A REPORT

ON

PERCEPTION TOWARDS LIFE INSURANCE AFTER

PRIVATISATON

A report submitted in partial fulfillment of

The requirements of

MBA Program

BY:

xxxxxxxxxxx

Distribution list

1) xxxxxxxxxxxxxxxxxxxxx

2) xxxxxxxxxxxxxxxxxxxxx

1

2

ACKNOWLEDGMENT

Learning is a lifelong process; one should not stop learning until dead. I am thankful to

ICFAI Business School for giving me an opportunity to learn and perform under SBI

Life Insurance.

I take this opportunity to express my sincere gratitude and profound regards to Dr.

xxxxxxxxx, my faculty guide, who has always given me motivational boost to go and

perform. I would further like to thank her for her persistence to listen to my problems

and to give apt solutions

.

I would like to thank my company guide Mr. Thirumalai Who in spite of busy schedule

has co- operated with me continuously and indeed, his valuable contribution and

guidance have been certainly indispensable for my project work

.

It would be really injustice on my part if didn’t thank Mr. E. Thirumudi Pandian, Area

sales manager and Mr. M. Arjunan, branch sales manager for their invaluable advice

and enlightening my path at every stage of my project

.

I take this opportunity to thank all the senior executives and every associate of SBI

Life Insurance Co Ltd, without their cooperation I would not be able to complete this

project.

xxxxxxxxxxxxxxxxIBS-CHENNAI

3

LIST OF ILLUSTRATIONS

LIST OF FIGURES

S.No TITLE OF FIGURES PAGE No.1 No of males and females

surveyed34

2 Educational qualifications of males

35

3 Educational qualifications of females

35

4 Popularity percentage of life insurance companies

36

5 Familiarity of schemes among people

37

6 Purpose of Insurance 38

7 Ranking of some benefits of insurance (figures expressed in %)

39

8 Insurance as the viable option for investment

40

9 Availability of Insurance Cover

40

10 Estimate of IT professionals enrolled into insurance

41

11 Type of investment interested in

42

12 Mode of premium payment

42

13 Services provided by the insurance company (figures expressed in %)

43

14 Returns given by the insurance company (figures expressed in %)

44

15 Ratings of various insurance companies

44

16 Privatization of insurance 4517 Availability of good

services after privatization46

4

LIST OF TABLES

S.No TITLE OF TABLES PAGE No.1 Popularity percentage of

life insurance companies36

2 Familiarity of schemes 373 Purpose of Insurance 38

4 Ranking of some benefits of insurance (figures expressed in %)

39

5 Estimate of IT professionals enrolled into insurance

41

6 Mode of premium payment

42

7 Ratings of various insurance companies

44

5

ABSTRACT

The project deals with the perception of the people towards insurance after the

privatization of the insurance sector. The report tries to find the reason for

opening up of insurance sector and discuss factors which completely change the

picture of the insurance industry in India. We are trying to understand the

perception of people when there are so many national and international

companies have now entered in the Indian market. Whether they still see

insurance as a tax saving product or they start looking towards it as a good

investment opportunity. To actually understand this one need to conduct some

primary and secondary research. In primary research one need to find out

persons monthly income, age, risk appetite, his thinking towards insurance as an

investment or tax benefit product and most importantly about his awareness of

insurance companies and products offered by them in the market. As well as his

knowledge about other investment products in the market and what is his

feedback when they had already invested in such products. We also look

towards one insurance product available in the market as ULIP. We see what its

important features and good aspects of this product, what the risk of investing in

this product are, what are the returns it offered etc.

6

PURPOSE, SCOPE AND LIMITATIONS

The purpose of this report is to find out the change in the perception of the

people towards life insurance after privatization and to understand and compare

the current insurance market with the market existing before opening up of the

industry for the private and outside players with some current issues and latest

development. This report also takes in to consideration the new innovative and

contemporary products available to the customers in the market and to which

level they are satisfied with these products and what is their recommendation for

any changes that should be done in the products.

The project report is structured

according to the data procured from the websites of life insurance companies,

IRDA annual report, and insurance council of India and through the survey

conducted by means of preparing a questionnaire. A small sample size is taken

for conducting the survey. The survey is conducted only in the Chennai so the

statistical data collected, analyzed and results drawn only reflects views and

perception of local residents, professionals about the life insurance and

insurance products. So the results through this effort may vary and deviate from

the actual findings and proceedings.

7

SOURCES AND METHODS

The main source of materials for collecting and procuring the data includes the

annual IRDA report, the regulatory body for insurance in India and the insurance

council of India and data is also collected by conducting a survey among general

mass using a carefully prepared questionnaire which tries to take in to account

the investment behavior of the people towards life insurance which includes their

yearly investment, investment in a particular product, their satisfaction level with

the service and returns and their recommendations for further improvement in the

product. The analysis and interpretation is done using the data collected by

means of using Microsoft Excel software and represented by means of pie

charts, bar graphs etc. some of the results are also include an element of

assumption where ever the data is not available and incomplete due to some

inevitable reasons so results may vary from the actual findings.

8

INDUSTRIAL ANALYSIS

Historical Background:

The Indian economy is currently showing signs of vibrancy; it is also

depicting a qualitative change in its composit ion. The economy

which had been essential ly built on agricultural wealth, has

transformed itself in stages over the period of the f ive year plans,

init ial ly into an economy, where industry assumed a leadership role

accompanied by a perceptible change in the last few years or so

with an accent on information technology and other service sectors.

Today, the Gross Domestic Product of the country is predominantly

derived from the services sector. This wil l naturally have its effect

on the state of capital market of which insurance sector is an

integral part.

Government's decision to accept the recommendations of the

Committee on Reforms in the Insurance Sector and to constitute an

interim Insurance Regulatory Authority, by an executive order in

January 1996, to look into the modifications, the regulatory frame

work of the insurance sector, has resulted in the establishment of a

statutory body, for regulating the players and in broadening the

sector by admission of new players from the private sector. Such a

development has had a ripple effect leading to the establishment

and development of professional institutions that are connected with

the industry. Subsequent sections of this report deal with these

aspects.

As more than 42% of the country's current GDP is being generated

by the services sector, obviously necessary steps are required to be

taken to sustain this process of growth and towards this end a

coordinated approach is necessary. And insurance being a service

industry could prima facie act as an engine of growth. In this

regard, the history of development of insurance industry in India has

9

been one of under-performance and under-achievement.

Appreciation for the necessity to cover risks of both personal l ives

and property has been very poor. In fact, the growth in the l i fe

insurance market has been mainly driven by income tax

considerations and this had been the primary reason why the urban

population has been a major beneficiary of l i fe policies. Coverage

of property to risks of different types has always been a secondary

consideration of i ts owners and has been prompted by lenders'

requirements. Unless there exists a compulsion on the part of

owners to cover the risks of loss, the industry shall not move in the

high gear for development. All these characteristics of the current

market are changing, albeit slowly, as a result of the transformation

that has been ushered in with the current developments in the

insurance sector. The compell ing reason for the same which was to

provide an opportunity for the consumers to have a choice in the

matter of selection of their r isk bearers is slowly unfolding into a

system whereby newer and newer dimensions are being added to

the product profi les that the companies produce. There is sti l l

considerable work to be done in this area by insurance companies.

But decidedly the first step in this direction has now been taken by

admission of new players and the Authority hopes that this step,

though small in nature, wil l be a signif icant one.

In the statements that fol low, the Authority portrays some basic and

fundamental statistics that relate to the Indian economy which are

relevant to the insurance industry. Also added to these statements

is a short table which depicts the state of insurance penetration in

the Indian context. A discerning reader may note that the level of

development of insurance in the country is sti l l not on the same level

as the development noticed in the neighborhood but the increase

shown in a period of the past few years is encouraging.

10

The opening of the market to private participation is a bold

experiment and was necessitated by the public perception of a

necessity to have a free availabil i ty of choice to customers. Hopes

were entertained that the opening up of the market wil l deepen the

insurance penetration, bring about a rationalization of premium

structure, end cross subsidization, provide covers which were

lacking in the market and provide the necessary resources for

infrastructure development. The functioning of the old insurers gave

enough hopes to nurture and encourage these thoughts. The new

companies have also supported this philosophy by their current

actions; however, they have been active for so l i t t le a t ime that their

effect on the market wil l be felt only in the years to come. Some of

the hopes have been achieved - in the areas of innovation of

products, extension of facil i t ies to cus tomers etc.

CURRENT DEVELOPMENTS IN ULIP

It is nearly seven years since the Indian insurance market was

opened up. In l i fe insurance, we have seen unprecedented growth

which is continuing. By the end of the f inancial year 2007-08 we are

l ikely to see more than twenty l i fe insurance companies in India. A

frequently asked question is: what is the optimum number of

insurance companies that is ideal for India’s needs? Considering

that l i fe insurance penetration is 3% of GDP and that one is aiming

at say 7% or 8% of GDP, that vast sections of people are sti l l not

covered by l i fe insurance and large geographical areas are

untouched by insurance, we can say that we have a long way to go

and that there is room for more insurance companies. The annual

‘new business’ growth has been around 100% for the last three

years and it looks l ikely that such a growth wil l continue for some

time. That such an incredible growth, to a great extent, has been

due to ULIP products is another matter. A signif icant part of ‘current

11

issues’ are consequent to such high growth. With current and

projected growth of the Indian economy at 9% for the foreseeable

future, domestic savings rate can be expected to grow from, or at

least be stable at 23-24%. It fol lows that unless the sector makes

major strategic errors, growth of l i fe insurance business wil l remain

high.

Predicting a company’s future over long term is diff icult enough;

attempting that for a sector in a market is much more risky. Yet

when one discusses ‘current issues in l i fe assurance (CILA)’ one

must devote thought to market-related strategic issues and

directions and to mid-term and long-term solutions. In a recent

special issue of Harvard Business Review on ‘ long term planning’ i ts

editor concludes his observations saying: ‘…the art of managing

for the long term is the art of making the whole greater than the

sum of its parts’. I believe this is apt for our l i fe insurance market.

It is necessary to create a market that f i ts the HBR editor’s comment

and one needs to keep this in mind when analyzing current issues

and identifying solutions. It is also said that ‘building the future is

really about building the present……..and a …. Leader must be

careful to stay close to the front l ine-the people who deal with

customers and markets’ (Maurice Levy-HBR). In this context let us

look at the industry issues in ‘building the present’ and what steps

are needed to resolve them and take the industry forward in a

wholesome, healthy and customer-oriented manner.

It is essential that the l i fe insurance market functions with ‘optimum

efficiency’ and ensures that resources are allocated eff iciently,

‘ensuring customer choice and value’ (Skipper). An eff icient market

wil l have innovative and constantly improving products, predictable

and affordable prices and transparent practices. But no market is

perfect and our l i fe insurance sector has more than its share of

imperfections. In a perfect market a regulator is perhaps not

12

needed. Information asymmetry between the three viz. insurer-

intermediary-customer is a major imperfection that manifests itself in

several of our operational issues and regulatory interventions. Dr.

Harold Skipper notes: “…within a competit ive insurance market

government / regulatory interventions are desirable only if three

condit ions exist:

a. Actual or potential market imperfections exist

b. The market imperfections could and do lead to economic

ineff iciency or inequity

c. Government (regulatory) action can ameliorate the

ineff iciency / inequity.”

All the three mentioned above apply to our l i fe insurance market.

The industry can do continuing introspection, as is being attempted

in this conference, and reduce if not eliminate imperfections. What

we call ‘ issues’ are actually the visible manifestations of

imperfections.

Saving Rates (as % of) GDP at Current Market Prices

1993-941994-951995-961996-971997-98 1998-99

(P)(Q)

Gross Domestic Saving 22.5 25.0 25.5 23.3 24.7

22.3

Public 0.6 1.7 2.0 1.7 1.40.0

Private 21.9 23.3 23.4 21.6 23.322.3

Household sector 18.4 19.8 18.5 17.1 19.018.5

(a) Financial savings 11.0 12.0 8.9 10.4 10.410.9

13

(b)Physical savings 7.4 7.8 9.6 6.7 8.67.6

Gross Domestic Investment* 23.1 26.1 27.2 24.6 26.2

23.4

GFCF 21.4 22.0 24.6 23.0 22.721.4

Change in stocks (-) 0.2 1.6 1.9 (-) 1.2 0.7 0.4

Saving-Investment Gap@ (-) 0.6 (-) 1.2 (-) 1.8 (-) 1.3 (-) 1.5 (-) 1.0

Public (-) 7.6 (-) 7.1 (-) 5.6 (-) 5.3 (-) 5.3(-) 6.6

Private 8.9 8.5 4.5 6.7 6.67.1

Note:(i)Gross domestic investment denotes gross domestic capital formation (GDCF)

(ii) Figures may not add up due to rounding off * : adjusted for errors and omissions;

@ : refers to the difference between the rates of savings and investment

GFCF : Gross fixed capital formation; P : Provisional estimates; Q : Quick estimates

Source : Economic Survey, 1999-2000

TABLE-3

Savings of the Household Sector in Financial Assets

(Rs. in crore)

Item 1992-931993-941994-951995-961996-971997-98P1998-99$

Savings(Gross) of the Household Sector in Financial Assets of which 80,387 109,485 145,381 124,986 157,424

178,576207,841

14

Currency 6,562 13,367 15,916 16,525 13,643 12,78022,131

(8.2) (12.2) (10.9 (13.2) (8.7) (7.2)(10.6)

Bank Deposits # 29,550 36,200 55,834 39,995 57,367 79,51476,590

(36.8) (33.1) (38.4) (32.0) (36.4) (44.5)(36.9)

Non-banking Deposits6,035 11,654 11,547 13,198 21,411 7,77515,376

(7.5) (10.6) (7.9) (10.6) (13.6) (4.4)(7.4)

Life Insurance Fund**7,114 9,548 11,370 13,894 16,188 19,43122,766

8.8) (8.7) (7.8) (11.1) (10.3) (10.9)(11.0)

Provident and Pension Fund14,814 18,226 21,295 22,292 26,248 32,80838,742

(18.4) (16.6) (14.6) (17.8) (16.7) (18.4)(18.6)

Claims on Government +3,885 6,908 13,186 9,588 11,701 22,16427,004

(4.8) (6.3) (9.1) (7.7) (7.4) (12.4)(13.0)

Shares and Debentures ++8,212 10,067 13,474 8,839 6,696 3,777 4,935

(10.2) (9.2) (9.3) (7.1) (4.3) (2.1)(2.4)

Units of Unit Trust of India5,612 4,705 3,908 262 3,776 595 565

(7.0) (4.3) (2.7) (0.2) (2.4) (0.3)(0.3)

Due to Changes in Coverage of non-banking deposits, figures prior to 1998-99 are not strictly comparable with those of 1992-96 These data are compiled /revised in December 1999 and

hence, do not tally with the Quick Estimates of CSO released

15

in February 1999. Constituents may not add up to total due

to rounding off.

Figures in brackets indicate percentages to total Financial Assets of households. # Includes deposits with Co-operative non-credit societies. ** Includes State / Central Government and postal insurance

fund. + Includes compulsory deposits. ++ Includes investment in shares and debentures of credit / non-credit societies, public sector bonds, and investment

in mutual funds (other than UTI) $ Tentative Estimates

Source: Report on Currency and Finance 1998-99, RBI

Privatization of the Insurance Market in India: From the British Raj to

Monopoly Raj to Swaraj.

IntroductionOver the past century, Indian insurance industry has gone through big changes.

It started as a fully private system with no restriction on foreign participation.

After the independence, the industry went to the other extreme.

It became a state-owned monopoly. In 1991, when rapid changes took place in

many Parts of the Indian economy, nothing happened to the institutional structure

of Insurance: it remained a monopoly. Only in 1999, a new legislation came into

effect signaling a change in the insurance industry structure. We examine what

16

might happen in the future when the domestic private insurance companies are

allowed to compete with some foreign participation. Because of the time

dependence of insurance contracts, it is highly unlikely that these erstwhile

monopolies are going to disappear.

Insurance in India started without any regulation in the Nineteenth

Century. It was a typical story of a colonial era: a few British insurance

Companies dominating the market serving mostly large urban centers. After the

independence, it took a dramatic turn. Insurance was nationalized. First, the

life insurance companies were nationalized in 1956, and then the general

insurance business was nationalized in 1972. Only in 1999 private insurance

companies have been allowed back into the business of insurance with a

maximum of 26% of foreign holding. In what follows, we describe how and why of

regulation and deregulation. The entry of the State Bank of India with its

proposal of bancassurance brings a new dynamics in the game. We study the

collective experience of the other countries in Asia already deregulated their

markets and have allowed foreign companies to participate. If the experience of

the other countries is any guide, the dominance of the Life Insurance Corporation

and the General Insurance Corporation is not going to disappear any time soon.

Insurance under the British Raj Life insurance in the modern form was first set up

in India through a British company called the Oriental Life Insurance Company in

1818 followed by the Bombay Assurance Company in 1823 and the Madras

Equitable Life Insurance Society in 1829. All of these companies operated in

India but did not insure the lives of Indians. They were there insuring the lives of

Europeans living in India. Some of the companies that started later did provide

insurance for Indians. But, they were treated as "substandard" and therefore had

to pay an extra premium of 20% or more.3policies that could be bought by

Indians with "fair value" was the Bombay Mutual Life Assurance Society starting

in 1871.The first general insurance company, Triton Insurance Company Ltd.,

was established in 1850. It was owned and operated by the British. The first

indigenous general insurance company was the Indian Mercantile Insurance

Company Limited set up in Bombay in 1907.By 1938, the insurance market in

India was buzzing with 176 companies (both life and non-life). However, the

industry was plagued by fraud. Hence, a comprehensive set of regulations was

17

put in place to stem this problem (see Table 1). By 1956, there were 154 Indian

insurance companies, 16 non-Indian insurance companies and 75 provident

societies that were issuing life insurance policies. Most of these policies were

centered in the cities (especially around big cities like Bombay, Calcutta, Delhi

and Madras). In 1956, the then finance minister S. D. Deshmukh announced

nationalization of the life insurance business.

TABLE 1

MILESTONES OF INSURANCE REGULATIONS IN THE

20THCENTURY

Year Significant Regulatory Event

1912 The Indian Life Insurance Company

Act

1938 1938The Insurance Act:

Comprehensive Act to regulate

insurance business in India

1956 Nationalization of life insurance

18

business in india

1972 1972Nationalization of general

insurance

business in India

1993 Setting up of Malhotra Committee

1994 Recommendations of

Malhotra Committee

1995 Setting up of Mukherjee Committee

1996 Setting up of

(interim) Insurance Regulatory

Authority (IRA)

1997 The

Government gives greater

autonomy to LIC, GIC and its

subsidiaries with regard

to the restructuring of boards and

flexibility in investment norms aimed

at

channeling funds to the

infrastructure sector

1998 The cabinet decides to allow

40% foreign equity in private

insurance companies-26% to

foreign companies and 14% to

NRI’s, OCB’s and FII’s

1999 The Standing Committee headed by

Murali Deora

decides that foreign equity in private

insurance should be limited to 26%.

The

IRA bill is renamed the Insurance

Regulatory and Development

19

Authority (IRDA)

Bill1999Cabinet clears IRDA

Bill2000President gives Assent to

the IRDA

Bill Sources: Various Monopoly Raj The nationalization of life insurance was

justified mainly on three counts. (1) It was perceived that private companies

would not promote insurance in rural areas. (2) The Government would be in a

better position to channel resources for saving and investment by taking over

the business of life insurance. (3) Bankruptcies of life insurance companies had

become a big problem (at the time of takeover, 25 insurance companies were

already bankrupt and another 25 were on the verge of bankruptcy). The

experience of the next four decades would temper these views.

Life Story of the Life Insurance Corporation The life insurance

industry was nationalized under the Life Insurance Corporation (LIC) Act of India.

In some ways, the LIC has become very successful. (1) Despite being a

monopoly, it has some 60-70 million policyholders. Given that the Indian middle-

class is around 250-300 million, the LIC has managed to capture some 30 odd

percent of it. (2) The level of customer satisfaction is high for the LIC (one of the

findings of the Malhotra Committee, see below). This is somewhat surprising

given the frequent delays in claim settlement. (3) Market penetration in the rural

areas has grown substantially. Around 48% of the customers of the LIC are from

rural and semi-urban areas. This probably would not have happened had the

charter of the LIC not specifically set out the goal of serving the rural areas. One

exogenous factor has helped the LIC to grow rapidly in recent years: a high

saving rate in India. Even though the saving rate is high in India (compared

with other countries with a similar level of development), Indians exhibit high

degree of risk aversion. Thus, nearly half of the investments are in physical

assets (like property and gold). Around twenty three percent are in (low

yielding but safe) bank deposits. In addition, some 1.3- percent of the GDP are

in life insurance related savings vehicles. This figure has doubled between 1985

and 1995. Life Insurance in India: A World Perspective In many countries,

20

Insurance has been a form of savings. Table 2 shows that in many developed

countries, a significant fraction of domestic saving is in the form of (endowment)

insurance plans. This is not surprising. The prominence of some developing

countries is more surprising. For example, South Africa features at the number

two spot. India is nestled between Chile and Italy. This is even more surprising

given the levels of economic development in Chile and Italy. Thus, we can

conclude that there is an insurance culture in India despite a low per capita

income. This bodes well for future growth. Specifically, when the income level

improves, insurance (especially life) is likely to grow rapidly.

Table 2

LIFE INSURANCE PREMIUM AS PERCENTAGES OF THE

GROSS DOMESTIC SAVING (GDS) AND THAT OF GROSS

DOMESTIC PRODUCT (GDP)

Rank Country % of GDS % of GDP

1 United 52.50 7.31

21

kingdom

2 South Africa 51.55 10.32

3 Japan 32.46 10.10

4 France 26.20 4.91

5 USA 25.20 3.63

6 South Korea 23.66 9.10

7 Finland 23.10 4.98

8 Switzerland 21.92 5.99

9 Netherlands 19.04 4.51

10 Israel 18.84 4.41

11 Sweden 17.88 3.51

12 Australia 17.88 3.48

13 Canada 17.05 3.04

14 Zimbabwe 15.88 6.27

15 Ireland 14.96 4.59

16 Greece 13.87 1.12

17 New Zealand 12.75 3.04

18 Taiwan 12.29 3.64

19 Denmark 12.00 2.71

20 Spain 11.68 2.23`

21 Germany 11.40 2.80

22 Norway 9.57 2.33

23 Belgium 9.13 2.38

24 Portugal 8.76 1.65

25 Austria 6.96 2.10

26 Chile 6.96 1.95

27 India 5.95 1.29

28 Italy 5.60 1.13

29 Malaysia 5.35 2.30

30 Singapore 4.72 2.73

Source: Roy (1999). Figures for 1994.

22

Malhotra Committee

Liberalization of the Indian insurance market was recommended in a report

released in 1994 by the Malhotra Committee, indicating that the market should

be opened to private-sector competition, and ultimately, foreign private-sector

competition. It also investigated the level of satisfaction of the customers of the

LIC. Curiously, the level of customer satisfaction seemed to be high. The union of

the LIC made political capital out of this finding (The following are the purposes

of the committee. (a) To suggest the structure of the insurance Industry, to

assess the strengths and weaknesses of insurance companies in terms of the

objectives of creating an efficient and viable insurance industry, to have a wide

coverage of insurance services, to have a variety of insurance products with a

high quality service, and to develop an effective instrument for mobilization of

financial resources for development. (b) To make recommendations for changing

the structure of the insurance industry, for changing the general policy framework

etc. (c) To take specific suggestions regarding LIC and GIC with a view to

improve the functioning of LIC and GIC. (d) To make recommendations on

regulation and supervision of the insurance sector in India. (e) To make

recommendations on the role and functioning of surveyors, intermediaries like

agents etc. in the insurance sector. (f) To make recommendations on any other

matter which are relevant for development of the insurance industry in India. The

committee made a number of important and far-reaching recommendations.(a)

The LIC should be selective in the recruitment of LIC agents. Train these people

after the identification of training needs.

(b) The committee suggested that the Federation of Insurance Institute, Mumbai

should start new courses and diploma courses for intermediaries of the insurance

sector. (c) The LIC should use an MBA specialized in Marketing (a similar

suggestion for the GIC subsidiaries). (c) It suggested that settlement of claims

were to be done within a specific time frame without delay. (d) The committee

has several recommendations on product pricing, vigilance, systems and

procedures, improving customer service and use of technology. (f) It also made a

number of recommendations to alter the existing structure of the LIC and the

GIC. (g) The committee insisted that the insurance companies should pay special

attention to the rural insurance business. (h) In the case of liberalization of the

23

insurance sector the committee made several recommendations, including entry

to new players and the minimum capital level requirements for such new players

should be Rs. 100 crores (about USD 24 million). However, a lower capital

requirement could be considered for a co-operative sectors' entry in the

insurance business. (i) The committee suggested some norms relating to

promoters’ equity and equity capital by foreign companies, etc.Mukherjee

Committee Immediately after the publication of the Malhotra Committee Report, a

new committee (called the Mukherjee Committee) was set up to make concrete

plans for the requirements of the newly formed insurance companies.

Recommendations of the Mukherjee Committee were never made public. But,

from the information that filtered out it became clear that the committee

recommended the inclusion of certain ratios in insurance company balance

sheets to ensure transparency in accounting. But the Finance Minister objected.

He argued (probably on the advice of some of the potential entrants) that it could

affect the prospects of a developing insurance company.

Insurance Regulatory Act (1999) After the report of the Malhotra Committee

came out, changes in the insurance industry appeared imminent. Unfortunately,

Instability in Central Government, changes in insurance regulation could not pass

through the parliament. The dramatic climax came in 1999. On March 16,1999,

the Indian Cabinet approved an Insurance Regulatory Authority (IRA) Bill that

was designed to liberalize the insurance sector. The bill was awaiting ratification

by the Indian Parliament. However, the BJP Government fell in April 1999. The

deregulation was put on hold once again. An election was held in late1999. A

new BJP-led government came to power. On December 7, 1999, the new

government passed the Insurance Regulatory and Development Authority (IRDA)

Act. This Act repealed the monopoly conferred to the Life Insurance Corporation

in 1956 and to the General Insurance Corporation in 1972. The authority created

by the Act is now called IRDA. It has ten members. New licenses are being given

to private companies (see below). IRDA has separated out life, non-life and

reinsurance insurance businesses. Therefore, a company has to have separate

licenses for each line of business. Each license has its own capital requirements

(around USD24 million for life or non-life and USD48 million for

reinsurance).Some Details of the IRDA Bill On July 14, 2000, the Chairman of

24

the IRDA, Mr. N. Rangachari set forth a set of regulations in an extraordinary

issue of the Indian Gazette that details of the regulation.

Regulations

The first covers the Insurance Advisory Committee that sets out the rules and

regulation. The second stipulates that the "Appointed Actuary" has to be a

Fellow of the Actuarial Society of India. Given that there has been a dearth of

actuaries in India with the qualification of a Fellow of the Actuarial Society

of India, this becomes a requirement of tall order. As a result, some companies

have not been able to attract a qualified Appointed Actuary (Dasgupta, 2001).

The IRDA is also in the process of replacing the Actuarial Society of India by a

newly formed institution to be called the Chartered Institute of Indian Actuaries

(modeled after the Institute of Actuaries of London). Curiously, for life insurers

the Appointed Actuary has to be an internal company employee, but he or she

may be an external consultant if the company happens to be a non-life insurance

company. Third, the Appointed Actuary would be responsible for reporting to the

IRDA a detailed account of the company. Fourth, insurance agents should have

at least a high school diploma along with training of 100 hours from a recognized

institution. More than a dozen institutions have been recognized by the IRDA for

training insurance agents (the list appears online at

http://www.irdaonline.org/press.asp).Fifth, the IRDA has set up strict guidelines

on asset and liability management of the insurance companies along with

solvency margin requirements. Initial margins are set high (compared with

developed countries). The margins vary with the lines of business (for example,

fire insurance has a lower margin than aviation insurance). Sixth, the disclosure

requirements have been kept rather vague. This has been done despite the

recommendations to the contrary by the Mukherjee Committee

recommendations. Seventh, all the insurers are forced to provide some coverage

for the rural sector. (1) In respect of a life insurer, (a) five percent in the first

financial year; (b) seven percent in the second financial year; (c) ten percent in

the third financial year; (d) twelve percent in the fourth financial year; (e) fifteen

percent in the fifth year (of total policies written direct in hat year). (2) In respect

of a general insurer, (a) two percent in the first Financial year; (b) three percent in

the second financial year; (c) five percent thereafter (of total gross premium

25

income written direct in that year).New Entry Immediately after the passage of

the Act, a number of companies announced that they would seek foreign

partnership. In mid-2000, the following companies made public statements that

they already were in the process of setting up insurance business with foreign

partnerships (see Table 3). However, not all the partnerships panned out in the

end (see below) There are three other companies with "in principal" approvals:(1)

Max New York Life. It is a partnership between Delhi based pharmaceutical

company Max India and New York Life, the New York based life insurance

company.(2) ICICI Prudential Life Insurance Company. This is a joint venture

between Mumbai based Industrial Credit & Investment Corporation and the

London based Prudential PLC. (3) IFFCO Tokio General Insurance Company. It

is a joint venture between Indian Farmers' Fertilizer Cooperative and Tokio

Marine and Fire of Japan. To date (end of April 2001), the following companies

have thus been granted licenses: ICICI -Prudential, Reliance General, Reliance

Life, Tata-AIG General, HDFC-Standard Life, Royal-Sundaram, Max-New York

Life, IFFCO-Tokio Marine, Birla-SunLife, Bajaj-Allianz General, Tata-AIG Life,

ING-Vyasa, Bajaj-Allianz Life, SBI-Cardiff Life. Note that all of these companies

are either in the life insurance business or in the non-life insurance business. No

license has been granted for reinsurance business so far (the size of the

reinsurance business can be 10-20% of the total revenue). No stand-alone health

insurance company has been granted license so far. Enter the Dragon On

December 28, 2000, the State Bank of India (SBI) announced a joint venture

partnership with Cardif SA (the insurance arm of BNP Paribas Bank). This

partnership won over several others (with Fortis and with GE Capital). The entry

of the SBI has been awaited by many. It is well known that the SBI has long

harbored plans to become a universal bank (a universal bank has business in

banking, insurance and in security). For bank with more than 13,000 branches all

over India, this would be a natural expansion. In the first round of license issue,

the SBI was absent. There were several reasons for this delay. First, the SBI was

seeking a foreign partner to help with new product design. Second, it did not

want the partner to become dominant in the long run (when the 26% foreign

investment cap is eventually lifted). It wanted to retain its own brand name. Third,

it wanted a partner that is well versed in the universal banking business. This

ruled out an American partner (where underwriting insurance business by banks

26

have been strictly forbidden by law). Cardif is the third largest insurance

company in France. More than 60% of life insurance policies in France are sold

through the banks. Fourth, the Reserve Bank of India (RBI) needed to clear

participation by the SBI because in India banks are allowed to enter other

businesses on a "case by case" basis. Over the course of the next twelve

months, the SBI will sell insurance in 00 branches. Over a period of 2-3 years it

will expand operation in 500 branches. Initially it will hold 74% ownership of the

joint venture company with Cardif. Over time, it will dilute its holding to 50-

60%.The SBI entry is groundbreaking for several reasons. This was the first for a

bank to enter the insurance market. This kind of synergy between a bank and an

insurance company is extremely rare in many parts of the world. In Continental

Europe, it is called bancassurance (in France) or allfinanz (in Germany). Second,

even though the regulators have said that banks would not (generally) be allowed

to hold more than 50% of an insurance company, the SBI was allowed to do so

(with a promise that its share would be eventually diluted).

Broken Marriages Several partnerships broke down during the year 2000.

Probably the most dramatic breakdown took place between Hindustan Times (a

newspaper group) and the Commercial Union of the UK. The management of

Hindustan Times realized that they are heavily reliant on a steady daily cash flow

(Kumari, 2001). Insurance is a completely different business. Their shareholders

would revolt if they faced large one-time losses (common in insurance

business).Similarly, by the end of July 2000, Kotak-Mahindra and Chubb

declared their divorce. Dabur Group and Allstate also parted company. Allianz

and Alpic broke their partnership.Re-pairing of Partners A curious trend has

developed by the end of 2000. Several divorced partners have come back to the

field to tie knots to some other partners. Dabur has decided to tie the knot with

another divorcee - Commercial Union. Allianz has announced a new partnership

with the giant Indian scooter-maker Bajaj.Back to the Future: Mostly Swaraj with

a Foreign Twist At present, 312 million middle class consumers in India have

enough financial resources to purchase insurance products like pension, health

care, accident benefit, life, property and auto insurance. Only 2.5 per cent of this

insurable population, however, have insurance coverage in any form. The

potential premium income is estimated at around US $80 billion. This will place

27

India as the sixth largest market in the world (after the US, Japan, Germany, UK

and France).

Lessons from China China is the most populous country in the world (at

1.2 billion); India is a close second (just over a billion). Both have followed the

path of deregulation and privatization - China started it in 1979 and India in 1991.

Comparisons of these processes are described in Sinha and Sinha (1997). In this

section, I will concentrate only on the insurance industry in the two countries. The

insurance business in India has a premium volume of $8.3 billion n 1999

whereas in China the premium volume is $16.8 billion in 1999. However,

premium per capita is not all that dissimilar: $13.7 per person in China and $8.5

in India in 1999. As a percent of GDP, insurance is 1.93% in India and 1.63% in

China in 1999 (all data from Sigma, 2000).In China, the People's Insurance

Company of China (PICC) had a monopoly between 1949 and 1959. In 1959,

insurance business was deemed capitalistic and all forms of insurance were

suspended (and the insurance business was taken over by the Peoples Bank of

China). The insurance business reopened in 1979, the PICC reassumed its old

role as the monopoly. There are many differences in the way China and India

have handled deregulation. First, in China, the China Insurance Regulatory

Commission (CIRC) was set up in November 1998, well after the first Insurance

Law was promulgated in 1995. In India, the IRDA was launched first with the

authority to issue licenses. It took almost a year before it issued licenses for the

first set of private insurance companies. Second, in China, foreign insurers need

to have a representative office for three years before they can submit a proposal

for operation (in practice, this has been reduced to two years in some cases).

In India, there is no such requirement. Third, foreign insurers can only own

1825% of the total value of the market (although, in reality, it has been much

less than that in Shanghai). In India, the limit is set at 26% per company. In

China, there is no limit at the company level. Thus, a foreign company can own

100% of an approved insurance company in China. Fourth, in India, the licenses

are national. A company with a license can operate in any part of the country.

In China, on the other hand, foreign companies are restricted to operation in

two metropolitan areas: Shanghai and Guangzhou. Fifth, the IRDA is a

Law-implementing body. It can only interpret the laws that have been passed by

the Indian Parliament. On the other hand, it seems that the CIRC has been a

28

Law-making body, it is setting up rules as it sees fit. Sixth, China seems to

Have been forced to issue insurance licenses to a host of foreign companies by

the end of 2000 simply because it wanted an assured entry into the World Trade

Organization (WTO). In India, there is no such pressure as India is already a

part of the WTO.Quo Vadis, Insurance? In this section, we gaze into the future of

the insurance industry in India. A number of trends are already emerging.

Convergence In many other regions around the world, one sure sign is emerging

in the insurance business. Different parts of the financial sectors are converging

This happened first in European Union (with the so-called Third Directive). It is

now happening in the United States with the effective repealing of the Glass-

Steagall Act of 1933. In India, it will surely come. Not everybody in India,

however, believes so. For example, the Insurance Regulatory Development

Authority (IRDA) chairman N. Rangachari said that India is not yet ready for the

convergence of all financial sectors under one supervisory authority as

suggested by the banking division of the finance ministry. The RBI (Reserve

Bank of India) has erected a firewall between banks and insurance companies to

protect investor interests. With the insurance sector transforming from total

regulation to being opened up after 35 years, fears have been expressed on how

it would move. However, the convergence is already happening on the ground in

a “curious way” as 10 out of 12 insurance proposals received for license by the

IRDA have come in from companies who are in the pure or applied finance

sector. It may appear curious, but clearly the companies who want to enter the

insurance sector see some kind of a synergy between their existing business and

insurance. Monitor Group Report how would the insurance market be divided up

between the incumbent Life Insurance Corporation and the newcomers? The

Monitor Group (from Boston) has published a study at the end of 1999 (reported

in Business Today, 2000). It estimates that the $5 billion market of life insurance

in India (figure for 1998) will become a $23 billion market by 2008. The report

estimates that the LIC will have some 70-80% of the market whereas the new

companies will share some 20-30%. The bright prognostics for the LIC come

from several key observations. (1) The LIC has a vast distribution network in the

rural and semi-urban areas. This would be hard to duplicate. (2) The LIC has had

a real annual growth rate of 8% over the last decade. This is much larger than

industrial growth. Therefore, the LIC has a head start. (3) As life insurance

29

benefits accrue over time, it becomes more expensive to switch - because

switching would mean a loss of accrued benefits. The general insurance

business is expected to grow from USD 1.8 billion (1998) to 12 billion in 2008.

The Monitor Group Report predicts that the private companies would have an

easier access to the general insurance business. The market share of the

newcomers will be 40-50% of the total market. Cause for better market

penetration for the new companies come from the fact that it makes no difference

for the insured to switch companies. Unlike life insurance, it is not expensive to

switch insurers. However, the lack of good data would hamper the newcomers

(see below).Reinsurance The GIC has decided to spin off its reinsurance

business as a separate company to be called Indian Reinsurer. The insurance

business in India is less than USD $1 billion at present (2000). In the near term

(three to five years), it is expected to double in size for two simple reasons. (1)

Under the new regime, the reinsurance requirements are higher (as a percentage

of total insurance business). (2) Privately run non-life insurance companies have

a higher reinsurance requirement in the early years. Aftermath of the Gujarat

Earthquake On January 26, 2001, an earthquake measuring 6.9 on the Richter

scale hit parts of Gujarat. Many buildings toppled. An estimated 20,000 persons

were killed - most of them in Bhuj district of Gujarat (around 18,000). Estimated

damage was in the order of magnitude of USD 5 billion - most of it uninsured.

The disaster was once in a lifetime event. In a curious way, it will help the new

entrants in the insurance industry in India. It is well known in the psychology

literature that disasters make people more aware of their insurance needs. Given

what happened in Gujarat, most Indians will now have a higher awareness about

buying an insurance policy than they would have otherwise. No amount of

advertisement by the insurance companies (both life and general) could have

achieved this. Ironically, India's national insurance companies began to exclude

earthquake cover in the new policy forms adopted from 1 April 2000 and began

to offer the protection as a buy-back on the recommendation of the Tariff

Advisory Committee (TAC) report. Many policyholders were unaware of the

change and so the relatively few individuals and companies that have been

prudent enough to buy insurance may discover that, in the case of the Gujarat

event, they are uninsured. Some Areas of Future Growth Life Insurance The

traditional life insurance business for the LIC has been a little more than a

30

savings policy. Term life (where the insurance company pays a predetermined

amount if the policyholder dies within a given time but it pays nothing if the

policyholder does not die) has accounted for less than 2% of the insurance

premium of the LIC (Mitra and Nayak, 2001). For the new life insurance

companies, term life policies would be the main line of business.

Health Insurance Health insurance expenditure in India is roughly 6% of GDP,

much higher than most other countries with the same level of economic

development. Of that, 4.7% is private and the rest is public. What is even more

striking is that 4.5% are out of pocket expenditure (Berman, 1996). There has

been an almost total failure of the public health care system in India. This

creates an opportunity for the new insurance companies. Thus, private insurance

companies will be able to sell health insurance to a vast number of families who

would like to have health care cover but do not have it.

Pension The pension system in India is in its infancy. There are generally three

forms of plans: provident funds, gratuities and pension funds. Most of the

pension schemes are confined to government employees (and some large

companies). The vast majority of workers are in the informal sector. As a result,

most workers do not have any retirement benefits to fall back on after retirement.

Total assets of all the pension plans in India amount to less than USD 40 billion.

Therefore, there is a huge scope for the development of pension funds in India.

Questionnaire

Name__________________________________________

Age_____

Gender: Male/Female

Educational Qualification:

a) Engineering

b) CA/MBA

c) MCA

d) Others

31

If Others. Specify_______________________

Email id __________________________________

1. Tick the life insurance companies you are familiar with:-

1) LIC 2) ICICI-Prudential

3) SBI Life 4) Bajaj-Allianz

5) Max New York Life 6) Birla Sun Life

2. Tick the types of schemes you are familiar with:-

1) Term plan

2) Endowment plan

3) Money Back plan

4) ULIP ( Unit Linked Insurance Plan)

5) Child plan

6) Pension plan

3. Tick on what the life insurance company provides?

a) Security for life

b) Investment Opportunity

c) Tax Benefits

d) High returns

e) Pension

4. Rank the following benefits of Insurance on a 1-5 scale:

32

_____ Financial Expenses

_____ loved Ones’ future security

_____ Exemption from tax

_____ Mortgage payments/Rent fund

_____ College/School Education

5. Do you think insurance is the viable option for investment?

Yes No

Why?........................................................................................................................

.....................

6. Do you have any insurance cover?

Yes No

If Yes, then which

company?.......................................................................................................

7. What type of investment are you interested in?

Short term Long term ULIP

Why?..................................................................................................................

..........................

…………………………………………………………………………………………

……

8. What is idea behind your investment in insurance?

Tax Benefit Future Security High Returns

33

9. What is the mode of your premium payment?

1) Monthly

2) Quarterly

3) Half-Yearly

4) Yearly

10. Are you happy with the services provided by the insurance company?

Yes No

11. Are you happy with the returns given by the insurance company?

Yes No

12. Which is the most trusted insurance company at present? (Both in the public and the

private sector)

Rate on the basis of 1-5 scale 1- least trusted …. 5- Most trusted (Tick the

appropriate no.)

LIC 1 2 3 4 5

SBI-Life 1 2 3 4 5

ICICI-Prudential 1 2 3 4 5

Bajaj-Allianz 1 2 3 4 5

Birla- Sun Life 1 2 3 4 5

13. Entry of large no. of private insurance companies is good for the public?

Yes No

14. After privatization whether the public is getting good products/service?

34

Yes No

15. What do you think about the role of the IRDA?

Regulator ………………. ….

Facilitator……………………

A govt. body…………………

ANALYSIS OF THE SURVEY

The survey was conducted to understand the knowledge and perception of the people

towards life insurance after privatization. The response is quantified by means of

response obtained in the form of answers and views put forward by the people in a survey

conducted. The survey includes response from professionals, businessmen, daily workers,

and housewives and working in different sectors and fields in Chennai. Almost everyone

knew insurance and relates insurance with LIC and those who have invested in insurance

35

products mainly invested for availing tax exemption and all traditional reasons of

investing like risk coverage and loved ones future security while some of them also said

that insurance is not a good option for investment due to inflation and when long term

gains were considered. Use of bar, line graphs, tables and pie diagrams are done to

represent the findings of the survey.

No of males and females software professionals surveyed

malefemale

0%10%20%30%40%50%60%70%80%90%

100%

247

36

58.33

4.16

20.83

16.66

Educational qualifications of males

Engg.CA/MBAMCAOthers

42.85

14.28

42.85

Educational qualifications of females

Engg.CA/MBAMCAOthers

37

80.64

67.74

61.29

41.93

45.16

61.29

Popularity percentage of life insurance companies

LICICICIBAJAJBIRLAHDFCSBI

Even though, the private sector insurance companies are increasing, the most sought after

insurance company even among people is LIC which has the highest market share in

India. This is also depicted by the pie-chart as shown above.

CATEGORY RESPONSE (in %)

1. LIC 80.64

2. ICICI 67.74

3. BAJAJ 61.29

4. Birla 41.93

5. HDFC 45.16

6. SBI 61.29

38

25.8

38.7

67.74

58.06

Familiarity of Schemes

term planendowment planmoney backULIP

Among many plans available, the most preferred one among the mass is money back

plan. This plan helps you to withdraw your money at regular intervals and still staying

insured. This plan is famous for its high liquidity advantage. The other product gaining

popularity is ULIP (unit linked insurance plan), as its serve multiple purpose, it give high

returns, tax benefit, life insurance , critical illness cover and is admired for its flexibility

for paying premium amount.

SCHEMES RESPONSE (in %)

1. Term plan 25.8

2. Endowment plan 38.7

3. Money back 67.74

4. ULIP 58.06

Objective for investment in Insurance

39

Among the surveyed people about 61.29% view insurance tax saving product. Life

insurance plans of some private insurance companies are giving 100% tax exemption.

Even the IT returns are also 100% tax free on annual basis. After that around 46 percent

buy insurance to cover risk followed by good returns and savings objective.

CATEGORY RESPONSE (in %)

1. Life Insurance 45.16

2. Investment 32.25

3. Tax Benefit 61.29

4. High Returns 22.58

5. Savings 29.03

Ranking of some benefits of insurance (figures expressed in %)

40

Among some benefits of insurance, loved ones’ security secured the least percentage i.e.

overall the highest rank. So, people take insurance so that their loved ones and they

themselves get secured and enjoy the life cover.

CATEGORY RESPONSE (in %)

1. Final Exp. 254

2. Loved ones’ security 187

3. Income Needs 200

4. Housing Loans 316

5. Children Edu. 374

Insurance as the viable option for investment

41

yesno

0%

10%

20%

30%

40%

50%

60%

70%

80% 80%

20%

Among the surveyed, 80% of them said that insurance is the viable option for investment.

The reasons were there that it is the medium of tax benefit, risk coverage and regular

savings. But, 20% of them said that it is not favorable for investment due to inflation and

comparatively less returns than other financial instruments.

Availability of Insurance Cover

Among the people surveyed, 90% of them said that they had life-insurance cover but only

10% of them were devoid of insurance but were planning to take one in the future.

Estimate of IT professionals enrolled into insurance

42

About 54.83% of IT professionals have chosen LIC as their premier insurance investment

company. And the rest all insurance companies having their insurance cover are far less

as compared to LIC. So, this illustrates that even the IT professionals have faith in LIC as

their most favored life insurance company.

INSURANCE COMPANY RESPONSE (in %)

1. LIC 54.83

2. Birla Sun-Life 6.45

3.ICICI 12.90

4.MetLife 3.22

5. Bajaj- Allianz 6.45

6. ING-Vyasa 3.22

7. SBI-Life 6.45

8. Tata- AIG 3.22

9. HDFC 3.22

10. Reliance 6.45

43

Type of investment interested in

32.25

54.83

16.12

Short termLong term ULIP

About 54.83% people said that the type of investment which they are interested in is long

term investment. This is because they wanted to reap benefits for a longer term. Long life

insurance cover will naturally give them high risk coverage and higher returns.

Mode of premium payment

38.7

22.5822.58

38.7

quarterlymonthlyhalf yearlyyearly

About 38.7% of them said that they paid their premium through quarterly and yearly

mode. And only 22.58% favored monthly and half yearly medium of premium payment.

44

MODE OF PREMIUM PAYMENT

RESPONSE (in %)

1. Quarterly 38.72. Monthly 22.583. Half- yearly 22.584. Yearly 38.7

Services provided by the insurance company (figures expressed in %)

Yes No0

102030405060708090

10090.32

6.45

About 90.32% of people said that they were happy with the services provided by the

insurance company. And only 6.45% were not satisfied. This shows that life insurance

companies are fairly performing well especially in India.

Returns given by the insurance company (figures expressed in %)

45

Yes No0

1020304050607080

70.96

22.58Series1

About 70.96% of people have view that they were happy with the returns given by the

insurance companies. But 22.58% were not. The reason for their dissatisfaction is that

they think that other financial instruments like bonds, shares, debentures, securities and

mutual funds are other good options for investment and they think that insurance does not

provide investment opportunity for the short term.

Ratings of various insurance companies

LIC SBI-Life ICICI Bajaj-Allianz Birla SunLife0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5 4.64

4.03

3.12 3.16 3.12

LIC of India is the most preferred life insurance company even among software

professionals as depicted through the above bar graph. It has a rating of 4.64. The other

private life insurance companies are having less percentage of share of it.

46

INSURANCE COMPANY RATING

1. LIC 4.64

2. SBI-Life 4.03

3. ICICI 3.12

4. Bajaj- Allianz 3.16

5. Birla- Sun Life 3.12

Privatization of insurance

Yes No0

5

10

15

20

25

24

7

78 % people of those surveyed were of the view that privatization is good for the public.

This is because they think that the many private insurance companies have come up with

some attractive plans like ULIPs which are fetching good returns even for a short period.

Only 22% of them think that that investing in a private insurance company is risky

because the returns are not guaranteed.

Availability of good services after privatization

47

70.96

19.35

YesNo

About 70.96 % of people think the insurance companies are providing good services even

after privatization. This is because they have come up with some new schemes and plans

which are innovative and are giving better returns even for a short period than compared

to plans pertaining to public sector insurance company like LIC. Only 19.35% think that

services are not good after privatization as they have less belief on these private life

insurance companies or they do not consider life insurance as important investment

option and also the private insurance companies have high premium allocation charges

and high surrender charges, fixed charges and other formalities.

48

CONCLUDING REMARKS

Unit Linked products are f inally products of choice. If you feel

equipped to manage your investments on your own or are not

comfortable with long lock-ins or you can't make the most of these

tax breaks, you may be better off investing elsewhere after securing

your l i fe insurance needs.

1. There is a great need to disclose the risk involved in the schemes

properly to the investor/insurance seeker by the

insurance/investment companies.

2. The Insurance Regulatory and Development Authority has to issue

set of guidelines on ULIP policies offered in the market.

3. The charges in the init ial years should be brought down.

4. The high returns (above 20 per cent) are definitely not

sustainable over a long term, as they have been generated during

the biggest Bull Run in recent stock market.

5. Investors/Insurance seeker has to take switching charges into

consideration as they have a long-term implication on the returns

generated.

49

REFERENCES

1. www.irdaonline.com

2. www.licindia.com

3. www.lifeinsurancecouncil.com

4. www.sbilife.co.in

50