Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE DEGREE OF M.B.A SUBMITTED BY: Vishal kumar upadhyay
UNDER SUPERVISION OF: MR. ABHISEK MISHRA SALES DEVELOPMENT MANAGER DEPT HDFC SLIC
UNDER GUIDANCE OF MR. UTKAL KHANDELWAL ASST. PROF MBA GLA UNIVERSITY
In the summer training project undertaken in the area of FINANCE is COMPERATIVE STUDY OF HDFC LIFE WITH OTHER INSURANCE COMPANY relating to HDFC S.L.I.C JHANSI. The project to me was to study the position of HDFC S.L.I.C which is one of the most important factors for leading HDFC. The objective of this Summer Training is to study the COMPARATIVE STUDY OF HDFC SLIC, BAJAJ ALLIANZ, BIRLA SUN LIFE AND LIC. . The liberalization of the Indian insurance sector has been the subject of much heated debate for some years. The policy makers where in the catch 22 situation wherein for one they wanted competition, development and growth of this insurance sector which is entirely essential for channelizing the investment into the infrastructure sector. At the other end the policy maker had the fears that the insurance premia, which are substantial, would seep out of the country, and to wanted to have a cautious approach of opening for foreign participation in the sector.
ACKNOWLEDGEMENT
I would like to take this opportunity to thank all those who have helped me tremendously during the course of the project. My heartiest thanks are due to many persons for assistance in this project to present state. The profound gratitude to our teachers especially;
Mr.Utkal Khandelwal for being my guide throughout the completion of this project. Mr. Vivek Dwivedi, Branch Manager of HDFC Standard Life Insurance Corporation, Roorkee for clarifying the problems which I encountered during the preparation of this project. I would also like to thank Mr. Abhisek Mishra, Sales development Manager, for guiding me throughout my project. I also extend my gratitude to other SDM's and my friends who have helped me directly or indirectly to complete my project.
I also acknowledge the Knowledge that I have gained during the preparation of this project.
CANDIDATES DECLARATION
I, VISHAL KUMAR UPADHYAY, a bonafide student of MBA at the GLA (I.B.M.), MATHURA, hereby declare that I have undergone the Summer Training at HDFC SLIC LTD under the supervision of Mr. ABHISEK MISHRA. I also declare that the present project report is based on the above summer training and is my original work. The content of this project report has not been submitted to any other university or institutes either in part or in full for the award of any degree, diploma or fellowship.
s.no.
1. 1.1. 1.1.1. 1.1.2
Description
INTRODUCTION THE INSURANCE INDUSTRY IN INDIA AN OVERVIEW HISTORICAL PROSPECTIVE
Page no.
INTRODUCTION
The project started with class room sessions involving lectures and interactions with the mentors Mr. Abhisek Mishra (SDM) and Mr. Vivek Dwivedi (BM). They explained all the plans available with HDFC SLIC in detail and the pension plan comparison of BIRLA SUN LIFE, BAJAJ ALLIANZ & LIC. The classroom also involved role plays and games. The role plays and games involved students being asked to play the roles of customers or clients and that of a person trying to persuade the customer to go in for a plan with HDFC SLIC. These class room lectures and role-plays helped me to gain a substantial understanding of the plans. This in turn helped me to effectively explain these plans to people whom I meet or took appointment to meet. The connect of life insurance has undergone several changes over the years and what has myriad array of attractive options apart from the basic of life cover. Life insurance schemes also offer tax benefits. In todays scenario life insurance solves the three objectives. 1. Security 2. Saving 3. Tax Benefit.
evaluate and analyze the findings so as to present a clear picture of recent trends in the Insurance sector.
hardly any old age income security. This in itself is an indicator that growth potential for the insurance sector in India is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain the economic growth of the country. (Source: www.indiacore.com)
Logic of insurance
It is a system by which the losses suffered by a few are spread over many, exposed to similar risks. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the amount premiums collected from the insuring public and the Insurance Companies act as trustees to the collected.
Insurance in India
Insurance is a federal subject in India and has a history dating back to 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies to solicit insurance and also allowing FDI up to 26%. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government.
Need of insurance
Insurance is desired to safeguard oneself and one's family against possible losses on account of risks and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events. By taking life insurance a person can have peace of mind and need not worry about the financial consequences in case of any untimely death. 10
Certain Insurance contracts are also made compulsory by legislation. For example, Motor Vehicles Act 1988 stipulates that a person driving a vehicle in a public place should hold a valid insurance policy covering Act" risks. Another example of compulsory insurance pertains the Environmental Protection Act, wherein a person using or to carrying hazardous substances (as defined in the Act) must hold a valid public liability (Act) policy.
HISTORICAL PERSPECTIVE
The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon.
11
The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development. The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).
KEY MILESTONES
1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.
12
competing in the Indian insurance market. Currently, in India only 2 million people (0.2 % of total population of 1 billion), are covered under Medi claim, whereas in developed nations like USA about 75 % of the total population are covered under some insurance scheme. With more and more private players in the sector this scenario may change at a rapid pace Different Insurance Companies Insurance is an upcoming sector, in India the year 2000 was a landmark year for life insurance industry, in this year the life insurance industry was liberalized after more than fifty years. Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are fifteen private life insurance companies has entered the industry. After the entry of these private players, the market share of LIC has been considerably reduced. In the last five years the private players is able to expand the market (growing at 30% per annum) and also has improved their market share to 18%. For the past five years private players have launched
Page 10
many innovations in the industry in terms of products, market channels and advertisement of products, agent training and customer services etc. The various life insurers entered India:-
1. 2. 3. 4. 5. 6.
National Insurance Company Limited. Reliance General Insurance. Star Health Plus Insurance. Oriental Insurance Company. United India Insurance Company Ltd. New India Assurance Company Ltd. 7. Bajaj Allianz General Insurance Company Ltd. 8. Universal Sompo Insurance Company Ltd. 9. Future General Insurance Company Ltd. 10. ICICI Lombard General Insurance Ltd.
Life insurance can also be used as a means of saving for ones future. There are a number of life insurance policies, which in addition to life cover also provide the means of investing ones income. The sum as per the policy will be received only after a period of time. This amount thus provides for the old age.
Savings in other scheme can be easily withdrawn and may be used for less worthy purpose. Termination of a life insurance policy by the policyholder usually results in
Page 12
substantial loss in benefits under the policy to the policyholder. One is thus encouraged to save and keep ones policy alive.
The object of insurance may be to serve as a security to educational funds in respect of loans advanced for educational purpose or to provide donations to charitable institutions like hospital and school.
The life insured can name the person or persons to whom the policy money would be payable in the event of his death .the proceeds of a life insurance policy can be protected against the claims of the creditors of the life insured by effecting a valid assignment of the policy. The beneficiaries are fully protected from creditors expect to the extent of any interest in the policy retained by the insured.21Marketability and suitability for borrowing After 3 years, if the policyholder finds that he is unable to continue payment of premiums he can surrender a policy for a cash sum. A life insurance policy is accepted as a security for a commercial loan.
A policy holder can take a loan from his insurance company against the Security of his life insurance policy provided the terms of the terms of his policy allow such a loan. This loan can be taken usually after a period of 3 years from commencement of the policy and is a percentage of its surrender value.
The unit link products gives comprehensive insurance solutions that cater to an individuals dual need of earning potentially high returns as well as stay for life. Thus there is an option to invest money in the products that combine the best of insurance and investment. In a volatile market conditions it is possible to secure both as 16
one can hedge the investment with saver investment vehicles that provide a diversified portfolio.
The Indian income tax act provides tax concessions to the policyholder both on payment of premium and on the maturity amount. Under sec 88 the tax benefits on premium paid by an individual for life insurance policies on his own life\on the life of spouse \children minor or major, including married daughters. Under sec 6 of the married womens property act if a married man takes a policy of life insurance on his own life and expenses on the face of it to be for the benefit of his wife or of his wife and children or any of them, then it shall be deemed to be a trust for the benefit of his wife and children or any of them, According to the interest so expressed and shall not so long as any object of trust remains be subject to the control of the husband or to his creditors or form part of his estate. An insurance policy taken by a married man in the above manner is ideal way to protect the interest of his wife and children, even after his untimely death.
Whole life plan- This policy provides the life assurance cover for
almost the entire life. Most of the insurance companies provide protection up to the age of 100 years. The sum assured is paid to you once you reach this age, and the policy is terminated. In this payment of premium is for whole life, and the sum assured is paid to your nominee in the event of your death. In other words, this is equivalent to a term plan over your lifetime. Pension plan- A pension plan can be looked as more of an investment product offered by insurers to cater to the golden retirement years of an individual. Also referred to as retirement plans, these are designed to ensure that you are financially independent during your retirement years. Most of the pension plans also provide an optional life assurance cover in them. Child plan- It basically aims at ensuring the achievement of life goals of your child. The goal can be higher education, financial help in establishing a business or profession, or even marriage. In a child plan, the life assured can be the parent or the child. The beneficiary for the policy, however, is the child. As a child is a minor, the life insurance contract is between the parent and the insurance company. In case of early 18
death of the parent, the premium payment is waived off by the insurance company and the policy continues as originally planned. Unit Linked Insurance Plan- ULIPs have been the darling of insurance companies, intermediaries and the insured population alike over the last five years. The main reason for this popularity is the twin advantage of a pure life cover (insurance component) and a range of investment funds or options (savings component) to match your risk profile. While the pure life cover provides the much needed financial security to your dependents in the event of your untimely death, the savings component allows you to participate in the capital markets and build wealth over the longterm tenure of the policy.
Ever growing middle class component in population. Growth of customers interest with an increasing demand for better insurance products. Application of information technology for business. Rebate from government in the form of tax incentives to be insured. Today, the Indian life insurance industry has a dozen private players, each of which are making strides in raising awareness levels, introducing innovative products and 19
increasing the penetration of life insurance in the vastly underinsured country. Several of private insurers have introduced attractive products to meet the needs of their target customers and in line with their business objectives
Market Performance & Forecast: In 2000, Indian insurance market size was $21.71 billion. Between 2000 and 2007, it had an increase of 120% and reached $47.89 billion. Between 2000 and 2007, total premiums maintained an average growth rate of 11.96% and the CAGR growth during this time frame has been 11.96%. It was one of the most consistent growth patterns we have noticed in any other emerging economies in Asian as well as Global markets.
Page 16
improve personal finances and for income tax planning; Indians have a tendency to 20
invest in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small 4-5%. This in itself is an indicator that growth potential for the insurance sector is immense. Its a business growing at the rate of 15-20% per annum and presently is of the order of $47.9 billion. India is a vast market for life insurance that is directly proportional to the growth in premiums and an increase in life density. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Competition in this market is increasing with companys continuous effort to lure the customers with new product offerings. However, the market share of private insurance companies remains very low -- in the 10-15% range. Even to this day, Life Insurance Corporation (LIC) of India dominates Indian insurance sector. The heavy hand of government still dominates the market, with price controls, limits on ownership, and other restraints. Major Driving Factors Growing demand from semi-urban population Entry of private players following the deregulation Rising demand for retirement provision in the ageing population The opening of the pension sector and the establishment of the new pension regulator Rising per capita incomes among the strong middle class, and spreading affluence Growing consumer class and increase in spending & saving capacity Public private partnerships infrastructure development Dearth of innovative & buyer-friendly insurance products Success of Auto insurance sector
Page 18
Emerging Areas Healthcare Insurance & Pension Plans Mutual fund linked insurance products Multiple Distribution Networks .i.e. Bank assurance The upward growth trend started from 2000 was mainly due to economic policies adopted by the then Indian government. This year saw initiation of an era of economic 21
liberalization and globalization in the Indian economy followed by several reforms and long-term policies that created a perfect roadmap for the success of Indian financial markets. On the basis of several macroeconomic factors like increase in literacy rate & per capita income, decrease in death rate and unemployment, better tax rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by $28.65 billion and reach $76.54 billion by 2011 with a CAGR (compounded annual growth rate) of 12.44% and a growth of 59.82%.
Both under insurance and over insurance can often be attributed to the lack of proper understanding of the exact insurance needs for oneself and the family, and the failure to spot and cover all liabilities properly and adequately, or being overconservative in this regard.
Under Insurance
Under insurance, typically occurs when the existing financial liabilities and insurance needs are fully taken care of. In the event of the untimely death of the only (or the main earning) member of the family, his financial liabilities would obviously fall on his dependents, leaving them in a state of financial distress that could threaten their need of sustenance.
Over Insurance
Conversely, there are also instances where individuals indulge in life insurance covers that far exceed in value than what is actually required. This is a classic case of over insurance, which leads to an unnecessarily higher premium payment, leaving you much poorer. It results in unnecessary expenditure that could otherwise be wisely invested elsewhere. The need for an adequate insurance cover is never static and keeps on varying with changes in the life stages and important events of an individual. The table below 22
provides an insight into the various life stages and events when life insurance cover usually requires a revision.
Page 19
Life stage Requirement for a life insurance cover Start work life An individual usually does not have any dependent
like spouse or children, thus allowing the need to take a life cover. However, if your parents are dependents then you need to take appropriate life cover on their behalf. Moreover, you may have taken a loan to finance your higher education or professional studies or purchase a car. You should take a suitable insurance cover so that in the event of your untimely death, the burden of EMI payments does not pass to your parents or other members of the family. Recently married Marriage requires a revision of your insurance needs. This can take a form of increase in life cover, taking into considerations an expected increase in expenses and repayment of liabilities, if any. Also, an insurance cover on the life of the spouse, although for a lesser amount, can be considered. However, if both the husband and the wife are working, the extent and value of life insurance coverage on both lives will depend on their respective remuneration packages, personal liabilities, as well as extent of financial dependence on one another. Birth of children The arrival of a child brings with it a great amount of responsibility. At this stage, a revision of insurance needs is based mainly on securing the financial needs of the child up to the time he/she has grown up and settled in life.
property. Therefore, you should take out a mortgage redemption plan to the extent of the outstanding loan amount. Purchasing a car through a vehicle loan, too, calls for a life cover of the borrower to the extent of the outstanding loan. The same holds good for any other asset or event which has been financed by a loan.
The loan taken to set up or enhance your profession or business should be fully covered.
With a range of products flooding the market, people today are more confused about insurance than ever. Here are a bagful of myths floating around and I have made an effort to bust a few of the significant ones. 1. I dont want to put my hard-earned money into a pure term assurance plan if I dont even get back all the premiums paid on survival of the term. A pure term assurance plan is a risk mitigation tool and not an investment product. In the event of your untimely death during the policy term, your dependents get a sum assured to enable them to continue living their existing lifestyle, repay loan liabilities and meet long-term financial goals. To achieve this, you only need to pay a premium amount that is a fraction of the sum assured. Moreover unlike investments, where it takes years to build a suitable corpus, the sum assured on your insurance policy is payable, in the event of your untimely death, from the date of its commencement. 2. It would be enough if only the main breadwinner of the family takes life insurance. While the main breadwinner should take out a life insurance policy on a priority basis; the other members of the family should also be covered. If the wife is working, then she should be covered to the extent of loss of income to the family in the event of her untimely death. On the other hand, even if she is not working, she should be covered, albeit for a smaller sum, because her contribution to the family, in form of household services, has monetary value. 3. I will get back all my premiums when I surrender my endowment policy prematurely.
Page 21
You couldnt be more wrong! You only get back the surrender value, which is based on the paid-up value is a proportion of the original sum assured based on the number of years for which premium was paid against the total premium-paying years. The paid-up value of the policy is also calculated and available as per the policy conditions. 4. Insurance is primarily useful as a tax-saving instrument. 24
Again, this is a huge misconception! While you do get attractive tax breaks, the primary objective of insurance is risk mitigations followed by wealth creation for the long term. Many people end up taking this myth too seriously, particularly without considering the costs and benefits involved. 5. After three years, I can walk away from any ULIP, along with the accrued investment or the fund value. Sure, you can do that! However, you need to remember that a ULIP, at least in the initial years, is very different from a mutual fund. While a mutual fund only charges o nominal fund management charge every year, a ULIP is front loaded. That means a significant chunk of your premium is allocated across various charges in the initial years of the policy and only the balance gets invested in a fund of your choice. As these charges taper off and average over time, it makes sense to stay in a ULIP for at least 15 years. Therefore, if your investment horizon is just 3-5 years, you better off in a mutual fund, and you can take out a separate term assurance plan for the required risk cover.
Page
25
INDUSTRY REFORMS
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.
26
27
EXECUTIVE SUMMARY
This project is based upon the fact & figure gathered from the websites about the plans of the firm. In the first part of the report there are some plans which are frequently sold by HDFC SLIC in the market, and then comparative study of pension plan of different firm namely BIRLA SUN LIFE, BAJAJ ALLIANZ and LIC is there In the last part of the project I have given some of the findings and conclusion about the life insurance market and what is the potential of the market. In the end I have give all the sources from which I have collected all the information. The project is all about comparative analysis of different insurance products of different companies. The objective of the project was to check the awareness level of Insurance and attitude of the people towards insurance in the current market. Survey was also done regarding the preference of insurance sector depending on the age group. Now, on to the statistical part, we designed a questionnaire that will provide a base for studying the awareness level and perception of the life insurance. The project helped me in developing my communication skill and interpersonal skills. During the tenure of my internship I learned a lot from my seniors, colique etc but above all I learned a lot from my own personal experience.
28
OBJECTIVE OF STUDY
1. Comparative study of HDFC SLIC, BIRLA SUN LIFE, BAJAJ ALLIANZ and LIC. 2. To analyze the pension plan on the basis of features offered. 3. To observe working of various departments of the organization.
29
COMPANY PROFILE
30
HDFC LIMITED
HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.
Business Objectives
The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.
Organizational Goals
HDFCs main goals are to a) Develop close relationships with individual households, b) Maintain its position as the premier housing finance institution in the c) Transform ideas into viable and creative solutions, d) Provide consistently high returns to shareholders, e) To grow through diversification by leveraging off the existing client base. country,
The Partnership:
HDFC is an organization that strives for excellence, with the twin objectives of enhancing customer satisfaction and shareholder value. HDFC and Standard Life first came together for a possible joint venture, to enter the Life Insurance market, in January 1995. At the outset it was clear that both companies shared similar values and beliefs and a strong relationship quickly formed. In October 1995 the companies signed a 3 year joint venture agreement. Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the relationship. The next three years were filled with uncertainty, due to changes in government and ongoing delays in getting the IRDA (Insurance Regulatory and Development authority) Act passed in parliament. Despite this both companies remained firmly committed to the venture. In October 1998, the joint venture agreement was renewed and additional resource made available. Around this time Standard Life purchased 2% of Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also started to use the services of the HDFC Treasury department to advise them upon their investments in India. Towards the end of 1999, the opening of the market looked very promising and both companies agreed the time was right to move the operation to the next level. Therefore, in January 2000 an expert team from the UK joined a hand picked team from HDFC to form the core project team, based in Mumbai. Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFC Bank. In a further development Standard Life agreed to participate in the Asset Management Company promoted by HDFC to enter the mutual fund market. The Mutual Fund was launched on 20th July 2000. The company was incorporated on 14th August 2000 under the name: HDFC Standard Life Insurance Company Limited. Their ambition from as far back as October 1995 was to be the first private company to re-enter the life insurance market in India. On the 23rd of October 2000, this ambition was realized when HDFC Standard Life was the only life company to be granted a certificate of registration. HDFC are the main shareholders in HDFC Standard Life, with 81.6%, while Standard Life owns 18.4%. HDFC and Standard Life have a long and close relationship 32
built upon shared values and trust. The ambition of HDFC Standard Life is to mirror the success of the parent companies and be the yardstick by which all other insurance companies in India are measured. HDFC Standard Life Insurance Company has been signed on by Blue Star to provide insurance cover to its 1,805 employees across India and overseas. HDFC Standard Life Insurance is one of the leading players in the group insurance segment of the life insurance business. Its group business has grown significantly since inception and now covers over 25,000 lives, across the entire industry spectrum including software, FMCG, pharmaceuticals, banking, consultancy, BPOs, retailing, and consumer electronics
MISSION:HDFC Standard Life aims to be the top new life insurance company in the market. This does not just mean being the largest or the most productive company in the market, rather it is a combination of several things like: Customer service of the highest order Value for money for customers Professionalism in carrying out business Innovative products to cater to different needs of different customers Use of technology to improve service standard Increasing market share
VALUES:33
SECURITY:
Providing long term financial security to its policy holders will be the companys constant endeavor. It will do this by offering life insurance and pension products.
TRUST:
HDFC Standard Life appreciates the trust placed by its policy holders in it. Hence, it will aim to manage their investments very carefully and live up to this trust.
INNOVATION:
Recognizing the different needs of its customers, it will be offering a range of innovative products to meet these needs. The companys mission is to be the best new life insurance company in India and these are the values that will guide it in this
34
FINANCE DEPARTMENT:
The finance department of HDFC Standard Life Insurance is headed by the General Manager (Finance), who reports to the MD and CEO. There are four other departments under the Finance Departments. These are: 1. Accounts Department 2. Actuary Department 3. Investment Department 4. Underwriting Department
The Investment Department is responsible for the investment of the money of the investors. Since the basic reason for the investors investing their money in Life Insurance is security, IRDA has put certain regulations on such companies for investments so that the money of investors is safe. These guidelines are: 1. Not less than 50% of the corpus will be invested in Government Securities (G-Sec) 2. Up to15% of the corpus will be invested in infrastructure, social and rural sectors. 3. Not less than 20% can be invested in government and other equities. 4. Remaining 15% can be invested in unapproved equities. Till recent time, HDFC has not been investing in equities. But now it has decided to follow the footsteps of its Joint-Venture partner Standard Life, which invests around 75% of its corpus in equities. The Investment Department is also responsible for calculating the returns of the investment to the investors. Here also the insurance companies are bound by regulations and guidelines. According to IRDA, the returns have to be in the range of 6 %-9 %.
36
RESEARCH METHODOLOGY
STUDY
The present investigation is a descriptive type of study undertaken to estimate the comparative study pension plan of HDFC SLIC, BIRLA SUN LIFE, BAJAJ ALLIANZ, LIC.
Sources
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.
Primary survey
Primary survey included: Visiting websites and fixing appointments with their agents. 37
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.
Secondary survey
Secondary survey included of consulting books, magazines, journals, internet and also taking reference from: Library. Internet.
Methodology
We would go in for a qualitative research as our objective is to judge the perception and preference of different insurance products. The research would be done from primary data. Sample Design: Target population: The target population for the research would be people who are in the age group beyond 40 and age group between 25 to 40.We targeted this group of population because these populations are the potential customers of insurance. Sampling Frame: The research would be conducted in Jhansi. The survey has been conducted among the potential customers of HDFCSLIC from different sectors as HDFC deals in many sectors of business. Sampling Technique: The sampling technique that is adopted is the simple random sampling wherein every element in the target population has an equal chance or probability of getting selected in the sample. That means every unit of the population who is more is in the above mentioned age group, have an equal chance of getting selected. 38
Sample Size:
I did a survey among 100 people by taking two categories in consideration of 50 each; that is 1.) Age group beyond 40 2) Age group of 25 to 40 Data Collection: The research would be conducted from the source of primary data collection. Secondary data would help us in knowing the trends prevailing in the insurance market and would help us in analyzing and interpretation of the primary data.
pension plans, unit linked plans, special plans, social security schemes diversified portfolio of products. HDFC SLIC could diversify its product portfolio. It could add more plans for high worth individuals and women.
ICICI PRUDENTIAL
ICICI Prudential is a stiff competitor for HDFC SLIC. The company is a merger between ICICI Bank which is the biggest private bank in India and Prudential Plc which is a global life insurance company. The company has an investment plan which is market related Invest Shield Life. In this plan even if the market falls, the premium will be returned to investors. It is a guaranteed plan which ensures the company carefully invests your money. The stock market performance of ICICI Prudential is much better than HDFC SLIC. The returns on the growth fund were 46.28% compared to the 42.70% offered by HDFC SLIC. Customers are attracted by higher returns and this is a plus point for Prudential. The company is very well advertised. The advertisements are showcased in movies, television, newspapers, magazines, bill boards, radio etc. The company has an excellent brand ambassador Mr. Amitabh Bacchan. His promotion of the company builds trust and faith in the minds of our people. However the charges are very high in the plans offered by ICICI Prudential. It is 35% during the first year, 15% in the next year and 3% from the third year onwards. Also a higher minimum premium of Rs. 8000 is charged. Hence the policies are not accessible to the lower strata of the society. (Source: www.iciciprulife.com)
across all its units worldwide. It is led by its Chairman - Mr. Kumar Mangalam Birla. Some of the key organizations within the group are Hindalco and Grasim. Sun Life Financial Inc. and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. It had assets under management of over US$343 billion, as on 31st March 2007. The company is a leading player in the life insurance market in Canada. Being a customer centric company, BSLI has invested heavily in technology to build world class processing capabilities. BSLI has covered more than a million lives since inception and its customer base is spread across more than 1000 towns and cities in India. All this has assisted the company in cementing its place amongst the leaders in the industry in terms of new business premium income. The company has a capital base of 520 crores as on 31st July, 2007. Its Flexi Life Line Plan offers lifelong insurance cover till the policy holder is 100 years of age. There are guaranteed returns of 3% p.a. net of policy charges after every 5 years from the eleventh policy year onwards. However the charges are very high. The initial charges for the first year are 65%. Hence the fund value is greatly reduced.
BAJAJ ALLIANZ
Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years in the Indian market. Together they are committed to offering you financial solutions that provide all the security you need for your family and yourself. Bajaj Allianz is the number one private life insurer for the year 2005 2006. It is leading by 78 crores. It has experienced a whopping growth of 216% in the last financial year. The company has sold 13, 00,000 policies and is backed by 550 offices across India. It offers travel insurance, motor insurance, home insurance, health and corporate insurance. The mortality charges are lower than HDFC SLIC. The entry age could be zero years which allow even new born babies to be insured. (Source: www.bajajallianz.com)
TATA AIG
41
Tata Aig is a joint venture between the Tata group and American International Group Inc. In one of the plans the company offers hospital cash benefit wherein it will pay Rs. 2500 per day in case of hospitalization and Rs.12.5 lakhs in case the person suffers from any critical illness. Annual premium is much less (about Rs. 6712) to avail such a good benefit. Charges are relatively low compared to HDFC SLIC for some policies. The company offers high coverage plans at low cost. There is a plan even for a policy term of 1 year. Your family can continue to enjoy their current lifestyle even in the case of something happening to you. These plans are very flexible and HDFC SLIC could adopt this idea of insuring individuals for short periods of time. For example; there is a family of four. The only earning member is the father. He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is able to repay the loan with his current salary in 15 years. The problem arises if something were to happen to him within these fifteen years. Not only will the family face the emotional and financial loss of their father but they will also have to repay the home loan or risk being homeless. (Source: www.tataaig.com)
42
2. SWITHCHES: After analyzing the feature the conclusion drawn is that HDFC is offering the most switches in the year. 3. CHARGES: The charges levied on the policy of the insurer is lowest in HDFC SLIC like FMC, PAC, but initial charge is second lowest which is also not bad in terms of investment. 4. WITHDRAWALS: Withdrawals not allowed in HDFC SLIC & BIRLA SUN LIFE because if withdrawals are there plan would not yield good return. 5. INVESTMENT OPTIONS: HDFC SLIC provides you the maximum funds for investment (Balanced fund, Defensive Managed fund, Safe Managed fund, Liquid fund & Growth fund). So HDFC SLIC provides you better portfolio to diversify your funds which reduces the risk and maximizes the return. 6. TOP UP: In HDFC SLIC the minimum top up is of RS 5000 with no charges levied but in others it is Rs 10000. Here we could see that people with low income can increase the premium with small amount. 7. BONUS UNIT: Only two firms are offering bonus unit to the customer and they are HDFC SLIC and LIC. 8. FLEXIBLE CONTRIBUTION: This feature is available in HDFC SLIC where a customer can increase or decrease its premium, but only Bajaj Allianz is offering an increase option only.
COMPARITIVE ANALYSIS
CONTENTS 44
HDFC PENSION-II VS BIRLA FLEXI SECURELIFE RETIREMENT HDFC PENSION-II VS BAJAJ ALLIANZ UNIT GAIN HDFC PENSION II VS LIC BIMAPLUS
HDFC PENSION-II VS BIRLA FLEXI SECURE LIFE RETIREMENT VS BAJAJ ALLIANZ UNIT GAIN VS LIC BIMAPLUS
HDFC Features Age Term PENSION 18 - 60 years 10 - 30 years BIRLA Flexi Secure Life Retirement 18 - 60 years Minimum Term of 10 years Allianz Bajaj Unit gain LIC Bima Plus 0 60 years 12 - 55 years Choice rests with the consumer with a minimum premium payment term of 3 years
Sum Assured
Only 5, 10, 20 (age-based) multiples are allowed as Sum Assured. Value of units partly in cash partly converted to annuity. Value of units, no sum assured is given.
Minimum Sum Assured is Rs. 50,000. Zero Death Benefit is also available. Unit Value is used to purchase an annuity
Survival benefit
Value of Fund at Bid price Bid Value of the fund units Death during the first 6 months 30% of SA + value
Death benefit
of units, next 6 months - 60% of SA + value of units. Death after 1st year - SA + value of units. Death during the 10th year - 105% of SA + value of Partial or complete Withdrawal benefit No Partial withdrawals are available. No Partial withdrawals are available withdrawal at bid price after 3rd year units. Premature withdrawal allowed after one year (after applying bid-offer spread. Contribution/ premium Flexible contribution Investment options 5 Fund OptionsBalanced, Defensive Managed, Safe Managed, Liquid Surrender Value & Growth The surrender charge is 25% of 3 years of No charges after Surrender is available from the 1st year itself. In the 1st year surrender 2nd year the charges are 46 A selling / purchase price spread of 5% will be applicable from the 3rd year onwards Partial surrender up to 50% of bid value of units allowed after 3 years from date of Nourish, Growth and Enrich Minimum: Rs. 10,000 p.a. Available Minimum Rs. 5,000 p.a. Not available Minimum: Rs. 10,000 p.a. Only an increase in contribution is allowed Equity Fund, Debt Fund, Balanced Fund, Cash Fund Balanced, Secured & Risk Minimum Rs. 10,000 p.a Not available
3 years Top-up Available with a minimum top-up of Rs 5,000 and maximum of 20% of sum Switch assured. 24 Switches are free.
50%, in the 3rd year the charges are 25%.. Available, with a minimum top-up of Rs. 10,000 Available
commencement
2 free switches every year. Every additional switch will be charged at 0.5% of the switch amount.
Three free switches every policy year. Subsequent switches would be charged @1% of switch amount or Rs. 100, whichever is higher. Charges 1st year - 70%; 2nd year - 2%; 3rd year 1%; No charges from the 4th year onwards Annual admin charges of 1.25% p.a. of net assets Not applicable 1% of the fund per annum Not Disclosed No free switches. Cost of switching is 2% of the fund value.
Initial Charge
Charges 20% of the initial premium in the 1st year and 2% of the premium from the 2nd year onwards. Policy admin fee of Rs. 20 per month
Admin Charge
Admin charges of Rs.180 fixed charge Per annum. Least in the industry 0.8% of the fund per annum Available
A fund based fee of 2.25 Annual investment % p.a. of the policy fund. Not Available charge of 1% p.a. of fund. Not Available
Available
47
RECOMMENDATIONS
1. Premium allocation charge (initial charge) should be reduced to provide customer with better return. 2. Policy administration charge should be reduced to gain more advantage in the market. 3. Surrender charges should be reduced.
48
CONCLUSION
Based on comparative study HDFC SLIC is on the upper side in the private life insurance companies in comparison to Birla sun life, Bajaj Allianz. HDFC SLIC based on the comparative study has many advantage in this segment of product like fund management charge, switches facility and maximum number of investment funds in offering (i.e., 5 namely Balanced fund, Defensive Managed fund, Safe Managed fund, Liquid fund & Growth fund ) but the rest of the insurance player that is LIC, Birla sun life, Bajaj Allianz are also not far behind HDFC SLIC.
49
BIBLOGRAPHY
www.birlasunlife.com WWW.GOOGLE.COM
50