Project Report...2003

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PROJECT REPORT

ON

COMPARATIVE STUDY OF LIFE INSURANCE COPORATION

WITH

OTHER PRIVATE LIFE INSURANCE COMPANIES

Submitted in Partial fulfillment of the award of degreeOf MBA (Industry Integrated)

Maharshi Dayanand University

Rohtak

Session: (2011-2013)

Project Guide:

SUBMITTED TO: SUBMITTEDBY:CONTROLLER OF SIDDHARTHAEXAMINATION BHARDWAJ

4th SEMESTERMBA (II)

DAV INSTITUTE OF MANAGEMENTFARIDABAD

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DECLARATION

In the undersigned solemnly declare that the report of the project work entitled

Comparative Study of LIC with other Private Companies , is based my own work

carried out during the course of my study under the supervision of

I assert that the statements made and conclusions drawn are an outcome of the

project work. I further declare that to the best of my knowledge and belief that

the project report does not contain any part of any work which has been

submitted for the award of any other degree/diploma/certificate in this

University or any other University.

_____________

(Signature of the Candidate)Name of the Candidate

Roll No.:

Enrollment No.:

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ACKNOWLEDGEMENT

It was a great opportunity for me to work with LIFE INSURANCE CORPORATION LTD

. I am extremely grateful to those who have shared their expertise and knowledge with me

and without whom the completion of this project would have been virtually impossible.

Firstly, I would like to thank our project guide Mr. Vijay Anand Deputy Manager, who has

been a constant source of inspiration for us during the completion of this project. He gave us

invaluable inputs during our endeavor to complete this project.

I would like to thanks for their constant enthusiastic encouragement and valuable

suggestions without which this project would not been successfully completed.

I am indebted to my friends for their valuable support and cooperation during the entire

tenure of this project. Not to forget, all those who have kept our spirits surging and helped us

in delivering our best.

(SIDDHARTHA BHARDWAJ)

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TABLE OF CONTENT

CHAPTERNO.

PARTICULARS PAGE.NO

1. CHAPTER I

Introduction

Introduction of Topic

Literature Review

Objective of Study

6-9

10-25

26

2. CHAPTER II

Research Methodology27-33

3.CHAPTER III

Company Profile

34-54

4.CHAPTER IV

Data Analysis & Interpretation55-66

5. CHAPTER V

Conclusions &Suggestions67-70

6. CHAPTER VI

Bibliography71-72

7. CHAPTER VII

Annexure73-76

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5

Chapter I

Introduction


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INTRODUCTION OF TOPIC

The Topic of Report Comparative Study of LIC with other Private Life Insurance

Company. LIC is the oldest life insurance company in the world. It is the largest insurer in

the US and is the 28th largest company in the world. In India, the company is marketing life

insurance products and unit linked investment plans. From my research at Max Life

Insurance, I found that the company has a lot of competition from other private insurers like

ICICI, Aviva, Birla Sun Life and Tata AIG. It also faces competition from LIC. To compete

effectively LIC could launch cheaper and more reasonable products with small premiums

and short policy terms (the number of years premium is to be paid). The ideal premium

would be between Rs. 5000 Rs. 25000 and an ideal policy term would be 10 20 years.

LIC must advertise regularly and create brand value for its products and services. Most of its

competitors like Aviva, ICICI, MAX, Reliance and LIC use television advertisements to

promote their products.

The Indian consumer has a false perception about insurance they feel that it would not

benefit them if they do not live through the policy term. Nowadays however, most policies

are unit linked plans where a customer is benefited even if their death does not occur during

the policy term. This message should be conveyed to potential customers so that they readily

invest in insurance.

The Insurance plays important in any person life for middle class its financial support to

match its incomes and expenses and do their routine works and for the Family support.

Family responsibilities and some invest for high returns and Long term Security are the three

main reasons people invest in insurance. Optimum returns of 16 20 % must be provided to

consumers to keep them interested in purchasing insurance.

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On the whole LIC is a good place to work. Every new recruit is provided with extensive

training on unit linked funds, financial instruments and the products ofLIC Life Insurance.

This training enables an advisor/sales manager to market the policies better. LIC was ranked

13 in the Best Places to Work survey. The company should try to create awareness about

itself in India. In the global market it is already very popular. With an improvement in the

sales techniques used, a fair bit of advertising and modifications to the existing product

portfolio, LIC would be all set to capture the insurance market in India as it has around the

globe.

In this Report we study also Comparative Plans of Max Life with Other Life Insurance which

the includes Traditional Plans, Health Plans, Unit Linked Investment Plans. . It also faces

competition from LIC. To compete effectively LIC could launch cheaper and more

reasonable products with small premiums and short policy terms (the number of years

premium is to be paid).

LIC is major player ,its from 51 years, its carries maximum share Specially in India in these

conditions Max Life Insurance introduces plans very cheaper rates which better than some

LIC Plans and provides better Services to them as Compare to other insurance companies

specially LIC .

The Indian consumer has a false perception about insurance they feel that it would not

benefit them if they do not live through the policy term. Nowadays however, most policies

are unit linked plans where a customer is benefited even if their death does not occur during

the policy term. This message should be conveyed to potential customers so that they readily

invest in insurance

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LIC must advertise regularly and create brand value for its products and services. Most of its

competitors like ICICI, MAX, and Reliance use television advertisements to promote their

products.

With an improvement in the sales techniques used, a fair bit of advertising and modifications

to the existing product portfolio, LIC would be all set to capture the insurance market in

India as it has around the globe.

Some of the important milestones in the life insurance business in India are:

1818: Oriental Life Insurance Company, the first life insurance company on Indian soilstarted functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company

started its business.

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.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central

government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act,1956, with a capital contribution of Rs. 5 crore 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:

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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 the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the

general insurance business in India with effect from 1st January 1973.

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LITERATURE REVIEW

Life insurance or life assurance is a contract between the policy owner and the insurer, where

the insurer agrees to pay a sum of money upon the occurrence of the insured individual's orindividuals' death or other event, such as terminal illness or critical illness. In return, the

policy owner agrees to pay a stipulated amount called a premium at regular intervals or in

lump sums. There may be designs in some countries where bills and death expenses plus

catering for after funeral expenses should be included in Policy Premium. In the United

States, the predominant form simply specifies a lump sum to be paid on the insured's demise.

As with most insurance policies, life insurance is a contract between the insurer and the

policy owner whereby a benefit is paid to the designated beneficiaries if an insured eventoccurs which is covered by the policy.

The value for the policyholder is derived, not from an actual claim event, rather it is the value

derived from the 'peace of mind' experienced by a.

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

policy.

Insured events that may be covered include:

Serious illness

Life policies are legal contracts and the terms of the contract describe the limitations

of the insured events. Specific exclusions are often written into the contract to limit

the liability of the insurer; for example claims relating to suicide, fraud, war, riot and

civil commotion.

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

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

typically a lump sum payment. A common form of this design is term insurance.

Investmentpolicies - where the main objective is to facilitate the growth of capital by

regular or single premiums. Common forms (in the US anyway) are whole life,

universal life and variable life policies.

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In some sense we can say that insurance appears simultaneously with the appearance of

human society. We know of two types of economies in human societies: money economies

(with markets, money, financial instruments and so on) and non-money or natural economies

(without money, markets, financial instruments and so on). The second type is a more ancient

form than the first.

In such an economy and community, we can see insurance in the form of people helping each

other. For example, if a house burns down, the members of the community help build a new

one. Should the same thing happen to one's neighbour, the other neighbours must help.

Otherwise, neighbours will not receive help in the future. This type of insurance has survived

to the present day in some countries where modern money economy with its financial

instruments is not widespread (for example countries in the territory of the former SovietUnion).

Turning to insurance in the modern sense (i.e., insurance in a modern money economy, in

which insurance is part of the financial sphere), early methods of transferring or distributing

risk were practiced by Chinese and Babylonian traders as long ago as the 3rd and 2nd

millennia BC, respectively. Chinese merchants travelling treacherous river rapids would

redistribute their wares across many vessels to limit the loss due to any single vessel's

capsizing. The Babylonians developed a system which was recorded in the famous Code ofHammurabi, c. 1750 BC, and practised by early Mediterranean sailing merchants. If a

merchant received a loan to fund his shipment, he would pay the lender an additional sum in

exchange for the lender's guarantee to cancel the loan should the shipment be stolen or lost at

sea.

Achaemenian monarchs of Ancient Persia were the first to insure their people and made it

official by registering the insuring process in governmental notary offices. The insurance

tradition was performed each year in Norouz (beginning of the Iranian New Year); the headsof different ethnic groups as well as others willing to take part, presented gifts to the

monarch. The most important gift was presented during a special ceremony. When a gift was

worth more than 10,000 Derrick (Achaemenian gold coin) the issue was registered in a

special office. This was advantageous to those who presented such special gifts. For others,

the presents were fairly assessed by the confidants of the court. Then the assessment was

writer, writes in one of his books on ancient Iran: Whenever the owner of the present is in

trouble or wants to construct a building, set up a feast, have his children married, etc. the one

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in charge of this in the court would check the registration. If the registered amount exceeded

10,000 Derrik, he or she would receive an amount of twice as much.

A thousand years later, the inhabitants of Rhodes invented the concept of the 'general

average'. Merchants whose goods were being shipped together would pay a proportionallydivided premium which would be used to reimburse any merchant whose goods were

jettisoned during storm or sink age.

The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when

they organized guilds called "benevolent societies" which cared for the families and paid

funeral expenses of members upon death. Guilds in the Middle Ages served a similar

purpose. The Talmud deals with several aspects of insuring goods. Before insurance was

established in the late 17th century, "friendly societies" existed in England, in which people

donated amounts of money to a general sum that could be used for emergencies.

Separate insurance contracts (i.e., insurance policies not bundled with loans or other kinds of

contracts) were invented in Genoa in the 14th century, as were insurance pools backed by

pledges of landed estates. These new insurance contracts allowed insurance to be separated

from investment, a separation of roles that first proved useful in marine insurance. Insurance

became far more sophisticated in post-Renaissance Europe, and specialized varieties

developed.

Some forms of insurance had developed in London by the early decades of the seventeenth

century. For example, the will of the English colonist Robert Hayman mentions two "policies

of insurance" taken out with the diocesan Chancellor of London, Arthur Duck. Of the value

of 100 each, one relates to the safe arrival of Hayman's ship in Guyana and the other is in

regard to "one hundred pounds assured by the said Doctor Arthur Duck on my life".

Hayman's will was signed and sealed on 17 November 1628 but not proved until 1633.

Toward the end of the seventeenth century, London's growing importance as a centre for

trade increased demand for marine insurance.

In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship

owners, merchants, and ships captains, and thereby a reliable source of the latest shipping

news. It became the meeting place for parties wishing to insure cargoes and ships, and those

willing to underwrite such ventures. Today, Lloyd's of London remains the leading market

(note that it is not an insurance company) for marine and other specialist types of insurance,

but it works rather differently than the more familiar kinds of insurance.

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Insurance as we know it today can be traced to the Great Fire of London, which in 1666

devoured 13,200 houses. In the aftermath of this disaster, Nicholas Barbon opened an office

to insure buildings. In 1680, he established England's first fire insurance company, "The Fire

Office," to insure brick and frame homes.

The first insurance company in the United States underwrote fire insurance and was formed

in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin

helped to popularize and make standard the practice of insurance, particularly against fire in

the form of perpetual insurance. In 1752, he founded the Philadelphia Contribution ship for

the Insurance of Houses from Loss by Fire. Franklin's company was the first to make

contributions toward fire prevention. Not only did his company warn against certain fire

hazards, it refused to insure certain buildings where the risk of fire was too great, such as allwooden houses. In the United States, regulation of the insurance industry is highly

Balkanized, with primary responsibility assumed by individual state insurance departments.

Whereas insurance markets have become centralized nationally and internationally, state

insurance commissioners operate individually, though at times in concert through a national

insurance commissioners' organization. In recent years, some have called for a dual state and

federal regulatory system (commonly referred to as the Optional federal charter (OFC)) for

insurance similar to that which oversees state banks and national banks.

History

Insurance began as a way of reducing the risk of traders, as early as 5000 BC in China and

4500 BC in Babylon. Life insurance dates only to ancient Rome; "burial clubs" covered the

cost of members' funeral expenses and helped survivors monetarily. Modern life insurance

started in 17th century England, originally as insurance for traders: merchants, ship owners

and underwriters met to discuss deals at Lloyd's Coffee House, predecessor to the famous

Lloyd's of London.

The first insurance company in the United States was formed in Charleston, South

Carolinain 1732, but it provided only fire insurance. The sale of life insurance in the

U.S. began in the late 1760s. The Presbyterian Synods in Philadelphia andNew York

created the Corporation for Relief of Poor and Distressed Widows and Children of

Presbyterian Ministers in 1759; Episcopalian priests organized a similar fund in 1769.

Between 1787 and 1837 more than two dozen life insurance companies were started,

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but fewer than half a dozen survived.

Prior to the American Civil War, many insurance companies in the United States

insured the lives of slaves for their owners. In response to bills passed in California in

2001 and in Illinois in 2003, the companies have been required to search their records

for such policies. New York Life for example reported that Nautilus sold 485

slaveholder life insurance policies during a two-year period in the 1840s; they added

that their trustees voted to end the sale of such policies 15 years before the

Emancipation Proclamation.

Stranger Originated Life Insurance

Stranger Originated Life Insurance orSTOLI is a life insurance policy that is held or financed

by a person who has no relationship to the insured person. Generally, the purpose of life

insurance is to provide peace of mind by assuring that financial loss or hardship will be

lessened or eliminated in the event of the insured person's death. STOLI has often been used

as an investment technique whereby investors will encourage someone (usually an elderly

person) to purchase life insurance and name the investors as the beneficiary of the policy. the

primary purpose of life insurance as the investors have no financial loss that would occur if

the insured person were to die. In some jurisdictions, there are laws to discourage or prevent

STOLI.

Overview

Parties to contract

There is a difference between the insured and the policy owner (policy holder), although the

owner and the insured are often the same person. For example, if Joe buys a policy on his

own life, he is both the owner and the insured. But if Jane, his wife, buys a policy on Joe's

life, she is the owner and he is the insured. The policy owner is the guarantee and he or she

will be the person who will pay for the policy. The insured is a participant in the contract, but

not necessarily a party to it.

The beneficiary receives policy proceeds upon the insured's death. The owner designates the

beneficiary, but the beneficiary is not a party to the policy. The owner can change the

beneficiary unless the policy has an irrevocable beneficiary designation. With an irrevocable

beneficiary, that beneficiary must agree to any beneficiary changes, policy assignments, or

cash value borrowing.

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In cases where the policy owner is not the insured (also referred to as the celui qui vit or

CQV), insurance companies have sought to limit policy purchases to those with an " insurable

interest" in the CQV. For life insurance policies, close family members and business partners

will usually be found to have an insurable interest.

The "insurable interest" requirement usually demonstrates that the purchaser will actually

suffer some kind of loss if the CQV dies. Such a requirement prevents people from benefiting

from the purchase of purely speculative policies on people they expect to die. With no

insurable interest requirement, the risk that a purchaser would murder the CQV for insurance

proceeds would be great.

In at least one case, an insurance company which sold a policy to a purchaser with no

insurable interest (who later murdered the CQV for the proceeds), was found liable in court

for contributing to the wrongful deathof the victim (Liberty National Life v. Weldon, 267

Ala.171 (1957)).

Contract terms

Special provisions may apply, such as suicide clauses wherein the policy becomes null if the

insured commits suicidewithin a specified time (usually two years after the purchase date;

some states provide a statutory one-year suicide clause). Any misrepresentations by the

insured on the application is also grounds for nullification. Most US states specify that the

contestability period cannot be longer than two years; only if the insured dies within this

period will the insurer have a legal right to contest the claim on the basis of misrepresentation

and request additional information before deciding to pay or deny the claim.

The face amount on the policy is the initial amount that the policy will pay at the death of the

insured or when the policymatures, although the actual death benefit can provide for greater

or lesser than the face amount. The policy matures when the insured dies or reaches a

specified age (such as 100 years old).

Costs, insurability, and underwriting

The insurer (the life insurance company) calculates the policy prices with intent to fund

claims to be paid and administrative costs, and to make a profit. The cost of insurance is

determined using mortality tables calculated by actuaries. Actuaries are professionals who

employ actuarial science, which is based in mathematics (primarily probability and statistics).

Mortality tables are statistically-based tables showing expected annual mortality rates. It is

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possible to derive life expectancy estimates from these mortality assumptions. Such estimates

can be important in taxation regulation.

The three main variables in a mortality table have been age, gender, and use of tobacco. More

recently in the US, preferred class specific tables were introduced. The mortality tablesprovide a baseline for the cost of insurance. In practice, these mortality tables are used in

conjunction with the health and family history of the individual applying for a policy in order

to determine premiums and insurability. Mortality tables currently in use by life insurance

companies in the United States are individually modified by each company using pooled

industry experience studies as a starting point. In the 1980s and 90's the SOA 1975-80 Basic

Select & Ultimate tables were the typical reference points, while the 2001 VBT and 2001

CSO tables were published more recently. The newer tables include separate mortality tablesfor smokers and non-smokers and the CSO tables include separate tables for preferred

classes.

Recent US select mortality tables predict that roughly 0.35 in 1,000 non-smoking males aged

25 will die during the first year of coverage after underwriting.Mortality approximately

doubles for every extra ten years of age so that the mortality rate in the first year for

underwritten non-smoking men is about 2.5 in 1,000 people at age 65.Compare this with the

US population male mortality rates of 1.3 per 1,000 at age 25 and 19.3 at age 65 (withoutregard to health or smoking status)

The mortality of underwritten persons rises much more quickly than the general population.

At the end of 10 years the mortality of that 25 year-old, non-smoking male is 0.66/1000/year.

Consequently, in a group of one thousand 25 year old males with a $100,000 policy, all of

average health, a life insurance company would have to collect approximately $50 a year

from each of a large group to cover the relatively few expected claims. (0.35 to 0.66 expected

deaths in each year x $100,000 payout per death = $35 per policy). Administrative and salescommissions need to be accounted for in order for this to make business sense. A 10 year

policy for a 25 year old non-smoking male person with preferred medical history may get

offers as low as $90 per year for a $100,000 policy in the competitive US life insurance

market.

The insurance company receives the premiums from the policy owner and invests them to

create a pool of money from which it can pay claims and finance the insurance company's

operations. Contrary to popular belief, the majority of the money that insurance companies

make comes directly from premiums paid, as money gained through investment of premiums

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can never, in even the most ideal market conditions, vest enough money per year to pay out

claims.[citation needed] Rates charged for life insurance increase with the insurer's age

because, statistically, people are more likely to die as they get older.

Given that adverse selection can have a negative impact on the insurer's financial situation,the insurer investigates each proposed insured individual unless the policy is below a

company-established minimum amount, beginning with the application process. Group

Insurance policies are an exception.

This investigation and resulting evaluation of the risk is termed underwriting. Health and

lifestyle questions are asked. Certain responses or information received may merit further

investigation. Life insurance companies in the United States support the Medical Information

Bureau (MIB) , which is a clearinghouse of information on persons who have applied for life

insurance with participating companies in the last seven years. As part of the application, the

insurer receives permission to obtain information from the proposed insured's physicians.[5]

Underwriters will determine the purpose of insurance. The most common is to protect the

owner's family or financial interests in the event of the insurer's demise. Other purposes

include estate planning or, in the case of cash-value contracts, investment for retirement

planning. Bank loans or buy-sell provisions of business agreements are another acceptable

purpose.

Many companies use four general health categories for those evaluated for a life insurance

policy. These categories are Preferred Best, Preferred, Standard, and Tobacco.[citation

needed] Preferred Best is reserved only for the healthiest individuals in the general

population. This means, for instance, that the proposed insured has no adverse medical

history, is not under medication for any condition, and his family (immediate and extended)

have no history of early cancer, diabetes, or other conditions Preferred means that the

proposed insured is currently under medication for a medical condition and has a family

history of particular illnesses.[ Most people are in the Standard category.[citation needed]

Profession, travel, and lifestyle factor into whether the proposed insured will be granted a

policy, and which category the insured falls. For example, a person who would otherwise be

classified as Preferred Best may be denied a policy if he or she travels to a high risk country.

[citation needed] Underwriting practices can vary from insurer to insurer which provide for

more competitive offers in certain circumstances.

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Insurance v/s Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In

general, in these jurisdictions "insurance" refers to providing cover for an event that might

happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that iscertain to happen. "Insurance" is the generally accepted term, however, people using this

description are liable to be corrected. In the United States both forms of coverage are called

"insurance", principally due to many companies offering both types of policy, and rather than

refer to themselves using both insurance and assurance titles, they instead use just one.

Types of life insurance

Life insurance may be divided into two basic classes temporary and permanent or following

subclasses - term, universal, whole life and endowment life insurance.

Temporary Term Insurance

Term assurance: provides for life insurance coverage for a specified term of years for a

specifiedpremium. The policy does not accumulate cash value. Term is generally considered

"pure" insurance, where the premium buys protection in the event of death and nothing else.

There are three key factors to be considered in term insurance:

Face amount (protection or death benefit),

Premium to be paid (cost to the insured), and

Length of coverage (term).

Various insurance companies sell term insurance with many different combinations of these

three parameters. The face amount can remain constant or decline. The term can be for one or

more years. The premium can remain level or increase.

A common type of term is called annual renewable term. It is a one year policy but the

insurance company guarantees it will issue a policy of equal or lesser amount without regard

to the insurability of the insured and with a premium set for the insured's age at that time.

Another common type of term insurance is mortgage insurance, which is usually a level

premium, declining face value policy. The face amount is intended to equal the amount of the

mortgage on the policy owners residence so the mortgage will be paid if the insured dies.

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A policy holder insures his life for a specified term. If he dies before that specified term is up,

his estate or named beneficiary receives a payout. If he does not die before the term is up, he

receives nothing.

In the past these policies would almost always exclude suicide. However, after a number ofcourt judgments against the industry, payouts do occur on death by suicide (presumably

except for in the unlikely case that it can be shown that the suicide was just to benefit from

the policy). Generally, if an insured person commits suicide within the first two policy years,

the insurer will return the premiums paid. However, a death benefit will usually be paid if the

suicide occurs after the two year period.

Permanent Life Insurance

Permanent life insurance is life insurance that remains in force (in-line) until the policy

matures (pays out), unless the owner fails to pay the premium when due (the policy expires

OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud

in the application, and that cancellation must occur within a period of time defined by law

(usually two years).

Permanent insurance builds a cash value that reduces the amount at risk to the insurance

company and thus the insurance expense over time. This means that a policy with a million

dollar face value can be relatively expensive to a 70 year old. The owner can access the

money in the cash value by withdrawing money, borrowing the cash value, or surrendering

the policy and receiving the surrender value.

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

endowment.

Whole life coverage

Whole life insurance provides for a level premium, and a cash value table included in the

policy guaranteed by the company. The primary advantages of whole life are guaranteed

death benefits, guaranteed cash values, fixed and known annual premiums, and mortality and

expense charges will not reduce the cash value shown in the policy. The primary

disadvantages of whole life are premium inflexibility, and the internal rate of return in the

policy may not be competitive with other savings alternatives. Also, the cash values are

generally kept by the insurance company at the time of death, the death benefit only to thebeneficiaries. Riders are available that can allow one to increase the death benefit by paying

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additional premium. The death benefit can also be increased through the use of policy

dividends. Dividends cannot be guaranteed and may be higher or lower than historical rates

over time. Premiums are much higher than term insurance in the short-term, but cumulative

premiums are roughly equal if policies are kept in force until average life expectancy.

Cash value can be accessed at any time through policy "loans". Since these loans decrease the

death benefit if not paid back, payback is optional. Cash values are not paid to the beneficiary

upon the death of the insured; the beneficiary receives the death benefit only. If the dividend

option: Paid up additions is elected, dividend cash values will purchase additional death

benefit which will increase the death benefit of the policy to the named beneficiary.

Universal life coverage

Universal life insurance (UL) is a relatively new insurance product intended to provide

permanent insurance coverage with greater flexibility in premium payment and the potential

for a higher internal rate of return. There are several types of universal life insurance policies

which include "interest sensitive" (also known as "traditional fixed universal life insurance"),

variable universal life insurance, and equity indexed universal life insurance.

A universal life insurance policy includes a cash account. Premiums increase the cashaccount. Interest is paid within the policy (credited) on the account at a rate specified by the

company. Mortality charges and administrative costs are then charged against (reduce) the

cash account. The surrender value of the policy is the amount remaining in the cash account

less applicable surrender charges, if any.

With all life insurance, there are basically two functions that make it work. There's a

mortality function and a cash function. The mortality function would be the classical notion

of pooling risk where the premiums paid by everybody else would cover the death benefit forthe one or two who will die for a given period of time. The cash function inherent in all life

insurance says that if a person is to reach age 95 to 100 (the age varies depending on state and

company), then the policy matures and endows the face value of the policy.

Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age

95, then the mortality function alone will not be able to cover the cash function. So in order to

cover the cash function, a minimum rate of investment return on the premiums will be

required in the event that a policy matures.

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Universal life insurance addresses the perceived disadvantages of whole life. Premiums are

flexible. Depending on how interest is credited, the internal rate of return can be higher

because it moves with prevailing interest rates (interest-sensitive) or the financial markets

(Equity Indexed Universal Life and Variable Universal Life). Mortality costs and

administrative charges are known. And cash value may be considered more easily attainable

because the owner can discontinue premiums if the cash value allows it. And universal life

has a more flexible death benefit because the owner can select one of two death benefit

options, Option A and Option B.

Option A pays the face amount at death as it's designed to have the cash value equal the death

benefit at maturity (usually at age 95 or 100). With each premium payment, the policy owner

is reducing the cost of insurance until the cash value reaches the face amount upon maturity.

Option B pays the face amount plus the cash value, as it's designed to increase the net death

benefit as cash values accumulate. Option B offers the benefit of an increasing death benefit

every year that the policy stays in force. The drawback to option B is that because the cash

value is accumulated "on top of" the death benefit, the cost of insurance never decreases as

premium payments are made. Thus, as the insured gets older, the policy owner is faced with

an ever increasing cost of insurance (it costs more money to provide the same initial face

amount of insurance as the insured gets older).

Limited-pay

Another type of permanent insurance is Limited-pay life insurance, in which all the premiums

are paid over a specified period after which no additional premiums are due to keep the

policy in force. Common limited pay periods include 10-year, 20-year, and paid-up at age 65.

Endowments

Endowments are policies in which the cash value built up inside the policy, equals the death

benefit (face amount) at a certain age. The age this commences is known as the endowment

age. Endowments are considerably more expensive (in terms of annual premiums) than either

whole life or universal life because the premium paying period is shortened and the

endowment date is earlier.

In the United States, the Technical Corrections Act of 1988 tightened the rules on tax shelters

(creating modified endowments). These follow tax rules asannuities and IRAs do.

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Endowment Insurance is paid out whether the insured lives or dies, after a specific period

(e.g. 15 years) or a specific age (e.g. 65).

Accidental Death

Accidental death is a limited life insurance that is designed to cover the insured when they

pass away due to an accident. Accidents include anything from an injury, but do not typically

cover any deaths resulting from health problems or suicide. Because they only cover

accidents, these policies are much less expensive than other life insurances.

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

known as an AD&D policy. In an AD&D policy, benefits are available not only for

accidental death, but also for loss of limbs or bodily functions such as sight and hearing, etc.

Accidental death and AD&D policies very rarely pay a benefit; either the cause of death is

not covered, or the coverage is not maintained after the accident until death occurs. To be

aware of what coverage they have, an insured should always review their policy for what it

covers and what it excludes.

Often, it does not cover an insured who puts themselves at risk in activities such as:

parachuting, flying an airplane, professional sports, or involvement in a war (military or not).

Also, some insurers will exclude death and injury caused by proximate causes due to (but not

limited to) racing on wheels and mountaineering.

Accidental death benefits can also be added to a standard life insurance policy as a rider. If

this rider is purchased, the policy will generally pay double the face amount if the insured

dies due to an accident. This used to be commonly referred to as a double indemnity

coverage. In some cases, some companies may even offer a triple indemnity cover.

Related Life Insurance Products

Riders are modifications to the insurance policy added at the same time the policy is issued.

These riders change the basic policy to provide some feature desired by the policy owner. A

common rider is accidental death, which used to be commonly referred to as "double

indemnity", which pays twice the amount of the policy face value if death results from

accidental causes, as if both a full coverage policy and an accidental death policy were in

effect on the insured. Another common rider is premium waiver, which waives future

premiums if the insured becomes disabled.

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Joint life: insurance is either a term or permanent policy insuring two or more lives with the

proceeds payable on the first death or second death.

Survivorship life: is a whole life policy insuring two lives with the proceeds payable on the

second (later) death.

Single premium whole life: is a policy with only one premium which is payable at the time

the policy is issued.

Modified whole life: is a whole life policy that charges smaller premiums for a specified

period of time after which the premiums increase for the remainder of the policy.

Group life insurance: is term insurance covering a group of people, usually employees of a

company or members of a union or association. Individual proof of insurability is not

normally a consideration in the underwriting. Rather, the underwriter considers the size and

turnover of the group, and the financial strength of the group. Contract provisions will

attempt to exclude the possibility of adverse selection. Group life insurance often has a

provision that a member exiting the group has the right to buy individual insurance coverage.

Senior and preneed products: Insurance companies have in recent years developed products

to offer to niche markets, most notably targeting the senior market to address needs of an

aging population. Many companies offer policies tailored to the needs of senior applicants.

Underwriters will determine the purpose of insurance. The most common is to protect the

owner's family or financial interests in the event of the insurer's demise. Other purposes

include estate planning or, in the case of cash-value contracts, investment for retirement

planning. Bank loans or buy-sell provisions of business agreements are another acceptable

purpose.

Many companies use four general health categories for those evaluated for a life insurance

policy. These categories are Preferred Best, Preferred, Standard, and Tobacco. [citationneeded] Preferred Best is reserved only for the healthiest individuals in the general

population. This means, for instance, that the proposed insured has no adverse medical

history, is not under medication for any condition, and his families (immediate and extended)

have no history of early cancer,diabetes, or other conditions

Preferred means that the proposed insured is currently under medication for a medical

condition and has a family history of particular illnesses. Most people are in the Standard

category.[citation needed] Profession, travel, and lifestyle factor into whether the proposedinsured will be granted a policy, and which category the insured falls. For example, a person

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who would otherwise be classified as Preferred Best may be denied a policy if he or she

travels to a high risk country.[citation needed] Underwriting practices can vary from insurer

to insurer which provide for more competitive offers in certain circumstances.

Insurance v/s Assurance

The specific uses of the terms "insurance" and "assurance" are sometimes confused. In

general, in these jurisdictions "insurance" refers to providing cover for an event that might

happen (fire, theft, flood, etc.), while "assurance" is the provision of cover for an event that is

certain to happen. "Insurance" is the generally accepted term, however, people using this

description are liable to be corrected.

In the United States both forms of coverage are called "insurance", principally due to many

companies offering both types of policy, and rather than refer to themselves using both

insurance and assurance titles, they instead use just one.

These are often low to moderate face value whole life insurance policies, to allow a senior

citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance.

This may also be marketed as final expense insurance, and an agent or company may suggest

(but not require) that the policy proceeds could be used for end-of-life expenses.

Preneed (or prepaid) insurance policies: are whole life policies that, although available at any

age, are usually offered to older applicants as well. This type of insurance is designed

specifically to cover funeral expenses when the insured person dies. In many cases, the

applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is

applied for. The death proceeds are then guaranteed to be directed first to the funeral services

provider for payment of services rendered. Most contracts dictate that any excess proceeds

will go either to the insured's estate or a designated beneficiary.

Actuarially, it is reasoned that out of a group of 1000 people, if even 10 of them live to age

95, then the mortality function alone will not be able to cover the cash function. So in order to

cover the cash function, a minimum rate of investment return on the premiums will be

required in the event that a policy matures.

Universal life insurance addresses the perceived disadvantages of whole life. Premiums are

flexible. Depending on how interest is credited, the internal rate of return can be higher

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because it moves with prevailing interest rates (interest-sensitive) or the financial markets

(Equity Indexed Universal Life and Variable Universal Life).

Mortality costs and administrative charges are known. And cash value may be considered

more easily attainable because the owner can discontinue premiums if the cash value allows

it. And universal life has a more flexible death benefit because the owner can select one of

two death benefit options, Option A and Option B.

Option A pays the face amount at death as it's designed to have the cash value equal the

death benefit at maturity (usually at age 95 or 100). With each premium payment, the policy

owner is reducing the cost of insurance until the cash value reaches the face amount upon

maturity.

Option B pays the face amount plus the cash value, as it's designed to increase the net death

benefit as cash values accumulate. Option B offers the benefit of an increasing death benefit

every year that the policy stays in force. The drawback to option B is that because the cash

value is accumulated "on top of" the death benefit, the cost of insurance never decreases as

premium payments are made. Thus, as the insured gets older, the policy owner is faced with

an ever increasing cost of insurance (it costs more money to provide the same initial face

amount of insurance as the insured gets older).

Group life insurance: is term insurance covering a group of people, usually employees of a

company or members of a union or association. Individual proof of insurability is not

normally a consideration in the underwriting. Rather, the underwriter considers the size and

turnover of the group, and the financial strength of the group. Contract provisions will

attempt to exclude the possibility of adverse selection. Group life insurance often has a

provision that a member exiting the group has the right to buy individual insurance coverage.

Senior and preneed products: Insurance companies have in recent years developed products

to offer to niche markets, most notably targeting the senior market to address needs of an

aging population. Many companies offer policies tailored to the needs of senior applicants.

These are often low to moderate face value whole life insurance policies, to allow a senior

citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance.

This may also be marketed as final expense insurance, and an agent or company may suggest

(but not require) that the policy proceeds could be used for end-of-life expenses.

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OBJECTIVES OF THE STUDY

Spread Life Insurance widely and in particular to the rural areas and to the socially

and economically backward classes with a view to reaching all insurable persons in

the country and providing them adequate financial cover against death at a reasonable

cost.

Maximize mobilization of people's savings by making insurance-linked savings

adequately attractive.

Bear in mind, in the investment of funds, the primary obligation to its policyholders,

whose money it holds in trust, without losing sight of the interest of the community as

a whole; the funds to be deployed to the best advantage of the investors as well as the

community as a whole, keeping in view national priorities and obligations of

attractive return.

Conduct business with utmost economy and with the full realization that the moneys

belong to the policyholders.

Meet the various life insurance needs of the community that would arise in the

changing social and economic environment.

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Involve all people working in the Corporation to the best of their capability in

furthering the interests of the insured public by providing efficient service with

courtesy.

Promote amongst all agents and employees of the Corporation a sense of

participation, pride and job satisfaction through discharge of their duties with

dedication towards achievement of Corporate Objective.

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Chapter II

Research Methodology


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RESEARCH METHODOLOGY

To conduct the market research first of all it is necessary to create a research design. Aresearch design is basically a blue print of how a research is to be conducted, it may include;

Choosing the approach

Determining the types of data needed.

Locating of source of data.

Choosing a method of data.

The success of any Insurance company depends on how well they are able to align with the

objectives and needs of individual customers, and is able to provide proper solutions to them.

To know how a company is performing and whether they have any cutting edge advantage

over competitors, an intensive study of the market is absolutely necessary.

In order to understand the performance of different companies in the market, we did two

types of surveys, primary survey and secondary survey

RESEARCH DESIGN

Basically there are 3 types of approaches used during the any research:

Exploratory

Descriptive

Experimental

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During this research Descriptive and Exploratory approach is taken into consideration

because of the availability of relevant information to describe the relationships between the

marketing problem and the available information.

Descriptive research: Descriptive Research also known as statistical research,

describes data and characteristics about thepopulation or phenomenon being studied.

However, it does not answer questions about e.g.: how/when/why the characteristics

occurred, which is done underanalytic research.

Although the data description is factual, accurate and systematic, the research cannot describe

what caused a situation. Thus, Descriptive research cannot be used to create a causal

relationship, where one variable affects another. In other words, descriptive research can be

said to have a low requirement forinternal validity.

The description is used forfrequencies,averages and other statistical calculations. Often the

best approach, prior to writing descriptive research, is to conduct a survey investigation.

Exploratory Research: Exploratory research ofresearch conducted for a problem

that has not been clearly defined. Exploratory research helps determine the

bestresearchdesign, data collection method and selection of subjects. It should draw

definitive conclusions only with extreme caution. Given its fundamental nature, exploratory

research often concludes that a perceived problem does not actually exist.

Exploratory research often relies onsecondary researchsuch as reviewing available literature

and/or data, or qualitative approaches such as informal discussions with consumers,

employees, management or competitors, and more formal approaches through in-depth

interviews, focus groups,projective methods, case studies orpilot studies. TheInternet allows

for research methods that are more interactive in nature. For example, RSS feeds efficiently

supply researchers with up-to-date information; majorsearch engine search results may be

sent by email to researchers by services such asGoogle Alerts; comprehensive search results

are tracked over lengthy periods of time by services such asGoogle Trends;

andwebsites may be created to attract worldwide feedback on any subject.

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Experimental Research: An experiment is an orderly procedure carried out with

the goal of verifying, refuting, or establishing the validity of a hypothesis. Experiments

provide insight intocause-and-effectby demonstrating what outcome occurs when a particular

factor is manipulated. Experiments vary greatly in their goal and scale, but always rely on

repeatable procedure and logical analysis of the results. A child may carry out basic

experiments to understand the nature of gravity, while teams of scientists may take years of

systematic investigation to advance the understanding of a phenomenon. Experiments can

vary from personal and informal (e.g. tasting a range of chocolates to find a favourite), to

highly controlled (e.g. tests requiring complex apparatus overseen by many scientists that

hope to discover information about subatomic particles). Uses of experiments vary

considerably between the naturalandsocial sciences.

Experiments might be categorized according to a number of dimensions, depending upon

professional norms and standards in different fields of study. In some disciplines

(e.g., Psychology or Political), a 'true experiment' is a method of social research in which

there are two kinds ofvariables. The independent variable is manipulated by the

experimenter, and the dependent variable is measured. The signifying characteristic of a true

experiment is that it randomly allocates the subjects in order to neutralize the potential for

experimenter bias and ensures, over a large number of iterations of the experiment, that

all confounding factors are controlled for.[

TYPES OF DATA USED:

Both primary and secondary data is used in the research.

Data Collected Methods

To conduct the market research the data is collected by two sources.

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SECONDARY DATA

Secondary data is one which already exists and is collected from the published sources.

Secondary data, is data collected by someone other than the user. Common sources of

secondary data forsocial science include censuses, organisational records and data collected

through qualitative methodologies or qualitative research. Primary data, by contrast, are

collected by the investigator conducting the research.

Secondary data analysis saves time that would otherwise be spent collecting data and,

particularly in the case ofquantitative data, provides larger and higher-quality databases that

would be unfeasible for any individual researcher to collect on their own. In addition,analysts of social and economic change consider secondary data essential, since it is

impossible to conduct a new survey that can adequately capture past change and/or

developments.

Sources of secondary data

As is the case in primary research, secondary data can be obtained from two different

research strands:

Quantitative: Census, housing, social security as well as electoral statistics and other

related databases.

Qualitative: Semi-structured and structured interviews, focus groups transcripts, field

notes, observation records and other personal, research-related documents.

A clear benefit of using secondary data is that much of the background work needed has

already been carried out, for example: literature reviews, case studies might have been carried

out, published texts and statistics could have been already used elsewhere, media promotion

and personal contacts have also been utilized.

This wealth of background work means that secondary data generally have a pre-established

degree ofvalidity and reliability which need not be re-examined by the researcher who is re-

using such data.

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Furthermore, secondary data can also be helpful in the research design of subsequent primary

research and can provide a baseline with which the collected primary data results can be

compared to. Therefore, it is always wise to begin any research activity with a review of the

secondary data

The sources from which secondary data was collected are:

1, Newspapers and Magazines like Economics Times, Insurance Times and Insurance Post.

2. Internet

PRIMARY DATA

The primary sources of data refer to the first-hand information Primary data is collected

during the survey with help of Questionnaires.

Primary survey

Primary survey included:-

Visiting websites and fixing appointments with their agents, salemanager and

agencies associate.

Creation of database of prospective clients from different sources calling them up to

fix appointment and then visiting them.

Prepare a questionnaire for the market survey.

Meeting different people to know their views, perception and preference of different

insurance companies.

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SAMPLE SIZE

The sample size for the survey conducted was 75 respondents. This sample size was taken

on 95% confidence level and 6 significant levels. Data universe for this sample is 10, 00,000

which is approx. population of Delhi excluding people below age of 18 years.

SAMPLING TECHNIQUE

Random sampling technique was used in the survey conducted.

PLAN OF ANALYSIS

Tables were used for the analysis of the collected data. The data is also neatly presented with

the help of statistical tools such as graphs and pie charts. Percentages and averages have also

been used to represent data clearly and effectively.

STUDY AREA

The samples referred to were residing in New Delhi. The areas covered were Passim Vicar,

Punjabi Bag, Narayan, New Friends Colony, and Nehru Place.

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35

Chapter III

Company Profile


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COMPANY PROFILE

Life Insurance Corporation of India (LIC) is the largest insurance group and investment

company in India. It's a state-owned company where Government of India has 100%stake. It

has assets estimated of 1,325,000 cores (US$230 billion). It was founded in 1956 with the

merger of 245 insurance companies and provident societies (154 life insurance companies, 16

foreign companies & 75 provident companies).

Headquartered in Mumbai, financial and commercial capital of India, the Life Insurance

Corporation of India currently has 8 zone Offices and 113 divisional offices located in

different parts of India, around 3500 servicing offices including 2048 branches, 54 Customer

Zones, 25 Metro Area Service Hubs and a number of Satellite Offices located in different

cities and towns of India and has a network of 13,37,064 individual agents, 242 Corporate

Agents, 79 Referral Agents, 98 Brokers and 42 Banks (as on 31.3.2011) for soliciting life

insurance business from the public.

Life Insurance Corporation of India (LIC) was formed in September, 1956, by an Actor

Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the

Government of India. The then Finance Minister, Sheri C.D. Deshmukh, while piloting the

bill, outlined the objectives of LIC thus to conduct the businesswith the utmost economy, and

a spirit of trusteeship; to charge premium no higher than warranted by strict actuarial

considerations; to invest the funds for obtaining maximum yield for the' policy holders

consistent with safety of the capital; to render prompt and efficient service to policy holders,

thereby making insurance widely popular. Since nationalization, LIC has built up a vast

network of 2,048 branches, 100divisions and 7 zonal offices spread over the country. The

Life Insurance Corporation of India also' transacts business abroad and has offices in Fiji,

Mauritius and United Kingdom. LIC is associated with joint ventures abroad in the field of

insurance, namely, Ken-India ,Assurance Company Limited, Nairobi; United Oriental

Assurance Company Limited, Kuala Lumpur and Life Insurance Corporation (International)

E.C.Bahrain. The Corporation has registered a joint venture company in 26 December,2000

in Katmandu, Nepal by the name of Life Insurance Corporation (Nepal) Limited in

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collaboration with Vishal Group Limited, a local industrial Group. An off-shore company

L.I.C. (Mauritius) Off-shore Limited has also been set up in 2001.

The slogan of LIC is "Yogakshemam Vahamyaham" which translates from Sanskrit to

"Your welfare is our responsibility". The slogan is derived from the Ancient Hindu text,

the Bhagavad Gita's 9th Chapter, 22nd verse. The literal translation from Sanskrit to English

is "I carry what you require". The slogan can be seen in the logo, written in Devanagiri script.

The agent advisors are trained in-house to ensure optimal control on quality of training. The

company currently has around 12,50,0000 agent advisors and more than 800 own employed

sales force at 712 offices across 389 cities. The company also has 36 referral tie-ups with

banks, 24 partnership distribution and alliance marketing relationships each. LIC has put inplace a unique hub and spoke model of distribution to deepen our rural penetration. This is

the first time such a model has been put in place for rural marketing of insurance.

The company has 133 offices dedicated to rural areas LIC invests significantly in its training

programme and each agent is trained for around 100 hours as opposed to the mandatory 50

hours stipulated by the IRDA before beginning to sell in the marketplace. Training is a

continuous process for agents at LIC and ensures development of skills and knowledge

through a structured programme spread over 400 hours in two years. This focus on

continuous quality training has resulted in the company having amongst the highest agent

pass rate in IRDA examinations and the agents have the highest productivity among private

life insurers. 218 agent advisors have qualified for the Million Dollar Round Table (MDRT)

membership in 2008.

Nationalisation

In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by owners of

private insurance agencies. In the ensuing investigations, one of India's wealthiest

businessmen, Sachin Devkekar, owner of the Times of India newspaper, was sent to prison

for two years. Eventually, the Parliament of India passed the Life Insurance of India Act on

1956-06-19, and the Life Insurance Corporation of India was created on 1956-09-01, by

consolidating the life insurance business of 245 private life insurers and other entities

offering life insurance services. Nationalisation of the life insurance business in India was a

result of the Industrial Policy Resolution of 1956, which had created a policy framework for

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extending state control over at least seventeen sectors of the economy, including the life

insurance.

Current status

LIC Zonal Office, at Delhi. Over its existence of around 57 years (up to 2013), Life Insurance

Corporation of India, which commanded a monopoly of soliciting and selling life insurance

in India, created huge surpluses, and contributed around 7% of India's GDP in 2006.

The Corporation, which started its business with around 300 offices, 5.7 million policies and

acorpus of INR 45.9 cores (US$ 92 million as per the 1959 exchange rate of roughly 5 for

US$1),[3]has grown to 25,000 servicing around 350 million policies and a corpus of over

800,000 crore (US$140 billion).

Benefits of liberalisation

LIC, has ironically, emerged as a beneficiary of liberalisation of the life insurance sector in

India. After Liberalisation, it has also demonstrated a robust performance, albeit on a base

substantially higher than the private sector, with the First Year Premium CAGR of 24.53%

and Total Life Premium CAGR at 19.28% matching the growth of the life insurance industry

and also out-performing the economic growth.[4]

Awards and recognition

The Economic Times Brand Equity Survey 2010 rated LIC as the No. 5Service Brand of the

Country. Though in the year 2010 is ranked at 4, the organisation is consistently amongst the

top rated service company ofIndia. From the year 2006, LIC has been continuously winning

the Readers' Digest Trusted brand award. According to the Brand Trust Report 2012, LIC is

the 6th most trusted brand of India.

Golden Jubilee Foundation

LIC Golden Jubilee Foundation was established in 2006 as a charity organisation. This entity

has the aim of promoting education, alleviation of poverty, and providing better living

conditions for the under privileged. Out of all the activities conducted by the organisation,

Golden Jubilee Scholarship awards are the best known. Each year, this award is given to the

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meritorious students in standard XII of school education or equivalent, who wish to continue

their studies and have a parental income less than 60,000 (US$1,000).

Strong promoter

LIC is a strong, financially secure business supported by two strong and secure promoters

LIC excellent brand strength emerges from its unrelenting focus on corporate governance,

high standards of ethics and clarity of vision. LIC is a strong, financially secure business and

a market leader in the Life & Pensions sector.

Preferred and Trusted Brand

Our brand has managed to set a new standard in the Indian life insurance communication

space. We were the first private life insurer to break the ice using the idea of self-respect

instead of death to convey our brand proposition . Today, we are one of the few brands that

customers recognize, like and prefer to do business. Moreover, our brand thought, is the most

recalled campaign in its category.

Investment Philosophy

We follow a conservative investment management philosophy to ensure that our customers

money is looked after well. The investment policies and actions are regularly monitored by a

formal Investment Committee comprising non-executive directors and the Principal Officer

& Executive Director.

As a life insurance company, we understand that customers have invested their savings with

us for the long term, with specific objectives in mind. Thus, our investment focus is based on

the primary objective of protecting and generating good, consistent, and stable investmentreturns to match the investors long-term objective and return expectations, irrespective of the

market condition.

Need-Based Selling Approach

Despite the criticality of life insurance, sales in the industry have been characterized by over

reliance on tax benefits and limited advice-based selling. Our eight-step structured sales

process Disha however, helps customers understand their latent needs at the first instance

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itself without focusing on product features or tax benefits. Need-based selling process,

'Disha', the first of its kinds in the industry, looks at the whole financial picture. Customers

see a plan not piecemeal product selling.

Risk Control Framework

LIC has fully implemented a risk control framework to ensure that all types of risks (not just

financial) are identified and measured. These are regularly reported to the board and this

ensures that the company management and board members are fully aware of any risks and

the actions taken to ensure they are mitigated

Focus on Training

Training is an integral part of our business strategy. Almost all employees have undergone

training to enhance their technical skills or the softer behavioural skills to be able to deliver

the service standards that our company has set for itself. Besides the mandatory training that

Financial Consultants have to undergo prior to being licensed, we have developed and

implemented various training modules covering various aspects including product

knowledge, selling skills, objection handling skills and so on.

Focus on Long-Term Value

LIC do not focus in the business of ramping up the top line only, but to create maximisation

of stakeholder's value. Today, we are extremely satisfied with the base that we have created

for the long-term success of this company.

Transparent Dealing

We are one of the few companies whose product details, pricing, clauses are clearly

communicated to help customers take the right decision.

Strict Compliance with Regulations

We have initiated and implemented many new processes, some of which were found useful

by the IRDA and later made mandatory for the entire industry.The agents who successfully

completed this training only, were authorized by the company to sell ULIPs. This has nowbeen made compulsory by IRDA for all insurance companies under the new Unit Linked

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Guidelines.

Diversified Product Portfolio

LIC wide and diversified product portfolio help individuals meet their various needs, be it:

Protection: Need for a sound income protection in case of your unfortunate demise

Investment: Need to ensure long-term real growth of your money

Savings: Save for the milestones and protect your savings too

Pension: Need to save for a comfortable life post retirement

Preferred and Trusted Brand

Our brand has managed to s

Project Report...2003

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