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To Identify the buying behaviour of financial products and cross selling of Insurance and Mutual fund
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SUMMER INTERNSHIP PROJECT REPORT ON
“DIFFERENT ASPECTS OF INSURANCE PRODUCTS AND MUTUAL FUNDS AND THEIR EFFECT ON THE
BUYING BEHAVIOUR OF INVESTORS”
FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENTFOR THE AWARD OF POST GRADUATE DIPLOMA IN
MANAGEMENT
UNDER THE GUIDANCE OF: UNDER THE SUPERVISION OF:
MR.ANURAG SINGH MR. DEVANSHU DHAWAN
SUBMITTED BY:
AJEET KUMAR
PGDM 2008-2010
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY
(APPROVED BYAICTE, MINISTRY OF HRD, GOVT.OF INDIA)
VIPUL KHAND-6, GOMTI NAGAR, LUCKNOW
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 1
CERTIFICATE
This is to certify that the project work done on “DIFFERENT ASPECTS OF INSURANCE PRODUCTS AND MUTUAL FUNDS AND THEIR EFFECT ON THE BUYING BEHAVIOUR OF INVESTORS ” is a bonafide work carried out by Mr. ---------------------------------------under my supervision and guidance. The project report is submitted towards the partial fulfillment of 2-year, full time Post Graduate Diploma in Management.
This work has not been submitted anywhere else for any other degree/diploma. The original work was carried during ------------to----------------- in STANDARD CHARTERED BANK.
Name & sign of company guide Name & sign of faculty guide
Student’s Name & sign
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 2
Roll no.
ACKNOWLEDGEMENT
With great zeal, I present my individual summer training Report in PGDM (Third
semester) on BUYING BEHAVIOUR OF INVESTORS FOR FINANCIAL PRODUCTS LIKE
INSURANCE POLICY AND MUTUAL FUNDS.
I convey my deepest gratitude to Mr.Vivek Sinha Branch Manager, Mr.Vipul
Srivastva(R.M.) , Mr. Company guide Devanshu Dhawan and all other staff members
of STANDARN CHARTERED BANK who have been very co-operative and helpful in
providing vital information for my project. Also a grateful thanks to Mr.Baghha Sir
and Mr.Anupam Srivastva for their contribution to make me understand how
interact with customers and how to sale the financial products.
Really I am too much oblige with Mr.Devanshu Dhawan Sir who inspired me and
direct me how handle the customers also how to sale the financial products.
By working at STANDARD CHARTERED BANK, I am studying different schemes of
INSURANCE PRODUCTS , MUTUAL FUND, knowing the criteria of making investment,
interacting with professional departmental heads and by preparing this report, it has
added a practical touch to my theoretical knowledge.
I avail this opportunity to convey my sincere thanks to Mr.Devashish Bose, the
director of IMRT BUSINESS SCHOOL. I am thankful to Anurag Singh , my project
guide for recommending me the necessary information for the report. His instilling
support and enthusiasm, expert guidance and insight have lent my project a unique
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 3
touch. I also express my sincere gratitude to Mr. Sanjeev Bansal, secretary of
I.M.R.T., LUCKNOW for providing us an opportunity to interact with professional
peoples in the real corporate world. I forward my gratitude for the compulsion of
this most wonderful aspect of our PGDM curriculum without which knowledge of
management is incomplete and futile. At last I am also thankful to my family
member and friends who had given me their constructive advice, educative
suggestions, encouragement and co-operation to prepare this report.
DECLARATION
I AJEET KUMAR, student of PGDM (M.B.A.), Semester III of INSTITUTE OF
MANAGEMENT OF RESEARCH AND TECHNOLOGY, hereby declare that the project
work presented in this report is my own work and has been carried out under the
supervisor of Mr.Devanshu Dhawan (Relationship Manager of STANDARD
CHARTERED BANK, LUCKNOW).
My report is submitted as a part of study curriculum and as a partial fulfillment of
the POST GRADUTE DIPLOMA IN MANAGEMENT equivalent to M.B.A. (Masters of
Business Administration).
I am also declaring that I am submitting this report on the training undertaken at
STANDARD CHARTERED BANK regarding the General Study and cross selling of Bajaj
Allianz Insurance products and Mutual Funds at LUCKNOW Branch and studying the
people’s perception regarding the investment in mutual fund.
I guarantee that this project report has not been submitted for the awards to any
other management colleges for diploma or any other such prizes.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 4
Date:
Place: LUCKNOW (AJEET KUMAR)
PREFACE
The PGDM program is well structured and integrated course of business studies. The
main objective of practical training at PGDM level is to develop skill in student by
supplement to the theoretical study of business management in general. Industrial
training helps to gain real life knowledge about the industrial environment and
business practices. The PGDM program provides student with a fundamental
knowledge of business and organizational functions and activities, as well as an
exposure to strategic thinking of management.
In every professional course, training is an important factor. Professors give us
theoretical knowledge of various subjects in the college but we are practically
exposed of such subjects when we get the training in the organization. It is only the
training through which I come to know that what an industry is and how it works. I
can learn about various departmental operations being performed in the industry,
which would, in return, help me in the future when I will enter the practical field.
Training is an integral part of PGDM and each and every student has to undergo the
training for 2 months in a company and then prepare a project report on the same
after the completion of training.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 5
During this whole training in Standard Chartered Bank , I got a lot of experience and
came to know about the management practices in real that how it differs from those
of theoretical knowledge and the practically in the real life.
In todays globalize world, where cutthroat competition is prevailing in the market,
theoretical knowledge is not sufficient. Beside this one need to have practical
knowledge, which would help an individual in his/her carrier activities and it is true
that “Experience is best Teacher”.
TABLE OF COTENTS PAGE NO.
1. Executive summary ………………………………….. 7
2. Introduction of Industry………………………………. 8 - 10
3. Abstract…………………………………………………. 11 – 12
4. Insurance………………………………………………… 13 – 26
5. Mutual Fund……………………………………………... 27-- 46
6. The Emerging market for Mutual Funds
And Insurance …………………………………………… 47
7. Bajaj Allianz Life Insurance co. Ltd……………………. 48—49
8. Analysis of Questionnaire……………………………….. 50---75
9. Literature Review………………………………………… 76--84
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 6
10. Objective of Project……………………………………… 85--86
11. Conclusion………………………………………………… 87
12. Suggestion…………………………………………………. 88
13. Limitation of Study……………………………………… 89
14. Over All experience During Summer training………… 90--
93
15. Bibliography……………………………………………… 94--
96
16. Appendices……………………………………………… 97--
101
EXECUTIVE SUMMARY
A mutual fund is a financial intermediary set up as a trust that pools the savings of a
number of investors who share a common financial goal. There are various
advantages of mutual funds like availability of various schemes and flexibility,
diversification benefits, low transaction costs, liquidity, professional management,
tax benefit and well regulation of it. There are certain disadvantages as well like risk
associated, charges involved, and lack of knowledge in common man etc. It can be
classified into various types depending on various ways of categorization like term of
the fund, investment objective, and types of investors, management style and load.
The function of insurance is to safeguard against misfortunes in the way contributions
of the many pay for the losses of the unfortunate few. It can be divided into social
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 7
and private insurance. Private insurance is categorized into life and non-life branch
which is further subdivided into life and health insurance.
The Standard Chartered Group is a result of merger of two banks in 1969, the
Standard Bank of British South Africa founded in 1863 and Chartered Bank of India,
Australia and China, founded in1853. The Indian operations of Chartered Bank
originated in Kolkata on April 12, 1858 but now, the head quarters is in Mumbai.
A study called Dhoni effect says that the semi-urban cities including Lucknow would
prove to be a very potential market in the near future and this process has already
started. So the project “A survey on different aspects of an insurance product
affecting the buying behavior of an investor and Cross Selling of mutual fund and
insurance” which was given to me by Standard Chartered Bank has lots of
importance attached to it. A questionnaire was developed to carry out the study which
contains all the aspect which investor looks before investing. The questionnaire was
developed with the help of my industry guide and some of the staff of the bank.
I took responses of around 120 persons and then with the help of SPSS tried to
analyze between different attributes. And the analysis is still in progress......
INTRODUCTION
STANDARD CHARTERED BANK
Listed on both the London Stock Exchange and the Hong Kong Stock Exchange,
Standard Chartered’s market capitalization consistently places it among the top 25 in
the FTSE 100. Their history goes back over 150 years and they operate in many of
the world’s fastest-growing markets. Through a global network of over 1,700
branches (including subsidiaries, associates and joint ventures) they are part of the
community in more than 70 countries across Asia Pacific, South Asia, the Middle
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 8
East, Africa, Europe and the Americas. Standard Chartered is leading the way in
Asia, Africa and the Middle East. The bank head quarters are situated in London with
UK as a base country. But around 90% of the total businesses of Standard Chartered
Bank are registered from:
Asia Pacific Region including Australia, China, India, Japan, North Korea,
South Korea, Malaysia, Philippines, Singapore and Hongkong.
South Asia Region including Bangladesh, Pakistan, Sri Lanka and Nepal
Middle-East comprising of Lebanon and UAE (Dubai).
Africa including Ghana, Kenya and South Africa
The Standard Chartered Group was formed in 1969 through a merger of two banks,
the Standard Bank of British South Africa founded in 1863 and the Chartered Bank
of India, Australia and China, founded in 1853.
The Chartered Bank
This bank was founded by James Wilson following the grant of a Royal Charter by
Queen Victoria in 1853. It started with its first branches in Mumbai (Bombay),
Calcutta and Shanghai in 1858, followed by Hong Kong and Singapore in 1859.
Their traditional business was in cotton from Mumbai (Bombay), indigo and tea from
Calcutta, rice in Burma, sugar from Java, tobacco from Sumatra, hemp in Manila and
silk from Yokohama. It played a major role in the development of trade with the East
which followed the opening of the Suez Canal in 1869 and the extension of the
telegraph to China in 1871.
The Standard Bank
It was founded in the Cape Province of South Africa in 1862 by John Paterson. The
bank commenced business in Port Elizabeth, South Africa, in January 1863. It was
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 9
Mr. Peter Sands, CEO Standard Chartered Bank
prominent in financing the development of the
diamond fields of Kimberley from 1867 and
later extended its network further north to the
new town of Johannesburg when gold was
discovered there in 1885. It expanded in
Southern, Central and Eastern Africa and by
1953 had 600 offices. In 1965, it merged with the Bank of West Africa expanding its
operations into Cameroon, Gambia, Ghana, Nigeria and Sierra Leone.
In 1969, Chartered and Standard decided to undergo a friendly merger. All was going
well until 1986, when a hostile takeover bid was made for the Group by Lloyds Bank
of the United Kingdom. When the bid was defeated, Standard Chartered entered a
period of change. Provisions had to be made against third world debt exposure and
loans to corporations and entrepreneurs who could not meet their commitments.
Standard Chartered began a series of divestments notably in the United States and
South Africa, and also entered into a number of asset sales.
From the early 1990s, Standard Chartered has focused on developing its strong
franchises in Asia, the Middle
East and Africa using its operations in the United
Kingdom and North America to provide customers with a bridge between these
markets. Secondly, it would focus on consumer, corporate and institutional banking
and on the provision of treasury services - areas in which the Group had particular
strength and expertise.
They acquired Grindlays Bank from the ANZ Group and the Chase Consumer
Banking operations in Hong Kong in 2000 in the new millennium. Their business
includes Personal Banking, SME Banking, Wholesale Banking, Islamic Banking and
Private Banking. The CEO is Mr. Peter Sands.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 10
Share Price as on April 18, 2009
Last Price Change Open Day High 52-Week High
1004.00
3.00 (0.30%) 1011.00 1037.00 1903.00
Volume Previous Close Day Low 52-Week Low
8,302,831 1001.00 970.00 554.00
Standard Chartered Bank India, The Indian operations of Chartered Bank
originated in Kolkata on April 12, 1858. During that time Kolkata was the most
important commercial city and was the hub of jute and indigo trades. With the
opening of the Suez Canal in 1869 and the growth of cotton trade, Bombay replaced
Kolkata as the main commercial center. Hence Standard Chartered shifted its main
operations to Bombay. So the Head Quarters of Standard Chartered Bank India Ltd.
are now in Mumbai with Kolkata branch as a key associate. Today the Bank's
branches and sub-branches in India are directed and administered from Bombay with
Kolkata remaining an important trading and banking centre.Today the reign of
standard chartered bank has expanded to the length and breadth of the country
including multiple branches in all major cities like Chennai, New Delhi, Kolkatta,
Mumbai, Guragon, Noida, Pune,
Hyderabad, Bangalore e.t.c.
ABSTRACT
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 11
MR NEERAJ SWAROOP, CEO-India, Standard Chartered Bank
A mutual fund is a financial intermediary set up as a trust that pools the savings of a
number of investors who share a common financial goal. There are various
advantages of mutual funds like Availability of various schemes and flexibility,
Diversification Benefits, Low Transaction Costs, Liquidity, Professional
management, Tax benefit and well regulation of it.
There are certain disadvantages as well like risk associated, charges involved, lack of
knowledge in common man etc. It can be classified into various types depending on
various ways of categorization like term of the fund, investment objective, types of
investors, management style and load.
The function of insurance is to safeguard against misfortunes in the way contributions
of the many pay for the losses of the unfortunate few. It can be divided into social
and private insurance. Private insurance is categorized into life and non-life branch
which is further subdivided into life and health insurance.
The Standard Chartered Group is a result of a merger of two banks in 1969, the
Standard Bank of British South Africa founded in 1863 and the Chartered Bank of
India, Australia and China, founded in 1853. The Indian operations of Chartered
Bank originated in Kolkata on April 12, 1858 but now, the Head Quarters India are in
Mumbai.
A study called Dhoni Effect says that the semi urban cities including Lucknow would
prove to be a very potential market in the near future and this process has already
started. So the project “Cross Selling of Mutual Funds and Insurance” which was
given to me by Standard Chartered Bank has lots of importance attached to it.
Till now I have mainly worked on two parts of my project that is “Cross Selling of
Mutual Funds and Insurance” and “Understanding the different aspects of an
insurance product which affects the buying behavior of an investor”. For these I have
met various important people, visited various clients as well as villages and markets.
A questionnaire was developed for the same after contacting various faculty members
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 12
including my faculty guide for SIP, the branch manager and the company guide.
Statistical tool named factor analysis is being used to analyze the responses for the
questions in the questionnaire given by various respondents.
For comparative analysis of different products of various companies, I have visited 3-
4 banks as a customer and collected information from them. I have also searched for
the secondary data by surfing net. The work is still on progress. I plan to start with
the fourth part of the project that is providing financial planning to the customers
coming week.
I have learnt a lot while doing this project. It is the mistakes which I did taught me
more. I developed the skill of communicating with the customers and in the corporate
world as well. I am getting a real life experience of corporate world which would
prove to be very useful for me in the future. I am learning everywhere… the office,
during communicating with customers, in the campus, during my trips and the
process is still in progress.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 13
INSURANCE :
Introduction
Since time immemorial human beings have always been in search of security. The
story of the evolution of mankind is, in fact, a saga of continuous pursuit of a secured
life. This urge for protection led to the concept of insurance. The Greeks and the
Romans were the first to introduce health and life insurance in 600 A.D. through the
establishment of guilds entitled as ‘benevolent societies’ which looked after the
families and paid funeral expenses to members upon death. In the modern society the
evolution of insurance business started off with the marine business in England
during the late 1680’s under the initiative of Edward Lloyd.
The life insurance business in India commenced with the formation of the Life
Insurance Corporation of India (LICI) on September 1, 1956 and later rejuvenated by
the establishment of a newly formed governing body in 1999, entitled as, “Insurance
Regulatory and Development Authority (IRDA)”. The IRDA was entrusted to look
after the growth of the life insurance and general insurance business in India
(chakraborty, 2007). The statutory body even emphasized upon the liberalization of
the country’s insurance sector to private players in India (both Indian and foreign) in
order to infuse fresh capital and become more competitive. This opened the flood
gates of opportunity for the private players in india to diversify themselves into the
insurance business either through joint ventures or as a stand-alone player. This has
even lured several banks and financial institutions to start off their insurance business
in order to capitalize on the opportunities that are generated on moving first in the
indian insurance market.
At the beginning of 2008, there were 18 registered life insurance companies in India
with one public- sector player and 17 private insurers with the retail giant pantaloons
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 14
and IDBI bank coming into the picture, the number of private life insurers operating
in india has risen to 17, with more proposals being in the pipeline.
India at the privilege of having some of the global insurance giants, such as the US-
based AIG and New York Life, UK-based Prudential and Aviva, Germany’s largest
insurer Allianz and France-based AXA, vying against each other to capitalize on the
largely untapped insurance market in India. The presence of these foreign insurance
giants in India has bought a revolutionary change in terms of developing innovative
products, smart marketing concepts apart from the aggressive selling and distribution
strategies but these could not completely eradicate the continued domination of LICI
in the Indian market although its market share took a beating. Nevertheless, the
challengers in the sector multiplied with the rising presence of the private players in
the Indian insurance market further fuelled by the impact of globalization and
liberalization.
Definition of insurance …
a) in legal terms
From legal perspective, insurance is a contract, by which one party, the policy owner,
pays a stipulated consideration called the premium to the other party called the
insurer, in return for which the insurer agrees to pay a defined amount of money or
provide a defined service if a covered event occurs during the policy term. The
person whose life, health, or property is the object of the insurance policy is referred
to as the insured. In most instances the insured is also the policy owner- the person
who exercises contractual rights under the policy. Under life insurance policies, the
person to whom the payment is made on the insured’s death is the beneficiary.
(Quoted from Kenneth Black,Jr., Harold D. Skipper, Jr., Life & Health Insurance,
Thirteenth Edition, page no. 20)
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 15
b) In economic terms, Insurance, in economics, is a form of risk management
primarily used to hedge against the risk of a contingent loss. Insurance is
defined as the equitable transfer of the risk of a loss, from one entity to
another, in exchange for a premium, and can be thought of as a guaranteed
small loss to prevent a large, possibly devastating loss. An insurer is a
company selling the insurance; an insured is the person or entity buying the
insurance. The insurance rate is a factor used to determine the amount to be
charged for a certain amount of insurance coverage, called the premium. Risk
management, the practice of appraising and controlling risk, has evolved as a
discrete field of study and practice.
(Quoted from http://en.wikipedia.org/wiki/Insurance )
FUNDAMENTAL PRINCIPLES OF INSURANCE
Some useful terms in Insurances:
1) INDEMNITY :-A contract of insurance contained in a fire, marine, burglary
or any other policy (excepting life assurance and personal accident and
sickness insurance) is a contract of indemnity. This means that the insured, in
case of loss against which the policy has been issued, shall be paid the actual
amount of loss not exceeding the amount of the policy, i.e. he shall be fully
indemnified. The object of every contract of insurance is to place the insured
in the same financial position, as nearly as possible, after the loss, as if he loss
had not taken place at all. It would be against public policy to allow an
insured to make a profit out of his loss or damage.
2) UTMOST GOOD FAITH:-Since insurance shifts risk from one party to
another, it is essential that there must be utmost good faith and mutual
confidence between the insured and the insurer. In a contract of insurance the
insured knows more about the subject matter of the contract than the insurer.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 16
Consequently, he is duty bound to disclose accurately all material facts and
nothing should be withheld or concealed. Any fact is material, which goes to
the root of the contract of insurance and has a bearing on the risk involved. It
is only when the insurer knows the whole truth that he is in a position to judge
(a) whether he should accept the risk and (b) what premium he should charge.
If that were so, the insured might be tempted to bring about the event insured
against in order to get money.
3) Insurable Interest - A contract of insurance affected without insurable
interest is void. It means that the insured must have an actual pecuniary
interest and not a mere anxiety or sentimental interest in the subject matter of
the insurance. The insured must be so situated with regard to the thing insured
that he would have benefit by its existence and loss from its destruction. The
owner of a ship run a risk of losing his ship, the charterer of the ship runs a
risk of losing his freight and the owner of the cargo incurs the risk of losing
his goods and profit. So, all these persons have something at stake and all of
them have insurable interest. It is the existence of insurable interest in a
contract of insurance, which distinguishes it from a mere watering agreement.
4) Causa Proxima - The rule of causa proxima means that the cause of the loss must
be proximate or immediate and not remote. If the proximate cause of the loss is a
peril insured against, the insured can recover. When a loss has been brought about by
two or more causes, the question arises as to which is the causa proxima, although the
result could not have happened without the remote cause. But if the loss is brought
about by any cause attributable to the misconduct of the insured, the insurer is not
liable.
5) Risk - In a contract of insurance the insurer undertakes to protect the insured from
a specified loss and the insurer receive a premium for running the risk of such loss.
Thus, risk must attach to a policy.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 17
· Mitigation of Loss - In the event of some mishap to the insured property, the
insured must take all necessary steps to mitigate or minimize the loss, just as any
prudent person would do in those circumstances. If he does not do so, the insurer can
avoid the payment of loss attributable to his negligence. But it must be remembered
that though the insured is bound to do his best for his insurer, he is, not bound to do
so at the risk of his life.
· Subrogation - The doctrine of subrogation is a corollary to the principle of
indemnity and applies only to fire and marine insurance. According to it, when an
insured has received full indemnity in respect of his loss, all rights and remedies
which he has against third person will pass on to the insurer and will be exercised for
his benefit until he (the insurer) recoups the amount he has paid under the policy. It
must be clarified here that the insurer's right of subrogation arises only when he has
paid for the loss for which he is liable under the policy and this right extend only to
the rights and remedies available to the insured in respect of the thing to which the
contract of insurance relates.
· Contribution - Where there are two or more insurance on one risk, the principle of
contribution comes into play. The aim of contribution is to distribute the actual
amount of loss among the different insurers who are liable for the same risk under
different policies in respect of the same subject matter. Any one insurer may pay to
the insured the full amount of the loss covered by the policy and then become entitled
to contribution from his co-insurers in proportion to the amount which each has
undertaken to pay in case of loss of the same subject-matter.
In other words, the right of contribution arises when (I) there are different policies
which relate to the same subject-matter (ii) the policies cover the same peril which
caused the loss, and (iii) all the policies are in force at the time of the loss, and (iv)
one of the insurers has paid to the insured more than his share of the loss.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 18
TERMS OF POLICY
Terms of policy mean the duration for which the policy will cover the risk. Except in
case of life insurance, a contract of insurance is from year to year only and the
insurance automatically comes to an end after the expiry of the years unless, of
course, it is renewed.
RE-INSURANCE & DOUBLE INSURANCE
Every insurer has a limit to the risk he can undertake. If a profitable proposal comes
his way he may insure it even if the risk involved is beyond his capacity. Then, in
order to safeguard his own interest, he may insure the same risk, either wholly or
partially, with other insurers, thereby spreading the risk. This is called -re-insurance.
Re-insurance can be resorted to in all kinds of insurance and a contract of re-
insurance is also a contract of indemnity. The re-insurers are liable to pay the amount
to the original insurer only if the latter has paid to the insured. Re-insurance is subject
to all the conditions in the original policy and the re-insurer is entitled to all the
benefits, which the original insurer enjoys under the policy.
When the insured insures the same risk with two or more independent insurers, and
the total sum insured exceeds the value of the subject matter, the insured is, said to be
over insured by double insurance. Both double insurance and over-insurance are
perfectly lawful, unless the policy otherwise provides. A man may insure with as
many insurers as he pleases and up to the full value of his interest with each one of
them. If a loss occurs, he may claim payment from the insurers in such order as he
thinks fit; but in no case he shall be entitled to recover more than his loss, because a
contract of insurance is a contract of indemnity only.
(All the above fundamental principles have been quoted from
http://www.helplinelaw.com/docs/insurance/1.php)
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 19
CLASSIFICATION OF INSURANCE
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 20
Social insurance vs Private insurance
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 21
Social insurance focuses on social equity through income redistribution where as
private insurance emphasizes on individual equity i.e. each insured’s premiums
reflect the expected value of his or her losses. In social insurance schemes
participation is compulsory and financing relies on government-mandated premiums.
Life vs Non-life insurance
The private insurance has been divided into life insurance i.e. insurance on the person
and non-life insurance or property or casualty insurance or general insurance i.e.
insurance to protect property.
The life branch includes insurance that pays benefits on a person’s:
1. Death- called life insurance or life assurance
2. Living a certain length of time-called endowments, annuities and pensions
3. Incapacity-called disability and long term care insurance
4. Injury or incurring a disease-called health insurance, accident insurance, and
medical expense insurance
Types of life and health insurance
The first two of the above mentioned points collectively deal with life insurance
while the last two with health insurance.
Under life insurance, the policy that gives coverage for the whole life is called whole
life insurance while the one which that covers a set time period, such as five or ten
years is called the term life insurance or endowment insurance.
A “term insurance” promises to pay the benefits only on the mishappening as death
of the insured during policy term while an “endowment insurance” pays the benefits
during the policy term as well as on the death of the insured during the policy term.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 22
Under health insurance, payment provoked because physical or mental incapacity
prevents the insured from being able to work is called disability income insurance. If
the incapacity prohibits the insured’s activities of daily living, it is called long-term
care insurance. If the insured incurs hospital, physician, or other health care expenses,
it is called medical expense insurance.
Indian Insurance Market Today
Insurance is one of the booming sectors among premium sectors, which is a US$ 41-
billion industry in India. India is the fifth largest life insurance market in the
emerging insurance economies globally and is growing at 32-34 per cent annually.
The players are bringing out newer products to attract more customers into their kitty
with increasing competitiveness amongst them. The total number of life insurance
companies operating in India is currently 22.
Foreign direct investment (FDI) up to 26 per cent is permitted under the automatic
route subject to obtain a licence from the official regulator, Insurance Regulatory and
Development Authority (IRDA).
3.6 billion US$ was the total premium collected by the public sector during April
2008-February 2009 showing the growth of over 6 per cent compared with the
previous year. The four public sector general insurers—United India Insurance
Company, National Insurance Company, New India Assurance and Oriental
Insurance Company—have been holding on to their combined market share of 59.4
per cent during April 2008-February 2009.
The retail segments such as motor and home insurances, especially of private sector,
have been impacted the most by the detariffing regulation. The detariffing regulation
Public sector insurance companies have, however, grown with addition in corporate
clients during the period. Presently, there are at least 18 third party agents (TPAs)
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 23
having a tie up with the four PSU insurers. Insurers have also begun setting up their
own TPA mechanism to rectify the current weaknesses.
Total revenue of 21 private sector general insurers together was US$ 478.3 million
(16 per cent) during April 2008-February 2009.
According to IRDA data, for the April-January 2009 period, the private sector life
insurance segment has recorded 13.22 per cent growth in first year premium and
20.36 per cent increase in number of policies.
Premium payments from pension policies have grown by 16 per cent for the 10
months ended December 2008 compared with a year earlier. Pension plans acted as
the main contributor to the total sales of ICICI Prudential Life Insurance, the
country’s largest private insurer for 2008-09, to around 33 percent. 22 per cent of the
total premiums received by Reliance Life Insurance over the past two years have also
come from pension plans.
Banc assurance
Banc assurance simply means selling of insurance products by banks. In India, the
bank branch network encompasses nearly 75,000 branches inclusive of PSU and
private banks.
Health Insurance
Bharti AXA General Insurance has launched a health insurance policy called ‘Smart
Health’.
Tata AIG has launched a health product called ‘Hospicashback’ in 2009. The product
offers a guaranteed return of premium irrespective of the claims of the customers
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 24
besides paying customers fixed benefits for expenses such as hospital and ambulance
charges.
Tata-AIG has also brought out a wellness product called ‘Well assurance’ to tap into
the health insurance market. The product offers a bouquet of personal accident cover,
health check-ups and spa treatments. The company, which has around 2,000 agents at
present, plans to have close to 3,500-4,000 agents by March 2010.
Weather based Crop Insurance Scheme (WBCIS)
During the Rabi 2008-09 season, this scheme was again implemented in 10 states
namely Haryana, Bihar, Rajasthan, Jharkhand, Karnnataka, Tamilnadu, Kerala, West
Bengal, Chhattisgarh and Himachal Pradesh. The scheme aims to mitigate the
hardship of the insured farmers against the possibility of financial loss anticipated
crop loss on account of anticipated crop loss resulting from incidence of adverse
conditions of weather parameters like rainfall, temperature, frost, humidity, etc.
Policy Initiatives
From June 2009, non-life insurance companies can neither arbitrarily increase the
premium while renewing cover, nor can they reject the renewal of existing health
insurance policies on the premise that claims had been made in the previous years.
The grounds for such rejection have been made rare and exceptional, according to an
IRDA circular.
The Road Ahead
“The insurance regulator has said it sees consolidation in the insurance industry in
2009. The regulator is also concerned over the finances of non-life companies and is
talking to ICAI to assess the audit framework for all insurers in the wake of the
Satyam scandal.”
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 25
“Speaking to ET, IRDA chairman J Hari Narayan said the phase of consolidation is
set to begin and the regulator will soon come out with guidelines for mergers and
acquisitions in the insurance industry.”
(Quoted from: Vidyalaxmi & Preeti Kulkarni, ET Bureau, IRDA sees 2009 as year of
consolidation for insurance industry, 26 Jan 2009,
http://economictimes.indiatimes.com/News_by_Industry/Insurance_Ind_consolidatio
n_in_09/articleshow/4031469.cms)
According to Mr. J Hari Narayan, in the life industry, even eight years after opening
up, only one company has made profit though the industry is doing good. Most non-
life companies continue to make an underwriting loss, which means that their claims
payout is in excess of premium collection.
Life Insurance in India is a US$ 35 billion industry with US$ 24 billion accounting
for First Year Premium (inclusive of Single Premium) and Non-Life Insurance - US$
5.6-billion industry with motor and health segments accounting for 56 per cent of
total business.
According to the Investment Commission of India, the Indian insurance market is
expected to be around US$ 52 billion by 2010. The compound annual growth rate
(CAGR) is expected to be over 30 per cent per annum. The total investment
opportunity is estimated to be US$ 14 billion-US$ 15 billion.
Further, according to a report 'Booming Insurance Market in India (2008-2011)’ by
Research and Markets, total life insurance premium in India is projected to grow US$
253.2 billion by 2010-11. Total non-life insurance premium is expected to increase at
a CAGR of 25 per cent for the period spanning from 2008-09 to 2010-11.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 26
According to Mr. Milind Chalisgaonkar, CEO, Bharti AXA “The General Insurance
market in India is under-penetrated; the current penetration level is at 0.6% which is
way below the Asian average of 2%. Hence, there is still a lot of scope for players to
grow. Segments like Health Insurance are still growing very strongly.”
According to him, the General Insurance industry is looking at a healthy growth rate
of 12-13% this year.
SOME INTERESTING NEWS ABOUT INSURANCE INDUSTRY
1. “Drug sales in India grew nearly 18% in March 2009 due to increasing
penetration of health insurance, favorable regulatory environment and
government support.”
(Quoted from: http://www.rncos.com/Blog/2009/05/Drug-Sales-in-India-Surge-18-
in-March.html)
2. According to online news indiainfoline ”We expect the industry to yield a
positive top line growth, somewhere in the range of 10-15% over the
previous year” says Mr. Kapil Mehta, MD & CEO, DLF Pramerica Life
Insurance Co. Ltd.
(Quoted from: May 11, 2009, Mr. Kapil Mehta, MD & CEO, DLF Pramerica Life
Insurance Co. Ltd, May 08, 2009,
http://www.indiainfoline.com/news/showleader.asp?storyId=762&lmn=1)
3. “Through the bulk deal window, Life Insurance Corporation of India (LIC),
ICICI Prudential, Birla Sun Life and Bajaj Allianz have been net buyers to
the tune of Rs 267.53 crore on the Bombay Stock Exchange (BSE) and the
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 27
National Stock Exchange (NSE)” according to Business Standard, Monday
May 11, 2009.
In the last six months, there was huge opportunity for insurance companies as foreign
institutional investors (FII) were selling and mutual funds were not in a position to
buy.
Insurers said that their appetite matched with the stocks sold by others. During June-
November 2008, insurers were net sellers in this segment as valuations were high.
They sold shares worth Rs 28.64 crore during the period.
(Quoted from: Shilpy Sinha & Swapnil Mayekar, Insurers up exposure to companies
via bulk deals, Business Standard, Mumbai, May 11, 2009, http://www.business-
standard.com/india/news/insurersexposure-to-companies-via-bulk-deals/357640/)
4. “The general insurance sector managed to register a 9% growth in premium
income during 2008-09 in contrast to a 12.63% growth during 2007-08 — a
year when the economy was witnessing a steady growth. By contrast, the life
insurance sector has witnessed a fall in premium income by about 6% during 2008-
09 against the previous year”( Quoted from: General insurers' see 9% growth in
premium income, life cos dip 6%, ET Bureau, 4 May 2009,
http://economictimes.indiatimes.com/Personal-Finance/Insurance/Insurance-
news/General-insurers-see-9-growth-in-premium-income-life-cos-dip-6/
articleshow/4480333.cms)“An insurance cover for job loss does grab attention in
current times”
“ICICI Lombard has recently come with a policy in which payment of equated
monthly installments in the event of a layoff is present as a compulsory rider. Called
Secure Mind, this is a benefit policy, which means that the entire insured amount is
paid, if the insurer accepts the claim”
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 28
( Quoted from: Tinesh Bhasin, Unemployment Insurance, Business Standard, April
19, 2009, http://www.business-standard.com/india/news/unemployment-insurance/
355502/ )
MUTUAL FUNDS
A mutual fund is a financial intermediary set up as a trust that pools the savings of a
number of investors who share a common financial goal.
Investment companies can be of two kinds…closed end and open end.
Closed end investment companies have a limited investment horizon. In these the
investors invest money for a s
pecified time period. The investment company manages the investment for a fixed
period of time and then at the end of the duration, the investments are liquidated and
the clients get their funds back along with the returns.
They are called closed-end mutual funds in USA and investment trusts in UK.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 29
Open end investment companies have an unlimited investment horizon. Their
investible funds and portfolio size keeps on changing because they regularly sell and
buy back their shares.
They are called mutual funds in US and unit trusts in UK.
All mutual funds in India are organized and set-up under the Indian trust act as trusts
except the Unit Trust of India.
Mutual fund operations flow chart
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 30
INVESTMENT COMPANIES
CLOSE-END OPEN-END
(US)
CLOSED-END MUTUAL FUNDS
(UK)
INVESTMENT TRUSTS
(US)
MUTUAL FUNDS
(UK)
UNIT TRUSTS
HISTORY OF MUTUAL FUNDS
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 31
FUND MANAGERS invest inFUND MANAGERS invest inINVESTORS pool their money
withINVESTORS pool their money
with
RETURNS
Passed back to
RETURNS
Passed back to
SECURITIES
generate
SECURITIES
generate
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 32
MUTUAL FUND INDUSTY IN INDIA
Milestones
1964 India’s first mutual fund, US 64 launched by Unit Trust of India.
1987 End of monopoly- UTI’s stranglehold ends as the public sector banks the
mutual fund’s bangdown.
1988 Other financial institutions jump into the fray with the launch of LIC
Mutual Fund
1993 Threat of competition-The industry is thrown open to the private Sector,
Kothari Pioneer Mutual Fund sets a hot pace.
1994 Foreign Mutual Funds arrive.
1997 Mutual Funds in troubled waters CRB Mutual Funds closes up.
2000 Shakeout Imminent.
2001 UTI Crisis
2003 UTI splits up into UTI1 and UTI2
As of August, 2004 more than 75% of the total assets under management were
managed by the private sector mutual funds. This proves the increasing trend of
private sector mutual funds in the market.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 33
United States of America leads in terms of size of mutual fund industry in the
world. The reasons being…
1. Absence of barriers to entry into the US mutual fund industry
2. Presence of multiple distribution channels that make mutual funds easily
accessible to investors
3. Many Americans using retirement saving and education saving as important
investment objectives
ADVANTAGES OF MUTUAL FUNDS
Availability of various schemes and flexibility
Mutual funds provide various schemes to the investors which allow them to choose
among various options. So they can choose between regular income schemes and
growth schemes, between schemes that invest in the money market and those which
invest in the stock market.
Diversification Benefits:
Since the corpus of a mutual fund is substantially big as compared to individual
investments, optimal diversification becomes possible.
Low Transaction Costs:
The transactions of a mutual fund generally being very large attract lower brokerage
commissions (as a percentage of the value of the transaction).
Liquidity
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 34
A mutual fund generally stands ready to buy and sell its unit on a regular basis. Thus
it is easier to liquidate holdings in a mutual fund as compared to direct investment in
securities.
Professional management
To manage a portfolio needs continuous monitoring of various securities and the
innumerable economic and non-economic variables that may affect the portfolio’s
performance. This requires a lot of time and effort on the investors’ side along with
in-depth knowledge of the functioning of the financial markets. Mutual funds are
managed by experienced and knowledgeable professionals whose time is solely
devoted to tracking and updating the portfolio. This saves the time and effort of the
investors.
Tax benefit
In india, no tax is charged on the dividend gained by an investor. So mutual funds
become an important source of gaining returns without paying any tax on them.
Well regulated
All the mutual funds are registered with SEBI and they function within the provisions
of strict regulations designed to protect the interest of investors. The operations of
mutual funds are regularly monitored by SEBI.
DISADVANTAGES
An investor does not normally know about which type of mutual fund to
invest in.
There is always the risk of the fund manager not performing well if he is not
very knowledgeable.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 35
The fund manager may tend to work only towards short term profits in order
to meet his targets and thereby the investor losing long term profits
The management fees charged tends to decrease the return of the investor.
In a security, the investor can decide upon how much earning to withdraw in a
particular period according to his need. But here the profits gained in a
particular year are totally decided by the mutual fund.
FACTORS AFFECTING GROWTH OF MUTUAL FUND INDUSTRY
1. Investor base
The presence of an investor acts as a catalyst for the mutual funds to grow. Different
investors come up with different requirements which encourage the companies to
come up with different mutual fund schemes. This thereby helps in the evolution of
the industry as a whole.
2. Returns on market
The returns generated by a mutual fund are generally reflective of the market returns.
So higher market returns lead to higher returns on mutual funds thereby helping to
boost up the industry as a whole.
3. Investment avenues
Presence of certain investment avenues like money market instruments,
investments in real estate, securitized debt, derivatives etc makes mutual fund
more attractive than direct investments.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 36
TYPES OF MUTUAL FUNDS
Mutual funds can be classified on the basis of:
Term of the fund Open-ended and close-ended
Investment
objective
Growth funds, income funds, balanced funds, specialized
funds etc
Types of investors Offshore funds, pension funds etc
Management style Managed funds, index funds
Load Load funds, no load funds etc
Classification based on the:
1. Term of the fund
An open-ended fund is required to redeem its shares any time the investors wish to
liquidate their holdings and also it remains open for issue. So a relatively higher
portion of its assets needs to highly liquid. Examples are- Alliance-95, Birla
Advantage, Canganga, Unit Scheme 64 etc
The shares of a close-ended fund generally quote at a discount for which investments
in less marketable securities are partly responsible. It can issue shares of mutual fund
only in the beginning, and cannot redeem them or reissue them till the end of their
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 37
maturity. Examples are- UTI Master Equity Plan 98, Reliance FTS dividend, BOB
EISS-9S, ICICI Power etc.
However nowadays this difference between the open-ended and close-ended funds is
becoming blurred as in many countries it is being permitted to redeem close-ended
shares before their maturity and in certain cases, these redeemed shares are even
being reissued.
New types of funds emerging in the market are:
Interval fund is basically an open-ended fund with redemptions allowed only after
certain pre-specified intervals. An extended-payment fund allows an open-ended fund
more days for making payment to the investors on redemption of shares. Both these
kinds of funds can manage their liquidity better than ordinary mutual funds.
2. Investment objective
Growth fund
Some investors look for growth for their capital for which growth fund is the best
option. The objective of a growth fund is to provide capital appreciation over the
medium to long term. Therefore a major portion of these funds is invested in equities.
Examples are- alliance basic industries, reliance growth, Tata, GSF-G etc.
Income fund
For the investors who are seeking regular income rather than capital appreciation,
income fund is the best solution as it provides regular and steady income to investors.
These funds or schemes generally invest in fixed incomes such as bonds and
corporate debentures. These are suitable for old and retired people who need capital
stability and regular income. Examples are- Birla Income Plus-D, Chola Freedom
Income-D, HDFC Income, etc.
Balanced fund
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 38
The aim of these funds is to provide income as well as growth to the investors by
periodically distributing a part of the income and capital appreciation to the investors
or reinvesting (in case of reinvestment scheme) such income and capital appreciation
to enhance the asset value of the fund. The investment is done in the proportion as
indicated in the offer document. Examples are- DSPML Balanced-G, HDFC
Balanced-G, JM Balanced-G, etc
Specialized fund
These funds invest in particular industries, instruments, sectors or markets. Different
types of specialized funds are:
Sectoral Fund…
Money market funds
These generally invest in short-term liquid assets like treasury bills, bankers
acceptances, negotiable certificates of deposit, repurchase agreements, certificate of
deposit (CDs) or commercial papers. The investors get better yield than saving
accounts in this. Examples are- Reliance liquid plan, IDBI-PRINCIPAL Money
Market Fund 1997, UTI Money market fund, BOB liquid fund.
Gilt FundThese funds invest in different types of long and medium term government
securities and highly rated corporate debt. These stick to high quality- low risk debt,
mainly government securities. Examples are FT India Gilt-Investment Plan (G), DSP-
ML Govt. Sec. Fund, Templeton India Govt. Sec.
PROFIT/LOSS CHART FOR VARIOUS LIFE INSURANCE COMPANIES
Company FY 07-08 FY 08-09 MTM provisions
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 39
SBI +34 cr -26 cr 97 cr
HDFC Standard
Life
-243 cr -543 cr 1820 cr
Reliance Life
Insurance
-768 cr -865 cr
Birla Sun Life
Insurance
-437 cr -686 cr
ICICI Prudential -1032 cr -577 cr
Bajaj Allianz profit
(Extracted from: Shilpy Sinha, Losses of Insurers Widen Further, Business Standard,
May 6, 2009, http://www.business-standard.com/india/news/losseslife-insurers-
widen-further/357172/)
“Foreign lender, Standard Chartered, has posted 25 per cent jump in its net profits in
the last fiscal year.
Net profit, during the period, jumped to Rs 1,706 crore as compared to Rs 1,364 crore
in the last fiscal.
StanChart's total balance sheet, in FY 08, grew by 25 per cent to Rs 73,445 crore, up
25 per cent, from Rs 58,891 crore in the year-ago period, the bank said in a press
release issued here today.”(Quoted from: stanchart FY 08 net profit up by 25 percent,
mydigitalfc.com, financial chronicle, june 25, 2008,
http://www.mydigitalfc.com/2008/stanchart-fy-08-net-profit-25-cent)
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 40
“Standard Chartered reaped the benefits of a focus on Asia and a resilient loan book
on Tuesday as it weathered the financial crisis to report record first-quarter profits,
sending its shares to 2009 highs.
The UK-listed bank, which gets two thirds of its revenue from Asia, said consumer
banking income had risen, mortgages had performed well and its key wholesale arm
had had an "excellent" quarter”
(Quoted from: UPDATE 2- Stanchart Weathers crisis in record Q1, REUTERS, May
5, 2009, http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/
idUSL5944160200905
STRUCTURED PRODUCT
A structured product is a financial instrument designed to meet specific investor
needs by incorporating special, non-standard features, including capital protection,
warrant and traditional loan gearing, exposure to overseas equities, commodity and
share index style investment. Such products can help an investor to take advantage
of upward market trends as well as falling or lackluster markets.
Considering that these investments are made in highly liquid securities and are
required to be held (i.e. locked for a defined time period, the service provider can
provide a suitable securities lending facility against such investments. This will help
the client to get additional returns on such investments.
A few innovative structured products:
COVERED LOAN PRODUCT
In this product, the protection is available to the client for the amount borrowed and
invested in equities (cash) market. The client can borrow a specified amount for a
period of say 1 to 5 years, from a service provider. The borrowed amount is fully
invested in a few highly liquid equity stocks. For this purpose, investments are
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 41
permitted only in the top 100 stocks (ranked in terms of market cap) listed in the
Primary Market Stock Exchange.
In order to protect against the fall in the price of such invested stocks and thus the
portfolio, the service provider will cover with a “put option” for the same stocks in
the same proportion and the value as that of the cash market exposure, with the
option period coinciding with the loan period. Thus in the event of fall in the price of
cash market portfolio on the maturity date, the client can exercise a put option. In
such an event, his loss will be limited to the extent of option premium, interest on
loan for the selected tenure besides charges payable to the service provider and the
upfront and trail commission payable to the financial advisors.
On the other hand, if the cash market portfolio value of the equity stocks actually
goes up on the maturity date, the client will profit from the strategy and the option
will be allowed to lapse.
CAPITAL SHIELD
Product Capital Shield
Fund Manager Bajaj Alliance
Maturity Period 5 years
Minimum Investment 5 lacs
Entry load 2% for amount<5 lac and 1% above it
Objective Capital guarantee and extra returns
This is a product in which the client is to pay minimum of 5 lacs for 5 years. For the
amount of less than 5 lacs the entry load is 1% and for more than 5 lacs the load is
2%. The investor is given full capital guarantee on the maturity of the product. 80%
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 42
of this amount is invested in government securities and the remaining 20% in in
stocks. The investor is also given around 15% of total return in the end. No capital
guarantee after 45 years.
Implications of the product: Actually as we know that government securities give
guaranteed return, so this 80% of the investors capital becomes more than 100% in 5
years thus capital shield. The fund manager has the authority to trade with 12 times of
the cash it has in the stocks. This 20% amount is subjected to the risk of market
conditions depending upon which the investor gets returns.
Apart from the 1% or 2% entry load, the charges related to every product like
mortality rate and fund management charges are also cut which is nominal for every
product. The fund management charges are about 2.75% pa and the mortality rate
around 2% pa. The mortality rate increases with the increase in age of the investor
and it is more the investors whose age crosses the age of 45.
Why these products are attractive?
As seen above, some of the products require limited initial investment from the
investor. In case the investor desires, he can borrow from the bank/ service provider
to take exposure in such attractive products. Besides the capital protection offered by
the bank greatly helps investors to test the sophisticated and diversified product in a
gradual way before moving to more risky products.
During the recent market turmoil, we have seen several investors getting severely
affected due to their exposure to various leveraged products such as margin lending
or pure derivative products. These products necessitate maintenance of periodical
margins besides constantly tracking the market movements. On the contrary, some of
the structured products help investors to have exposure to diversified products with
medium term perspective, besides participating in the upside potential offered by
these products, without spending too much time to track the daily market movements.
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 43
Thus more than ever before, the recent market developments have demonstrated that
a diversified portfolio is the primary tool in portfolio risk management and structured
products with varied risk profile will be handy to meet the needs of various client
profiles.
Structured products in India
According to one report, the structured product industry in india is estimated to be
worth over Rs 10,000 Cr. A few leading global banks and a few mutual funds are
reported to be the leading players in this field. It has been reported that several High
Net Worth individuals have invested in structured products to protect their profits
made during the Bull Run in the equity market. Further some of the investors with
lesser risk appetite have also invested in such products as the products were supposed
to guarantee the return of the capital invested.
However it has been reported in the media that substantial part of money raised have
been invested in unsecured debentures issued by Non-Banking Finance Company
(NBFC). With the NBFC’s being the counter party in such transactions having taken
hit in the recent past, the matter of guarantee has been the focus of attention these
days. Thus though structured products are in nascent stage in India, due to these
developments, brokers are reportedly unable to push these products to their clientele.
It is hoped that despite the initial teething problems faced in the Indian market, one
can see launch of several new structured products to capture various market
opportunities. If banks in India also package suitable structured products having
exposure to global indices, it will provide good opportunity to Indian investors to
diversify their portfolio across various asset classes with limited investment.
I got this in conceptual details with help of company guide during
Matrix training
Mr Rajat Handa- has 80% of work experience with HSBC
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 44
Normally 10%-20% of the total sale of a bank is equity and remaining 80% is debt.
The period from 2000-20001 was known as “dead party”. Same cycle has been
repeated in last 6-7 months.
Equity holders are the owners of the firm and they get the profit of the firm in the end
after distributing to all shareholders.
Debt is a kind of loan or borrowing. It has three components viz principal, maturity,
interest (coupon)
STRIPS (Specially Traded Registered Interest And Principal Security)- These are
debt instruments not prevalent in india. The whole bond is divided into separate small
strips which are traded individually.
Zero coupon bond or discount bond or deep discount bond- If the bond is providing
with no coupon or interest then why should an investor invest into such a bond? The
answer is such bonds are sold at discounts and at the time of maturity, they get the
face value of the bond i.e. the benefit to the customer is the principle.
Floating rate bonds are based on some benchmarks. For e.g. MIBOR, GOI 10 year
yield
The extendible bonds are same as floating rate bonds.
Call option- It is the right of the issuer to give back the money prematurely.
Put option- It is the reverse of the call option i.e. right of an investor to take back the
money prematurely.
Tata capital debentures which were sold recently in standard chartered bank were non
convertible bonds. They had call option after 36 months.
We have UP state electricity bonds.
Government Securities or G Secs
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 45
Gilt fund- They gave more than 10% return in the first week of January 2009. In a
single month they even gave more than 20% return. But again they can give very low
returns also at times.
So gilt funds as well as equity are risky and both can give double digit returns.
In an auction, if it is yield based, the person who demands the lowest yield build gets
the bond and in the price based auction, the one who offers highest price gets the
bond.
SGL or Subsidiary General Ledger- This is similar to D-Mat accounts.
CSGL account- Constituent SGL account
The maximum time for G-secs is 30 years and minimum time is 2 years. 60% to 70%
of debt market is owned by G-secs.
The time limit for corporate debts is 1 to 12 years. It has only 4% of market share.
There can be liquidity problem in selling a corporate bond.
Credit Rating Agencies- CRISIL, ICRA, CARE, FITCH
Mutual funds can invest in unrated bonds but not in low rated bonds.
Yield spread- It is the difference between G-sec yield and corporate rate bond yield.
Higher the yield spread, higher the coupon rate of corporate bond, lower the rating of
the corporate bond. For e.g. A BBB rated company will have to offer more yield than
AAA rated company.
I have to have at least credit rate of 2 to come up with a bond.
Money Market Debt Instruments
1. Treasury bills
2. Commercial paper
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These instruments mature in less than a year.
Money market risk- There is negligible money market risk because there is no default
risk.
On 1st may it was said that all liquid funds need to have their average maturity down
to 3 months.
Liquid fund- you should have 10% mark to mark. (25% DDT)
Liquid Plus Scheme- It tweaks liquid fund returns. (Increases returns by 4%-5% and
sell as debt where tax is half of liquid fund, around 12.5%) Its nomenclature was
changed to “money manager” by government.
Commercial paper- In this the stamp duty is the least. 90 day CP, return is as high as
1.5%.
Certificate deposits- The issue of certificate deposit (CD) is like a FD. It cannot be
prematurely encashed but can be transferred. There is a benefit of banks. Its maturity
is less than a year. The minimum maturity period is 7 days. 1 lakh is usually the base
amount.
Negotiable instrument
The interest rate is slightly higher than F.D.
Repo- right now its value is 5% (huge fall from 9%)
Reverse repo- 3.8%
Mutual funds can lend money in the market.
CBLO- It is a part of mutual fund portfolio (5% nowadays) Collaterized Borrowing
and Lending Obligation. It is regulated by CCIL, and is similar to repo. Repo is
regularized by RBI. Mutual funds one of the largest lenders in CBLO. The maximum
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 47
time limit is 1 year. Market practice is not more than 90 days. You can prematurely
demand back or return back.
Treasury bills are discounted bonds.Indices and benchmarks
Equity- sensex and nifty
Debt- There are 3 indices CRISIL Comp BEX (for long term bond funds)
Liquid FEX (for liquid bonds)
STBEX (for short term funds)
Bond valuation-
P0= CF/ (1+r) ^1 + CF2/ (1+r) ^2 + ….. + CFn/ (1+r) ^n
P0=price at time 0
CF1= cash flow expected at time t
R= d/c rate (reflecting asset’s risk)
n= no. of discounting periods
All starting terms will have coupon got every year e.g. Rs 100. On maturity, principle
+ coupon
RTT- Risk tolerance test
Longer the maturity period, lower is the present value of the bond.
Do not sell a long maturity bond to a risk averse customer.
The document which will give you average maturity of a mutual fund is fact sheet.
The gilt fund maturity is more than 9 years. Lower coupon bond is more sensitive to
interest rates.Longer term bonds are more sensitive to changes in interest rates.
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Yield to maturity (YTM) is similar to IIR
Yield curve: x axis-time to maturity
Y axis- yield
If YC is flat or downward sloping, it may lead to recession. FIIS look into y-curve
before investing.
Risks related to equity
1. Market risk
2. Company specific risk
3. Default risk
Risks related to debt
1. Default or credit risk
2. Interest rate risk measured by duration (higher the rating lower is the risk)
3. Reinvestment risk
4. Liquidity risk
Duration- ZCB’s (zero coupon bond)
The relationship between weighted average maturity vis a vis price of the bond.
Duration is interest rate risk. Because the price of a bond with name more duration
will fluctuate more.If 1% increase in yield and duration is 5, the price decreases by
5%.This is why the gilt funds have either very high (jumped) interest rates or
extremely low interests.
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Gilt funds are the riskiest when it comes to duration because it has highest duration.
Then corporate fund, then short term fund. The least risky is money market funds.
How fund managers manage duration?
If they know interest rates going down, they increase the duration. But if these rates
start increasing, such long duration would punch back.
Debt fund taxation
Marginal rate of taxation can be without dividend or with dividend.
Long term rate of taxation-
Indexation - benefit of inflation.
Inflated or indexed cost price
With indexation- 20% of indexed price
Without indexation- you pay flat 10%
Monetary instruments
CRR +/- Cash Reserve Ratio
NDTL Net Demand and Term Liabilities: a percentage of NDTL is calculated every
fortnight Friday with RBI (around 5%)
RBI decreases CRR to encourage banks to lend more.
SLR +/- Statuary Liquidity Ratio- It is very similar to CRR. The banks need to keep
some fixed percentage of their assets with RBI in three forms- cash, gold,
unencumbered securities. Current SLR is 4%. Currently almost Rs 20 lakh Rs lying
with RBI as SLR. If RBI decreases SLR, too much supply of government securities
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or gilt funds in the market.MSS & OMO- market stabilization scheme & open market
operations– MSS is the indirect way of borrowing.
THE EMERGING MARKET FOR MUTUAL FUNDS AND
INSURANCE
According to an Ernst and Young study, titled ‘The Dhoni Effect: Rise of Small
Town India’, 22 key urban towns (KUT) such as Chandigarh, Ahmedabad, Jaipur,
Lucknow, Indore or Pune have three-fourths or more of the affluence levels of
Mumbai. On growth potential, they do even better.
(Quoted from http://www.blonnet.com/2008/03/20/stories/2008032052300500.htm)
This study suggests that Lucknow, being a semi-metro city is standing as a very
potential market in the present scenario. So insurance and mutual fund business has
also a very bright future in lucknow. Not only the city, the rural areas around
lucknow have also a huge potential to invest in such products
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BAJAJ ALLIANZ LIFE INSURANCE CO. LTD
1. Unit Link Plan
In this the customer has different investment options. He can invest his money in
equity fund or debt fund or bond fund or cash fund. The premium has to be paid for 3
years. The investor can withdraw money after 3 years. In case of any mishappening,
the risk cover is up to 10 times the amount invested. There is a tax rebate under
section 18 and section 10 10(b). The minimum amount to be invested is Rs 2000 and
the age limit is 18 to 65 years.
2. Pension Plan (Future Secure Plan)
Under this plan, premium for 3 years is to be invested. The minimum premium is of
Rs 10,000. The vesting age i.e. the age from which the investor wants to get the
pension is under investor’s discretion which can be from 40 years of age to 60 years
of age. The pension is gained lifelong. For example: if a client invests a premium of 1
lakh for 3 years at the age of 31, 32, 33 respectively, then he will get a pension of
around Rs 30,000 per month from 45 years of age.
3. Traditional Plan
Under this we have 3 products
i. Invest Gain Plan
Under this plan, the investor can invest minimum of Rs 10,000 for 15 years. He gets a
guaranteed return of 3.25% of per 1000 Rs invested of the sum assured.
ii. Child Gain Plan
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Standard Chartered Bank Lucknow at Shahnajaf Road
It is an Endowment Plan and 2 lives are insured in this, one the parent, another, the
child in whose name the policy is made. The categories are 21/21+/24/24+. The
maturity age for the plan 21 and 21+ is 21 years of age and 24 for 24 and 24+. The
minimum and maximum age of entry of a child is 0 and 13 years. Thus the minimum
and maximum policy term for the plan 21 is 8 and 21 years and for plan 24 is 11 and
24 years. The minimum and maximum age of entry of a CLA i.e. Child Life Assured
(parent) is 20 and 50 years of age. The minimum and maximum sum assured are 1lac
and 50 lacs of rupees. The minimum premium is Rs 5000/- annually. The minimum
payment term is 5 years.
There is an inbuilt FIB (Family Income Benefit) rider in this plan which means that in
case of any mishappening to the parent, the child is given 1% of the sum assured
every month till the end of tenure. The payouts start at the age of 18 years of the
child.
Recent News of Bajaj Allianz
“In a move unprecedented in the Indian insurance industry, Bajaj Allianz has decided
to integrate key functions in its life and general insurance companies.”
Currently, the company has had to endure higher operating costs, as it has had to
invest twice over in rent, equipment and property to support both companies. Also,
processes are decentralized now, leading to a lot of redundancy. Though both
companies i.e. Bajaj Finserv (de-merged from Bajaj Auto) and German insurer
Allianz SE have the same parent, the present structure makes it difficult to cross-sell
products and increases the value per customer, as they are structured as separate
entities.
(Quoted from: Chandra Ranganathan, ET Bureau, Bajaj Allianz to integrate key life
& non-life ops, May 1, 2009,
http://economictimes.indiatimes.com/Insurance-news/Bajaj-Allianz-to-integrate-key-
life--non-life-ops/articleshow/4469930.cms)
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“The Bajaj Group of companies, India’s largest manufacturer of two- and three-
wheeler vehicles, is planning to expand its financial business footprint. The group,
which is already operating in the insurance and asset finance space, has not ruled out
banking operations too”
(Quoted from: BS Reporter / Chennai, Business Standard, Bajaj eyes banking space,
to strengthen financial business, April 29, 2009,
http://www.business-standard.com/india/storypage.php?autono=356536)
ANALYSIS OF QUESTIONNAIRE
2. Which insurance company have you invested in?
a) Birla plus b) Max New York life
c) Bajaj Allianz d) LIC
Fig.1(a)
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Fig.1(b)
From the response of 120 respondents we find that 82.33% investors prefer LIC as their first choice where as 50% prefer Bajaj Allianz life insurance.
Fig.1(b) shows one or more option chosen by the investors.
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From this question we find that most of the people who have taken LIC are either satisfied or they are very satisfied while the people who took other insurance are neither satisfied or dissatisfied or they are not at all satisfied with the services provided by that insurance company this is shown in the fig. given below.
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4. Do you buy insurance for..........
a) Life cover b) Return
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c) Tax benefit d) others.......
There is a mix response but maximum people buy insurance for life cover and tax benefits.
5. Which kind of insurance would you go for?
a) Money back b) pension plan
c) child gain d) ULIP
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From the given plans 46.8% have child plan, 42.6% have pension plan, 46.8% have ULIP and 36.2% have money gain. So there is not much to comment as investors invest according to their needs.
6. Through whom do you buy insurance product?
a) Agent b) Broker
c) Bank assurance d) corporate agent
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49% investors buy insurance from the agent of the respective company. Only 30% of the total investors buy through bank.
7. What would you opt if you have a choice?
a) High risk, high return b) Moderate risk, moderate return
c) Low return but negligible risk d) Capital preservation model
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Around 42% prefer moderate risk, moderate return and 35% go for capital preservation model. Most of the investors don’t find suitable to invest their money in high risk schemes.
8. For how long would you like to invest?(tenure)
a) 1-4yrs b) 4-7yrs
c) 7-10yrs d) more than 10yrs
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This bar chart shows that the investors who invest in high risk, high return generally are the short term investors and investors who invest for their preservation of capital are long term investors.
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Investors who invest in money back and in Ulip are short term investors i.e., they invest for 1-4 yrs term whereas child gain and pension plan’s investors invest for long term generally for more than 10 yrs.
The above 4 graph shows the cross analysis of tenure and the plans.
9. You have opted this policy in persuasion of...
a) Self-awareness b) Relatives
c) Advisor d) other....
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Advisor either bank advisor or CA of the investors are the one who influence them for investment. But self awareness is also their to protect the future of their lives by taking insurance.
11. Which service you prefer the most?
a) Prompt claim settlement b) timely receivables
c) Facilitating premium submission d) facilitating premium submission
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Most of the investors look for the premium facilitating submission and prompt claim settlement as the most important service that should be provided by any company.
12. Do you keep track of various schemes of investment from different companies?
a) Yes b) no
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It was really the most unexpected thing that about 65% of investors are not aware what is going around them. They are unaware of the
new launches of schemes. This shows the loyalty of the customers for LIC.
13. Rank the aspects below of an insurance scheme which you look
into before investing into it in the order of your preference: (type 1
in the box you feel your preference is)
Least
preferred
Less
preferred
preferred More
preferred
Most
preferred
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Return
Less
premium
term of
plan
High
benefit
term
Risk
associated
Charges
related
Your
advisor
perspective
Newspaper
article or
financial
magazines
WOM
Riders
attached
with
scheme
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Flexibility
Risk cover
Entry age
Tax benefit
The above graph shows the attributes chosen by the given
number of respondents.
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Ranking of the attributes as preferred
ATTRIBUTES RATING
Return
Less premium
term of plan
High benefit
term
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Risk associated
Charges related
Your advisor
perspective
Newspaper article or
financial magazines
Word of mouth
(i.e. common man’s view)
Riders associated with the scheme (i.e.
add on benefits associated with it)
Flexibility
(option to withdraw after 3 years)
Risk
Cover
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Entry
Age
Tax
Benefit
LEAST PREFERRED
LESS PREFERRED
PREFERRED
MORE PREFERRED
MOST PREFERRED
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KMO and Bartlett's Test
.714
375.440
78
.000
Kaiser-Meyer-Olkin Measure of SamplingAdequacy.
Approx. Chi-Square
df
Sig.
Bartlett's Test ofSphericity
Bartlett’s test of sphericity is a test statistic used to examine the hypothesis that the
variables are uncorrelated in the population that is the correlation matrix is the
identity matrix. It’s value if greater than .5 suggests that the data is good for factor
analysis.
From the above table, .714 value of KMO suggests that the data is favourable for
doing factor analysis. I have 13 variables in my likert scale and the sample size used
for testing is 113. The significance value is 0 which is less than .05. Thus it nullifies
the hypothesis that the correlation matrix is the identity matrix. Thus the variables
used have some correlations among them , thus good model for doing analysis has
been proved.
Communalities
1.000 .631
1.000 .689
1.000 .666
1.000 .583
1.000 .593
1.000 .593
1.000 .532
1.000 .546
1.000 .597
1.000 .382
1.000 .768
1.000 .670
1.000 .813
V1
V2
V3
V4
V5
V6
V7
V8
V9
V10
V11
V12
V13
Initial Extraction
Extraction Method: Principal Component Analysis.
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Communality is the extent of variance a variable shares with all the other variables
being considered. This is also the proportion of variance explained by the common
factors.
For e.g. In the above table, variable 1, that is return of the insurance scheme is
sharing 63.1% of variance with all other variables. Variable 2,that is less premium
time is sharing 68.9% variance with all other variables. V13 i.e. Tax benefit shares
the highest variance of 81.3% with all other variables.
Total Variance Explained
3.553 27.333 27.333 3.553 27.333 27.333 2.395 18.426 18.426
1.842 14.167 41.500 1.842 14.167 41.500 2.113 16.257 34.683
1.474 11.342 52.842 1.474 11.342 52.842 1.833 14.098 48.780
1.192 9.171 62.013 1.192 9.171 62.013 1.720 13.233 62.013
.888 6.828 68.841
.728 5.597 74.438
.664 5.106 79.543
.559 4.299 83.842
.533 4.098 87.940
.509 3.919 91.859
.411 3.162 95.021
.362 2.783 97.803
.286 2.197 100.000
Component1
2
3
4
5
6
7
8
9
10
11
12
13
Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cumulative %
Initial Eigenvalues Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
Extraction Method: Principal Component Analysis.
The above table shows that 4 factors are having Eigen values greater than 1. The total
variance explained by each factor is its Eigen value. So the variables can be divided
into 4 factors. The total variance explained by these 4 factors is 62.013%. Factor (1)
explains 18.43% of variance, factor (2) 16.26%, factor (3) 14% and factor (4) 13.2%.
n
The above screen plot shows that actually there are only two very prominent factors
which can be taken into consideration. But from the Eigen values shown on the plot,
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it is very clear that 4actors have Eigen values more than 1. So we will consider 4
factors.
Rotated Component Matrixa
.627 -.261 .280 .302
.825 .022 .054 -.065
.715 .367 -.097 .106
.077 .046 .753 .086
.118 .200 .707 .199
.045 .524 .557 .079
.246 .658 .195 -.024
-.027 .723 .149 .015
.493 .569 -.113 .132
.550 .252 .119 .041
.214 .009 .184 .829
.365 .491 -.490 .234
-.051 .089 .066 .893
V1
V2
V3
V4
V5
V6
V7
V8
V9
V10
V11
V12
V13
1 2 3 4
Component
Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.
Rotation converged in 11 iterations.a.
Rotated component matrix shows the amount of variance of each variable explained
by each factor. The above table shows that factor 1 will include variables 1, 2, 3, 10
i.e. Return, less premium term, high benefit term and flexibility. We can name them
collectively as “features less related to insurance products”
Factor 2 would include variable 6, 7, 8 that is advisor’s view, different articles view,
word of mouth. We will name it as “others opinion”.
Factor 3 would include variable 4, 5, 9, 12 that is risk associated, charges related,
riders associated with the product, entry age. We can keep all these variables under
one umbrella of “features less known by people”.
Factor 4 would include variable 11, 13 i.e. risk cover, tax benefit. This factor can
certainly be named as “features best known for insurance by Indian market
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FACTOR 1 FACTOR 2 FACTOR 3 FACTOR 4
features less
related to
insurance
products”
others opinion features less
known by people
features best
known for
insurance by
Indian market
Return advisor’s view risk associated risk cover
less premium term different articles
view
charges related tax benefit
high benefit term word of mouth riders associated
with the product
Flexibility entry age
Regression Analysis:
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Model Summaryb
.890a .792 .785 .347Model1
R R SquareAdjustedR Square
Std. Error ofthe Estimate
Predictors: (Constant), REGR factor score 4 foranalysis 1, REGR factor score 3 for analysis 1, REGRfactor score 2 for analysis 1, REGR factor score 1 foranalysis 1
a.
Dependent Variable: Yb.
R, the multiple correlation coefficient, is the correlation between the observed and
predicted values of the dependent variable… here it is the buying behavior of
customers. The values of R for models produced by the regression procedure range
from 0 to 1. Larger values of R indicate stronger relationships… here it is .89.
R squared is the proportion of variation in the dependent variable explained by the
regression model. The values of R squared range from 0 to 1. Small values indicate
that the model does not fit the data well. The sample R squared tends to optimistically
estimate how well the models fits the population. In the above table the value of R
square is .792 which suggests that 79.2% of variance in the dependent variable i.e.
the buying behavior is affected by the independent variables i.e. different features of
an insurance product.
Adjusted R squared attempts to correct R squared to more closely reflect the
goodness of fit of the model in the population. Here its value is .782 again suggesting
that 78.2% of variance in Y is explained by variance in all Xs.
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ANOVAb
50.350 4 12.587 104.771 .000a
13.216 110 .120
63.565 114
Regression
Residual
Total
Model1
Sum ofSquares df Mean Square F Sig.
Predictors: (Constant), REGR factor score 4 for analysis 1, REGR factor score 3for analysis 1, REGR factor score 2 for analysis 1, REGR factor score 1 foranalysis 1
a.
Dependent Variable: Yb.
The sum of squares, degrees of freedom, and mean square are displayed for two
sources of variation, regression and residual.
The output for Regression displays information about the variation accounted for by
the model which is 50.35% in the above table. The output for Residual displays
information about the variation that is not accounted for by the model which is
13.21% here. And the output for Total is the sum of the information for Regression
and Residual i.e. 63.565% here.
A model with a large regression sum of squares in comparison to the residual sum of
squares indicates that the model accounts for most of variation in the dependent
variable which is true here.
Very high residual sum of squares indicate that the model fails to explain a lot of the
variation in the dependent variable, and we may want to look for additional factors
that help account for a higher proportion of the variation in the dependent variable.
If the significance value of the F statistic is small (smaller than say 0.05) then the
independent variables do a good job explaining the variation in the dependent
variable.
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Coefficientsa
3.217 .032 99.542 .000
.435 .032 .583 13.407 .000
.378 .032 .506 11.649 .000
.240 .032 .322 7.405 .000
.227 .032 .304 6.986 .000
(Constant)
REGR factor score1 for analysis 1
REGR factor score2 for analysis 1
REGR factor score3 for analysis 1
REGR factor score4 for analysis 1
Model1
B Std. Error
UnstandardizedCoefficients
Beta
StandardizedCoefficients
t Sig.
Dependent Variable: Ya.
The unstandardized coefficients are the coefficients of the estimated regression
model. Often the independent variables are measures in different units. The
standardized coefficients or betas are an attempt to make the regression coefficients
more comparable. The t statistics can help us determine the relative importance of
each variable in the model. t values well below -2 and well above +2 are good.
Let F1 be factor 1, F2 be factor 2….as got from the factor analysis. Then,
The regression equation of our model as deduced from the table is
Y= .583F1+.506F2+.322F3+.304F4+3.217 i.e.
Buying Behavior= .583“features less related to insurance products” + .506“others
opinion” + .322 “features less known by people” + .304 “features best known for
insurance by Indian market” + 3.217
This means any change in factor 1 will produce most impact on the buying behavior
of customers since its beta coefficient is the maximum.
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LITERATURE REVIEW
Private Life Insurance Companies in India: Strategizing Ways to Overcome the
Product Selling Challenges
Sandeep Ray Chaudhary and Joy Chakraborty
The Icfai Journal of Risk & Insurance
This article deals with the in depth study of the different strategies adopted by the
private insurance companies in india to overcome the product selling challenges in
the Indian life insurance market. More and more players are trying to catch hold of
Indian insurance industry, it being the booming industry. But the main challenge
faced by the private insurance companies is the monopoly of LIC still today. So they
are continuously trying to find out innovative ways to attract more and more
customers by providing them with tailor made products.
Introduction
The life insurance industry in India had witnessed a significant surge in those years
that numerically raised the insurance players to 16, almost from the scratch. The
Indian life insurance sector had got the much needed boost that reflected in a 15% to
16% annual business growth every year since the arrival of the private players in the
scene. The private players had even recorded a 26.6% market share at the end of
2005-06 (chakraborty, 2007) despite the dominance of Life Insurance Corporation of
India (LICI). Their success could be attributed to numerous factors including the
innovation of highly customized products and aggressive marketing strategies that
they resorted to. Going by the preexisting dominance of LICI I the Indian market, the
private insurers had to tread through a lot of challenges before finally establishing
themselves in the Indian insurance market. Apart from this, there were several other
regulatory dilemmas that acted as a hindrance in the way of the private insurers. The
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private life insurance companies confronted several other obstacles pertaining to
product-selling and luring of investments owing to the rising competitiveness in the
country’s upcoming sector.
According to the paper, “insurance is not bought, it is always sold”. Because of the
intangible nature of the insurance products and lack of awareness among the masses,
an insurance agent has to endeavor a lot in explaining about the product’s actual
benefits before a customer finally buys it. Some of the challenges faced by the
insurance sellers are as follows:
a) Low Consumer Response
Due to the push-selling strategies and inappropriate call timings, the private players
were not able to capture the full attention of the customers. All the private companies
following the same aggressive marketing strategies like telemarketing has raised the
competition to a certain level for all of them result into low customer response.
b) Lack of knowledge about insurance benefits
People in India perceive an insurance product as a tax saving or life coverage device,
they lack in the awareness about various other benefits of them.
c) Lack of the trust in private life insurance companies
The private organizations are often found to be involved in scams and fraudulent
activities that further strengthen the preconceived notions of indian customers about
the private companies. As a result people still believe in public organizations like
LICI.
d) Target oriented business environment
The intense rivalry among the private players has resulted into insurers giving
astronomical targets to their agents. So instead of customers need-based selling, the
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agents pay more heed to number-game resulting into push-selling and thereby
customers’ low satisfaction.
e) Competition from Alternate channels of investment
Most of the insurance products have longer lock-in period and unattractive interest
rates. Thus people believe that government bonds, mutual funds fixed deposits and
post office savings carry a higher interest rate and flexible investment periods. Indian
people are more interested in quick and high returns rather than security.
f) Ineffective distribution channels
Banks, corporate agents, referrals, channel partners and broking firms serve as
distribution channels for life insurance companies to reach out to the masses. These
are often found to be incompetent in terms of marketing aspect of the insurance
products of the customers. Many times they close down in the midway because of
improper delivery facilities.
g)Lack of skilled agents
Most of the agents of insurance companies lack in sound academic and financial
background which results into miscommunication with the customers about the
products and their benefits. They also lack in right kind of attitude that is required for
customer dealings and on-the job training programs.
h) Lack of penetration in rural areas
The rural areas of India are the maximum GDP contributing sector of the country,
which is often neglected by the private insurance companies because of lack of
infrastructural, transportation and distribution facilities. As a result it has been again
tapped by LICI.
i) Inadequate pay structure of the agents
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The agents normally get very less amount of commissions on the basis of number of
policies sold by them; they handle a lot of pressure on the daily basis because of the
astronomical targets set by the insurers. This results into lack of motivation in them
and thus poor performance.
j)Trade barriers
Entry restrictions and operational barriers are the two trade barriers responsible for
the underperformance of country’s insurance sector. There are regulatory dilemmas
associated with the stake (26%) of a foreign insurance partner who is entering into a
joint venture with an Indian partner. An another barrier is the mandatory investment
of Rs 100 crore that an insurance company has to maintain with the IRDA for
obtaining the license to commence its operations in india.
Strategies to overcome the challenges
a) Innovative products
Private companies have succeeded to some extent to break the preconceived notion of
people regarding insurance as only a tax-saving product. For this they are coming up
with different innovative products which are tailor-made for customers according to
their needs. The insurers focused on the financial protection and long-term wealth
creation and have four different types of products in their kitty, commonly known as
PIPS (Protection-Insurance-Pension-Savings). They try to gauge the needs of the
customers and their financial capability before offering them the product which
would suit their preference. For e.g. many companies are nowadays coming up with
structured products to bring about innovation in their products.
b) Good relationship with customers
Today’s customer is insatiable in terms of rapid change in his preferences, their
demand of getting the service at any place, anytime, preoccupied with overload of
information etc. So to satisfy them an agent needs to maintain good relationship with
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the customers and try build to gain their full trust. He/She needs to give his/her
customer the right kind of product after gauzing his/her needs and avoid push-selling
strategy.
c) Technology
Inspite of the growing use of new technology like internet and sms for
communicating with the customers which are cheaper and easier, it has not gained
much popularity among the customers. New technology challenges the traditional
methods of the insurers in terms of changing distribution channels, facilitating
customer-relationship management and enhancing customer services.
The issue of online claim processing through the web-based software has been a topic
of focus for the insurers, although the attempt to implement such cost-effective
system so far has been less than successful. The Knowledge-based Expert System can
been used more directly as a training tool for the salespeople. With the help of it, the
salespeople are able to match various products with the needs of the customers and
deal with more unusual and unique customer cases. This would result into effective
selling and reduced direct selling costs.
d) Agents
I. Skills
It is said that 80% of the revenue comes from the 20% of salespeople i.e. 80-20 rule.
It means that the knowledge and skill of a salesperson plays very important part in the
final conversion of a call. So this 20% are those salespersons who have a very good
relationship with their customers. The more sincerity a salesperson shows to his
customer, the more likely would be his chances of maintaining a high level of
interaction with the customers. The relationship quality between a salesperson and a
customer is indirectly related to the intension of the customer of doing business with
him in future and his intension of giving referrals. There are three broad dimensions
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of relationship selling that consists of interaction intensity, mutual disclosure and co-
operative intentions.
II. Selection Criteria
This stage is the foundation to get the right kind of salesperson needed to get
maximum benefits. The companies must have their vision clear so that they can give
right training to their salespersons. The selection criteria can be divided into several
general categories such as physical traits, individual behaviors, psychological traits
and aptitude. Training would make the agents more responsive to the pre-sale,
during-sale and after-sales service.
III) Training initiatives
The agents must be quick enough to adapt to the new technology like providing their
customers with user-friendly web pages that make online quotes, underwriting,
claims adjustments, etc so that the customers remain loyal to them. Routine
interaction with the customers via e-mails, telephone or personal contacts helps to
develop a sound relation with customers. The expert system helps the agent with a
series of questions followed by several answer choices. The user enters the
corresponding question for the relevant response. The whole process continues until
the agent persuades the customer in getting an appointment, a faxed contract, or a
brochure.
III. Nature of customers
The agents should look forward to long term relationship with their customers rather
than Law of Large Numbers (LLN). They should try to build sound relations with
them so that the customers submit timely premiums and deal with them always in the
future.
Marketing Strategies
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Today, the customer is very satiable in terms of rapid change in his preferences,
expectation of service at any place at any time, demand of variety of products under
the same umbrella or because of overload of information. This has happened due to
many reasons including globalization, access to better technology etc. Also the
insurance transactions, instead of strictly market-based decision, often result on
account of activities pertaining to relationship marketing that the agents undertake
from time-to-time. Also the agents have to keep themselves updated about the
companies’ expectations and policies from time to time. For e.g. HDFC Standard Life
had introduced gold and silver cards for those salespersons that outperform their
target before their stipulated time. Under this scheme they also get the opportunity of
holiday tours to the place of their choice. Such kinds of practices keep the employees
motivated to do their job. In this competitive environment, the traditional methods of
marketing are not sufficient to attract customers. Television advertisements and
telemarketing are some new ways to do so but insurers have to think of more
innovative ideas to market their products.
Alternate Distribution Channels
As a part of their marketing strategy, the private life insurance companies resort to
several distribution channels such as banks, brokers, corporate agents and other
intermediaries to reach out to the masses throughout the length and breadth of the
country. The emphasis has now shifted from single-unit sale towards multiple-
product selling. The channel partners help the insurance companies to augment their
sales figure in return of a hefty commission. SBI Life had launched its “Integrated
Bancassurance” strategy by utilizing its seven associate banks through the launch of
its Super Suraksha Group Insurance Scheme to the deposit account holders of those
associate banks.
Other Strategies
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The insurance companies have followed many other marketing strategies like tie-ups
with Regional Rural Banks (RRBs) for selling micro-insurance products, tie-ups with
hospitals for selling health insurance products, tie-ups with retail outlets such as
Pantaloons and Big Bazaar and offering insurance products based on the amount of
purchases made by the customers, online marketing or e-marketing, opening up of
makeshift sales outlets in different rural and semi-urban regions of the country. The
selling of the insurance products through the retail outlets is expected to move up in
the future because of the foray of Future Group into the insurance sector, which has
retail outlets like Pantaloons and Big Bazaar under its belt. Reliance Life Insurance
Company Limited has already taken this initiative by providing its product “Express
Life” over the counter.
Future Prospects
The government of india was not far behind in speeding up the development in the
insurance sector and even came forward with the introduction of a “comprehensive
insurance amendment bill” that would hike the investment limit of the foreign players
from 26% to 49% (chakraborty, 2007), at that time awaiting the government’s
approval.
The FDI hike would enable the foreign insurers to infuse fresh capital into the indian
insurance sector through the indian counterparts. Moreover, this would increase the
presence of the foreign investors in the indian insurance market. The entry of the new
private players would make the indian insurance market highly competitive with
ample opportunities in terms of business and volume. With several entry proposals
being on the pipeline, the IRDA recently granted permission to pantaloons and Italy –
based Assicurazioni Generali as the new private liufe insurer to commense their
operations in the indian insurance sector. This new joint venture would surely open
new and much-improved avenues of insurance distribution along with the other
conventional formats prevalent in the country. The Indian Union Budget (2007-08)
has even emphasized the development of the country’s insurance sector with
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deductions in medical insurance-u/s 80D being raised to Rs. 15000 and Rs 20000 for
general and senior citizens respectively( chakraborty 2007).
Besides these, the government of India has come out with numerous reform
initiatives to amend the insurance laws for the benefit of the society at large. Among
the most notable ones are the mandatory collection of customer’s signature in the
sales illustration sheet by the agent while selling unit linked products (ULIPs).
Moreover, the proposal put forth by the Department of Economic Affairs (DEA) to
amend the existing provisions of the insurance act is a big initiative taken by the
Indian government to impose the life insurers to honour a policy at the time of claim
settlements rather than questioning its validity (chakraborty, 2007). The IRDA has
even come down heavily on the life insurance companies that were claiming to offer
astronomical returns on their products, in order to make the system flawless. In a
move aimed at protecting consumer’s interest, the Bombay High Court’s decision to
allow trading of life insurance policies in India received accolades from the industrial
world.
The insurance companies in India may soon have more flexibility in investing in
corporate bonds and mortgage-based securities so that they can enjoy higher yields
from their investments. But they would only be allowed to invest in all highly-rated
(minimum AA+) corporate issues (chakraborty, 2007). The insurers are also looking
at developing need-based insurance products for the largely untapped rural market in
india. The high growth potential of the Indian insurance sector also promises
tremendous employment opportunities for the masses.
Despite all these ,the Indian insurance market is still at a nascent stage because of the
low penetration in the rural and semi-urban regions of the country. It is high time that
both LICI and the private life insurers capitalized on this fact and started penetrating
more into the remote areas of the country through attractive product offerings.
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Objective of the Project: To identify a new customer base for Standard Chartered
Bank and thereby maximize its profits.
Methodology:
Getting the database of customers, calling them, fixing up appointments with
them and then convincing them to buy the financial products.
Also I have developed a questionnaire asking about the different insurance
companies people have invested in and the features of these products which
they prefer while buying. The questionnaire gives complete information about
risk taking nature of the customer as well. This would give the new database
of customers to my bank, also their preferences as well as their risk taking
Nature which would help them to pinch the right customer the right kind of
product.
OBJECTIVE OF PROJECT
MY PROJECT ON………..
DIFFERENT ASPECTS OF INSURANCE PRODUCTS AND
MUTUAL FUNDS AND THEIR EFFECT ON THE BUYING
BEHAVIOUR OF INVESTORS
To divide different features of an insurance product into different factors by using the statistics tool Factor Analysis and then do Multiple Regression of those factors on the customers preference of buying to find out the factor which affects the buying behavior of the customers the most. This would help the bank to peach those products in the market which have those features in them.
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Methodology:
a) Making the questionnaire
Mistakes make you learn very fast, this was realized by me during this project. The
very first thing I did to develop the questionnaire is to think about all the possible
features an insurance product can have and documented them all. For this I referred
to different brochures given to me from different banks and also the internet. Then I
developed the questionnaire based on it. I wanted to get the approval of my company
guide and branch manager but they were busy. So I showed it to my faculty guide and
after her making some changes it was approved by her.
The very next day the branch manager himself asked me about my proceedings about
the project. I did not want to lose the opportunity and so showed him my
questionnaire. According to him I had missed some points, so he asked me to make
some changes. After making the changes according to him, I showed it to the
statistics faculty of our campus that is Mr. Manish Dube, the market research faculty
Mr. Devashis bose( Director IMRT,) and also . My company guide also checked my
questionnaires.
I took the 15 responses and did the pilot testing for it. In question number 3,4,9 and
10, people were choosing more than one options which became a problem for doing
SPSS analysis. Again it was discussed with faculty members and it was suggested to
change question numbers 3 and 4 to ordinal scale and highlight in question number 9
and 10 to strictly choose only one option.
Another problem which was faced was that the dependent variable for doing multiple
regression had been missed. So it was decided to add one question to get the same.
b) Methodology for Sample Design
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The choice of sampling method depended on the objectives of the survey and
perhaps on the survey technique being employed. For the purpose of data
collection convenient sampling has been done. Questionnaires have been got
filled according to my reach and contacts.
C) Sample size
There are around 14 variables in the Likert Scale of Questionnaire and ten times of it
is around 140. For that I would have to get at least 200 questionnaires filled. This
would be my sample size.
d) Survey technique
The survey technique which has been used is getting the questionnaire filled by those
who can fill it. Otherwise an interview of the customer is taken and the questionnaire
is filled according to the responses given by him/her.
CONCLUSION
Really summer training is very important part of our PGDM course curriculum
because I got live exposure of market as well as customers. How to handle the
customers, how to satisfied the customers and basically these things are back bone of
any business and companies. During two months I did hard work for myself and
identifying where I am lacking right now.
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This report is prepared to get the basic ideas of mutual fund and life insurance
products. The general concept of the market study will help the different individuals
to invest in different investment tools as per their appetite. Through research study, it
is very much visualized the present market trend opted by the selected number of
people and their perception regarding Mutual Fund as well as insurance policy.
Hence, from this report I conclude that people are more keen interested to invest in
mutual Fund due to the stability and getting more diversified options they are not
interested to invest in insurance sector because most of the people insured before .
In spite of this hard fact, where there is a will, there is way. If I will get opportunity,
I will do it. This type sector required more patience, confidence, as well as smart and
tricky verbal and non verbal communication skill because we should have must be
follow-up the customers till conversion of business.
SUGGESTIONS
1. As some of the people think that mutual fund is risky so the company should
show people the advantages of the mutual fund and how it is better than the
other investment avenues.
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2. Now a day’s people are investing in more of an equity fund because it gives
high return as compare to other mutual fund schemes.
3. It is suggestion to SCB , develop their customer data base because I got
knowledge that STANDARD CHARTERED BANK,L.K.O has approx 10000
Accounts and Lucknow has population approx 500000 (APRIL 2009) means
that there is huge opportunity for SCB in future.
4. The people of Lucknow have enough purchasing power supported by N.R.I. and
SCB should also identify more N.R.I. peoples.
5. A very small part market has been covering SCB. It can increase the circle of its
business in small and rural areas of every state and cities of India where they an
find a huge business.
6. Company should undertake the Campaign, Road shows, Advertisement and
other type of Publicity for the effective awareness of different schemes that are
available in the market.
7. The company should arrange seminars and presentations, giving detail idea
about securities and benefits of SCB,L.K.O.
8. Really Standard chartered Bank do have a class banking system and they cater
premium class people but they really need to increase their database regarding
the same because due to a scarce or say limited database of High Net
Individuals (HNI) the bank is facing a literal shrinkage.
9. Due to cut throat competition in service Market, the banking is in boom period
without any recessionary effect, hence SCB should need to be keen concern
about their competitor like City BANK, HSBC ,ABN-AMRO e.t.c.
10. Due to excessive growth in population of Lucknow ,there is need of increase the
branches as well as ATM machines to cater more and more customers.
Limitations of the Study:
a) Access to high end customers’ database is very difficult.
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b) Due to present market conditions, people are reluctant to invest in
financial products. Even they are not interested to talk about any
financial product.
c) LIC being a government organization, people are more prone to
invest in its products.
d) People are not interested in filling up the questionnaire or even if they
are filling it, they are filling it wrongly because of lack of interest,
improper reading of the question and hence improper understanding
of the same or improper understanding of English Language by so
called educated class. Sometimes they may be in a hurry to fill it up.
e) Basically I am in cross selling in insurance product ,according to me
for selling insurance policy there is a need of personal relation with
customer.
f) For success in this field there is need of motorcycle to go anywhere
according demand of customers.
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OVER ALL EXPERIENCE DURING SUMMER TRAINING
In the company…
It was the beautiful morning of MAY 15, 2009… my first experience inside my own
office! I could have never thought of entering the premises of an MNC before!! But I
was not dreaming… it was reality! Such a reputed bank! Such a location! The
infrastructure was really beautiful!
My company guide was Mr. Devanshu Dhawan, an Excel manager in the branch
whose sales skills were commendable. Beside his cabin was the cabin of Mr. Vipul
Kumar, another Excel manager of the bank. He was the first person in the bank who
behaved in a very friendly manner with me. It gave me sigh of relief! I started doing
my own work.
Within 3-4 days of my SIP, I got acquainted with around 8 employees of the bank.
They were good to me but soon I realized that I would have to make my own ways to
get my work done. Everybody was so busy and when they were not, they wanted to
relax or enjoy. So I tried to help my company guide with his work so that I get some
work to do there. Whenever I used to get the opportunity, I used to ask him about the
products which the bank was into selling. It was very tough to get the information…
but I found my own ways to get the same. I even visited Bajaj Allianz office to get
some idea of the products. Mr.Bagha helped me a lot to understand the product of
insurance.
It was tough to build the trust which I tried to do. I used to sit at my own place
without moving cabins to cabins so that they feel that I am not an outsider who is
acting as a detective to know their secrets. I did never touch sir’s system or anything
else. I did never try to go for lunch when the employees of the bank were discussing
amongst themselves in the dining room. I used to sit somewhere else when some
customer used to come to meet Devanshu Sir or the branch manager. This practice of
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 97
mine started working to some extent as a result of which, my company guide allowed
me to surf net on his system twice. I started gaining his trust.
Working there, I also started understanding the real corporate life and the kind of
competition involved with it. Everybody is concerned about his/her own targets and
forgets about everything else. How people respond to you only when they feel it is
fruitful for them. It made me more practical .Even branch manager has very friendly
relation with me, he inspired me a lot. Basically in SATANDAR CHARTERED all
peoples are very co-operative. I never forget Mr.Anshu Bajpai ( area manager of
operation),he is oldest employee in SCB. He taught me a lot of issues related to
banking as well as banking operations.
Experience with the customers…
While sitting in the office, I listened to the conversation of my company guide with
some of his customers. There were some who were very fussy and did not like to
speak even if any other employee of the bank was sitting there. Some were very
talkative who used to talk for an hour, some humorous and the remaining to the point.
My company guide being an Excel Relationship Manager dealt with only high end
customers who used deal with more than 25 lacs with the bank. So most of them were
very educated and from standard families.
I called many customers from the database which I got from my classmates. I also
pinched the IMRT employees. The way they reacted reminded me of the treatment
we give to the sales people who come to our homes for selling some product. As soon
as they used to hear the word investment, they used to make excuses or put down the
phone. I called around 300-400 customers in all. It was a mixed experience…
somewhere sweet and bitter at some places.
I met Mr. Arsad Bhai in Budha Park, he was always ready to take child plan of
insurance but he procrastinated the date of conversion. It is done by starting with the
closest contacts of yours, asking for their help. Then gradually he would tell another
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person, that person would recommend your name to some other person in his contact.
In this way, a chain is developed, trust is built on your face value and life becomes
easy for you. It takes some time to develop your own customer base.
I visited many places like malls, parks even I did survey in the Hazarat chauraha .but
ultimately I got only procrastinated from him. Really this is hard core marketing. it
requires patient as well as proper follow up with customers. I believe that it is tough
and hard core marketing but it has growth and future.
Then Mr. Rajesh Bhatnagar of Bajaj Allianz gave further insights into selling
process. He said the very first thing you need to make sure is to make the customer
comfortable that you are not there for selling. Talk to him about his needs in life, his
spending, and then pinch him when he becomes emotional.
Visiting different banks for doing comparative study of their products…
It was on April 3, 2009 that I visited ICICI Prudential at Mahanagar and HDFC
Standard Life at Halwasia market. I went to these banks as a customer and tried to
find out their child gain scheme and pension plan. I acted well!! This was done just to
understand the features of same products of different companies and thus do the
comparative analysis of the same.
I met Parvez bhai, the sales manager of Max New York Life on March 30, 2009
through some contact. He put some inputs on the selling skills and also gave me some
valuable information regarding his company’s products.
A trip to Gosaiganj and Takroi…
While surfing net, I had come across news clippings where it was said that only 7%-
8% of Indian market has been tapped by insurance business and 80% of Indian
market lies in the rural market. So to find out the awareness level and to tap the
unreached market, two of my friends and myself went to Gosaiganj on April 5, 2009.
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It was a good experience as we talked to some people there. We first talked to the
“pradhan” of “Alamgarh” Shri Lal Mohammad. He called some other people as well
as the school teacher named Shri Jagat Narayan, 2-3 villagers and also one LIC agent
Mr. J. P. Verma and one corporate agent named Merajjuddin of the village. They
listened to whatever we talked and understood the concepts. They knew the so called
“Beema”, hindi word for insurance.
The corporate agent had a tie up with around 7 companies and he sells around 4500
policies a month!!! He was very confident about his business. The LIC agent was also
doing good in his business. The pradhan asked us to come again after 30 th April
because all the villagers were busy in wheat fields and very few educated were busy
with election campaigns. He would call for a meeting then so that we can talk to all
the villagers.
On our way back to Lucknow, we passed by a place called Arjungarh. I met 2-3
shopkeepers there who seemed somewhat educated to us. One of them filled my
questionnaire and when I asked him about meeting other villagers, he said it is a
waste of time. Nobody would be interested in talking about insurance products
because most of them are illiterate. He inspite of being a student of Christian college
was not actually interested in filling it.Then we paved our way to Takroi , a village at
the back of munshi pulia. It was 1 pm till that time and everybody on work or rest. I
talked to one of the general merchant who told me that the whole village had trust in
“LIC Beema” and most of them invested in it because one or the other relatives of
them are working as the agent of company and investing in the insurance would
profit those relatives.
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BIBLIOGRAPHY
1. Kenneth Black,Jr., Harold D. Skipper, Jr., “Life & Health Insurance”,
Thirteenth Edition, Pearson Education, page nos. 19-22
2. Mutual Funds, ICFAI Publications, page nos. 1-40
3. Wikipedia, The Free Encyclopedia, Insurance
Available from: http://en.wikipedia.org/wiki/Insurance [Accessed April 15, 2009]
4. Sandeep Ray Chaudhary and Joy Chakraborty, Private Life Insurance
Companies In India: Strategizing Ways To Overcome The Product Selling
Challenges, The Icfai Journal of Risk & Insurance, ICFAI UNIVERSITY
PRESS, Vol. V, No. 2, April 2008
5. Available from: http://www.helplinelaw.com/docs/insurance/1.php [Accessed
April 15, 2009]
6. Standard Chartered official website standardchartered.com
Available from: http://www.standardchartered.com/about-us/en/index.html
[Accessed April 18, 2009]
7. Standard Chartered Bank India official website Standard Chartered.co.in
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 101
Available from: http://www.standardchartered.co.in/personal/home/en/index.html
[Accessed April 18, 2009]
8. India Business Directory ,standard chartered bank, maps of india.com’s
Available from: http://business.mapsofindia.com/banks-in-india/standard-chartered-
grindlays-bank-ltd.html [Accessed April 18, 2009]
9. Google maps, Finance And Investment Guide, standard chartered bank,
India,Available from: http://www.iloveindia.com/finance/bank/foreign-
banks/standard-chartered-bank.html http://maps.google.co.in/maps?
hl=en&um=1&ie=UTF-8&q=standard+chartered+bank+lko&near=Lucknow,
+Uttar+Pradesh&fb=1&split=1&gl=in&view=text&latlng=10944815455423
38728 [Accessed April 18, 2009]
10. Wikimapia, standard chartered bank and Bajaj Allainz Lucknow
Available from: http://wikimapia.org/383899/Standard-Chartered-Bank-Bajaj-Allianz
[Accessed April 18, 2009]
11. Life Insurance- Indian life insurance sector on the rise, Only Finance.com,
Available from: http://www.onlyfinance.com/Life-Insurance/Indian-life-insurance-
sector-on-the-rise.aspx [Accessed March 21, 2009]
12. RNCOS, MINDBRANCH, Indian Insurance Industry: New Avenues for
Growth 2012
Available from: http://www.mindbranch.com/Indian-Insurance-Avenues-R459-85/
[Accessed March 21, 2009]
INSTITUTE OF MANAGEMENT RESEARCH AND TECHNOLOGY 102
13. THE FINANCIAL EXPRESS, Rural insurance business to touch $35
billion by 2010, says Assocham
Available from: http://www.financialexpress.com/news/rural-insurance-business-to-
touch-35-billion-by-2010-says-assocham/168898/ [Accessed March 21, 2009]
14. Invest In India, Mutual Funds 2009-02-25 11:31:00
Available from: http://investmoneyinindia.com/mutual-funds-2009-02-25-113100/
[Accessed March 22, 2009]
15. Harish Dhawan, Top News. in, Average AUM for Indian Mutual funds
increase 8.68% in Feb, 2009: AMFI
Available from: http://www.topnews.in/average-aum-indian-mutual-funds-increase-
868-feb-2009-amfi-2134339 [Accessed March 22, 2009]
16. Arindam Banerjee, Mutual Funds In India: Perspectives & Strategies,
Extracts taken from Overview of the above said book
Available from: http://www.books.iupindia.org/IB11012700009.htm [Accessed
March 22, 2009]
17. Available from
http://www.domainb.com/finance/insurance/2005/20050916_types_insura
nce.html
18. Available from : http://www.medical-billing-coding.org/Content260.html
19. Available from:
http://www.blonnet.com/2008/03/20/stories/2008032052300500.htm
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Appendices
Questionnaire
(This questionnaire is aimed at understanding different aspects of an insurance
product which an investor looks before investing in it. The project is purely for
academic purpose and will not be used for publishing.)
1. Have you ever invested in insurance?
a) Yes b) No
2. Which insurance company have you invested in?
a) Birla plus b) Max New York life
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c)Bajaj Allianz d) LIC
3. Are you satisfied with your existing plan?
a) Very satisfied b) Satisfied
c) Neither satisfied nor dissatisfied d) dissatisfied e) very dissatisfied
4. Do you buy insurance for..........
a) Life cover b) Return
c) Tax benefit d) others.......
5. Which kind of insurance would you go for?
a) Money back b) pension plan
c) Child gain d) ULIP
6. Through whom do you buy insurance product?
a) Agent b) Broker
c) Bank assurance d) corporate agent
7. What would you opt if you have a choice?
a) High risk, high return b) Moderate risk, moderate return
c) Low return but negligible risk d) Capital preservation model
8. For how long would you like to invest?(tenure)
a) 1-4yrs b) 4-7yrs
c) 7-10yrs d) more than 10yrs
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9. You have opted this policy in persuasion of...
a) Self-awareness b) Relatives
c) Advisor d) other....
10. What is the main reason for investing in that company?
a) High return b) security of your money
c) Reputation d) Service quality
11. Which service you prefer the most?
a) Prompt claim settlement b) timely receivables
c) Facilitating premium submission d) reminders for premium submission
12. Do you keep track of various schemes of investment from different
companies?
a) Yes b) no
13. Rank the aspects below of an insurance scheme which you look into before
investing into it in the order of your preference: (type 1 in the box you feel your
preference is)
Least
preferred
Less
preferred
preferred More
preferred
Most
preferred
Return
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Less
premium
term of plan
High benefit
term
Risk
associated
Charges
related
Your advisor
perspective
Newspaper
article or
financial
magazines
WOM
Riders
attached
with scheme
Flexibility
Risk cover
Entry age
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Name: _______________________________
Age: _________________________________
Gender: ______________________________
Profile: _______________________________
Income: _______________________________
Contact no:____________________________
Address: _______________________________
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