi'iduals pro'iding a fundout of 0hichthose 0ho suffer losses may ,e

reim,ursed.@

5

http://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Decision_modelhttp://en.wikipedia.org/wiki/Indemnityhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Insurance_policyhttp://en.wikipedia.org/wiki/Insurance_policyhttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Insurance_in_India#cite_note-1http://en.wikipedia.org/wiki/Life_Insurance_Corporation_of_Indiahttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Decision_modelhttp://en.wikipedia.org/wiki/Indemnityhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Insurance_policyhttp://en.wikipedia.org/wiki/Foreign_direct_investmenthttp://en.wikipedia.org/wiki/Insurance_in_India#cite_note-1http://en.wikipedia.org/wiki/Life_Insurance_Corporation_of_India


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In &e(#& !en!e

?Insurance is a contracted agreement 0here,y one party agrees in consideration of the price paid

to him +premium to compensate another party for losses.@

$ contract +policy in 0hich an indi'idual or entity recei'es financial protection or

reim,ursement against losses from an insurance company. )he company pools clients: ris/s to

ma/e payments more afforda,le for the insured

11 *RIEF HISTORY OF INSURANCE

)he Indian life insurance industry has its o0n origin and history since its inception. It has

passed through many o,stacles hindrances to attain the present status. Insurance o0es its

e8istence to 17th century Angland. In fact it too/ shape in 1655 at a rather interesting place

called (loyd:s Coffee >ouse in (ondon 0here merchants ship-o0ners and under0riters met to

discuss and transact ,usiness. )he first stoc/ companies to get into the ,usiness of insurance

0ere chartered in Angland in 172. )he year 17! sa0 the ,irth of the first insurance company in

the $merican colonies in Charleston. In 179 the Pres,yterian Synod of Philadelphia sponsored

the first life insurance corporation in $merica for the ,enefit of ministers and their dependents.

(ife insurance in its modern form came to India from Angland in 1515 0ith the formation of

riental (ife Insurance Company +(IC in ol/ata mainly ,y Auropeans to help 0ido0s of

their /in. (ater due to persuasion ,y one of its directors +Shri Ba,u %uttyal Seal Indians 0ere

also co'ered ,y the company. >o0e'er it 0as after 15* that life insurance really too/ off in a

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,ig 0ay. By1565 25 companies 0ere doing ,usiness of insurance in India. Aarlier these

companies 0ere go'erned ,y Indian company $ct 1566.

By 157 17* companies ceased to e8ist 0hen British Parliament enacted Insurance $ct 157.

)hese companies ho0e'er insured Auropean li'es. )hose Indians 0ho 0ere offered insurance

co'er 0ere treated as su,-standard li'es and 0ere accepted 0ith an e8tra premium of 1; to

2;. By the end of the 15th century (loyd:s had ,re0ed enough ,usiness to ,ecome one of the

first modern insurance company.

1+ PRINCIPLES OF INSURANCE

$ contract of insurance may ,e defined as a contract ,et0een t0o parties 0here,y a

person underta/es in consideration of a fi8ed sum of money to pay to the other a fi8ed amount

of money on the happening of a certain e'ent + death or maturity of policy or to pay the amount

of actual loss 0hen it ta/es place through a ris/ insured + in case of property. "ollo0ing are the

important principles of insurance contractD

1. Principle of utmost good faith.2. Principle of insura,le interest.!. Principle of indemnity.*. Principle of su,rogation.. Principle of contri,ution.6. Principle of pro8imate cause.

Pr%nc%p&e o$ "t,o!t (oo) $#%t-

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)he principle of utmost good faith also /no0n as ?E,errimae "edei@. )he contract of

insurance is a contract ,ased on utmost good faith. It is duty ,ound on the parties to disclose all

material facts and figures relating to the su,Fect matter of the insurance contract. $ material fact

is one 0hich affects the Fudgement or decision of ,oth the parties in entering into the contract. If

this principle is not o,ser'ed ,y either party the contract may ,e a'oided ,y the other. )he duty

of disclosure is a,solute and positi'e.

%ost of the coomercial contracts are su,Fect to the doctrine of GCa'eat empterH + let the

,uyer ,e0are 0hich does not pre'ail in the insurance contract. In the a,o'e doctrine it is the

duty of the ,uyer to satisfy himself the genuineness of the su,Fect matter and the seller is under

no o,ligations to supply information a,out it.

But in the insurance contract ,oth the parties should disclose in the form in 0hich it

really e8ist and there should ,e no concealment misrepresentation mista/e or fraud a,out the

material facts. A'en though the principle is eually applica,le to ,oth the parties the onus of

ma/ing a full disclosure of al material facts rests primarily on the insured. A8amples of material

facts areD

a In life insurance D Information relating to age income health diseases family

history nature of ,usiness or profession.

, In fire insurance it is relating to acti'ities of firm condition of godo0n the detailsof the goods stored 0hether such goods are of haardous nature. In motor insurance

details of the dri'ers condition of 'ehicle etc.

)he 0hole truth must ,e disclosed a,out the su,Fect matter of insurance so that the

under0riter may /no0 the e8tent of his ris/ and the amount he must charge for the insurance

policy as a premium. It is the duty of the insurer to disclose all the rele'ant facts a,out the

policy conditions and ,enefits. )he facts should ,e disclosed at the time of entering into the

contract and if there are some changes su,seuently then the same should ,e intimated to the

insurer ,y the insured.

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Pr%nc%p&e o$ %n!"r#.&e %ntere!t'

)he contract is 'alid only 0hen the insured possess an insura,le interest in the su,Fect

matter to ,e insured. )he insura,le interest is the pecuniary interest in the property to ,e insured

0here,y the insured is ,enefited ,y the e8istence of the su,Fect matter and 0ill suffer financial

&o!! on the death or damage of the su,Fect matter.

In the 0ords of Ree(e& #n) M%&&er ?$n insura,le interest is an interest of such a

nature that the possessor 0ould ,e financially inFured ,y the occurrence of the e'ent insured

against.

)he essentials of a 'alid insura,le interest are the follo0ingD

a )here should ,e su,Fect matter to ,e insured. , )he relationship ,et0een the su,Fect matter and the policy holder must ,e recognised ,y

la0.c )he policy holder should ha'e monetary relationship 0ith the su,Fect matter and the

insured ris/ must ,e capa,le of financial e'aluations.d )he relationship ,et0een the policy holder and the su,Fect matter should ,e such that the

insured is economically ,enefited ,y the sur'i'al e8istence of the su,Fect matter or 0ill

suffer economic loss ,y the death or non- e8istence of the su,Fect matter.e )he insura,le interest must e8ist ,oth at the time of the proposal and at the time of

claims in the fire insurance ,ut in the case of life insurance it may not ,e present at the

time of claim if the policy is assigned. In case of marine insurance it must e8ist at the

time of claim.

Insura,le interest is the ,asis of legality of insurance contracts. In the a,sence of the

insura,le interest the insurance contract ,ecomes'oid and such 'oid contracts are contracts

against pu,lic interests.

Pr%nc%p&e o$ %n)e,n%t/'

)he 'ery foundation of e'ery rule 0hich has ,een applied to insurance la0 is that the

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contract of insurance contained in a marine or fire policy is a contract of indemnity only. If e'er

a preposition is ,rought for0ard 0hich is in 'ariance 0ith it that is to say 0hich either 0ill

pre'ent the assured from o,taining a full indemnity or 0hich gi'es the assured more than a full

indemnity that proposition must certainly ,e 0rong.

)he principle of indemnity implies that on the happening of an e'ent insured against the

insurer underta/es to place the insured in the same pecuniary +monetary position that he

occupied immediately ,efore the e'ent. Indemnity means the e8act financial compensation

0hich is paid to the insured. $ccording to this contract the insured should ,e neither ,etter off

nor 0orse off after recei'ing the insured amount in case of loss due to e'entualities.

)he main o,Fect of this principle is to ensure that the insured is not a,le to use this contract

for speculation or gam,ling. )he indemnity pre'ents the insured from ,enefiting under the

contract and to reduce the impact of moral haards. )he principle is applica,le to all types of

contract e8cept life insurances personal accident and sic/ness insurance. Ender the contract of

insurance the sum assured 0ill ,e paid ,y the insurer 0hen the person dies due to the fact that

life cannot ,e indemnified. )he principle of indemnity does not apply to personal insurance

,ecause the amount of loss is not easily calcula,le there.

)he measure of indemnity is decided at the time of entering into the contract itself. In the

e'ent of claim the insured mustD

a Pro'e that he 3 she has sustained a monetary loss. , Pro'e the e8tent and 'alue of his 3 her loss.c )ransfer any rights 0hich he 3 she may ha'e for reco'ery from another source to the

insurer if he 3 she has ,een fully indemnified.

Pr%nc%p&e o$ !".ro(#t%on'

)his principle is also a corollary to the principle of indemnity. Su,rogation may ,edefined as the transfer of rights and remedies of the insured to the insurer 0ho has compensated

the insured in respect of the loss.

a It literally means ?to stand in place of@. It is the right of one person to stand at la0 in the

place of another and to a'ail all rights and remedies of that other person. , ften 0hen a claim occurs there may ,e t0o a'enues of reco'ery. Suppose ?$@ dri'es

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negligently and causes an accident damaging BHs car. If BHs car is insured then t0o

options are open to ?B@ to reco'er his loss. ?B@ can sue ?$@ for damages or he can claim

from his insurer. If B pursues ,oth a'enues he 0ill recei'e dou,le compensation. )o

pre'ent B from profiting from his loss su,rogation is used in terms of 0hich once the

insurer has paid B the insurer assumes all BHs rights to sue $. this ensure that principle of

indemnity is preser'ed.

S".ro(#t%on -#! # n",.er o$ !".0pr%nc%p&e! n#,e&/'

a )he insurer cannot ,e su,rogated to the insuredHs right of action until it has paid the

insured and made good the loss. , )he insurer can ,e su,rogated only to actions 0hich the insured 0ould ha'e ,rought

him.c )he insurer must not preFudice the insurerHs right of su,rogation. )hus the insured may

not compromise or renounce any right of action he has against the ! rd party if ,y doing

so he could diminish his loss.d Su,rogation against the insurer. Just as insured cannot profit from his loss the insurer

may not ma/e a profit from the su,rogation rights. )he insurer is only entitled to reco'er

the e8act amount they paid as indemnity nothing more. If they reco'er more the ,alance

should ,e gi'en to the insured.e Su,rogation gi'es the insurer the right of sal'age.

Pr%nc%p&e o$ Contr%."t%on'

)he principle is applica,le to all types of insurance contracts e8cept life insurance.

4here an insurer gets the su,Fect matter insured 0ith more than one insurer in case of loss or

damage to the insured property the insurers shall contri,ute to0ards the claim in proportion to

the sum assured 0ith each.

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Contri,ution condition is a corollary to the principle of indemnity. If an insured o,tains

more than one policy co'ering the same ris/ he cannot reco'er in total more than a full

indemnity. )he essentials of this principle areD

a )he policies co'ers the same perils. , )he policies co'er the same su,Fect matter.c )he policies should ,e in force 0hen loss occurs.d )he policies co'er a common interest

Pr%nc%p&e o$ pro%,#te c#"!eD

Pro8imate cause can ,e defined as ? )he acti'e efficient cause that sets in motion a

chain of e'ents 0hich ,rings a,out a result 0ithout the inter'ention of any ne0 force started

and 0or/ing acti'ely from a ne0 independent source.@

a In Insurance the rule is that for a loss to ,e paid or compensated under a policy of

insurance it must ha'e ,een caused ,y an insured peril. Enless the loss is

pro8imately caused ,y an insured peril the policy does not pay or respond. , )he onus of pro'ing that the loss 0as pro8imately caused ,y an insured peril rests

0ith the insured.c If the insured ma/es a prima-facie case that the loss 0as pro8imately caused ,y an

insured peril the insurer is o,liged to indemnify unless they can pro'e that an

e8ception applies.

)his principle /eeps the scope of the insurance 0ithin the limits intended ,y the insured

and the insurer 0hen the contract 0as made. It also helps in gi'ing effect to the real meaning

and intention of insurance contract. In the a,sence of this rule e'ery loss could ,e claimed ,y

the insured and the insurer could reFect e'ery loss. )hus the principle ser'es not only to define

the scope of co'erage under the insurance contract ,ut also to protect the rightsof the parties tothe contract. $ pro8imate cause is the first e'ent in a chain of e'ents that gi'es rise to a claim of

the insurance.

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12 FUNCTIONS OF INSURANCE

)he functions of Insurance can ,e ,ifurcated into three partsD

3#4 Pr%,#r/ F"nct%on!3.4 Secon)#r/ F"nct%on!

3#4 Pr%,#r/ F"nct%on!

)he primary functions of insurance include the follo0ingD

Pro5%)e Protect%on

)he primary function of insurance is to pro'ide protection against future ris/ accidents and

uncertainty. Insurance cannot chec/ the happening of the ris/ ,ut can certainly pro'ide for

losses of ris/. Insurance is actually a protection against economic loss ,y sharing the ris/ 0ith

others.

A!!e!!,ent o$ r%!6

Insurance determines the pro,a,le 'olume of ris/ ,y e'aluating 'arious factors that gi'e rise to

ris/. #is/ is the ,asis for determining the premium rate also.

Co&&ect%5e .e#r%n( o$ r%!6

Insurance is a de'ice to share the financial loss of fe0 among many others. Insurance is a mean

,y 0hich fe0 losses are shared among larger num,er of people. $ll the insured contri,ute

premiums to0ards a fund out of 0hich the persons e8posed to a particular ris/ are paid.

S#5%n(! #n) %n5e!t,ent

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Insurance ser'es as a tool for sa'ings and in'estment insurance is a compulsory 0ay of sa'ings

and it restricts the unnecessary e8penses ,y the insured. "or the purpose of a'ailing income-ta8

e8emptions people in'est in insurance also.

3.4 Secon)#r/ F"nct%on!

)he secondary functions of insurance include the follo0ingD

Pre5ent%on o$ Lo!!e!

Insurance cautions indi'iduals and ,usinessmen to adopt suita,le de'ice to pre'ent unfortunate

conseuences of ris/ ,y o,ser'ing safety instructions installation of automatic spar/ler or alarm

systems etc. #educed rate of premiums stimulate more ,usiness and ,etter protection to the

insured.

S,#&& c#p%t#& to co5er r(e r%!6!

Insurance relie'es the ,usinessmen from security in'estments ,y paying small amount of

premium against larger ris/s and uncertainty.

Contr%."te! to7#r)! t-e )e5e&op,ent o$ r(e %n)"!tr%e!

Insurance pro'ides de'elopment opportunity to large industries ha'ing more ris/s. A'en the

financial institutions may ,e prepared to gi'e credit to sic/ industrial units 0hich ha'e insured

their assets including plant and machinery.

So"rce o$ E#rn%n( Fore%(n Ec-#n(e

Insurance is an international ,usiness. )he country can earn foreign e8change ,y 0ay of issue of

insurance policies.

R%!6 Free Tr#)e

Insurance promotes e8ports insurance 0hich ma/es the foreign trade ris/ free 0ith the help of

different types of policies under marine insurance co'er.

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+1 M#&-otr# Co,,%ttee

In 199! %alhotra Committee- headed ,y former "inance Secretary and #BI Ko'ernor #..

%alhotra- 0as formed to e'aluate the Indian insurance industry and recommend its futuredirection. )he %alhotra committee 0as set up 0ith the o,Fecti'e of complementing the reforms

initiated in the financial sector. )he reforms 0ere aimed at creating a more efficient and

competiti'e financial system suita,le for the reuirements of the economy /eeping in mind the

structural changes currently under0ay and recognising that insurance is an important part of the

o'erall financial system 0here it 0as necessary to address the need for similar reforms. In 199*

the committee su,mitted the report and some of the /ey recommendations includedD

3%4 Str"ct"re

Ko'ernment sta/e in the insurance Companies to ,e ,rought do0n to ;. Ko'ernment should

ta/e o'er the holdings of KIC and its su,sidiaries so that these su,sidiaries can act as

independent corporations. $ll the insurance companies should ,e gi'en greater freedom to

operate.

3%%4 Co,pet%t%on

Pri'ate Companies 0ith a minimum paid up capital of #s.1,n should ,e allo0ed to enter the

sector. o Company should deal in ,oth (ife and Keneral Insurance through a single entity.

"oreign companies may ,e allo0ed to enter the industry in colla,oration 0ith the domestic

companies. Postal (ife Insurance should ,e allo0ed to operate in the rural mar/et. nly one

State (e'el (ife Insurance Company should ,e allo0ed to operate in each state.

3%%%4 Re("tor/ *o)/

)he Insurance $ct should ,e changed. $n Insurance #egulatory ,ody should ,e set up.

Controller of Insurance- a part of the "inance %inistry- should ,e made independent.

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!!

3%54 In5e!t,ent

%andatory In'estments of (IC (ife "und in go'ernment securities to ,e reduced from 7; to

;. KIC and its su,sidiaries are not to hold more than ; in any company +their current

holdings to ,e ,rought do0n to this le'el o'er a period of time

354 C"!to,er !er5%ce

(IC of India should pay interest on delays in payments ,eyond ! days. Insurance companies

must ,e encouraged to set up unit lin/ed pension plans. Computerisation of operations and

updating of technology to ,e carried out in the insurance industry. )he committee emphasised

that in order to impro'e the customer ser'ices and increase the co'erage of insurance policies

industry should ,e opened up to competition. But at the same time the committee felt the need to

e8ercise caution as any failure on the part of ne0 players could ruin the pu,lic confidence in the

industry. >ence it 0as decided to allo0 competition in a limited 0ay ,y stipulating the

minimum capital reuirement of #s.1 crores. )he committee felt the need to pro'ide greater

autonomy to insurance companies in order to impro'e their performance and ena,le them to act

as independent companies 0ith economic moti'es. "or this purpose it had proposed setting up

an independent regulatory ,ody- )he Insurance #egulatory and &e'elopment $uthority.

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++ INSURANCE ACT91:2;

)he Insurance $ct19!5 and its su,seuent amendments in 19 and 1999 are

serious attempts to address 'arious issues relating to the ,usiness.Some of them areD

• Protection of policy holder interest.

• (imiting the e8penses of insurance organiations.

• Asta,lishment of tariff ad'isory committee.

• Sol'ency le'els to ,e maintained

• Creation of insurance organiation.

• &efining the roles and responsi,ilities of 'arious functionaries associated 0ith the

,usiness.

Fe#t"re! o$ In!"r#nce Act 1:2;'

1. )he $ct applies to all types of insurance ,usiness- lifemarine etc done ,y companies

incorporated in India.2. )he insurer carrying on the ,usiness of life insurancegeneral insurance or re-insurance shall

,e registered only ifDa $ paid up capital or rupees one hundred croresin case of a person carrying

on the ,usiness of life insurance or general insuranceor , $ paid up capital of rupees t0o hundred croresin case of a person carrying

on e8clusi'ely the ,usiness as a reinsurer.

!. #egarding depositsto pre'ent the gro0th of insurers of small financial resources or

speculati'e concernsthe $ct pro'ided for registration of all insurers and a su,stantial

deposit 0ith the #eser'e Ban/.*. o company can carry on the insurance ,usiness unless he has o,tained from the $uthority a

certificate of registration for the particular class of ,usiness

. )he audited accounts and ,alance sheet and actuarial report and a,stract and four copies

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thereof shall ,e furnished as returns to the $uthority.6.

+2 T-e In!"r#nce Re("tor/ #n) De5e&op,ent

A"t-or%t/ 3IRDA4#eforms in the Insurance sector 0ere initiated 0ith the passage of the I#&$ Bill in Parliament in

&ecem,er 1999. )he I#&$ since its incorporation as a statutory ,ody in $pril 2 has

fastidiously stuc/ to its schedule of framing regulations and registering the pri'ate sector

insurance companies. Since ,eing set up as an independent statutory ,ody the I#&$ has put in a

frame0or/ of glo,ally compati,le regulations. )he other decision ta/en simultaneously to

pro'ide the supporting systems to the insurance sector and in particular the life insurance

companies 0as the launch of the I#&$ online ser'ice for issue and rene0al of licenses to agents.)he appro'al of institutions for imparting training to agents has also ensured that the insurance

companies 0ould ha'e a trained 0or/force of insurance agents in place to sell their products.

)he regulatory ,ody for insurance I#&$ has ,een esta,lished 0ith the follo0ing missionD

)o protect the interests of the policy holders to regulate promote and ensure orderly gro0th of

the insurance industry and for matters connected there0ith or incidental thereto.L

D"t%e!9 Po7er! #n) F"nct%on! o$ IRDA

Section 1* of I#&$ $ct 1999 lays do0n the duties po0ers and functions of I#&$D314 Su,Fect to the pro'isions of this $ct and any other la0 for the time ,eing in force the

$uthority shall ha'e the duty to regulate promote and ensure orderly gro0th of the insurance

,usiness and re-insurance ,usiness.

3+4 4ithout preFudice to the generality of the pro'isions contained in su,-section +1 the po0ers

and functions of the $uthority shall includeD

3#4 Issue to the applicant a certificate of registration rene0 modify 0ithdra0 suspend or

cancel such registration

3.4 Protection of the interests of the policy holders in matters concerning assigning of policy

nomination ,y policy holders insura,le interest settlement of insurance claim surrender

'alue of policy and other terms and conditions of contracts of insurance3c4 Specifying reuisite ualifications code of conduct and practical training for intermediary

or insurance intermediaries and agents3)4 Specifying the code of conduct for sur'eyors and loss assessors

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3e4 Promoting efficiency in the conduct of insurance ,usiness3$4 Promoting and regulating professional organiations connected 0ith the insurance and re-

insurance ,usiness3(4 (e'ying fees and other charges for carrying out the purposes of this $ct3-4 Calling for information from underta/ing inspection of conducting enuiries and

in'estigations including audit of the insurers intermediaries insurance intermediaries and

other organiations connected 0ith the insurance ,usiness3%4 Control and regulation of the rates ad'antages terms and conditions that may ,e offered

,y insurers in respect of general insurance ,usiness not so controlled and regulated ,y the

)ariff $d'isory Committee under section 6*E of the Insurance $ct 19!5 +* of 19!53j4 Specifying the form and manner in 0hich ,oo/s of account shall ,e maintained and

statement of accounts shall ,e rendered ,y insurers and other insurance intermediaries364 #egulating in'estment of funds ,y insurance companies

3&4 #egulating maintenance of margin of sol'ency3,4$dFudication of disputes ,et0een insurers and intermediaries or insurance intermediaries3n4 Super'ising the functioning of the )ariff $d'isory Committee3o4 Specifying the percentage of premium income of the insurer to finance schemes for

promoting and regulating professional organiations referred to in clause +f3p4 Specifying the percentage of life insurance ,usiness and general insurance ,usiness to ,e

underta/en ,y the insurer in the rural or social sector and

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CHAPTER 2

LIFE INSURANCE

21 L%$e In!"r#nce %n In)%#

(ife insurance in the modern form 0as first set up in India through a British company called the

riental (ife Insurance Company in 1515 follo0ed ,y the Bom,ay $ssurance Company in 152!

and the %adras Auita,le (ife Insurance Society in 1529. $ll these companies operated in India

,ut did not insure the li'es of Indians. )hey insured the li'es of Auropeans li'ing in India. Someof the companies that started later did pro'ide insurance for Indians as they 0ere treated as

?su,standard@. Su,standard in insurance parlance refers to li'es 0ith physical disa,ility.

Pioneering efforts of reformers and social 0or/ers li/e #aFa #ammohan #ay &0ara/anath

)agore #amatam (ahiri #ustomFi Co0asFi and others led to entry of Indians in insurance

,usiness. )he first Indian insurance company under the name MBom,ay (ife Insurance SocietyL

started its operation in 157 and started co'ering Indian li'es at standard rates. (ater Mriental

Ko'ernment Security (ife Insurance CompanyL 0as esta,lished in 157* 0ith Sir Phiroshah

%ehta as one of its founder directors. Insurance in India can ,e traced ,ac/ to the Nedas. "or

instance yoga/shema the name of (ife Insurance Corporation of India:s corporate headuarters

is deri'ed from the #ig Neda. )he term suggests that a form of Mcommunity insuranceL 0as

pre'alent around 1 BC and practiced ,y the $ryans.

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Insurance ,usiness 0as conducted in India 0ithout any specific regulation for the insurance

,usiness. )hey 0ere su,Fect to Indian Companies $ct 1566. $fter the start of the MBe Indian Buy

Indian %o'ementL +called S0adeshi %o'ement in 19 indigenous enterprises sprang up in

many industries. It 0as during the s0adeshi mo'ement in the early 2th century that insurance

0itnessed a ,ig ,oom in India 0ith se'eral more companies ,eing set up. ot surprisingly the

%o'ement also touched the insurance industry leading to the formation of doens of life

insurance companies along 0ith pro'ident fund companies +pro'ident fund companies are

pension funds. In 1912 t0o sets of legislation 0ere passedD the Indian (ife $ssurance

Companies $ct and the Pro'ident Insurance Societies $ct. )here are se'eral stri/ing features of

these legislations. )hey 0ere the first legislations in India that particularly targeted the insurance

sector. )hey did not include general insurance ,usiness. )he go'ernment did not feel the

necessity to regulate general insurance. )hey restricted acti'ities of the Indian insurers. $s these

companies gre0 the go'ernment ,egan to e8ercise control on them. )he Insurance $ct 0as

passed in 1912 follo0ed ,y a detailed and amended Insurance $ct of 19!5 that loo/ed into

in'estments e8penditure and management of these companies: funds.

In 191* there 0ere only ** companies ,y 19* this num,er gre0 to 19. Business in force

during this period gre0 from #s.22.** crores to #s.!*.! crores +1625!51 polices. (ife fund

steadily gre0 from #s.6.!6 crores to #s.62.*1 crores. In 19!5 the insurance ,usiness 0as

hea'ily regulated ,y enactment of insurance $ct 19!5 +,ased on draft ,ill presented ,y Sir

..Sarcar in (egislati'e $ssem,ly in January 19!7. "rom here on0ards the gro0th of life

insurance 0as uite steady e8cept for a set,ac/ in 19*7-*5 due to aftermath of partition of India.

In 19*5 there 0ere 29 insurances 0ith 712.76 crores ,usiness in force under !16

policies. )he life fund ,y then gre0 to 1.!9 crores.

By the mid-19s there 0ere around 17 insurance companies and 5 pro'ident fund societies

in the country:s life insurance scene. >o0e'er in the a,sence of regulatory systems scams and

irregularities 0ere almost a 0ay of life in most of these companies. &espite the mushroom

gro0th of many insurance companies the per capita insurance in Indian 0as merely #s.5. in

19** +against #s.2 in ES and #s.6 in E ,esides some companies 0ere indulging in

malpractices and a num,er of companies 0ent into liuidation. Big industry houses 0ere

controlling the insurance and ,an/ing ,usiness resulting in interloc/ing of funds ,et0een ,an/s

and insurance companies. )his shoo/ the faith of the insuring pu,lic in insurance companies 0ho

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0ere seen as custodians of their sa'ings and security. )he nation under the leadership of Pandit

Ja0aharlal ehru 0as mo'ing to0ards socialistic pattern of society 0ith the main aim of

spreading life insurance to rural areas and to channelie huge funds accumulated ,y life

insurance companies to nation ,uilding acti'ities. )he Ko'ernment of India nationalied the life

insurance industry in January 196 ,y merging a,out 2* life insurance companies and forming

(ife Insurance Corporation of India +(IC 0hich started functioning from 1.9.196. $fter

completing the arduous tas/ of integration of a,out 2* life insurance companies (IC of India

ga'e an e8emplary performance in achie'ing 'arious o,Fecti'es of nationaliation. )he non-life

insurance ,usiness continued to thri'e 0ith the pri'ate sector till 1972. )heir operations 0ere

restricted to organied trade and industry in large cities. )he general insurance industry 0as

nationalied in 1972. 4ith this nearly 17 insurers 0ere amalgamated and grouped into four

companies- ational Insurance Company e0 India $ssurance Company riental Insurance

Company and Enited India Insurance Company. )hese 0ere su,sidiaries of the Keneral

Insurance Company +KIC. "or years thereafter insurance remained a monopoly of the pu,lic

sector. It 0as only after se'en years of deli,eration and de,ate that #. . %alhotra Committee

report of 199* ,ecame the first serious document calling for the re-opening up of the insurance

sector to pri'ate players. )he sector 0as finally opened up to pri'ate players in 21.)he

Insurance #egulatory and &e'elopment $uthority an autonomous insurance regulator set up in

2 has e8tensi'e po0ers to o'ersee the insurance ,usiness and regulate in a manner that 0ill

safeguard the interests of the insured. Insurance is a federal su,Fect in India. )here are t0o

legislations that go'ern the sector- )he Insurance $ct- 19!5 and the I#&$ $ct- 1999. )he

insurance sector in India has come a full circle from ,eing an open competiti'e mar/et to

nationaliation and ,ac/ to a li,eralied mar/et again. )racing the de'elopments in the Indian

insurance sector re'eals the !6 degree turn 0itnessed o'er a period of almost t0o centuries.

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2+ LIFE INSURANCE CONTRACT

1. E&e,ent! o$ 5#&%) contr#ct' Since the life insurance contract is a contract ,et0een the

insured and the insurer it is go'erned ,y the Indian Contract $ct. )he contract of

insurance must contain the essential elements of a 'alid contract + offer and acceptance

legal consideration competency of the parties free consent and legal o,Fect.

2. In!"r#.&e %ntere!t' )he insured must ha'e an insura,le interest in the life to ,e insured.

)he insura,le interest must e8ist at the time of the contract of insurance. )he ris/ against

this policy is the death of the insured.I. Insura,le interest in o0nHs life

II. Insura,le interest in otherHs life

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!. Ut,o!t (oo) $#%t-' )he principle of utmost good faith should ,e o,ser'ed ,y ,oth the

parties in life insurance. $t the time of ta/ing a policy the policy holder should disclose

all the material facts. Similarly the insurer is ,ound to e8ercise same good faith in

disclosing facts.*. W#rr#nt%e!' 4arranties are an important feature of life insurance contract. 4arranties

are integral part of contract i.e. they form the ,asis of the contract ,et0een proposer and

insurer. )he contract shall ,ecome null and 'oid if any statement 0hether material or non

material facts are untrue. )he policy insured 0ill contain that the proposal and the

personal statement 0ill form part of the policy and ,e the ,asis of the contract.. A!!%(n,ent #n) no,%n#t%on' $ssignment and nomination are essential features of life

insurance policy. In the case of nomination a person or persons to 0hom the money

secured ,y the policy shall ,e paid on the death of insured against ,ut the rights of

insured are not transferred. In the case of assignment the rights are transferred to the

assignee for some legal cconsideration or lo'e and affection.

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6. Pre,%",' Premium is the price paid ,y the insured for the ris/ or loss underta/en ,y the

insurer. )he premium is paid monthly uarterly half yearly or in annual instalment for a

certain period.7. Cert#%nt/ o$ e5ent' In life insurance policy the insurer has to pay the insured amount at

the time of death of the insured or at maturity 0hich is certain.

22T/pe! o$ L%$e In!"r#nce Po&%c%e!

$ life insurance policy could offer pure protection +insurance another 'ariant could offer

protection as 0ell as in'estment 0hile some others could offer only in'estment. In India life

insurance has ,een used more for in'estment purposes than for protection in oneLs o'erall

financial planning. "ollo0ings are the types of life insurance policyD

Ter, L%$e In!"r#nce Po&%c/

$s its name implies term life insurance policy is for a specified period. It depends on the

length of time. It has one of the lo0est premiums among insurance plans and also carries an

added ad'antage of fi8ed payments that do not increase during the term of the policy. In case

of the policy holder:s untimely demise the ,enefit amount specified in the insurance

agreement goes to the nominees.

W-o&e L%$e In!"r#nce Po&%c/

4hole life insurance policies do not ha'e any fi8ed term or end date and is only paya,le to

the designated ,eneficiary after the death of the policy holder. )he policy o0ner does not get

any monetary ,enefits out of this policy. Because this type of insurance in'ol'es fi8ed /no0n

annual premiums it:s a good option to ensure guaranteed financial ,enefits for sur'i'ing

family mem,ers.

Mone/ *#c6 Pn

4ith a money ,ac/ plan policyholder recei'es periodic payments 0hich are a percentage ofthe entire amount insured during the lifetime of policy. It:s a plan that offers insurance

co'erage along 0ith sa'ings. )hese policies pro'ide for periodic payments of partial sur'i'al

,enefits during the term of the policy itself. $ uniue feature associated 0ith this type of

policies is that in the e'ent of death of the insured during the policy term the designated

,eneficiary 0ill get the full sum assured 0ithout deducting any of the sur'i'al ,enefit

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amounts 0hich ha'e already ,een paid as money-,ac/ components. %oreo'er the ,onus on

such policies is also calculated on the full sum assured.

Pen!%on Pn

Pension plans are different from other types of life insurance ,ecause they do not pro'ide any

life insurance co'er ,ut ensure a guaranteed income either for life or for a certain period.

)he Policyholder ma/es the in'estment for a pension plan either 0ith a single lump sum

payment or through installments paid o'er a certain num,er of years. In return he gets a

specific sum e'ery year e'ery half-year or e'ery month either for life or for a fi8ed num,er

of years In case of the death of the insured or after the fi8ed annuity period e8pires for

annuity payments the in'ested annuity fund is refunded usually 0ith some additional

amounts as per the terms of the policy.

En)o7,ent Po&%c/

It is the most popular life insurance plan. )his policy com,ines ris/ co'er 0ith o,Fecti'e of

sa'ings and in'estment. If the policy holder dies during the policy period he 0ill get the

assured amount. A'en if he sur'i'es he 0ill recei'e the assured amount. )he ad'antage of

this policy is if the policy holder sur'i'es after the completion of policy tenure he recei'es

assured amount plus additional ,enefits li/e ,onus from the insurance company. &esigned

primarily to pro'ide a li'ing ,enefit along 0ith life insurance protection the endo0ment

policy ma/es a good in'estment if policyholder 0ants co'erage as 0ell as some e8tra

money.

)here are t0o types of Ando0ment policyD

3#4 W%t-o"t0pro$%t en)o7,ent pn

3.4 W%t-0 pro$%t en)o7,ent pn

3#4 W%t-o"t pro$%t en)o7,ent pn )hese plans do not participate in the profits the

insurance company ma/es each year. $part from the sum assured the policyholder could

possi,ly get a loyalty ,onus 0hich is a one time payout.

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3.4 W%t-0pro$%t en)o7,ent pn )hese plans share the profits the insurance company

ma/es each year 0ith the policyholder. So they offer more returns than 0ithout-profit

endo0ment plans and are more e8pensi'e i.e. the premiums 0ill ,e higher than 0ithout-profit

endo0ment plans.

Un%t0&%n6e) %n!"r#nce pn 3ULIP4 Enit-lin/ed insurance plans gi'es a policyholder greater

control on 0here premium can ,e in'ested. )he annual premium is in'ested in 'arious types of

funds that in'est in de,t and euity in a proportion that suits all types of in'estors. $

policyholder can s0itch from one fund plan to another freely and can also monitor the

performance of his plan easily. E(IP is suita,le for those 0ho understand the stoc/ mar/et 0ell.

2= Pro$%&e o$ L%$e In!"r#nce Co,p#n%e! %n In)%#

$ll pri'ate life insurance companies and pu,lic sector company operating in India during 2-

1 to 29-1 0ere ta/en for the study. (ife Insurance Corporation 0hich is the only pu,lic

sector life insurer and t0enty t0o pri'ate sector life insurers most of them Foint 'entures

,et0een Indian groups and glo,al insurance giants 0ere ta/en for the study.

PU*LIC SECTOR

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L%$e In!"r#nce Corpor#t%on o$ In)%#

(ife Insurance Corporation of India +(IC is an autonomous ,ody authoried to run the

life insurance ,usiness in India 0ith its >ead ffice at %um,ai. $,out 1* Indian

insurance companies 16 non-Indian companies and 7 pro'ident fund societies 0ereoperating in India at the time of nationaliation. ationaliation 0as accomplished in t0o

stages initially the management of the companies 0as ta/en o'er ,y means of an

rdinance and later the o0nership ,y means of a comprehensi'e ,ill. )he Parliament of

India passed the (ife Insurance Corporation $ct on the 19th of June 196 and the (ife

Insurance Corporation of India 0as created on 1 st Septem,er 196 0ith the o,Fecti'e of

spreading life insurance much more 0idely and in particular to the rural areas 0ith a 'ie0

to reach all insura,le persons in the country pro'iding them adeuate financial co'er at a

reasona,le cost.

PRIVATE SECTOR

)he Ko'ernment ha'ing tried 'arious models for the insurance industry such as pri'atiation

0ith negligi,le regulation +pre 196 and nationaliation +196-2 and ha'ing o,ser'ed su,

optimal performance of the sector resorted to adopting a hy,rid model of ,oth these resulting in

pri'atiation of the sector 0ith an efficient regulatory mechanism +post 2. )his 0as initiated

0ith the aim of ma/ing the industry competiti'e so that there are more players offering a greater

'ariety of products o'er a large section of the population. )he follo0ing companies are entitled

to do insurance ,usiness in India.

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CHAPTER =

LIFE INSURANCE CORPORATION OF

INDIA

3 P".&%c !ector co,p#n/4

L%$e In!"r#nce Corpor#t%on o$ In)%# +LIC is an Indian state-o0ned insurancegroup andin'estment company headuartered in %um,ai. It is the largest insurance company inIndia 0ith an estimated asset 'alue of 16*52 crore +ESO2* ,illion.istory

)he riental (ife Insurance Company the first company in India offering life insurance

co'erage 0as esta,lished in Calcutta in 1515 ,y Bipin Behari &asgupta and others. Its primary

30

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target mar/et 0as the Auropeans ,ased in India and it charged Indians heftier

premiums. Surendranath )agore +son of Satyendranath )agore had founded >industhan

Insurance Society 0hich later ,ecame (ife Insurance Corporation.

)he Bom,ay %utual (ife $ssurance Society formed in 157 0as the first nati'e insurance

pro'ider. ther insurance companies esta,lished in the pre-independence era included

• Postal (ife Insurance +P(I 0as introduced on 1 "e,ruary 155*

• Bharat Insurance Company +1596

• Enited India +196

• ational Indian +196

•

ational Insurance +196

• Co-operati'e $ssurance +196

• >industan Co-operati'es +197

• Indian %ercantile

• Keneral $ssurance

• S0adeshi (ife +later Bom,ay (ife

• Sahyadri Insurance +%erged into (IC 1956

)he first 1 years 0ere mar/ed mostly ,y tur,ulent economic conditions. It 0itnessed India:s"irst 4ar of Independence ad'erse effects of the 4orld 4ar I and 4orld 4ar II on the economyof India and in ,et0een them the period of 0orld 0ide economic crises triggered ,y the Kreatdepression. )he first half of the 2th century also sa0 a heightened struggle for India:sindependence. )he aggregate effect of these e'ents led to a high rate of and liuidation of lifeinsurance companies in India. )his had ad'ersely affected the faith of the general pu,lic in theutility of o,taining life co'er.

N#t%on#&%!#t%on %n 1:>>

In 19 parliamentarian $mol Barate raised the matter of insurance fraud ,y o0ners of pri'ateinsurance agencies. In the ensuing in'estigations one of India:s 0ealthiest ,usinessmen Sachin&e'/e/ar o0ner of the )imes of India ne0spaper 0as sent to prison for t0o years.

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A'entually the Parliament of India passed the (ife Insurance of India $ct on June 19 196creating the (ife Insurance Corporation of India 0hich started operating in Septem,er of thatyear. It consolidated the life insurance ,usiness of 2* pri'ate life insurers and other entitiesoffering life insurance ser'ices this consisted of 1* life insurance companies 16 foreigncompanies and 7 pro'ident companies. )he nationalisation of the life insurance ,usiness in

India 0as a result of the Industrial Policy #esolution of 196 0hich had created a policyframe0or/ for e8tending state control o'er at least se'enteen sectors of the economy includinglife insurance.

8ro7t- #! # ,onop&/

"rom its creation the (ife Insurance Corporation of India 0hich commanded a monopoly ofsoliciting and selling life insurance in India created huge surpluses and ,y 26 0ascontri,uting around 7; of India:s K&P

)he Corporation 0hich started its ,usiness 0ith around ! offices .7 million policies andacorpus of I# *.9 crores +ESO92 million as per the 199 e8change rate of roughly for

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Employees and Agents

(s n 31 *arch 2014+ LIC ha$ 1+20+388 e%!&"ees+ ut f ,hich 24+867 ,ere

,%en 20.65/.

C#te(or/ o$ e,p&o/ee! Tot#& N",.er No o$ Wo,en

Class-I fficers !1*2 6292

&e'elopment fficers 26621 1!!

Class III3IN employees 62!*7 17*2

)otal 12!55 2*567

A(enc/

(IC had 119916 agents as on !1 %arch 21* out of 0hich the num,er of acti'e agents 0ere

11!2677 +9*.71;

A! per IRDA Ann"#& Report +?1+012 t-e Tot#& L%$e F"n) o$ t-e L%$e In!"r#nce In)"!tr/

7#! R!1@9==;:= crore T-e %ncre#!e %n L%$e F"n)! )"r%n( +?1201=7#! R!19:=92?? crore

co,p#re) to R!19;?9??? crore %n +?1+012 !-o7%n( # (ro7t- o$ @:=

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CHAPTER B

HDFC L%$e In!"r#nce

3 Pr%5#te !ector co,p#n/ 4

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HDFC Life (HDFC Standard Life Insurance Company) is a long-term life insurance provider with its

headuarters in !um"ai# offering individual and group insurance$

It is a %oint venture "etween Housing Development Finance Corporation Ltd (HDFC)# one of India&s

leading housing finance institution and Standard Life plc# leading well 'nown provider of financial

savings investments services in the nited *ingdom$ HDFC Ltd$ holds +,$+. and Standard Life

(!auritius Holding) Ltd$ holds ,/$00. of euity in the %oint venture# while the rest is held "y others$

Corporate History

The Insurance egu&atr" an$ De'e&!%ent (uthrit" ID( ,as cnstitute$ in

1999 as an autn%us )$" t regu&ate an$ $e'e&! the insurance in$ustr". The

ID( !ene$ u! the %aret in (ugust 2000 ,ith the in'itatin fr a!!&icatin frregistratins. HDFC Life ,as esta)&ishe$ in 2000 )ec%ing the #rst !ri'ate sectr

&ife insurance c%!an" in In$ia

" 2001+ the c%!an" ha$ its 100th cust%er+ strengthene$ its e%!&"ee frce t

100 an$ ha$ sett&e$ its #rst c&ai%. HDFC Life &aunche$ its #rst T a$'ertising

ca%!aign ar tha e i" in 2005. In 2006+ a stu$" cn$ucte$ )" the ran$ :;uit"

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< :cn%ic Ti%es ha$ !ut HDFC Life at 29th ran in the %st truste$ In$ian ran$s

a%ngst the T! 50 er'ice ran$s f 2010

The Insurance egu&atr" an$ De'e&!%ent (uthrit" ID( ga'e accre$itatin t

HDFC Life fr 149 training centres huse$ in its )ranches t cater t the %an$atr"

training re;uire$ t )e gi'en as ,e&& as fr ther sa&es training re;uire%ents in2009.

In 2012+ it the #rst !ri'ate &ife insurance c%!an" t )ring )ac !ensin !&ans

un$er the ne, regu&atr" regi%e+ ,ith the &aunch f t, !ensin !&ans - HDFC Life

=ensin u!er =&us an$ HDFC Life ing&e =re%iu% =ensin u!er.

Pre!ence D%!tr%."t%on

>&"C (ife has a,out *Q ,ranches and presence in 95Q cities and to0ns in India. )hecompany has also esta,lished a liaison office in &u,ai.

>&"C (ife distri,utes its products through a multi channel net0or/ consisting of Insurance

agents Bancassurance partners +>&"C Ban/ Saras0at Ban/ Indian Ban/ &irect channel

Insurance Bro/ers nline Insurance Platform.

36

http://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Saraswat_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/HDFC_Bankhttp://en.wikipedia.org/wiki/Saraswat_Bankhttp://en.wikipedia.org/wiki/Indian_Bank


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CHAPTER B

DATA ANALYSIS FOR LIFE

INSURANCE COMPANIES

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B1 M#r6et !-#re .#!e) on pre,%", #n) po&%c%e!

B11 M#r6et S-#re .#!e) on Tot#& Pre,%",)he most important indicator to assess life insurers is the amount of premium collected.

)he sum assured is fragmented into installments of premium. In other 0ords premium isthe fragmented 'alue of the Sum $ssured of policy paya,le continuously at regularinter'als until the maturity of the policy. )he total premium consists of first year premium #ene0al Premium and Single Premium.

)he amount of premium other0ise called premium rate depends onD%ortality e8perience of insured li'esA8penses incurred ,y the company in administrating the life fundield on in'estments of life fundBesides these three the premium rates may also ,e affected ,y other factors namely

interest rates and ta8ation rates.

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)his ta,le sho0s the mar/et share of pu,lic and pri'ate sector life insurance companies ,ased on

total premium.

)he total premium of (ife Insurance Corporation of India increased continuously since 2-1

to 29-1.>o0e'er a significant decline is noticed in mar/et share from 99.95; in 2-1 to

7.1; in 29-1. 4hile in case of pri'ate sector the total premium income and mar/et share

of total premium ha'e ,oth increased.

)he mar/et share of pri'ate sector life insurance companies on the ,asis of total premium has

increased from .2; in 2-1 to 29.9; in 29-1. It reflects that the pri'ate sector has

,een successful in capturing the mar/et share from (ife Insurance Corporation of India.

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B1+ M#r6et S-#re .#!e) on Rene7#& Pre,%",

Premium collected on ,usiness in force is called rene0al premium. Increase in the rene0al

premium is a good measure of uality of the ,usiness under0ritten ,y the insurer. It reflects

increase in their persistency ratio and ena,les insurers to ,ring do0n o'erall cost of doing

,usiness.

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#ene0al premium.

)he pu,lic sector recorded 99.99; mar/et share ,ased on rene0al premium in the year 2-1

,ut it has decreased to 7!.6*; in the year 29-1. 4hile that of the pri'ate sector recorded

.1; in the year 2-1 0hich increased to 26.!6; in the year 29-1. Pri'ate sector has

managed to ta/e a0ay nearly 26; of the mar/et share from (IC of India. (IC of India is still the

mar/et leader in this segment.

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B12 M#r6et S-#re .#!e) on Tot#& Po&%c%e!

)he life insurance contract pro'ides elements of protection and in'estment. $fter getting insured

the policy-holder feels a sense of protection ,ecause he shall ,e paid a definite sum at death or

maturity. Since a definite sum must ,e paid the element of in'estment is also present. In other

0ords life insurance pro'ides against pre-mature death and a fi8ed sum at maturity of policy.

)he t0o elements of protection and in'estment e8ist in 'arious degrees in different types of

policies.

)he older the policy the lesser the element of protection and higher the element of in'estment

and 'ice-'ersa is also true. >a'ing different elements in different policies the policy-holders are

free to choose the ,est policies according to their reuirements.

It should ,e /no0n that no one policy is the ,est policy for all the policy-holders due to 'ariance

in cost elements of in'estments and protection reuirements of the policy-holders and

a'aila,ility of the policy. (ife insurance policies are di'ided on the ,asis of duration of policy

method of premium payments and participation.

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)his ta,le sho0s the mar/et share of ,oth the pu,lic and the pri'ate sector life insurance

companies ,ased on total policies. )he mar/et share of (IC of India 0as 99.2!; in the year

2-1.It has decreased to 7!.2; in the year 29-1. 4hile that of the pri'ate sector 0as

.77; in the year 2-1 and increased to 26.95; in the year 29-1.

)here are concerns o'er (ife Insurance Corporation of IndiaHs declining mar/et share ,ased on

total policies and concurrent rise of pri'ate insurers 0ho ha'e Fust entered ten years ago.

Inno'ati'e products smart mar/eting and aggressi'e distri,ution channels has ena,led pri'ate

life insurance companies to sell policies. $s of today (ife Insurance Corporation of India has

retained the mar/et share ,ased on total policies.

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B1= M#r6et S-#re .#!e) on Ne7 *"!%ne!!

Premium collected on the ne0 ,usiness is called first year premium. It also includes single

premium. It is the first Premium collected ,y the insurance companies from policy holders.

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e0 Business.

)he mar/et share of (ife Insurance Corporation of India on the ,asis of the first year premium in

the year 2-1 0as 99.9!; ,ut it declined to 6.59; in 25-9 and has slightly risen to

6.5; in 29-1 0hile the mar/et share of pri'ate sector life insurance companies 0as only

.7; in 2-1 0hich increased up to !9.11; in 25-9 and slightly declined to !*.92; in

29-1.)he gro0th in first year premium of pri'ate sector 0as fuelled ,y sales of unit lin/ed

products.

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B+ Pre)%ct%on o$ Ne7 *"!%ne!! Tot#& Pre,%", o$

L%$e In!"r#nce Sector $or t-e Ye#r +?1>

B+1 Pre)%ct%on o$ Ne7 *"!%ne!! $or P".&%c Sector

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B++ Pre)%ct%on o$ Ne7 *"!%ne!! $or Pr%5#te Sector

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B+2 Pre)%ct%on o$ Tot#& Pre,%", $or P".&%c Sector

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B+= Pre)%ct%on o$ Tot#& Pre,%", $or Pr%5#te

Sector

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B2 Co!t e$$%c%enc/ o$ L%$e In!"r#nce Co,p#n%e!

Co!t E$$%c%enc/ Score

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CHAPTER @

SWOT ANALYSIS OF INSURANCE

INDUSTRY IN INDIA

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@1 Stren(t-!Opport"n%t%e! o$ In!"r#nce In)"!tr/

1. )he intense competition ,rought a,out ,y deregulation has encouraged the industry to

inno'ate in all areas from under0riting mar/eting policy holder ser'icing to record-

/eeping.2. )he e8istence of stringent licensing reuirements ensure that only adeuately capitalied

and professionally managed companies are eligi,le to carry out insurance and

reinsurance.!. )he Insurance #egulatory &e'elopment $uthority of IndiaHs +I#&$ emphasis on

uarterly reporting3monitoring of insurer sol'ency has enhance capital adeuacy and

transparency.

*. $ggressi'e mar/eting strategies ,y pri'ate sector insurers 0ill ,uoy consumer a0arenessof ris/ and e8pand the mar/ets for products.

. Competition in a deregulated en'ironment 0ill allo0 mar/et forces to set premiums that

are appropriate for e8posure and push insurers to differentiate their products and ser'ices.6. Inno'ations in distri,ution and impro'ements in mar/et penetration 0ill follo0 as pu,lic

and pri'ate insurers compete to mar/et their products. $llo0ing insurers to issue their

o0n policy 0ordings and set their o0n rates 0ill ena,le under0riters to tailor products to

meet client needs. #ange of a'aila,le products 0ill increase ,ecause foreign companies

,ring 0ith them a 0ide range of products and product de'elopment e8pertise.7. (icensed ,ro/ers are 'ery much part of the intermediary structure and only those 0ith

adeuate capital professional e8perience and e8pertise 0ill ,e licensed ,y I#&$ .5. Capital structure of entire insurance industry 0ill impro'e as foreign companies ,ring

fresh capital 0ith them.9. %ar/et efficiency 0ill impro'e due to information dissemination glo,al operating

/no0ledge and increased competition.1. %anagement efficiency 0ill increase ,ecause foreign companies ,ring 0ith them glo,al

e8perience and management inno'ation.11. CustomersH ser'ice 0ill impro'e competition. 0hich 0ill finally ,enefit the consumers.

Klo,aliation 0ill also impro'e #egulatory and Ko'ernance system. It 0ill also

impro'e mar/et conduct and Athical Business Standard.

@+ We#6ne!!e!C-#&&en(e! o$ In!"r#nce In)"!tr/

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1. Premiums rates 0ill remain under pressure due to intense competition on more profita,le

lines. "alling premium income 0ithout a corresponding reduction in claims is li/ely to

dri'e do0n profits.2. Pu,lic and pri'ate sector insurersH greater reliance on their in'estment portfolios to

generate sufficient income and gains for net profits 0ould su,Fect them to the 'olatility of

the financial mar/ets.!. Pri'ate insurers need to raise more capital other0ise gro0th could ,e constrained since

reliance on reinsurance for capital relief is not al0ays 'ia,le or a'aila,le.*. )raditional distri,ution channels especially tied agents need to impro'e to match the

ne0 product offerings.. )here is general lac/ of transparency as financial and operational data for insurers are not

readily a'aila,le as none of IndiaHs insurers are directly listed on stoc/ e8changes.6. (i/e all de'eloping economies on a fast trac/ the shortage of trained insurance

professionals and technicians at all le'els cannot ,e remedied in the short term.7. atural catastrophes 0ill al0ays ,e present the Indian su,-continent is 'ulnera,le to

cyclones floods hurricanes and earthua/es and until there is a national capacity

+similar to the terrorism pool to manage losses dependence on o'erseas reinsurers 0ill

continue.

CONCLUSION

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Insurance plays an important role in general life. #is/ e8ist e'ery 0here to co'er these

ris/ Insurance is 'ery important. But the method or procedure of insurance need to ,e

change. $s days goes needs reuirements of the people get change. Insurance includes

different-different products to fulfill the need of the people.

In our daily li'es 0e encounter lot of ris/s 0hich results in fiscal losses. ne of the

e8cellent 0ays to safeguard these losses is through insurance. )he insurance firms in

India ta/e entire charge of any such losses against the payment forfeited e'ery month in

the form of premium. Insurance is a commercial means for relocating ris/s and co'ering

fiscal losses.

Insurance is an integral part of any personal financial plan. )he type of insurance and the

amount of co'erage you o,tain all depends on your uniue financial and family

circumstances and must ,e e'aluated carefully.

)hus Insurance is a needy financial instrument that e'ery indi'idual should pursue for

co'ering the ris/ of his life and pro'iding safety against life property lia,ility disa,ility

etc.

*%.&%o(r#p-/

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*oo6! o"rn#&! *"&&et%n!

1 )he IC"$I Eni'ersity Press on Insurance R Indian

Insurance An'ironment R ,y. .B.S umar

2 Insurance + "und %anagement R ,y

$arthi alyanraman . (a/shmi a'itha

! Basic of Insurance Industry - ,y .%. %ishre

We.&%o(r#p-/

1 000.insuremagic.com2 000.finance.cch.com! 000.0i/ipedia.com* 000.I#&$.org.in

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