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ABOUT LIFE INSURANCE
All the human beings on the earth know that they will die in future but they dont want
to die. They want to fulfill all the dreams, which they had thought, but there are times when
all these dreams cant come true.
Death is inevitable and yet we live our lives obvious to reality that may strike- when we
have no idea. And when it happens, all the dreams come crashing down.
In the words of D S Hansell Insurance may be defined as a social device providing
financial compensation for the effects of misfortune, the payment being made from
the accumulated contributions of all the parties participating in the scheme
Life insurance is the only tool to secure our life in future. It also provides a safe guard
to the uncertainty of our life. Life insurance is the cheapest investment tool in which we can
earn more in a short period of time.
The function of insurance is to protect you against losses you can't
afford. This is done by transferring the risks of a person, business, or
organization -- the "insured" -- to an insurance company, or
"insurer."The insurer then reimburses the insured for "covered" losses -- i.e., those losses it pays
for under the policy's terms. As the insurance consumer, you pay an amount of money, called a
premium, to the insurer to transfer the risk. The insurer pools all its premiums into a large fund,
and when a policyholder has a loss, the insurer draws funds from the pool to pay for the
loss. Life is full of unexpected events that can create large financial losses. For example,
whenever you drive, it is possible that you may have a costly accident. Risks affect you by
causing worry about potential loss and how to deal with the consequences.
India has traditionally been a high savings oriented country being on par with the thrifty
Japan. Insurance sector in the United States of America is as big in size as the banking
industry there. This gives us an idea of how important the sector is. Insurance sector
channelises the savings of the people to long-term investments. In India where
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infrastructure is said to be of critical importance, this sector will bring the nations own
money for the nation.
The global life insurance market stands at $1,521.2 billion while the non-life
insurance market is placed at $922.4 billion.
India takes the 23rd position with US $9.933 billion annual premium collections and a
meager 0.41% share.
Out of one billion people in India, only 35 million people are covered by insurance.
Indian insurance market is set to touch $25 billion by 2010, on the assumption of a 7
per cent real annual growth in GDP.
This has made the sector the hottest one in India after IT. With social security and securityto the public at large being the agenda for opening the sector, the role of the regulatorbecomes all the more serious and one that would be carefully watched at every step.
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HISTORY OF LIFE INSURANCE
Insurance concept had been found out way behind in 13 th and 14th century. The
earliest reference to insurance has been found Babylonia, the Greeks and the Romans.The use of insurance appeared in the account of North Italian Merchant Bank that then
dominated the international trade in Europe at that time.
The oldest and earliest record of insurance come in the form of marine insurance where
ships and the cargo were insured against perils such as pirates, storm, mutiny and
wars.The first company known as the Sun Insurance Office Ltd. was set up in the Calcutta
in the years 1710. After that a number of companies were established for marine andgeneral insurance. The history of life insurance in India dates back to 1818 when it was
conceived as a means to provide for English Widows. Interestingly in those days a higher
premium was charged for Indian lives than the non-Indian lives as Indian lives were
considered more riskier for coverage. The Bombay Mutual Life Insurance Society started its
business in 1870. It was the first company to charge same premium for both Indian and
non-Indian lives. The Oriental Assurance Company was established in 1880. The first
general insurance company- Tital Insurance Company Limited was established in 1850. Till
the end of nineteenth century insurance business was almost entirely in the hands of
overseas companies. Insurance regulation formally began in India with the passing of the
Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds
during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance
companies. The first comprehensive legislation was introduced with the Insurance Act of
1938 that provided strict State Control over insurance business. The insurance business
grew at a faster pace after independence. Indian companies strengthened their hold on this
business but despite the growth that was witnessed, insurance remained an urban
phenomenon. The Government of India in 1956, brought together over 240 private life
insurers and provident societies under one nationalised monopoly co-orporation and LIC
was born. Nationalisation was justified on the grounds that it would create much-needed
funds for rapid industrialization. This was in conformity with the Government's chosen path
of State led planning and development.
The (non-life) insurance business, however, continued to thrive with the private sector til1972. Their operations were restricted to organized trade and industry in large cities. The
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general insurance industry was nationalized in 1972. With this, nearly 107 insurers were
amalgamated and grouped into four companies- National Insurance Company, New India
Assurance Company, Oriental Insurance Company and United India Insurance Company
These were subsidiaries of the General Insurance Company (GIC).
The Life Insurance Corporation was established on 01.09.1956 and ahs been the
sole corporation to write the life insurance business in India. The Indian insurance industry
saw a new sun when Insurance regulatory & Development Authority (IRDA) invited the
applications for registration as insurers in August, 2000. With the liberalization and opening
up of the sector to private players, the industry has presented promising prospects for the
coming future. The transition has also resulted into introduction co ample opportunities for
the professionals.
Insurance
The insurance industry provides protection against financial losses resulting from a variety
of perils. By purchasing insurance policies, individuals and businesses can receive
reimbursement for losses due to car accidents, theft of property, and fire and storm
damage; medical expenses; and loss of income due to disability or death.
It is a contract for payment of money to the person assured (or to the person entitled to
receive the same) on the occurrence of the event insured against. The common policies
available are:
Whole Life Policy
Endowment policy
Money Back policy
Types of Insurance Companies
Insurance companies may be classified as
Life insurance companies: which sell life insurance, annuities and pensions products.
Non-life orgeneralinsurance companies: which sell other types of insurance.
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In most countries, life and non-life insurers are subject to different regulatory regimes and
different tax and accounting rules. The main reason for the distinction between the two
types of company is that life, annuity, and pension business is very long-term in nature
coverage for life assurance or a pension can cover risks over many decades. By contrast,
non-life insurance cover usually covers a shorter period, such as one year.
Function of Insurance
Risk Transfer: the primary function of insurance is to act as a risk transfer mechanism.
For example, there is a car owner. He has a car valued at Rs. 300,000. A considerable
amount of his savings has been invested in its purchase and even the least risk conscious
person would recognise that they are at risk in such a situation. The car could be stolen, get
damaged in an accident, or catch fire. There could be a serious accident resulting in serious
injury to passengers or other people. How will the owner of the car cope with all these
potential risks and their financial consequences? Here is the place where insurance comes
in to help. Insurance will not, in itself, prevent any of the above risks from occurring, but
what it will do is provide some form of financial security. The owner of the car can transfer
the financial consequences of the risk to the insurer, in return for paying a premium. Thus, a
whole range of benefits flow from this primary function of risk transfer.
Creation of the Common Pool: an insurance company takes contributions, in the form of
insurance premiums, from many people and pays the losses of the few. The contributions
have to be enough to meet the total losses in any one year and cover the other costs of
operating the pool, including the profit of the insurer. In operating the common pool, the
insurer benefits from the Law of Large Numbers.
For example, there are 1000 houses and the insurer expects only one of them to be totally
destroyed. The cost of this say will be Rs. 100,000, thus a contribution will have to be made
to the pool which will cover this expected loss and all the costs and profit of the insurer. The
actual outcome in one year may vary from what is expected, but a small provision in the
amount collected from each person insuring will take care of this.
Equitable Premiums: when risks of similar type are brought together in a common pool,they do not all represent the same degree of risk to the pool itself. That is, the probability of
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a loss having to be met by the pool is not equal over all those in the pool. For example, a
timber- built house represents a different risk from one of standard brick construction; an 18
year old driver with a fast sports car is different from a 40 year old family man driving a
family saloon. Thus, here the insurer is faced with risks of differing magnitude or hazard.
The probability of an event occurring is quite different in both pairs. This will have to be
reflected in the contributions which each will make to the pool. It would not be equitable to
expect the driver of a family saloon to subsidise those who choose to drive fast sports cars.
Each person or company, willing to join the pool must be prepared to make an equitable
contribution to that pool.
Thus, the assessment of risk is extremely important, as the insurer has to ensure that a fair
premium is charged, which reflects the hazard and the value which the person or the
company brings to the pool.
Classes of Insurance
As insurance has developed, the various types of cover have been grouped into severa
classes, which have come about by practice within insurance company offices, and by the
influence of legislation controlling the financial aspects of transacting insurance. Following
are the divisions in which companies organise their business:
Fire, including business interruption; Accident, including theft, all risks, goods in transit,
glass, money, credit, fidelity; Liability, including employers liability, public liability, products
and professional indemnity; Motor; Engineering; Marine and Aviation; Life, Health insurance
and Pensions.
The Place and Role of Insurance within the Financial Framework
The Indian insurance industry is developing and its operations affect the countrys economy
in a variety of ways:
A risk transfer mechanism
Loss prevention and reduction
Major institutional investment
Major employer
Contribution to invisible earnings and balance of trade
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The Insurance Market Comprises of
Sellers: insurance companies
Buyers: the general public, industry and commerce
Middlemen: insurance brokers and agents
Financial viability of insurance companies
Financial stability and strength of an insurance company should be a major consideration
when purchasing an insurance contract. An insurance premium paid currently provides
coverage for losses that might arise many years in the future. For that reason, the viability
of the insurance carrier is very important. In recent years, a number of insurancecompanies have become insolvent, leaving their policyholders with no coverage (or
coverage only from a government-backed insurance pool or other arrangement with less
attractive payouts for losses). A number of independent rating agencies, such as Best's,
Fitch, Standard & Poor's, and Moody's Investors Service, provide information and rate the
financial viability of insurance companies.
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ADVANTAGES OF LIFE INSURANCE
1. It is superior to an ordinary saving plan: Unlike other saving plans, it
affords full protection against risk of death. IN case of death, the full sum assured is
made available under a life insurance policy; whereas under saving scheme the total
accumulated saving alone will be available. The later will be considerably less than
the sum assured. If death occurs during early years.
2. Easy settlement & protection against creditors: The Life assured can
name persons called Nominee to whom policy money would be payable in the event
if his death. The proceeds of a life policy can be protected against the claim of the
creditors of the life assured by effecting a valid assignment of the policy.
3 . Ready marketability & suitability fir quick borrowing:After an initia
period. If the policyholder finds him unable to continue payment of premiums he can
surrender the policy for a cash sum. Alternatively, he can tide over a temporary
difficulty be taking loan on the sole security of the policy without delay. Further, a life
insurance policy is sometimes acceptable as security for the commercial loan.
4. Tax Relief: The Indian Income Tax Act allows deduction of certain portion of
the taxable income, which is diverted to payment of life insurance premiums from the
total income tax liability. When this tax relief is taken into account, it will be found that
the assured is in effect paying a lower premium for his insurance.
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OVERVIEW
With largest number of life insurance policies in force in the world, Insurance happens to be
a mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually
and presently is of the order of Rs 450 billion. Together with banking services, it adds about
7 per cent to the countrys GDP. Gross premium collection is nearly 2 per cent of GDP and
funds available with LIC for investments are 8 per cent of GDP.
Yet, nearly 80 per cent of Indian population is without life insurance cover, health insurance
and non-life insurance continue to be below international standards. And this part of the
population is also subject to weak social security and pension systems with hardly any old
age income security. This itself is an indicator that growth potential for the insurance sectoris immense. A well-developed and evolved insurance sector is needed for economic
development as it provides long-term funds for infrastructure development and at the same
time strengthens the risk taking ability. It is estimated that over the next ten years India
would require investments of the order of one trillion US dollar. The Insurance sector, to
some extent, can enable investments in infrastructure development to sustain economic
growth of the country.
With a large capital outlay and long gestation periods, infrastructure projects are fraught
with a multitude of risks throughout the development, construction and operation stages.
These include risks associated with project implementation, including geological risks
maintenance, commercial and political risks. Without covering these risks the financia
institutions are not willing to commit funds to the sector, especially because the financing of
most private projects is on a limited or non- recourse basis.
Insurance companies not only provide risk cover to infrastructure projects, they alsocontribute long-term funds. In fact, insurance companies are an ideal source of long-term
debt and equity for infrastructure projects. With long-term liability, they get a good asset-
liability match by investing their funds in such projects.IRDA regulations require insurance
companies to invest not less than 15 percent of their funds in infrastructure and social
sectors. International Insurance companies also invest their funds in such projects.
Insurance is a federal subject in India. There are two legislations that govern the sector-
The Insurance Act- 1938 and the IRDA Act- 1999.
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INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an open competitive market
to nationalization and back to a liberalized market again. Tracing the developments in the
Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two
centuries.
INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N.
Malhotra, was formed to evaluate the Indian insurance industry and recommend its future
direction. The Malhotra committee was set up with the objective of complementing the
reforms initiated in the financial sector. The reforms were aimed at creating a more efficient
and competitive financial system suitable for the requirements of the economy keeping in
mind the structural changes currently underway and recognizing that insurance is an
important part of the overall financial system where it was necessary to address the need
for similar reforms. In 1994, the committee submitted the report and some of the key
recommendations included:
Structure: Government stake in the insurance Companies to be brought down to
50% Government should take over the holdings of GIC and its subsidiaries so that
these subsidiaries can act as independent corporations. All the insurance companies
should be given greater freedom to operate.
Competition: Private Companies with a minimum paid up capital of Rs.1bn should
be allowed to enter the industry. No Company should deal in both Life and General
Insurance through single entity. Foreign companies may be allowed to enter the
industry in collaboration with the domestic companies .
Regulatory Body: The Insurance Act should be changed .An Insurance Regulatory
body should be set up. Controller of Insurance (Currently a part from the Finance
Ministry) should be made independent.
Investments: Mandatory Investments of LIC Life Fund in government securities to
be reduced from 75% to 50%.
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GIC and its subsidiaries are not to hold more than 5% in any company
(The recurrent holdings to be brought down to this level over a period of time)
Customer Service: LIC should pay interest on delays in payments beyond 30
days. Insurance companies must be encouraged to set up unit linked pension plans.Computerization of operations and updating of technology to be carried out in the
insurance industry. The committee emphasized that in order to improve the customer
services and increase the coverage of the insurance industry should be opened up to
competition.
But at the same time, the committee felt the need to exercise caution as any failure
on the part of new players could ruin the public confidence in the industry. Hence, it
was decided to allow competition in a limited way by stipulating the minimum capital
requirement of Rs.100 Crores.
The committee felt the need to provide greater autonomy to insurance companies in
order to improve their performance and enable them to act as independent
companies with economic motives. For this purpose, it had proposed setting up an
independent regulatory body.
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INSURANCE REGULATORY
AND
DEVELOPMENT AUTHORITY
The Insurance Regulatory and Development Authority Reforms in the Insurance sector
were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA
since its incorporation as a statutory body in April 2000 has fastidiously stuck to its
schedule of framing regulations and registering the private sector insurance companies.
The other decisions taken by them simultaneously were to provide the supporting systems
to the insurance sector and in particular the life insurance companies were the launch of the
IRDA online service for issue and renewal of licenses to agents. The approval of institutions
for imparting training to agents has also ensured that the insurance companies would have
a trained workforce of insurance agents in place to sell their products. Since being set up as
an independent statutory body the IRDA has put in a framework of globally compatible
regulations. In the private sector 15 life insurance and 9 general insurance companies have
been registered.
The opening up of the sector is likely to lead to greater spread and deepening of
insurance in India and this may also include restructuring and revitalizing of the public
sector companies. A host of private Insurance companies operating in both life and non-
life segments have started selling their insurance policies since 2001.
Insurance Regulatory and Development Authority (IRDA) is constituted by the Government
of India, which governs all the companies that are operating in the insurance sector in India.
As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority
(IRDA, which was constituted by an act of parliament) specify the composition of Authority.
The Authority is a ten member team consisting of
(a) a Chairman;
(b) five whole-time members;
(c) four part-time members,
(all appointed by the Government of India.)
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MISSION OF IRDA
To protect the interests of the policyholders, to regulate, promote and ensure orderly growth
of the insurance industry and for matters connected therewith or incidental thereto.
Duties, Power and Functions of Irda
Section 14 of IRDA Act, 2000 lays down the duties, powers and functions of IRDA. The
Authority shall have the duty to regulate, promote and ensure orderly growth of the
insurance business and re-insurance business.
The powers and functions of the Authority shall include:
(a) Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend
or cancel such registration;
(b) Protection of the interests of the policy holders in matters concerning assigning of
policy, nomination by policy holders, insurable interest, settlement of insurance
claim, surrender value of policy and other terms and conditions of contracts of
insurance;
(c) Specifying requisite qualifications, code of conduct and practical training forintermediary or insurance intermediaries and agents;
(d) Specifying the code of conduct for surveyors and loss assessors;
(e) Promoting efficiency in the conduct of insurance business;
(f) Promoting and regulating professional organizations connected with the insurance
and re-insurance business;
(g) Levying fees and other charges for carrying out the purposes of this Act;(h) Calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance
intermediaries and other organizations connected with the insurance business
control and regulation of the rates, advantages, terms and conditions that may be
offered by insurers in respect of general insurance business not so controlled and
regulated by the Tariff Advisory Committee under section 64U of the Insurance Act
1938 (4 of 1938)
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(i) Specifying the form and manner in which books of account shall be maintained and
statement of accounts shall be rendered by insurers and other insurance
intermediaries;
(j) Regulating investment of funds by insurance companies;
New products, innovative distribution, and better use of technology are helping the
new breed of private life insurers to take market shares away from the monopolist of
yesterday. Time was, if you wanted to buy a life insurance policy, you called a LIC advisor
referred to you by search of an advisor. He a friend or a relative. These days, you dont
have to go in comes after you. There has been a sea change in the life insurance industry.
Now private life insurance companies are the market leaders. They use all sort of marketing
tricks such as DIRECT MARKETING, ALLIANCE MARKETING and a new
BANCASSURANCE.MAX NEW YORK LIFE INSURANCE CO. LTD. is the new dominant
player in the life insurance industry. Aggressive selling strategies are the order of the day.
Indian Life Insurance Industry in Present Time:-
The Government of India liberalized the insurance sector in March 2000 with the passage
of the Insurance Regulatory and Development Authority (IRDA) Bill, removing all entry
restrictions for private players and allowing foreign players to enter the market with some
limits on direct foreign and with the growth in this industry many companies entered the life
insurance sector. any company with the joint venture of life insurance company can start
business of life insurance.
These are following life insurance companies:
(1) MAX New York Life Insurance Ltd.
(2) BAJAJ Allianz Life Insurance Company Ltd.
(3) BIRLA Sun Life Insurance Co. Ltd
(4) HDFC Standard life Insurance Co. Ltd
(5) ICICI Prudential Life Insurance Co. Ltd.
(6) ING Vyasa Life Insurance Pvt. Ltd.
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(7) MET Life India Insurance Co. Ltd.
(8) KOTAK Mahindra Old Mutual Life Insurance Ltd.
(9) SBI Life Insurance Company Ltd.
(10) Reliance Life Insurance Co Ltd.
(11) AVIVA Life Insurance Co. India Pvt. Limited.
(12) SAHARA India life Insurance Co. Ltd.
(13) SRI RAM Life Insurance Co. Ltd.
LIFE INSURANCE MARKET
The Life Insurance market in India is an underdeveloped market that was only tapped by
the state owned LIC till the entry of private insurers. The penetration of life insurance
products was 19 percent of the total 400 million of the insurable population. The state
owned LIC sold insurance as a tax instrument, not as a product giving protection. Most
customers were under- insured with no flexibility or transparency in the products. With the
entry of the private insurers the rules of the game have changed.
The 12 private insurers in the life insurance market have already grabbed nearly 9 percent
of the market in terms of premium income. The new business premiums of the 12 private
players have tripled to Rs 1000 crores in 2002- 03 over last year. Meanwhile, state owned
LIC's new premium business has fallen.
Innovative products, smart marketing and aggressive distribution. That's the triple
whammy combination that has enabled fledgling private insurance companies to sign up
Indian customers faster than anyone ever expected. Indians, who have always seen lifeinsurance as a tax saving device, are now suddenly turning to the private sector and
snapping up the new innovative products on offer.
The growing popularity of the private insurers shows in other ways. They are coining money
in new niches that they have introduced. The state owned companies still dominate
segments like endowments and money back policies.
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But in the annuity or pension products business, the private insurers have already wrested
over 33 percent of the market. And in the popular unit-linked insurance schemes they have
a virtual monopoly, with over 90 percent of the customers.
The private insurers also seem to be scoring big in other ways- they are persuading people
to take out bigger policies. For instance, the average size of a life insurance policy before
privatization was around Rs 50,000. That has risen to about Rs 80,000. But the private
insurers are ahead in this game and the average size of their policies is around Rs 1.1 lac
to Rs 1.2 lac- way bigger than the industry average.
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INTRODUCTION OF THE COMPANY
The company was founded in 1845 as the Nautilus Insurance Company in New York
City, with assets of just $17,000. It was renamed the New York Life
Insurance Company in 1849. Its first headquarters were at 112-114
Broadway; the first president was James DePeyster Ogden. The current
New York Life headquarters was designed by noted architect Cass Gilbert
and completed in 1928. The New York Life building, at 51 Madison Avenue,
was constructed during the presidency of Darwin P. Kingsley. He
expanded the companys operations and developed new types of
insurance. As with other early insurance companies in the U.S., in its early
years the company insured the lives of slaves for their owners. In response
to bills passed in California in 2001 and in Illinois in 2003, the company
reported that Nautilus sold 485 slaveholder life insurance policies during a
two-year period in the 1840s; they added that their trustees voted to end
the sale of such policies 15 years before the Emancipation Proclamation.
The company became known for innovative business practices. In 1860, well before
state laws required it, New York Life developed the non-forfeiture option,
the predecessor to the guaranteed cash values of modern policies, under
which a policy remains in force even if a premium payment is missed. It
was also the first American life insurance company to pay a cash dividend
to policyholders, and the first U.S. company to issue policies to women at
the same rates as men. Susan B. Anthony was one of their first female
policy holders, and her father worked for NYLIC. In 1896, New York Life
became the first company to insure people with disabilities and the first to
issue a policy with a disability benefit that presumes total disability to be
permanent after a predetermined period.
In the late 1990s New York Life was one of several large mutual life insurers to back a
bill that would allow demutualization into a structure known as a mutual
holding company (MHC). CEO Sternberg himself argued strongly in favorof the bill, which was ultimately defeated. The NYLIC board of directors
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subsequently reversed course, with the company strongly and publicly
embracing their mutual nature in a series of advertisements.
According to their Report to Policyholders 2007, in early 2007 the company's
managers became concerned about the state of credit markets, so in
February 2007 "based on our belief that the markets were acting
irrationally" New York Life decided to move much of its cash flow into
safer investments such as US Treasury bonds. "By August 2007, the credit
market problems we had feared were front page news," the Report notes.
In November 2008, the company announced it will not participate in the Troubled
Asset Relief Program. "The company can meet all of its strategic
objectives without government capital, its businesses are strong and
profitable, and it is committed to remaining a mutual company operating
for the sole benefit of its policyholders," states a company press release.
New York Life maintains "superior" financial ratings from A.M. Best, Fitch Ratings,
Moody's and Standard and Poor's.
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ABOUT THE COMPANY
Max New York Life is a joint venture between Max India Ltd., one of India's leading multi-
business corporate and New York life, a Fortune 100 company. Max New York Life
Insurance, incorporated in 2000, is one of India's leading private life insurance companies.
The company offers both individual and group life insurance solutions. It has established a
wide distribution network across India. Max New York Life has sold well over 2.7 million
policies with more than Rs. 77,000 crore in sum assured. It has more than 46,800 agents,
who are widely recognized as among the best in the industry. Through its wide network of
highly competent life insurance agent advisors and flexible product solutions, Max New
York life Insurance is creating a partnership for life with its customers in India.
Max New York Life is also the only private life insurer in India to receive a National
Insurer Financial Strength rating of AAA (Ind) from Fitch ratings. The AAA (Ind) rating is the
highest rating, and is a clear assurance of Max New York Life 's ability to meet its
obligations to customers at the time of maturity or claims.
Max New York Life Insurance Company
VISON
To become the most admired life Insurance Company in India.
MISSION
Become one of the top quartile life insurance companies in India. Be a national player.
Be the brand of first choice. Be the employer of choice. Become principal of choice for
agents.
Joint Venture Partner
Max New York Life Insurance Company is a joint venture between New York LifeInternational Inc., a Fortune 100 company and America's largest life insurance provider and
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Max India Limited one of the leading multi-business corporations in India. Max New York
Life Insurance Co Ltd is a Rs. 250 crore joint venture with a paid up capital of Rs. 807
crore. Max India has raised its economic interest in life insurance joint venture with a
foreign partner, Max New York Life (MNYL) from 50% to 74%.It is widely known that as per
the agreement signed between the two leading giants in 2003, the New York Life was
contributing 26 percent in the 26:74 joint venture for every equity investment made. Max
was contributing 50 percent and the remaining 24 percent was funded through an advance
paid by New York Life to it. New York Life had an option to raise its shareholding in the JV
close to 50 percent at the par value, in case of a relaxation up to 26 percent in the FDI
sectoral cap in the insurance segment. These terms were approved by the Insurance
Regulatory and Development Authority (IRDA) and were highlighted in the successive
annual reports of Max India.
Asset under Management
Max New York Life Insurance announced that it has clocked Rs. 2,100 crore in collectedpremiums for the period Jan - July 2008 recording a growth of 81% over the similar period
last year. Of this, first year premiums contributed Rs. 1195crore, while earnings from
renewal premium stood at Rs.905 crore. The company has acquired around 27 lakh
policies since inception and is ranked number 3 amongst private life insurers in terms of
number of policies sold (YTD June). The Assets Under Management have also increased to
over Rs.4138 crore on July 31, 2008 as compared to Rs.2271 crore on July 31, 2007.
The capital base of the company is expected to expand to Rs.3600 crore from current
equity base of Rs.1,232 crore. New York Life is one of the largest and strongest life
insurance companies in the world with more than USD$215 billion assets under
management and has received among the highest ratings for financial strength from the life
insurance industry's principal rating agencies: A.M. Best (AA+), Standard & Poor's (AA+)
Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's rating reflects the
company's good quality investment portfolio, ample liquidity, and sound capitalization, as
well as the good growth potential of its international business.
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Strategies
Max New York Life Insurance is further strengthening its investment function, the growth
strategy of the company. The company plans to strengthen its investment desk by adding
analysts and fund managers and launching more fund options to provide better value to its
customers of both ULIP and traditional products. The company also announced completion
of one year of its Growth Super Fund, which has provided a return on investment of 20.2%
as on 30th May 2008. At a time when equity markets have been volatile, the Growth Super
Fund has performed exceptionally well. During the same period CNX 500 recorded a
growth of 11.11% and the BSE Sensex a growth of 12.86%. Growth Super is a fund thathas the mandate to invest a minimum of 70% in equity and can scale it up to 100%, with the
rest invested in debt and cash instruments.
Span of Organization
Max New York Life Insurance has a strong growth focus. The company plans to
significantly expand its distribution footprint by opening more than 100 new officesevery year for next 3-4 years. The number of agent advisors is expected to touch 2,
00,000 from current 36,500. The growth in agency distribution will be complemented
by strong growth in partnership distribution. The company currently has an equity
base of Rs.1, 032 crore. To support this growth plan, the shareholders are
committed to increase the capital base to Rs. 2,650 crores over the next 3-4 years.
There are 13000 employees all over India and 55000 Agent advisors.
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New York Life LLC
New York Life Insurance Company a Fortune 100 company founded in 1845, is the largest mutual
life insurance company in the United States and one of the largest life insurers in the world.
Headquartered in New York City, New York Lifes family of companies offer life insurance,
annuities and long-term care insurance. New York Life Investment Management LLC provides
institutional asset management and retirement plan services. Other New York Life affiliates
provide an array of securities products and services, as well as institutional and retail mutual
funds.
The mission of New York Life is to maintain its superior 'financial strength', adhere to the highest
standards of 'integrity' and demonstrate 'humanity' by treating its customers, agents and
employees with compassion, consideration and respect.
New York Life is one of the largest and strongest life insurance companies in the world with more
than USD$215 billion assets under management and has received among the highest ratings for
financial strength from the life insurance industry's principal rating agencies: A.M. Best (AA+),
Standard & Poor's (AA+), Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's
rating reflects the company's good quality investment portfolio, ample liquidity, and sound
capitalization, as well as the good growth potential of its international business.
As a leader in the insurance industry, New York Life continues to bring to its operations new
management concepts, advanced technologies, new distribution and training systems and
Some of the Industry Firsts
First company to provide Freelook period of 15 days to the customer. This was later made
mandatory by the regulator
First company to start toll free line for agent services
First and the only life insurance company in India to implement Lean methodology of service
excellence in service industry
First life insurance company in India to provide various services to the agents and customers
over phone
First Indian life insurance company to start service center at the regional level
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First life insurance company in India to be awarded ISO 9001:2000 certification
Awards
Among the top 25 companies to work for in India, according to Businessworld 2003 Great
Workplaces of India
Among the top five most respected insurance companies in India as per Businessworld 2004
& 2006 survey
Won Indo-American Corporate Excellence Award for Best Indo-US company in Financia
Services Category in 2006
Received Best Six Sigma Project award at Sakal Six Sigma Excellence Awards 2006
Among top 3 in Asia Life Insurance Company of the Year Award 2007 instituted by Asia
Insurance Review
Received the Amity Corporate Excellence Award 2007
Received the Outlook Money Award for being among the best new insurers in the country.
First life insurance company to be awarded CII-Exim Bank Commendation Certificate for
Strong Commitment to Excel - 2008
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PERFORMANCE OF THE COMPANY & LOYALTY SEGMENTATION
A recent survey conducted by Business World to gauge the loyalty andconfidence that customers have in their insurance company, placed Max New York LifeInsurance right at the Seventh of the heap of private life insurers. Max New York LifeInsurance has a base of loyal customers of 45% which is a cut above the insuranceindustrys loyalty average of 45%. ICICI Prudential, with a C S I ( Customer SatisfactionIndex ) score of 45.
The Rankings
45
45
48
48
49
52
55
59
7
7
5
5
4
3
2
1
MAX New York
ING Vysya
BAJAJ Allianz
AVIVA Life
TATA AIG
HDFC STANDARD
ICICI Prudential
LIC
CSI SCORE Rank
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Loyalty segmentation
15
19
17
20
12
18
16
12
9
32
34
35
32
40
32
33
33
22
6
8
7
7
6
7
6
5
4
48
40
41
42
42
43
45
50
66
0 20 40 60 80 100 120
Industry Avg.
MAX New York
ING Vysya
TATA AIG
BAJAJ Allianz
AVIVA Life
HDFC Standard
ICICI Prudential
LIC
HIGH RISK TRAPPED ACCESSIBLE TRUE LOYALS
PERFORMANCE MEASURES
InsuranceIndustry
LIC ICICIPrudential
Max NewYork Life
Tata AIG HDFCStandarLife
Appl.approvalprocess
61 65 67 61 57 60
Medical examprocess
47 33 48 52 61 57
Insurance policies 60 60 61 58 60 66
Advertising
promotion
50 53 57 49 53 58
Comm.on newpolicies & scheme
47 47 49 43 52 50
Post purchase exp. 56 52 65 58 53 60
Ins. Agent/advisor 58 57 64 59 60 60
Call center/helpline 64 67 60 69 75 62
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PRODUCTS AND SERVICES
The topics covered under this are:
Product Mix
Segmentation and positioning strategies
Communication strategies and media analysis
Distribution and channel management
PRODUCT MIX
Max Vijay -The product
Max Vijay is not just another life insurance plan. Through Max Vijay you can consolidate
your loose change to take care of your family's financial and security needs. Every Rupee
saved in Max Vijay will gradually help you in fulfilling your protection and long-term dreams.
Affordable
Max Vijay available with three premium payment options of 'Rajat', 'Swarna' and 'Heera'
enables the customer to enter the plan at a minimal enrollment premium amount of Rs.
1000, Rs. 1500 and Rs. 2500 respectively. Option of paying subsequent premiums of as
low as Rs. 10 makes the value proposition of affordability even stronger.
There is a guaranteed Sum Assured along with policyholder's account value in case of
natural death and almost double of Sum Assured in case of in case of Accidental Death
Flexible
Max Vijay provides customers the flexibility in financial planning by offering a choice to
invest any amount, anytime, anywhere.
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It works like a savings account in which customers can consolidate their loose change for
10 years. This loose change which otherwise disappears in our day-to-day living, can be
saved for a better future. After 10 years this saved amount along with some investment
returns will be given to customers as maturity benefit for fulfilling their dreams.
Insurance in a Box - Instant policy issuance and recharge
The MAX VIJAY policy pack would be made available in a box to the customer on the spot.
Neither does the product require any financial and medical underwriting nor any supporting
documents for age. In terms of documentation, the customer would be required to fill a
simple one-page form and submit only an ID proof to own the policy. The policyholder can
pay subsequent premiums at the nearest collection point for Max Vijay and will be
immediately given an updated account statement through the hand held device.
Accessible - Insurance at the consumer's doorstep
The distribution approach adopted for this product is designed to make insurance available
in the remotest area of the country. For the first time in the history of Life Insurance in India,
Max New York Life would make insurance available in a box. The policy will have tie up to
sell this product across channels including neighborhood, MFIs, NGOs and others.
Lapse-free
The policy will not lapse for non-payment of regular premiums as long as there is sufficient
value in the policy account.
Robust backend support through internationally renowned partner
The company has tied-up with IBM to provide end-to-end technology backbone for
fulfillment. Apart from this they will facilitate the handheld terminal, which enables data
transfer to the back end through GPRS and hence facilitates on the spot policy receipt.
Speaking at the Press Conference, Rajit Mehta, Deputy Chief Operating Officer, Max
New York Life Insurance said, "Backed by best in class services we have emerged as a
leader in setting quality benchmarks, offering the most transparent documentation for ourlife insurance products with outstanding claims ratio. With the launch of Max Vijay and the
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superior back end operations associated with it, we have not only simplified the entire
buying process for the customer but also turned around in the way insurance is sold and
serviced. The unique concept of on the spot premium receipts provides the customer with
immediate gratification which until now was missing."
Anil Mehta, Senior Director - New Markets SBU, Max New York Life Insurance said
"Every rupee saved in Max Vijay will work to help customers to fulfill their dreams and
aspirations". Riding on the natural reach of an existing distribution channel, Max Vijay will
be widely accessible to all. Spreading financial security across the country by aggregating
the loose change that tends to slip away."
With the launch of Max Vijay, there is now a customized product to meet the needs of themasses who wish to invest their small savings.
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Direct Marketing
Max New York Life also markets for its products though different ways like telecalling,
mail etc. As mentioned about branch network of Max New York Life above they all are
having their staff that is involved in direct marketing for its product.
Distribution Strategy of Max New York Life
Tied Agency Bancassurance & Alliances
Banc assurance
Corporate Agency &
Brokers
Direct Marketing
Agency Force
20%
70%
10%
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Tied Agency
In life insurance business wide distribution network and tied agency is biggest source of
getting more business for any company so developing them is key to increase share in the
life insurance Market. LIC has 10, 02,149 agents and 2048 branch offices as on 31 st march
2005.
Tied agency is a substantial business channel for Max New York Life because 70% of
business of company comes from this channel. Company provides agency to individual
whose age is between 25 to 40 years and minimum qualification is 12 pass. As we have
seen, companys major business comes from this channel. Max New York Life is
immensely concentrating on developing this channel. It has 33,000 advisors and it is
planning to extend this number to 54000 by the end of the year 2004-2005. For that Max
New York Life does many activity like they do direct marketing, they recruit management
trainees on fulltime project they hold seminars, they also keep stall in big events for
developing that channel. Unit managers provide major support in developing this channel.
Unit manager target is to recruit 30 advisors on 5 - 6 months time. Unit managers have
around 25-30 advisors, who are recruited by them.Max New York Life provides lots of benefits to the advisors like flexibility in timing,
different motivation factors like money, foreign trips, career building programs permission to
access office etc. Company called its offer to business opportunity for individual. People
who accept companies business offer and complete 100 hours training of IRDA for getting
license to do business of life insurance, they call them advisors of Max New York Life .
The project given to the management trainees involves developing business channels
called Tied Agency. I did this task for Fifteen Days. I adopted various techniques for data
collection which are discussed later in the methodology section. A part from this we were
also given an opportunity to present new and develop some creative ideas in order to target
HNIs. We came out with some creative ideas like distributing scratch cards at departmental
stores, petrol pumps etc. and we also fixed up the limit of money spent by the people so
targeted only the higher segment.
Max New York Life has recruited and trained over 33000 insurance agents to
interface with and advise customers. Further, it leverages its state of the art IT infrastructureto provide superior quality of service to customers.
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HISTORICAL BACKROUND
New Delhi July 24, 2008: Max New York Life Insurance Co. Ltd, one of Indias leading
insurance companies today, with the introduction of MAX VIJAY, revolutionized the way
insurance is procured, sold and serviced. The product not only fulfils the customers primary
need of protection, but also facilitates long-term savings. It has been designed specifically
for the underserved segment of the society to meet the unique challenges of
unpredictability in life and their income flow. A unique technology driven distribution and
service model will ensure reach of Max Vijay to the customers even in the remotest of
places.
Max Vijay has been designed keeping in mind the lifestyle, income patterns and needs of
the rural and semi-urban population. It empowers millions of Indians to benefit from the
economic boom in financial services that was hitherto denied to them.
Announcing the launch, Chairman, Max New York Life Insurance Mr. Analjit Singh
commented: "MAX VIJAY empowers millions of Indians, who may not be a part of the
economic growth scenario that the country is witnessing today, to participate in this
revolution and realize their dreams. The business model leverages innovation at every step
be it product design, technology, distribution or service delivery to ensure a comprehensive
offering for the common man."
"Deeply rooted in the understanding of this segment, 'Max Vijay-Insurance Savings Box' or
"Bima Gullak" combines the best of insurance and savings and gives customers a means to
aggregate his earnings in a structured and well-planned manner. This is yet another step in
our journey of becoming the most admired life insurance company in India," he further
added.
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FEATURES OF INDIAN INSURANCE
INDUSTRY
Low market penetration.
Ever-growing middle-class components in population.
Growth of consumer movement with an increasing demand for better insurance
products.
Inadequate application of information technology for business.
Adequate fillip from the Govt. in the form of tax incentives to the insured.
59% of the advisors are satisfied by the commission provided by the co. Those who
are not satisfied said that the commission provided is very low as compared other players in
the industry. Most of the advisors are satisfied by the working conditions.
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MAJOR PLAYERS IN INSURANCE SECTOR
LIFE INSURANCE NON LIFE INSURANCE
BUSINESS BUSINESS
Life Insurance Corporation General Insurance Corporation
Max New York Life
ICICI Prudential Life insurance National Insurance Company.
HDFC Standard Life Insurance New India Insurance Company
Oriental Insurance Company
Birla Sun Life Insurance United India Insurance CompanyOM Kotak Mahindra Life Insurance Reliance General Insurance
Reliance Life Insurance ICICI Lombard Insurance
Allianz Bajaj Life Insurance Royal Sundaram Alliance
General Ins. Bajaj Allianz General Insurance
Dabur CGU Life Insurance
ING Vyasa Life Insurance
SBI Life Insurance
PNB Life Insurance
BOB Life Insurance
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Introduction of Traditional Life Insurance Plan
Term Life Insurance
Endowment Life Insurance
Whole Life Insurance
Investment options available
Traditional Life Insurance
Traditional products consisting of Term Insurance, Endowment and Whole Life Policies
1
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1. Term Life Insurance: Term insurance is issued for a specific period, or term. This
term usually ranges from 1 to 30 years. We may choose the length of the term that best
suits us. Term insurance is considered an affordable insurance choice. If we are youngwith a family and need a large amount of protection without paying high premiums, this
type of life insurance may be of interest to us.
Under a Term policy, in case of death during the term of the policy, our beneficiary
receives the cash payment equal to the insurance amount, or death benefit. The death
benefit amount is chosen when we buy the policy. Term insurance protection ends when
the period or term is over, and only pays out in case of death. For this reason this
product type offers higher protection at a lower cost. It is a pure risk transfer product.Term insurance can be divided into three main types: level term, increasing term, and
decreasing term. Level term means that the death benefit remains the same throughout
the term of the policy. Increasing term means the death benefit gets larger throughout
the term of the policy. Decreasing term means the death benefit gets smaller.
The above chart shows durations of our most popular term life insurance products
2. Endowment Life Insurance: Endowment life insurance generally guarantees that a
sum of money will be available to us or our beneficiaries, whether we live until the policy
ends (or matures,) or in case of an untimely death. Endowment insurance usually
provides a guaranteed death benefit and has a savings component called the cash
value.
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Generally, if we buy an endowment policy and keep it until maturity, it will provide a
lump-sum cash payout equal to the insurance amount, or death benefit. In case of
death before maturity, the death benefit would be paid to our beneficiary.
Endowment insurance can be useful for people who know that they will have to incur aspecific expense in the future like a wedding or college tuition. They know that
regardless of what the future may hold, the expense will have to be paid. Endowment
insurance allows them to be certain that the money will be there.
3. Whole Life Insurance: Whole life insurance has many of the same features as
Endowment insurance, but it is designed to remain in force during the insured's entire
lifetime. Like Endowment insurance, it provides a guaranteed death benefit, and has asavings component called the cash value. As we pay our premiums, a portion of each
payment is set aside to create the cash value. The insurance company typically invests
the cash value, which continues to grow as long as the policy is in force.
Some of the advantages of a policy's cash value are that:
- We can cancel or surrender the policy in total or in part and receive the cash
value; however, since this is a long-term policy, in the early years the cash value may be
small or even equal to zero.
- If we find that we need to skip a premium payment, we can use the cash value to
continue our current insurance protection for some time.
- In most cases, we may borrow from the insurance company, using the cash value
in our life insurance as collateral.
Other types of whole life insurance:
1-Universal Life Insurance:
Universal life insurance has all the features of Whole life insurance. In addition to
those features, it offers flexibility in premium payment and face amount, and it
provides current interest rates. Unlike whole life and term, Universal life allows us,
after payment of our initial premium, to pay premiums at any time, in virtually any
amount, subject to certain minimums and maximums. We can also reduce orincrease the death benefit more easily than under traditional whole life policy.
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2-Variable Universal Life Insurance:
Variable universal life insurance has all the features of Universal life insurance
coverage, but, instead of earning an interest rate, its cash value is linked to non-
guaranteed equity investment funds, bond investment funds, or similar investments
Our premiums will be invested in the various investment options that we have
chosen, and we assume the investment risks. The amount of the policy benefit is
dependent on the performance of our investments.
Investment options available in traditional plan
The Indian debt market offers the following investment options:
1- Central Government Securities
Securities issued by the central government have the highest safety because there is
no risk of default. If pushed to the wall, the government can print currency notes to
meet its obligations. Local currency issues of the central government are also
referred to as sovereign borrowings. These are the most liquid securities of the debt
market.
2- State Government Securities
The yield on state government securities is generally higher than that available on
central government securities. They are also less liquid.
3- Public Sector Bonds
In order to ensure that capital investment by public sector undertakings does not
become a drag on the resources of the national economy, such undertakings have
been given the liberty to borrow from the market. Such borrowings are in the form of
taxable bonds or tax-free bonds.
4- Bonds issued by Domestic Financial Institutions
IDBI, HDFC and such other institutions use the local bond market as a significant
source of funds. Their borrowings are normally in the form of unsecured bonds in
the nature of promissory notes.
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5- Corporate Debentures
Private corporate issuers use the bond market as a means of directly tapping
investors for resources, instead of going through financial institutions. The objective
is to lower cost of funds in the short term, and to build brand equity in the market inthe long term.
6- Commercial Paper
These are issued by companies to finance their short-term working capital needs.
The tenor usually varies from 30 days to 6 months.
7- Certificate of Deposit
These are issued by banks and financial institutions. Banks issue CDs for a
maximum of 1 year, while financial institutions issue CDs for a minimum of 1 year
and maximum 3 years.
8- Floating Rate Notes
Regular interest bonds / debentures can be issued as:
Fixed rate instruments, where the issuer pays a fixed rate of interest irrespective
of the interest rates prevailing in the market from time to time; or
Floating rate instruments, where the issuer pays a rate of interest that varies with
the market interest.
The interest is also referred to as coupon.
9- Zero coupon / deep discount instruments
These do not entail any regular interest payment; instead the difference between the
redemption value and the investment amount represents interest income for the
investor.
10. Indira Vikas Patra
This small savings investment option generally offers an attractive interest rate.Although the income is taxable, this remained a popular investment option because
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no record of the investors is maintained. This also compounds the problems
associated with loss of certificates.
11. Kisan Vikas PatraThis too is a small savings investment option with a similar structure. However,
investors have the comfort of a record being maintained of their investments. So, if
they lose their certificates, the investment does not become a dead loss.
12. Post Office Deposits
These can be savings or time deposits. PO Time Deposits are a very popular
investment option.
13- RBI Relief Bonds
The return offered on these bonds is tax free. The Finance Minister, in his Budget for
the financial year 2002-03, has limited investments in relief bonds to Rs 200,000 per
investor per annum. The period of 12 months commenced on March 1, 2002. The
limit is however not applicable for investments by retiring or already retired persons
of government, public sector undertakings, banks, local bodies and private sector
enterprises.
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INTRODUCTION OF ULIP PLAN
Features of ULIP
Benefits of ULIP
Reasons why ULIP Preferred
ULIP Portfolio
INTRODUCTION OF ULIP PLAN
Unit linked insurance plan (ULIP) Unit linked guidelines were notified by IRDA on 21s
December 2005. It is a life insurance solution that provides for the benefits of protection
and flexibility in investment. The investment is denoted as units and is represented by the
value that it has attained called as Net Asset Value (NAV). The policy value at any time
varies according to the value of the underlying assets at the time.
Unit Linked Insurance Plan (ULIPs) are insurance policies that combine risk coverage with
investing in the stock/debt markets. In effect, they are designed to behave as norma
insurance policies plus mutual funds.
An investor contribution to ULIPs gets invested in specific types of portfolios that he/she
chooses. The policy typically
pays back based on market
returns on investments at the
end of the insured period.
Therefore, it forms an
interesting savings instrument
that can get good risk cover.
Features of ULIPs include:
1. Units allotted under ULIP
schemes have Net Asset
Values (NAV) declared
regularly, like a mutual
fund
2. Investors can invest
across types of portfolios
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similar to mutual funds - growth equity, balanced, debt funds, etc. Investors can
move across portfolios, typically at nominal costs
3. Investors can invest as a lump sum (single premium) or make premium payments on
an annual, half-yearly, quarterly or monthly basis. Premium amounts can bechanged over the course of ULIPs life
4. Investments qualify under Section 80C of the Income Tax Act. Maturity proceeds
from ULIPs are tax free. There are no long term capital gains tax and 10% short term
capital gains tax on equity portfolios within ULIP. For debt funds, long term capital
gains tax is 10% while short term is at the investors marginal tax rate.
5. However, charges charged by insurance companies can be quite confusing -
therefore, investors should compare them with similar mutual funds to see if chargesquoted are reasonable.
Despite their interesting structure and potential benefits, investors are better off clearly
understanding portfolio types offered, performance of fund managers and expenses/fees
before investing in ULIPs.
ULIP provides multiple benefits to the consumer
Life protection
Investment and Savings
Flexibility
Adjustable Life Cover
Investment Options
Transparency
Options to take additional cover
against
Death due to accident
Disability
Critical Illness
Surgeries
Liquidity
Tax planning
Reasons why ULIPs Preferred
We have seen the popularity of ULIPs in the recent past that they have outpaced the
growth of regular endowment plans. We take a look at the most important reasons
why ULIPs score over endowment plans.
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The power of equity- Simply put, ULIPs are life insurance plans, which
have a mandate to invest up to 100% of their corpus in equities. While
individuals have the choice to shift between equity and debt, several studies
have shown that equities are best equipped to deliver better returns
compared to their fixed-return counterparts like bonds and government
securities. And given the fact that life insurance is a long-term contract,
equity-oriented ULIPs augur well for the policyholder.
1. Flexibility - While ULIPs offer the opportunity to invest up to 100% in
equity, it is also true that ULIPs provide individuals the flexibility to shift to
up to 100% debt. It is entirely upon the individual how he wishes to
allocate his premiums between equity and debt. This is not the case with
endowment type plans- individuals can't choose their investment avenues
and have to be content with the insurance company's investment
decisions which revolve largely around debt.
ULIPs are available in 3 broad variants: 'Aggressive' ULIPs, which invest
up to 100% of their corpus in equities, 'Balanced' ULIPs which invest up to
60% of their corpus in equities and 'Conservative' ULIPs which invest upto 100% of their corpus in debt instruments and the money market
instruments. Individuals are free to decide where they want to invest their
money. For example, individuals with an appetite for risk can invest their
entire money in equities while conservative individuals have the option to
park their money in balanced or conservative ULIPs.
That apart, ULIPs also provide individuals with the flexibility ofterminating/resuming premiums, increasing/decreasing premiums and
paying top-ups (i.e. a one-time sum over and above the regular premium)
whenever possible. These options are not available in regular endowment
plans.
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2. Transparency- For the first time, ULIPs introduced transparency into the
manner in which life insurance products were being managed. This is
something that was missing in conventional savings-based insurance
products (like endowment/ money-back/ pension plans).
Unit linked plans brought transparency into the scheme of things. Today, if
an individual wants to invest in a ULIP, he knows upfront what percentageof the premium is being invested, what are the charges being levied and
where his monies are being invested. This is a welcome change for the
policyholder. Another advantage ULIPs offer is that they enable insurance
seekers to compare plans across companies and help him buy a plan that
fits well into his portfolio. Also ULIPs disclose their portfolios at regular
intervals, so we know exactly where our money is being invested.
3. Liquidity- ULIPs offer liquidity to the individual. He can withdraw money
anytime he wishes to once the initial years' premiums are paid. He will not
be levied with any surrender charges i.e. he stands to get the full market
value of his investments, net of charges, till date. This is unlike
conventional endowment plans where individuals tend to lose out on
surrender charges on surrendering their policies. Besides, part surrender
is also allowed in ULIPs. Simply put, part surrender allows individuals to
withdraw a part of their corpus and thus keep the policy alive, albeit with
some adjustments. This helps individuals tide over a situation where they
need cash but have few 'liquid' investments at their disposal.
43
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4. Allows fund switching- You can switch from one fund to another in
ULIPs. This allows you to ensure that the investment fund that you have
chosen is in-sync with your prevailing risk appetite and market sentiments.
Your risk capacity does not remain constant but changes to mirror your
changing life situation. If the markets sentiment changes, you can switch
from a debt-oriented fund to a balanced/equity oriented fund and vice
versa. Most ULIPs allow 3-4 free switches a year and beyond that at a
minimal cost. This becomes important as ULIP is a long term protection
instrument with a minimum lock-in of three years and has surrender
penalties for terminating the long term contract before the agreed duration.
5. Capital Guarantee - Certain ULIPs, offer you the benefit thatirrespective of the market conditions prevailing at the time of maturity, you
will receive a certain guaranteed amount. This guarantee comes into
effect when the value of your invested amount is below the guaranteed
value. In the reverse scenario, you get the amount as per your portfolio
value. In either case you get an amount which is higher of the guaranteed
amount or your portfolio value. For the first time buyers into any market
linked products GuaranteedMaturity Value proves to be a major comfort -
protection of the downside with the upside remaining intact.
The NAV is calculated in the following manner:Net Asset Value (NAV) =(Market Value of investment held by the fund +/- the expenses incurred in the
purchase/sale of assets + value of Current Assets + any accrued income net of
fund management charges - value of Current Liabilities- Provisions) divided by
Number of outstanding units in the Fund. Because of the sheer benefits
associated with ULIPs, an insurance portfolio without this type of policy is truly
incomplete.]
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RESEARCH METHOLOGY
Title of the Study
CORPORATE STUDY OF ULIP IN REFERENCE OF TRADITIONAL PLANS OF
INSURANCE POLICY
Duration of the project
Durations of the project was short 45 days in summer vacation from 18 May to 2
July
To get knowledge about insurance sector
To know the various insurance products available in the market.
To know the investment opportunities available to the insurance
holder.
To compare the traditional & ULIP plans of various Private life
insurance companies of India.
To know the market trend.
To understand the customer opinion about the insurance plans.
Type of Research
The type of research used in this project is Descriptive in nature. Descriptive
research is used to obtain information concerning the current status of thephenomena to describe "what exists" with respect to variables or conditions in
a situation.
In this research I have used some variables like premium amount, flexibility,
sum assured etc. To find out the preference of general public for the 2
insurance product i.e ULIP and traditional life insurance plan.
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Sample Size
large sample give more reliable result than small sample, so for this reason I had
taken around 50 people to whom I should focus upon.
Sample method
In this project I have used Non-probability Convenience sampling. I have
selected the samples according to my convenience, ease and economy of
reaching subjects and my appropriateness.
I have taken sample people who are-
In the age group 25 to 55 year old
Private as well as government employee
Professional people
People who invest their income etc.
Scope of the study
A big boom has been witnessed in Insurance Industry in recent times. A large
number of new players have entered the market and are trying to gain market
share in this rapidly improving market. The study deals with Reliance in focus
and the various segments that it caters to. The study then goes on to evaluate
and analyze the findings so as to present a clear picture of trends in the
Insurance sector.
Limitations of the study
As the movement throughout the city is not possible due to certain
constraints so the movement was quite restricted.
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People are not ready to go for training. As the training period is of 15 days
and it involves full day, so it becomes difficult for them to leave their
offices or shops for such a long time.
The compulsion of selling 12 policies in a year also restricts them from
becoming advisors. If they do not fulfill this target, then their license is
cancelled after a year.
Lack of trust on any company of Private Sector.
Lack of knowledge about the products of Max New York Life and their total
and blind faith on LIC.
Sometimes, fresh graduates want to become advisors but the company
denies making them an advisor as they are very fickle-minded and also
unreliable.
There is a problem in targeting Chartered Accountants. ICAI, which is the
governing body of Chartered Accountants, does not allow them to become
advisors. However, now they have permitted some CAs to become
advisors, but these are only those ones who are doing jobs somewhere
and not allowed the ones who are doing their practice. So, still this
decision is very dicey.
Sometimes, even those people want to become advisors for the company
who are not a localite but then the major problem that they face is that
they have got no natural market, so they are very susceptible about their
performance and whether they will be able to generate business for the
company or not, so they avoid to take up this challenge.
It was a great problem to get appointments from people in the month of
March as most of them were busy in filing their returns.
Some people ask about comparative analysis with LIC.
Some people consider IRDA fees of Rs. 1000 as a constraint.
Non-availability of part-time training.
All small towns are not open for doing this business.
One person cannot take Life Insurance Agency of two different
Companies.
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Sample size was too short to reveal the actual preferences of people
towards ULIP and traditional life insurance plan.
The sample people were from Jaipur only, but other metropolitan cities
people can make a better picture for this project.
People were hesitated to give information about the investment avenue
they opt for, may be they felt insecure to give such information.
DATA INTERPRETATIONS & ANALYSIS(Through Secondary Data)
Chart 1 Investment pattern of interviewee
The above investment chart shows that people highly invest in insurance sector(with 43%) as compared to other investment options.
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Chart 2 Investment pattern of interviewee in ULIPs & Traditional
Insurance plan according to their income level
The above chart shows the preference for ULIP & Traditional insurance plan of
various income group people, it shows that low income level people prefer to
invest in Traditional insurance plan due to low premium , low risk & high sum
assured, but the high income group people whose salary is above 5lakh prefer to
invest in ULIP insurance plan as they are more risk bearing people and also
enjoy high return when the market is on boom . Moderate income group people
are indifferent among the ULIP & Traditional insurance plan that is all depend on
the market situations also
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Chart 3 Investment pattern of interviewee in ULIPs & TraditionalInsurance plan according to their occupation
The above chart shows that Government employee are less risk averge so they
invest in traditional insurance plan as compared to private employee who can
bear risk to earn high on their investment. Self employed & others too prefer to
invest in traditional insurance plan.
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Chart 4Factors that attracts interviewee to invest in ULIPs
The above ranking chart shows that for investing in ULIPs people give high
preference to risk factor as it is an risky investment , after that comes flexibility
for switching from 1 plan to another, surrendering inbetween ect..then comes
sum assured the total amount which they get after completion of maturity peroid
or on the happening of some incidence. Under ULIPs people give less
preference to premium & life protection.
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Chart 5 Factors that attracts interviewee to invest in traditional
Insurance plan
The above chart shows the ranking of various factors which people prefer to
invest in traditional insurance plan. People give high preference to life protection
as it is the basic aim of the traditional life insurance, then comes the premium
which is less as compared to ULIPs , then comes sum assured which is very
huge amount that people gets on the happening of some event. Risk factor has
given low ranking beacause it a risk free investment similarly it is an inflexible
investment as compared to ULIPs.
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FINDINGS & ANALISIS
(Through Primary Data)
Investment tool 16%
Tax saving tool 14%
Security 70%
COMMENT:- Most of the people, almost 70% people told that insurance is asecurity tool.
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raph depicting the %age of people who are insured.
Insured 75%
Uninsured 25%
COMMENT:- As can be seen from the graph, mostly people are insured.
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Graph despicting the %age of people who are associated withMAX New York life insurance company.
Associated 72%
Not associated 28%
COMMENT:- Large number of people are associated with Max New York lifeinsurance company.
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How many people know that Max New York is the No.2 privatelife insurance company?
KNOW 51%
DONT KNOW 49%
COMMENT:- 51% People know that Max New York is the no.2 life insurancecompany. It shows that people are aware about the company.
The %age of People who are working with Max New York Life.
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Less than 1 year 8%
1-2 years 16%
2-3 years 46%
More than 3years 30%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
LESS THEN 1
YEAR
1-2 YE ARS 2-3 YE ARS MORE THE N
3 YEA RS
Series1
COMMENT:- The majority of people who are working with Max New York 2-3 years.
Purpose of buying an insurance products.
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SUCRITY 46%
INVESTMENT 30%
TAX BENEFIT 18%
OTHER 6%
COMMENT:-Most of the people buy an insurance product to secure their
life.
Product which are sold most.
Smart kid plan 38%
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Unit link plan 35%
Annuity plan 27%
COMMENT:- People buy mostly smart kid plan.
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Graph depicting the %age of company which has best productsavailable in the market.
COMMENT:-People think that UTI Insurance company has best products.
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UTI 30%
Max New York 25%
IDBI 17%
HDFC 28%
UTI
IDBI
Max
HDFC
HDFC
28%
UTI30%
IDBI
17%
Max New
25%
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CONCLUSIONS
This project served as a great learning experience for me. It gave me an
in-depth view of the insurance plans.
I came to know that lots of investment opportunities available to different
income group people. If we want to invest less but expect high sum
assured then traditional insurance plan is best. Traditional insurance
protection ends when the period or term is over & only pays out in case
of death. For this reason this product type offers higher protection at a
lower cost. On the other hand ULIPs provides benefits of protection &
flexibility in investment.
ULIPs are insurance policies that combine risk coverage with investing in
the stock/ debt markets. In effect, they are designed to behave as normal
insurance policies plus mutual funds. Traditional plans are simple to sell
and are easily accepted by customers due to its presence all these years.
ULIPs need understanding of Equity and Debt markets and in-depth
knowledge of various competitive investment products and insuranceplans too, to provide the best customized solution. Besides, Commissions
are higher in traditional plans.
ULIP is the future of the insurance industry as convenience and flexibility
will be preferred over the rigid terms and conditions of traditional
insurance plans. Also lower returns offered by traditional plans will slowly
but surely force individuals to look at unit-linked plans considering the
potential for higher returns.
In conclusion, ULIPs will continue to be a favorite option among investors.
The downfall of the market did not have a negative impact on unit-linked
plans and the strong approach of the people towards it proves that quite
robustly. Probably, laypeople are finding it exciting to explore more
options. After all it is worth to take a bit of risk to get those extra bucks!!
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1. I found that in insurance sector a person should have great
Communication and convergence skill.
2. Max New York Life has interested and profitable plans for different age
group.
3. There is lots of scope of life insurance in India only 2.5 people are
secure with life insurance so the insurance sector is in its blooming stage
this boom will increase in 2-3 years.
4. Good profile insurance advisor could do the better job. If Max New York
mentions the level of advisor, they may give great sales to the company.
5. Max New York Life has tough competition with LIC as well as BAJAJ
ALLIANZ, BIRLA SUNLIFE INSURANCE, SAHARA, ING VYASA, OM
KOTAK MAHINDRA, HDFC INSURANCE, SBI LIFE AND RELIANCE
LIFE INSURANCE.
6. Max New York Life has great goodwill in market. In liberalized Indian
market there are approximately 13 big companies and Max New York
Life is the No. 2 private insurance company.
7. If the company starts
Recommended