PROJECT REPORT ON MARKET POTENTIAL OF TATA AIG LIFE INSURANCE COMPANY

CHAPTER-1


INTRODUCTION

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INDUSTRY PROFILE Insurance in India
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. A brief history of the Insurance sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:
• 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 taken over by the

central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act,
• 1956, with a capital contribution of Rs. 5 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 (Nationalization) Act, 1972 nationalized

the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies’ viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

The Insurance Regulatory and Development Authority
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. 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’s online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.

3

ROLE OF IRDA
Section 14 of IRFDA Act, 1999 lays down the duties, powers & functions of IRDA. The power & functions of the Authority shall include: 1. 2. Issue to the applicant a certificate of registration, renew, modify, Protection of the interests of the policy holders, insurable interest,

withdraw, suspend or cancel such registration. settlement of insurance claim, surrender value of policy & other terms & conditions of contracts of insurance. 3. 4. Specifying requisite qualifications, code of conduct, & practical training Calling for information from, undertaking inspection of, conducting for intermediary or insurance intermediaries & agents; enquiries & investigations including audit of the insurers, intermediaries, insurance intermediaries & other organizations connected with the insurance businnes; 5. Control & regulations of the rates, advantages, terms & conditions that may be offered by insurer in respect of general insurance business not so controlled & regulated by the Tariff Advisory Committee under the section 64U of the Insurance Act, 1938 (4 of 1938). 6. Adjudications of disputes between insurers & intermediaries or insurance intermediaries.

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COMPANY PROFILE Tata AIG Life Insurance Ltd.
Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company, formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Life combines the Tata Group’s pre-eminent leadership position in India and AIG’s global presence as one of the world’s leading international insurance and financial services organization. The Tata Group holds 74 per cent stake in the insurance venture with AIG holding the balance 26 per cent. Tata AIG Life provides insurance solutions to individuals and corporates. Tata AIG Life Insurance Company was licensed to operate in India on February 12, 2001 and started operations on April 1, 2001.

Company’s Mission
We focus on the needs of our customers and create confidence, trust and loyalty by offering a wide range of innovative insurance solutions. Strengthened by our commitment to professional management, we ensure the continued growth and advancement of our employees.

Company’s Vision
Tata AIG Life Insurance has a deep rooted commitment to improve the quality of life of its customers, employees and stakeholders. We aim to be the most preferred General Insurance Company. We do this by our efforts which strives to make Tata AIG Life Insurance a corporate with values. • Increase Customer Value. • Integrated efforts
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The TATA Group

Tata is a rapidly growing business group based in India with significant international operations. Revenues in 2007-08 are USD 62.5 billion (around Rs. 251,543 crores), of which 61% was from business outside India. The Group’s Net Profit for 2007-08 is USD 5.4 billion (around Rs. 21,578 crores). The Group employs around 350,000 people worldwide. The business operations of the Tata Group currently encompass seven business sectors - Communications and Information Technology, Engineering, Materials, Services, Energy, Consumer Products and Chemicals. The Group's 28 publicly listed enterprises have a combined market capitalisation of around $60 billion, among the highest among Indian business houses, and a shareholder base of 2.9 million. The major companies in the Group include Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels, Tata Teleservices and Tata Communications.

AIG Group

American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.
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SWOT ANALYSIS Strengths
•

Disciplined fund management - Years of experience in asset management, and a strong track record in managing funds.

•

Innovative - Known for being an innovator in providing world-class pragmatic financial solutions, with a constant focus on customization and flexibility

• •

Customer Satisfaction - A highly committed sales force, with customer satisfaction as the key driving force. Transparency in Services - Daily declaration of fund performances, regular performance benchmarking, well regulated asset management, and monthly newsletter on market updates.

Weaknesses• •

Employees – Less number of personnel Tata AIG Life Insurance employs around 4328 people in its various businesses and has 112 branches across 134 cities as compared to ICICI Prudential has 735 offices, 22 Bank assurance partners and over 2.4 lakh advisors therefore it should increase its offices.

•

Training Department – Tata AIG Life Insurance has a limited number of trainers in its branches, because of which advisors are not properly trained, so it should work on developing its training department.

Opportunities
• • India's economic development made it a most lucrative Insurance market in the world and post liberalisation the entry of foreign partners has been allowed. Life Insurance industry is growing at an unprecedent pace so to survive in the Industry they should analyse the emerging requirements of the policyholders / insurers and they are in the forefront in providing essential services and
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introducing novel products. Thereby they can become niche specialists, who provide the right service to the right person in right time • The impact of Information Technology in Insurance business is being felt at an accelerating pace. In the initial years IT has been used more to execute back office functions like maintenance of accounts, reconciling broker accounts, client processing etc. With the advent of "database concepts", these functions are better integrated in an administrative efficiency. • The real evolution is however emerged out of Internet boom. The Internet has provided brand new distribution channels to the Insurers. The technology has enabled the Insurer to innovate new products, provide better customer service and deeper and wider insurance coverage to them. • In the present competitive scenario, a key differentiator is the professional customer service in terms of quality of advice on product choice along with policy servicing. Servicing focus is on enhancing the customer's experience and maximizing his convenience. This calls the effective CRM system, which eventually creates sustainable competitive advantage and enables to build long lasting relationship.

Threats
• Private and Foreign entrants in the Insurance Industry made others difficult to retain their market. Higher customer aspirations lead to new expectations and compel him to move towards the insurer who provides him the best service in time. It becomes less viable for them even to maintain the functional networks or competitive standards and services. • With the entry of private and foreign players in the Insurance business, people have got a lot of options to choose from. Radical changes are taking place in customer profile due to the changing life style and social perception, resulting in erosion of brand loyalty.
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•

The conflict of IRDA and SEBI over certain products in recent time has made the survival tough for some crucial products of Life Insurance. Some guidelines has been changed like lock–in period, company’s margin, number of Life Advisers etc. which is making the operation of this industry very tough.

Market share of various Life Insurance Companies
•

LIC (Life Insurance Corporation of India) still remains the largest life insurance company accounting for 64% market share. Its share, however, has dropped from 74% a year before, mainly owing to entry of private players with innovative products and better sales force.

• ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance

company in India. It experienced growth of 58% in new business premium, accounting for increase in market share to 8.93% in 2007-08 from 6.97% in 2006-07.
• Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its

market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%.
• SBI Life Insurance Co Ltd in terms of new number of policies sold, the

company ranked 6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an increase of 87% over last year.
• Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its

market share went up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th in number of new policies sold in 2007-08.
• HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in

FY2007-08, registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among the insurance companies and 5th amongst the private players.
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•

Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08 from 8the a year before, pushing down Max New York Life insurance company.

•

Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore. The company was pushed down to the 8th position from 7th in 2007-08.

•

Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in 2007-08. Last year the company doubled its branch network to 150 from 74.

•

Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th last year. It has presence in more than 3,000 locations across India via 221 branches and close to 40 bancassurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs 344 crore. With the fresh investment, total paid-up capital of the insurer would go up to Rs 1,348.8 crore.

MAJOR COMPETITORS
PRIVATE PLAYERS IN INSURANCE SECTORS India still has low insurance penetration of 1.95 percent, 51st in the world. Despite the fact that India boosts a saving rate of around 25 percent, less than 5 percent is spent on insurance. The insurance landscape in India is undergoing major changes. Close to foreign competition since nationalization in 1956, the life insurance industry had been protected from competitive pressures. Now, with the reopening of the sector, several new players have entered the scene.

LIFE INSURANCE COMPANIES

10

S. No. 1.

Insurers

Foreign Partners Standard Life Assurance, UK New York Life, USA

Year of Operation 2000-01

HDFC Standard Life Insurance Co. Ltd.

2.

Max New York Life Insurance Co. Ltd.

2000-01

3.

ICICI-Prudential Life Insurance Co. Ltd.

Prudential , UK

2000-01

4.

Om Kotak Life Insurance Co. Ltd.

Old Mutual, South Africa

2001-02

5.

Birla Sun Life Insurance Co. Ltd.

Sun Life, Canada American International Assurance Co., USA BNP Paribas Assurance SA, France ING Insurance

2000-01

6.

Tata-AIG Life Insurance Co. Ltd.

2000-01

7.

SBI Life Insurance Co. Ltd.

2001-02

8.

ING Vysya Life Insurance Co. Ltd.

International B.V., Netherlands

2001-02

9.

Allianz Bajaj Life Insurance Co. Ltd.

Allianz, Germany

2001-02

10 . Metlife India Insurance Co. Ltd.

Metlife International Holdings Ltd., USA ---

2001-02

11 .

Reliance Life Insurance Co. Ltd. (Earlier AMP Sanmar Life Insurance Co. from

2001-02

11

S. No.

Insurers 3.1.2002 to 29.9.2005)

Foreign Partners

Year of Operation

12 . AVIVA

Aviva International Holdings Ltd., UK

2002-03

13 . Sahara Life Insurance Co. Ltd. --2004-05

14 . Shriram Life Insurance Co. Ltd. Sanlam, South Africa 2005-06

15 . Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France 2006-07

16 .

Future Generali India Life Insurance Company Ltd.

Generali, Italy

2007-08

17 . IDBI Fortis Life Insurance Company Ltd. Fortis, Netherlands 2007-08

18 .

Canara HSBC OBC Life Insurance Company Ltd. Aegon Religare Life Insurance Company Ltd.

HSBC, UK

2008-09

19 .

Religare, Netherlands

2008-09
12

S. No.

Insurers

Foreign Partners

Year of Operation

20 . DLF Pramerica Life Insurance Co. Ltd.

Prudential of America, USA

2008-09

21 . Star Union Dai-ichi

Dai-ichi Mutual Life Insurance, Japan

2008-09

22 . India First life insurance company

Legal & General Middle East Limited, UK

2009-10

23 . Life Insurance Corporation of India --1956-57

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Chapter 2 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY
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The research is carried on in a proper planned and systematic manner. This methodology includes:  Familiarization with the concept of insurance and its various terms.  Thorough study of the information collected.  Conclusions based on findings. The research methodology which is adopted to conduct this study are both qualitative as well as quantitative. Qualitative In order to identify the insurance needs of the Indian population with respect to their emotional, physical & financial conditions and to match the needs of the population with the products in hand require to conduct the qualitative study. Quantitative In order to understand the market segmentation of insurance products and to study the various factors which influence the purchase decision of insurance products require the quantitative study.

REVIEW OF LITERATURE
BACKGROUND OF THE PROBLEM The entire Insurance sector is divided into 2 broad categories: • • General Insurance Life Insurance

Further Life Insurance is sub-divided into two categories: • • TRADITIONAL INSURANCE PLANS ULIPS (Unit Linked Insurance Plans)

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Traditional products are basically the term plans and the whole life plans, in which risk cover is the foremost objective of the customers. In case of term plans the sum assured is given to the nominee of the life to be insured in case of his death, there is no maturity claim, whereas in case of whole life some amount is paid after a certain period of time.

ULIPS were introduced couple of years back in the Indian market. These include the endowment policies and money back policies that have the investment benefit along with the risk cover i.e. the certain portion of the premium paid by the customer is used for the risk cover and rest is further invested in the funds offered by the company. So when the private players entered the market they decided to introduce market driven plans named ULIP which promised a very attractive return to the consumers. Birla Sun Life was the first company to establish the concept of ULIP. Though this concept was very attractive but still a number of policies got lapsed, then the private players came up with an idea of 3 years lock in period, so that number of policies lapsing could be reduced, which worked well. Now since the expectations of investors have increased who are investing their money, so the money flow in mutual funds and stock market has increased gradually because the returns are as high as 25% - 30%. But still Life Insurance is Safe Avenue while promising you good returns, this would be clear from the following points: • Returns in ULIPs are also as high as 25% - 30%, while it also gives life cover in case of mishappening such as death, disability, etc. • Risk in ULIPs is less as compared to mutual funds and stock market, as ULIPs offer different funds with different combinations of debt and equity. • Fund management fee in ULIPs is 1.25% as compared to the fee in mutual funds 2.5%. • The entire fund of the investor can be eroded under mutual fund if market crashes, but under ULIPs at least principle amount plus bank rate is guaranteed.
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• • •

ULIPs provide insurance cover as well as good returns. Capital gains are not taxable under ULIPs. Most companies offering ULIPs provide a number of free switches to its investors, if they would like to switch their funds, but these switches are chargeable under mutual funds.

Most of the investors in the Indian market are not aware of these benefits of Life Insurance, but as the awareness is increasing more and more investors are joining this sector, resulting in increased turnover year over year.

OBJECTIVES OF THE STUDY
The objectives mark the right direction to carry out any study. So, the objectives of this study are as under: To learn and understand the market segmentation of insurance products.

 To identify the insurance needs of the Indian population with respect to their emotional, physical and financial conditions.  To study the various factors which influence the purchase of insurance products  To match the needs of the population with the products in hand or else design a new product.

RESEARCH DESIGN
DESCRIPTIVE RESEARCH
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This study is based on a descriptive research design wherein the risks and returns associated with the various products have been studied and the reasons for customer perception regarding these products have been found out.

UNIVERSE
The areas of North and West Delhi are selected as the Universe to conduct this study.

SAMPLE DESIGN
As the research is based on analyzing the consumer preference among various investment avenues in the market such as stock market, mutual funds, life insurance, fixed deposited., for that a sample size of 100 was taken , which was picked up on random basis for the purpose of survey. Simple Random Sampling has been adopted to conduct this study.

SAMPLE UNIT
The sample unit considered for this study is Investor who invests in various avenues available in the market. The respondents have been selected from the Universe defined above.

SOURCES OF DATA COLLECTION:
Both the Primary and Secondary sources have been used to collect the desired data for the study. Primary data collection has been done through the means of:
• •

Questionnaires- In order to get the primary data, a close ended questionnaire has been design to conduct the study. Interviews- In addition to the questionnaire, some other relevant questions were also asked to get the information regarding their marked choices.

.

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Secondary data: These include books, the internet, company brochures, product brochures, the company website, competitor’s websites etc, newspaper articles etc

DURATION
The study has been conducted in the duration of 7 Weeks which is as follows: Phase – I (3/06/10-08/06/10):- The first phase of training is all about the classroom training in which they told about the general concepts about the insurance. Phase – II (09/06/10-19/06/10):- The second phase of training is all about the company profile and different operations. Phase – III (19/06/10-30/06/10):- In the third phase market research was conducted. Phase – IV (1/07/10-11/07/10):- Fourth Phase is about the data analysis and its interpretation. Phase – IV (12/06/10-21/07/10):- Documentation was done in the final phase.

SAMPLE SIZE:
Total sample of 100 was selected which is as follows: West Delhi Area North Delhi Area 60 40

SCOPE OF THE STUDY
In the present scenario as our economy is growing and the per capita income is rising people at large have got more money with them to invest in the market, who according to their choice invest in share market, government bonds, life insurance, mutual funds, real estate. If a consumer chooses to invest in mutual funds there are 33 mutual fund companies, if one chooses to invest in stock market there are hundreds of companies listed on the stock exchange, if he chooses to invest in life insurance there are 16 companies present such as ICICI PRUDENTIAL., AVIVA LIFE INSURANCE, KOTAK LIFE INSURANCE, SBI LIFE INSURANCE, TATA AIG LIFE INSURANCE, LIC, BAJAJ ALLIANZ, etc.; so in order to study the consumer preferences, the various factors
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that influence the buying behavior of a consumer buying life insurance, a sample of 100 was chosen from DELHI.

LIMITATIONS OF THE STUDY
By working on this project, a lot of knowledge about the insurance sector in INDIA has been gained. However, there were many limitations or problems that I faced while working on this project. The following are the limitations:
 Small Sample Size: The study was relied more on the primary data and the data

was collected from a small population of 100, therefore, the findings may not be applicable in their true sense when it is applied in general.
 Time Constraint: As the duration of internship was only 7 weeks, therefore, it

was very difficult to conduct the entire study about the vast insurance sector
 Small Universe: The study is restricted only to some areas of Delhi which

ignores the entire public in general
 Biased Responses: The answers of the customers could have been biased which

may affect the analysis of the study.

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Chapter 3 CONCEPTUAL DISCUSSION

THEORY & CONCEPTS USED IN THE PROJECT

21

WHAT IS AN INVESTMENT? Investment is the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income {dividend}, or appreciation of the value of the instrument.It is related to saving or deferring consumption. Investment is involved in many areas of the economy, such as business management and finance no matter for households, firms, or governments. An investment involves the choice by an individual or an organization such as a pension fund, after some analysis or thought, to place or lend money in a vehicle, instrument or asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or options), or the foreign asset denominated in foreign currency, that has certain level of risk and provides the possibility of generating returns over a period of time.

WHAT IS AN INSURANCE? GENERAL DEFINITION: In the words of John Magee, " Insurance is a plan by themselves which large number of people associate and transfer to the shoulders of all, risks that attach to individuals. " FUNDAMENTAL DEFINITION: In the words of D.S.Hansell, “Insurance accumulated contributions of all parties participating in the Scheme. " CONTRACTUAL DEFINITION: In the words of Justice Tindall,"Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency."

CHARACTERISTICS OF INSURANCE  Sharing of risks  Cooperative device  Evaluation of risk
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 Payment on happening of a special event  The amount of payment depends on the nature of losses incurred.  Insurance is a plan, which spreads the risk and losses of few people among a large number of people.  The insurance plan is a plan in which the insured transfers his risk on the insurer.

FUNCTIONS OF INSURANCE PRIMARY FUNCTIONS
1. Provide protection: - Insurance cannot check the happening of the risk, but can

provide for the losses of risk.
2. Collective bearing of risk: - Insurance is a device to share the financial losses of

few among many others.
3. Assessment of risk: - Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk.
4. Provide Certainty: - Insurance is a device, which helps to change from

uncertainty to certainty. SECONDRY FUNCTIONS:
1. Prevention of losses: - Insurance cautions businessman and individuals to adopt

suitable device to prevent unfortunate consequences of risk by observing safety instructions.
2. Small capital to cover large risks: - Insurance relives the businessman from

security investment, by paying small amount of insurance against larger risks and uncertainty.

WHY WE NEED INSURANCE?
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Premature Death 1 out of 4 people don’t reach the age of 60.  You are providing your family with a lifestyle.  This lifestyle is dependent on your continued income generating capability.  If this income were to stop unfortunately, how would your family meet its financial requirements?  My responsibility is to help you protect your family financially in event something unfortunate happens… Living too long 7 out of 10 people endure retirement instead of enjoying it.  Do you want financial independence post retirement?  Imagine living beyond your working years on a depleted income.  However, you would want to maintain your some living standards and be financially independent.  My responsibility is to help you secure a financially stable future post retirement. Children’s Future To get a premier MBA degree in year 2015 will cost Rs. 18lakh.  It is your responsibility to provide your children with best possible education they can have.  Do you want to compromise on their future? My responsibility is to help you build financial assets for your children’s future. DO I NEED INSURANCE? HUMAN LIFE CONCEPT Your life is your most valuable asset. This is easily proved if we were to assign a monetary value to your life; this value depends on your income- earning potential or your Human Life Value.
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Your income supports your family. Helps them to get the most out of life. Month after month, year after year, you and your dependents live the best way you can use the money you earn. This money enables your household to run smoothly, your children to college, takes care of the medical bills, your vacations and helps maintain your lifestyle. On the basis of your income or earning potential, we can calculate your Human Life Value. A simple rule of thumb to compute it as follows: multiply your present annual income by the number of years until you plan to retire. This does not take in factors such as inflation or an increase in your income over time. Therefore, your Human Life Value is a great deal higher than the amount calculated above. What if an unfortunate incident happens in your life and you were unable to work? Your income would stop. Your family is then, at a risk of losing all your future income. The potential cost of losing your income is too great to ignore.

PROTECTING YOUR MOST VALUABLE ASSET If something were happen to you, here are a few possible ways of dealing with the financial implications: 1. Draw from your savings: But how long would the funds last? A lifetime of savings could be used up in a few months. 2. Borrow from others: Who will lend you the money? Even family and friends can only help to an extent. And anyway, this would only be a short-term solution. 3. Sell your assets: What price will you get for your assets? Would you like to sell your home? Your car? 4. Transfer the risk to an insurance company. We recommend that you transfer the risk to an insurance company. It’s cheaper, safer and smarter in the long run.
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If you insure the risk, your money outflow is actually miniscule. For the sake of illustration, an annual premia payout of approx. Rs. 25 for 15 years guarantees your family will receive Rs. 1000 – if something happens to you in that situation a small price to pay for providing peace of mind to your family. A smaller sum is payable for transferring the risk of disability. Another advantage of transferring the risk is that you remove the uncertainty. So do take care to protect your most valuable asset…..your life!

WHAT ARE MUTUAL FUNDS?
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities. Mutual funds have a fund manager who invests the money on behalf of the investors by buying / selling stocks, bonds etc. It is a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints. Benefits include professional money management, buying in small amounts and diversification. Mutual fund units are issued and redeemed by the Fund Management Company based on the fund's Net Asset Value (NAV), which is determined at the end of each trading session. NAV is calculated as the value of all the shares held by the fund, minus expenses, divided by the number of units issued. Mutual Funds are usually long term investment vehicle though there are some categories of mutual funds, such as money market mutual funds which are short term instruments. Currently, the worldwide value of all mutual funds totals more than $US 26 trillion. The United States leads with the number of mutual fund schemes. There are more than 8000 mutual fund schemes in the U.S.A. Comparatively, India has around 1000 mutual fund schemes, but this number has grown exponentially in the last few years. The Total Assets under Management in India of all Mutual funds put together touched
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a peak of Rs. 5,44,535 crs. at the end of August 2008.

WHAT ARE GOVT. BONDS?
A bond is a debt investment in which an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to a company. A government bond is a bond issued by a national government denominated in the country's own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. The first ever government bond was issued by the English government in 1693 to raise money to fund a war against France. It was in the form of a tontine. Government bonds are usually referred to as risk-free bonds, because the government can raise taxes to redeem the bond at maturity. Some counter examples do exist where a government has defaulted on its domestic currency debt, such as Russia in 1998 (the "ruble crisis"), though this is very rare. As an example, in the US, Treasury securities are denominated in US dollars. In this instance, the term "risk-free" means free of credit risk. However, other risks still exist, such as currency risk for foreign investors (for example non-US investors of US Treasury securities would have received lower returns in 2004 because the value of the US dollar declined against most other currencies). Secondly, there is inflation risk, in that the principal repaid at maturity will have less purchasing power than anticipated if the inflation outturn is higher than expected. Many governments issue inflation-indexed bonds, which should protect investors against inflation risk.

WHAT ARE FIXED DEPOSITS?
Fixed deposits are loan arrangements where a specific amount of funds is placed on deposit under the name of the account holder. The money placed on deposit earns a fixed rate of interest, according to the terms and conditions that govern the account. The actual amount of the fixed rate can be influenced by such factors at the type of currency
27

involved in the deposit, the duration set in place for the deposit, and the location where the deposit is made. Fixed deposits are a credible way to make a return on investment that is somewhat higher than a standard savings account. The use of fixed deposits can also be helpful when working with various types of currency. By establishing what is known as a Foreign Currency Fixed Deposit or FCFD, it is possible to choose the type of currency involved in the deposit and lock in a rate of interest. If the choice of currency is a good one, this means the investor can enjoy a healthy fixed deposit currency rate for the duration of the deposit and earn more than with a standard fixed deposit strategy. However, going with an FCFD does contain a slightly higher amount of risk, since the funds deposited must be converted to the currency of choice and then converted back when the deposit is fulfilled. If the currency did not fare well in the interim, there is some chance of obtaining a loss, due to the changes in the rate of exchange from the time the fixed deposit was activated until the time the deposit is considered complete.

Chapter 4
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DATA ANALYSIS & INTERPRETATION
DATA ANALYSIS
1. What is your age?
•

Less Than 20 20-30 SAMPLE SIZE 100 Less than 20 yr 20-30 yr 30-45yr Above 45 yrs TOTAL FREQUENCY 12 37 33 18 100

•
•

30-45 More Than 45 PERCENTAGE 12 37 33 18 100

•

29

less than 20

20-30

30-45

more than 45

18

12

37 33

Inference: It can be observed from the pie-chart that:
• • • •

12% of the investors are less than that of 20 years of age. 37% lie in the age group of 20-30 years as such investors are returns oriented and are risk takers. 33% lie in the age group of 30-45 years as these investors want safe products. Only 18% of the investors lie in the age group of more than 45 years. Such investors are risk averse.

2. What is your marital status? • Married • Unmarried

MARITAL STATUS SAMPLE SIZE 100 Married Unmarried TOTAL FREQUENCY 82 18 100 PERCENTAGE 82 14 100
30

m arried
18%

unm arried

82%

Inference- It can be seen from the pie-chart that:•

82% of the investors are married as they have dependents so they are more conscious towards the health and life of their family members.

•

18% of the investors are unmarried.

31

3.

What is your annual income? • • Less than 1,00,000 1,00,000-2,50,000 • • 2,50,000-5,00,000 More than 5,00,000

SAMPLE SIZE 100 Income less than 1 Lac 1-2.5 Lac 2.5- 5 More than 5 Lac TOTAL

FREQUENCY PERCENTAGE 15 36 40 9 100 15 36 40 9 100

less than 1lac

1-2.5 lac

2.5-5

more than 5

9%

15%

40% 36%

Inference- It can be derived from the pie-chart that • • • 15% of the investors are in the income group of less than 1 lac. 36% of the investors lie in the income slab of 1-2.5 lacs. 40% of the investors are in the income group of 2.5-5 lacs.
32

•

9% of the investors lie in the age group of more than 5 lacs.

4. Which Avenues do you prefer for investment? • • Stock Market Mutual funds SAMPLE SIZE 100 Stock Market Mutual Funds Govt. Bonds Fixed Deposit TOTAL • • FREQUENCY 37 22 32 9 100 Govt. Bonds Fixed deposit PERCENTAGE 37 22 32 9 100

stock market govt. bonds

m utual funds fixed deposit

9% 37%

32%

22%

Inferences- It can be inferred from the pie-chart that
•

37% of the investors invest in stock market due to its high returns capability and investors are risk takers as well. 22% of the investors invest in mutual funds as they are quite structured avenues, offer good returns and are safe too. 32% of the investors invest in govt. bonds as they are safe investment options and risk associated is less.
33

•
•

•

9% of the investors invest in fixed deposits as they are the traditional investment avenues.

5. Are you aware about the benefits of Insurance? • Yes • No

SAMPLE SIZE 100 Yes No TOTAL
yes

FREQUENCY 91 09 100
No

PERCENTAGE 91 09 100

9%

91%

Inference- It can be seen from the pie-chart that
•

91% of the investors are aware about the benefits of insurance.

•

7% of the investors are unaware of the benefits of insurance.

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6. Are you and your family members insured? •
•

All members including you Only you

•

No

SAMPLE SIZE 100 All members including you Only you No one TOTAL

FREQUENCY 77 13 10 100

PERCENTAGE 77 13 10 100

35

all members including you

only you

no one

10% 13%

77%

Inference- It can be derived from the pie-chart that • •
•

77% of the investors have taken insurance plans for their family as well as themselves as they are concerned about their dependents. 13% of the investors have taken insurance plans for themselves only.
10% of the investors have neither taken insurance plans for their family nor for themselves.

7. If yes, from which company are you insured? • • LIC ICICI •
•

HDFC TATA AIG • OTHERS

36

SAMPLE SIZE 100 LIC ICICI HDFC TATA AIG Others Total

FREQUENCY 47 27 11 5 10 100

PERCENTAGE 47 27 11 5 10 100

LIC

ICICI

HDFC

TATA AIG

6% 12%

52% 30%

Inference- It can be observed from the pie-chart that
• • • •

47% of the investors invest in LIC insurance plans due to their good records of returns and safety. 27% the investors invest in ICICI as it holds a good record in private sector insurers and has a huge customer equity. 11% of the investors have taken insurance plans from HDFC due to their good experiences with it. 10% have taken plans from other insurance companies like birla sun life, SBI life

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8. Which of the following features which affects your purchase? • • Brand Returns
•

EMI Time Period

•

SAMPLE SIZE 100 Brand EMI Returns Time period TOTAL

FREQUENCY 32 08 43 17 100

PERCENTAGE 32 08 43 17 100

brand

Emi

returns

time period

17%

32%

43%

8%

Inference- It can be seen from the pie-chart that
•

32% of the investors are affected by the brand image of the company in the

market as it reflects their past performances as well.
38

• •
•

8% of the investors are affected by EMIs that is demanded by the plan. 43% are concerned with the returns offered by the plan. 17% are concerned with the tenure of the plans.

39

9. What is the annual premium you are paying? • • 5000-10000 10000-25000 SAMPLE SIZE 100 5000-10000 10000-25000 25000-50000 Above 50000 TOTAL • • FREQUENCY 09 36 38 17 100 25000-50000 Above 50000 PERCENTAGE 9 36 38 17 100

5000-10000

10000-25000

25000-50000

17%

9%

Above 50000

36%

38%

Inference- It can be seen from the pie-chart that • • • • 9% of the investors pay an annual premium between Rs.5000-10000. 36% pay an annual premium in the range of Rs.10000-25000. 38% pay an annual premium of Rs.25000-50000. 17% of the investors pay an annual premium above Rs.50000.
40

Q10.Which type of plan you prefer now? • • Traditional plans ULIPs SAMPLE SIZE 100 Traditional ULIPs TOTAL FREQUENCY 12 88 100 PERCENTAGE 12 88 100

Traditional

ULIP

12%

88%

Inference: It can be observed from the pie-chart that
• •

88% of the investors prefer ULIPs over Traditional plans due to several benefits they offer. 12% of the investors still prefer Traditional plans over ULIPs due to unawareness about the products and its benefits.

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11. If your preferred avenue has been changed then please mentions the reason • • Potential for better returns. Greater transparency. • • Flexibility in investment.

Higher liquidity

SAMPLE SIZE 100 Potential for better return Greater transparency Flexibility in investment Higher liquidity TOTAL

FREQUENCY 52 20 18 10 100

PERCENTAGE 52 20 18 10 100

10 18 52

P oten for tial b etter retu rn Greater Tran aren sp cy Flexib ility in In vestm t en

20
Hig er h L u ity iq id

Inference- It can be seen from the pie-chart that
• •

52% of the investors are interested in potential for better returns. 20% of the investors are prefer transparent services.
42

• •

18% of the investors wants flexibility in investment.. 10% of the investors investaccordig to the company’s liquidity.

Chapter – 5 Findings, Recommendatio ns & Conclusion
43

FINDINGS
After collecting primary data and analyzing them graphically it can be concluded that:
•

12% of the investors are less than that of 20 years of age.37% lie in the age group

of 20-30 years as such investors are returns oriented and are risk takers.33% lie in the age group of 30-45 years as these investors want safe products with assured returns.Only 18% of the investors lie in the age group of more than 45 years. Such investors are risk averse. • It was found that in a sample of 100, 36 (36%) of people had annual income

between Rs.100000-250000. Out of these 36, 14 people pay a premium below Rs. 10000, 22 pay premiums between Rs. 10000-20000. • In the same sample of 100, 40 (40%) people had annual income between Rs.

250000-500000. Out of these 25, 7 people pay premium between Rs. 10000-20000, 14 people pay premium between Rs. 20000-50000, and 9 of them pay premium above Rs. 500000.
•

The highest market share from the sample was of LIC with 47% respondents

having LIC policy, followed by ICICI PRUDENTIAL with a market share of 27%, HDFC STANDARD LIFE with 11% share , TATA AIG with 5% and OTHERS with 10% share. • Most people choose LIC for its Brand Image and since it is a PSU, also it offers to

its customers’ low EMIs, but on the other hand private players offer better returns.
•

It was found that most of the people considered “Returns 43%” as a major factor

while buying insurance with positive responses, 32% “Brand Image” as the prime factor, 8(8%) prefer “EMI” and 17(14%) prefer “Time Period”.
44

•

The most preferred avenue for investment was found out to be Stock Market

preferred by 37% respondents, followed by Mutual Fund preferred by 22% respondents, 32% preferred Govt. Bonds, 9% preferred Fixed Deposit.
•

Out of the entire sample of 100, 78(78%) preferred Traditional Insurance Plans,

and 22(22%) preferred ULIPs 3 years ago but in present scenario 12% prefer Traditional Plans and 88% prefer ULIPs. Among the reasons for this change 52(52%) respondents prefer “Potential for better returns”, 20(20%) prefer “Greater Transparency”, 18(18%) prefer “Flexibility in investment” and 10(10%) prefer “Higher liquidity”.

Recommendations for whole Insurance Industry
• As it can be seen that that most of the investors are inclined toward stock market

and mutual funds there is a strong need to take some important steps on the part of government and insurance companies which would help this sector grow at a faster pace.
•

The government should make life insurance mandatory, because most of the peole

live with the myth “I don’t need insurance”, so this myth should be eradicated from the mind of the consumers by highlighting the benefits of life insurance, government can launch campaigns to increase awareness especially in the rural sector. • The companies should highlight the advantages of life insurance in comparison to other investment avenues such as mutual funds, stock market, as only ULIPs offer returns plus life cover which other investment options do not provide, also capital gains or maturity amount is exempted from tax under Section 10(10) D of the Income Tax Act. • There should be strong distribution channel of the insurance companies so that they are closely connected to consumers, distribution channel that is the agents of life insurance companies are foundation of life insurance business, they must be properly trained by the companies to sell products according to the needs of the customer, give suitable suggestions to the customer to make his/her future secure.
45

Recommendations for Tata AIG Life Insurance
If Tata AIG Life Insurance wants to become a market leader it has to work on certain areas:
•

Tata AIG Life Insurance employs around 4328 people in its various businesses and has 112 branches across 108 cities as compared to ICICI Prudential has 735 offices, 22 Bank assurance partners and over 2.4 lakh advisors therefore KLI should increase its offices.

•

Tata AIG Life Insurance has a limited number of trainers in its branches, because of which advisors are not properly trained, so it should work on developing its training department.

•

Increase expenditure on promotion and advertising to make people think of Tata AIG Life Insurance whenever they think of insurance.

•

Transparency in the system i.e. conductance and training of Life Advisers, in customer relationships, reporting should be there.

CONCLUSION
Earlier Life Insurance was taken as an option for risk cover or a tax saving by people. But in the present scenario the mind set and outlook of people has changed a lot. They now consider Life insurance as an investment opportunity in long run. Clients have also shifted a lot from traditional plans to Unit linked insurance plan (ULIP). ULIP provide the investor with benefits like Potential for better returns. Under IRDA guidelines, traditional plans have to invest at least 85% in debt instruments which results in low returns. On the other hand, Ulips invest in market linked instruments with varying debt and equity proportions and if you wish you can even choose 100% equity option. There is
46

also Flexibility in investment. The top most advantage which ULIPs offer over traditional plans is the flexibility offered to the customer to customise the product according to their needs:
1.

Flexibility to invest the money the way customer wants: Unlike traditional plans, Ulips allow customer to full discretion to choose the fund option most appropriate to their risk appetite.

2.

Flexibility to change the fund allocation: Ulips also give the customer an option to change the fund allocation at a later stage through fund switching facility.

Last but not least ULIP

also provide investor with ;Higher Liquidity (Better exit

options), the possibility to withdraw your money before maturity (through surrender or partial withdrawals) is higher in case of Ulips as compared to traditional plans and also the exit costs are lower. Therefore In ULIPs, a part of the investment goes towards providing a life cover and the residual portion of the ULIP is invested in a fund which in turn invests in stocks or bond. The value of investments alters with the performance of the underlying fund opted by the customer In short we can say that ULIP is managed according to the customer’s specific needs and offers them unprecedented flexibility and transparency.

47

BIBLIOGRAPHY

48

BIBLIOGRAPHY
BOOKS
1.

Insurance Distribution – An Introduction, Insurance Series, ICFAI Kothari, C.R: Research methodology,2nd edition,1990, New age IC-24, Legal Aspect of Life Insurance issued by IRDA Marketing Management –Philip Kotler,13th edition

University
2.

international (p) ltd,New delhi 3. 4.

WEBSITES
• • • •

http://www.tataAIGlifeinsurance.com http://www.irdaindia.org/ www.google.com http://economictimes.indiatimes.com

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Annexure

50

Questionnaire
Contact Information Name: Address: Gender: 1. What is your age? 1. Less Than 20 2. 20-30 3. 30-45
4. More Than 45

Occupation: Phone No.:

2. What is your annual income? 1. Less than 1,00,000 2. 1,00,000-2,50,000 3. 2,50,000-5,00,000 4. More than 5,00,000 3. What is your marital status? 1. Married :
2. Unmarried:

4. Which Avenues do you prefer for investment? 1. Stock Market 2. Mutual funds 3. Govt. Bonds
51

4. Fixed deposits 5. Are you aware about the benefits of Insurance? 1. Yes 2. No 6. Are you and your family members insured? 1. All members including you 2. Only you 3. No one 7. If yes, from which company are you insured? 1. LIC 2. ICICI 3. HDFC
4. TATA AIG

5. Others 8.Which of the following features which affects your purchase? • • • • Brand EMI Returns Time Period
1. 5000-15000 2. 15000-30000 3. 30000-50000

9. What is the annual premium you are paying?

4. Above 50000

10. Which type of plan you prefer now? 1. Traditional plans 2. ULIPs
52

11. If your preferred avenue has been changed then please mentions the reason 1. Potential for better returns. 2. Greater transparency. 3. Flexibility in investment. 4. Higher liquidity.

(Signature)

53