Professional Documents
Culture Documents
Session: 2008-2011
TABLE OF CONTENTS
CERTIFICATE
PREFACE
ACKNOWLEDGEMENT
EXECUTIVE SUMMARY
CONTENTS Page no.
CHAPTER 1-INTRODUCTION 7-46
1.1. OVERVIEW OF INDUSTRY AS A WHOLE 7-14
1.2. PROFILE OF THE ORGANIZATION 14-31
1.3. PROBLEMS OF THE ORGANIZATION 31-34
1.4. COMPETITION INFORMATION 35-45
1.5. S.W.O.T ANALYSIS OF THE COMPANY 45-46
ANNEXURES: 67-69
SAMPLE QUESTIONNAIRES
FINANCIAL STATEMENT
BIBLOGRAPHY 70
2
Max New York Life Insurance
PREFACE
In the two yeas since the Insurance Regulation and Development authority (IRADA)
licensed private players into the life insurance industry, there have been unpredictable
boom in the insurance market. A number of private players associated with the
multinational giant have appeared in market jostling with pre-established public
sector company, particularly LIC, recognized as behemoth life insurance Corporation
of India. To sustain in the vast market of Insurance Industry a veritable explosion of
the products appeared in the market that was introduced by the private players. It
offers customers a much richer menu of options.
Yet despite these strategies, LIC continues to remain the pack leader having a new
premium accretion of at least 2,791crore whereas private player mopped up 285crore
in the same period. The combined premium of the private sector is barely 10% of this
figure. Despite its terming one billion populations, India still has a low penetration of
1.95 percent, 31st in the world. This is in spite of this fact India has a saving rate of
around 25%, although less than 5 percent is spent on insurance the Confederation of
Indian Industry’s (CII) Expend group on Insurance has put the aggregate insurance
market at a conservative figure of Rs.1,88,700crores by 2009-10 while life premiums
are set to touch Rs.1,45,000crores by that year from Rs.21,500crores in 2005-06 non-
life premiums are set to touch 38,600 from 8,400crores personal line premiums are
expected to rise to Rs.5,100crore from Rs.400crores. Herein, I am required to focus
on the planning, procedure and achievement of some private players and two big
group ICICI life prudential and HDFC from private sector and Life Insurance
Corporation from public sector established in Insurance market.
Lack of adequate data on improvement in mortality and the falling interest rate
regime are making life difficult for private players. In the backdrop of uncertainties
and the absence of level playing field, the private insurance players expect anywhere
between five and seven years for them to attain breakeven.
3
Max New York Life Insurance
ACKNOWLEDGEMENT
I would like to acknowledge the support and guidance that was extended to me from
time to time by all the people during the period of the project.
I hope this project serves the purpose it was intended for and benefits the
organization in as many ways as possible.
Last but not the least, our faculty members who have been a guiding light right from
day one and whose encouragement and support; have helped us complete our project.
SIDDHARTH KUMAR
4
Max New York Life Insurance
EXECUTIVE SUMMARY
Insurance sure is an upcoming sector but with the privatization of the same, selling
insurance products has become tough due to the competition angle attached to it.
It is usually said that if you can sell insurance, you can sell anything in the world
including garbage. The reason behind this concept is the hesitant and unaware
population, who simply run away at the mere mention of its name.
CHAPTER-1
5
Max New York Life Insurance
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 industries in India have a long history. Life Insurance in existing form
came in India from UK in 1818 with Oriental Life Insurance Company. The Indian
Life Assurance companies Act, 1912 was the first measure to regulate Life Insurance
business. Later in 1928, the Indian Insurance Companies act was enacted, which was
amended in 1938. Finally, Government of India in 1950 again amended this act. Life
Insurance Corporation of India was formed in September 1956 by passing LIC Act,
1956 in Indian parliament.
The first general insurance company- Sun Insurance Office Ltd. was established in
Calcutta in the year 1710. The General Insurance Business Act nationalized general
Insurance business in India with effect from 1.1.73. From 1973, The General
Insurance Company (GIC) as a holding company divided in four subsidiaries as:
6
Max New York Life Insurance
to be one of the few remaining countries of the world to remain insulated from the
foreign direct investment in its insurance sector. In a bid to make this sector more
competitive the government constituted an eight-member committee chaired by Mr.
R N Malhotra in 1993. The committee took a year to submit its report. The main
thrust of its recommendations was:
♦ A competitive environment
♦ World-class sophisticated technology
♦ Better & wider range of products with more reasonable & affordable pricing
♦ Price war, leading to competitive pricing of the products
♦ Efficient & effective service
♦ Efficiency in the conduct of insurance business
♦ Global expertise & practices of insurance
♦ New entrants with a professional approach & state of art technology to
revolutionize the market
♦ Services of intermediaries like corporate agents, brokers etc
Malhotra Committee, in its report stated that only 22% of the Indian population is
insured. The poor reach of insurance in the country and the sheer numbers make
India a market with tremendous potential. The following facts show how under-
developed the Indian insurance business is due to state monopoly and lack of
aggressive marketing of insurance policies:
7
Max New York Life Insurance
Nationalized insurance companies have not been able to target niche markets that are
currently served poorly or not at all. Life insurance products provide a good example.
They compete with investment and savings options like mutual funds. It is imperative
that they should offer comparable returns and flexibility. For instance, pure
protection products like term assurance account for up to 20 per cent of policies sold
in developed countries. In India, the figure is less than one percent because policies
are inflexible. Besides, no Indian life assurance product is linked to non-traditional
investment avenues such as stock market indices. Therefore, returns are lower than
those on other savings instruments.
Keeping in mind the problems that ensnared LIC & GIC, the Malhotra Committee
Report recommended the end of monopoly market in insurance.
Due to this Act the private players were allowed to enter the market from 1999.
Several Indian private companies have entered into the insurance market, and some
companies have joined with foreign partners. After the passage of this Act, with
8
Max New York Life Insurance
effect from December 2000, all the four subsidiaries of GIC have been de-linked
from the parent company and have been made independent insurance companies.
GIC now functions as a National Reinsure.
IRDA, for the time being, prohibits 100% foreign equity in insurance. It requires the
Indian promoter to invest either wholly in an insurance venture or team up with a
foreign insurer, with a cap of 26% of equity for a foreign partner.
Since the opening up of Insurance Sector, 12 private players have entered the Life
Insurance sector & 9 private players have entered the general insurance sector.
THE REGULATORS
Recent economic liberalization started few years ago have started bringing in new
investments from global giants and the government was hard pressed to facilitate
global integration by lowering trade barriers for the free flow of technology,
intellectual and financial capital. Additionally, reforms are essential if the Indian
economy is to achieve and sustain a growth rate of 7 to 8 per cent per annum.
Reaching a faster growth path also implies attracting foreign direct investment
inflows of $ 10 Billion every year, up from the current level of $ 3 to $ 3.5 Billion.
9
Max New York Life Insurance
In 1995-96, LIC had a total income from premium and investments of $ 5 Billion
while GIC recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC
income grew at a healthy average of 10 per cent as against the industry's 6.7 per cent
growth in the rest of Asia (3.4 per cent in Europe, 1.4 per cent in the US).
LIC has even provided insurance cover to five million people living below the
poverty line, with 50 per cent subsidy in the premium rates. LIC claims settlement
ratio at 95 per cent and GIC at 74 per cent are higher than that of global average of
40 per cent. Compounded annual growth rate for Life insurance business has been
19.22 per cent per annum and for General insurance business it has been 17 per cent
per annum.
However, there is other side of the coin too. Their large scale of operations, public
sector bureaucracies and cumbersome procedures hampers nationalized insurers. The
field staff and the agents of the GIC and its four wholly owned subsidiary companies
have seldom bothered to venture out into the rural hinterland to sell crop or any other
personal line insurance. The domestic insurance companies, despite meeting their
social objectives of going into the deepest interiors of the country, have lagged
behind in meeting customer expectations in products and services.
Potential private entrants expect to score in the areas of customer service, speed and
flexibility. It is expected that their entry will mean better products and choice for the
consumer. Critics counter that the benefit will be slim, because new players will
concentrate on affluent, urban customers as foreign banks did until recently.
This might seem a logical strategy from the point of view of new players. Start-up
costs-such as those of setting up a conventional distribution network-are large and
high-end niches offer better returns. However, in the long run 'middle-market' offers
the greatest potential as in terms of it is the second largest market in the world. This
may still be an urban market but goes beyond the affluent segment.
10
Max New York Life Insurance
Insurance, even more than banking, is a volume game. A very exclusive approach is
unlikely to provide meaningful numbers. Therefore, private insurers would be best
served by a middle-market approach, targeting customer segments that are currently
untapped.
GIC has already identified the areas that need to be activated and given a shape
through the four subsidiary companies. Foremost is the area of providing health
insurance services. A change in the GIC Act will enable the corporation to float a
joint venture company for health insurance. Other areas that the GIC is looking at are
savings-linked insurance products and use of alternate distribution channels including
banc assurance. Also in progress is the co-ordination of all foreign operations of the
group.
The PSU companies have offered VRS to their employees in an effort to reduce the
manpower cost & to make their operations more effective.
Substantial shift in the distribution of insurance in India is likely to take place. Many
of these changes will echo international trends. Worldwide, insurance products move
along a continuum from pure service products to pure commodity products. Initially,
11
Max New York Life Insurance
insurance is seen as a complex product with a high advice and service component.
Buyers prefer a face-to-face interaction and place a high premium on brand names
and reliability.
In other markets, notably Europe, this has resulted in banc assurance: banks entering
the insurance business. The Netherlands led with financial services firms providing
an entire range of products including bank accounts, motor, home and life insurance,
and pensions. Other European markets have followed suit. In France over half of all
life insurance sales are made through banks. In the UK, almost 95% of banks and
building societies are distributing insurance products today.
In India too, banks hope to maximize expensive existing networks by selling a range
of products. Various seminars and conferences on banc assurance are taking place
and many bankers have clearly shown their inclination to enter insurance market by
leveraging their strengths in the areas of brand image, distribution network, and face
to face contact with the clients and telemarketing coupled with advanced information
technology systems.
Max New York Life Insurance Company Ltd. is a joint venture between New York
Life, a Fortune 100 company and Max India Limited, one of India's leading multi-
business corporations. The company has positioned itself on the quality platform. In
line with its vision to be the most admired life insurance company in India, it has
developed a strong corporate governance model based on the core values of
12
Max New York Life Insurance
In line with its values of financial responsibility, Max New York Life has adopted
prudent financial practices to ensure safety of policyholder's funds. The Company's
paid up capital is Rs.657crore, which is more than the norm laid down by IRDA.
Max New York Life has identified individual agents as its primary channel of
distribution. The Company places a lot of emphasis on its selection process, which
comprises four stages - screening, psychometric test, career seminar and final
interview. The agent advisors are trained in-house to ensure optimal control on
quality of training.
Max New York Life invests significantly in its training program and each agent is
trained for 152 hours as opposed to the mandatory 100 hours stipulated by the IRDA
before beginning to sell in the marketplace. Training is a continuous process for
agents at Max New York Life and ensures development of skills and knowledge
through a structured program spread over 500 hours in two years. This focus on
continuous quality training has resulted in the company having amongst the highest
agent pass rate in IRDA examinations and the agents have the highest productivity
among private life insurers.
201 agent advisors have qualified for the Million Dollar Round Table membership in
2005. MDRT is an exclusive congregation of the world’s top selling insurance agents
and is internationally recognized as the standard of excellence in the life insurance
business.
Having set a best in class agency distribution model in place, the company is
spearheading a major thrust into additional distribution channels to further grow its
business. The company is using a five-pronged strategy to pursue alternative channels
of distribution. These include the franchisee model, rural business, direct sales force
involving group insurance and telemarketing opportunities, banc assurance and
corporate alliances.
13
Max New York Life Insurance
Max New York Life offers a suite of flexible products. It now has 26 life insurance
products and 8 riders that can be customized to over 400 combinations enabling
customers to choose the policy that best fits their need.
VISION
MISSION
2. Be a national player
VALUES
1. KNOWLEDGE
Knowledge leads to expertise; and our expertise is in helping people protect them.
Perfectly combining global expertise with local knowledge, we are India's life
insurance specialist. Max New York Life believes that for knowledge to be of value it
must be focused, current, tested and shared.
2. CARING
Max New York Life is redefining the life insurance paradigm by focusing
on customers first. The service process is responsive, personalized, humane and
empathetic. Every individual who represents the company is for us our brand
champion.
14
Max New York Life Insurance
3. HONESTY
Honesty is the heart of the life insurance business. It is all about trust.
Transparency, integrity and dependability form the cornerstones of the Max New
York Life experience. The company ensures that everyone who represents the brand
carries a promise: we care — in word as well as deed.
4. EXCELLENCE
Excellence at Max New York Life implies the ability to perform at a consistently
high level. Focused on the value of continuous improvement in people, processes and
the organization, the company strives for the highest standards of quality in every
aspect of its business.
• Operating earnings increased 17% to $1.1 billion in 2006, from $934 million in
15
Max New York Life Insurance
20051.
• Operating revenue grew more than $1.2 billion, or 11%, to $12.3 billion in 20061.
• Total investment sales increased more than $6.6 billion, or nearly 24%, to $34.9
billion.
• Assets Under Management increased by more than $39 billion to nearly $265
billion in 2006.
Sy Sternberg, chairman and chief executive officer, said, “The company’s operations
had a year for the record books in 2006. Our broad array of products, including
traditional life insurance products, lifetime income products, long term care
insurance, and institutional and retail investment products and services, are clearly
meeting the varied needs of our policyholders and clients. The robust growth
achieved in 2006 reflects outstanding execution of our strategy, including our focus
on life insurance, on career agents, on remaining a mutual company, and of course,
maintaining financial strength, a hallmark of our company. Surplus reached a new
high of $13.9 billion, providing a superb cushion of safety and security for our
policyholders.”
Strong Earnings
Operating earnings, the company’s measure to track profitability from ongoing
operations, increased 17% to a record $1.1 billion in 2006, compared with 2005
operating earnings of $934 million. Significantly, earnings from International and
New York Life Investment Management, both of which represent future earnings
growth engines, exceeded expectations in 2006. The company’s GAAP net income
(including realized capital gains and losses) totaled $2.3 billion in 2006, compared
with $855 million in 2005. These results included net realized capital gains of $1,205
million in 2006, compared with net realized capital losses of $180 million in 2005.
16
Max New York Life Insurance
the United States of life insurance (up 24%) and lifetime income annuities (up 45%)
and by a 26% increase in sales of life insurance in the company’s International
operations. New York Life is the largest seller of life insurance and lifetime income
annuities in the United States, according to an industry source2. In addition, sales of
life insurance through AARP increased 22% in 2006.
Investment sales increased nearly 24%, to $34.9 billion in 2006, driven by a 27%
increase in sales at New York Life Investment Management, which saw particularly
strong sales in its Institutional, retirement services, and retail mutual fund businesses.
New York Life’s operating revenue of $12.3 billion was up 11%, a new company
milestone, led by a 24% increase in operating revenue from International operations.
Review of Businesses
The company’s U.S. Insurance Operations include its Life and Annuity and Special
Markets business units. Life and Annuity is the company’s largest revenue generator,
selling a full array of products in the United States including individual, bank- and
corporate-owned life insurance, lifetime income annuities and a variety of variable
and fixed investment annuities. Key highlights of 2006 were:
• Operating revenue in Life and Annuity increased 10% to $7.8 billion, compared
with $7.1 billion in 2005.
• New York Life continued its leadership in the Million Dollar Round Table, the
industry’s most prestigious professional organization for agents, for the 52nd
consecutive year. The company had 2,331 agents achieve this recognition in
2006, nearly a third of New York Life’s active field force in the U.S.
• Through the AARP programs, New York Life is America’s leading direct
marketer of life insurance, and in 2006 launched a new program offering lifetime
income annuities to AARP members.
17
Max New York Life Insurance
• The company’s long term care insurance operation ranks as the seventh largest
provider in this field, according to an industry source2, with sales up 15% in
2006, versus industry sales that declined by 8%.
• An 18% increase in assets under management over 2005, exceeding $235 billion
by year-end.
New York Life International has operations in nine markets including China, Hong
Kong, India, South Korea, Taiwan, Thailand, Argentina, and Mexico. New York Life
International operations remain in growth mode, expanding rapidly in a number of
the world’s most attractive emerging markets, including India and China. Key
highlights of 2006 were:
18
Max New York Life Insurance
• Operating revenue grew to $2.3 billion in 2006, up 24% over the prior year.
• Max New York Life, the company’s joint venture in India, virtually doubled
insurance sales over the prior year. It grew the number of licensed agents in India
to nearly 18,000 and expanded its network of offices to 90 in 55 Indian cities.
• Insurance sales in China grew 70% as we entered four new cities, including the
provincial capital of Nanjing.
Max New York Life Insurance, one of the leading life insurance companies of India,
on Wednesday announced it First Year Premium (FYP) income for financial year
ended March 2008. During the year the company has recorded a growth of 70% in
individual first year premium adjusted for single pay. The adjusted individual FYP
for FY 2008 stood at Rs.1,308 crore as compared to Rs.769 crore during previous
financial year.
During the last quarter of the financial year (Jan–Mar 08), the company grew by 95%
over the corresponding period last year. The adjusted individual FYP for quarter
ended March 2008 stood at Rs.471 crore as compared to Rs.241 crore for quarter
ended March 2007.
Commenting on the continued high growth of the company, Mr. Gary Bennett,
Managing Director & CEO, Max New York Life Insurance, said, “We have built a
robust and values driven business model. We have the best in class agent advisors
who are acknowledged for their quality of advice. We always had a strong focus on
customer needs and during past one year we further sharpened our customer
centricity. This reflects in our entry into new product segments like health insurance
and retirement planning and superior customer service and claims record. These
efforts are reflected in our financial performance for the year and will help us
continue on this growth trend.”
Max New York Life Insurance sold 8.7lakh policies during the financial year 2008,
an increase of 58% over 5.5lakh policies sold during financial year 2007. The
company has acquired around 23lakh policies since inception. In the financial Year
20
Max New York Life Insurance
2008 the Assets Under Management also doubled to over Rs3,600 crore as compared
to Rs.1,800crore as at the end of previous financial year.
During the Financial Year 2008, Max New York Life further strengthened its
distribution network. The company launched 77 new offices and now has presence in
157 cities across the country through 242 offices. The rural business of Max New
York Life Insurance started its hub and spoke operations in Haryana after witnessing
stupendous success in Punjab. The company also strengthened its partnership
distribution channel by signing 4 corporate agency relationships, 5 broking house tie-
ups and 8 referral tie-ups with banks.
Max New York Life Insurance launched 13 new products during the financial year
and now has a portfolio of 38 products and 8 riders for individuals. The company
entered the health insurance segment with the launch of...
In 1999, when the insurance sector was opened to private players in India, Max India
Limited tied up with New York Life to form Max New York Life (MNYL) to
provide individual and group life insurance solutions. In a short span of around 5
years, it established a wide distribution network with 28 offices and representatives
across 21 cities in India. Max New York Life offered 13 products and 9 riders’
customized to over 400 combinations that provided a number of options to the
customer.
Max New York Life mission, vision and values were all directed towards becoming
the most admired and preferred Life insurance Company in India. They also aimed to
be the first choice for employees as well as agents. In 2000, Max New York Life
realized that to compete against LIC, the only large player in the life insurance
segment, it had to build a huge network and implement a product differentiation
21
Max New York Life Insurance
strategy to gain customers. However, the tie up with New York life ensured that
different options were given to the customer as against LIC products which were not
differentiated.
There was also an opportunity in the Indian markets as penetration rates were only
1.3% and insurance policies were mainly considered as a tax-saving investment,
rather than risk coverage. The leading player (LIC) concentrated only on selling and
very little qualitative advice was offered to the customer buying its insurance
policies. This service gap enabled a customer-oriented player like Max New York
Life to impress the potential customers.
Max New York Life laid stress on training of agents, as personal relationships were
the key to success in selling insurance. For this purpose, it took special measures to
train agent advisors who were the primary source of distribution. In 2002, it had
around 1900 agent advisors who underwent 152 hours of training before selling as
against 100 hours stipulated byIRDA.
These training programs were spread over 2 years for 500 hours and ensured up
gradation of skills and knowledge. The training program covered consumer
psychology, the financial markets, and development of selling skills, discipline and
the right attitude in the agents. These agents were groomed to become financial
advisors to customers. Commenting on internal brand building, Debashis Sarkar
(Sarkar), senior vice-president, marketing, Max New York Life said:
22
Max New York Life Insurance
There are tapping opinion leaders in the village like schoolteachers, social workers
and chemists, and creating products which suit rural needs," commented Sarkar. The
company tied up with Shoppers' Stop and reached out to customers who held the
chain's "First Citizen" discount card and bought children's clothes more than once a
month. Such customers were tapped for child saving schemes as well.
Max New York Life created product differentiation by giving “Whole Life “policies
that offered customers the correct balance between protection and savings. They
offered for the first time in India a free-look period i.e., a customer had 15 days
period to weigh the various options offered by Max New York Life which helped
him to take an informed decision. This standard was adopted by IRDA as the best
practice to be emulated by all players in the Indian insurance market. They were also
the first company to sell a policy with riders.
For example, 5-Year Term Renewable and Convertible Policy had two riders
attached to it viz. Personal accident benefit and Dread disease benefit, which could be
attached at the time of purchase of policy or later, subject to certain conditions. Max
New York Life also offered a specialized rural policy provided term insurance for
Rs10,000 for a sum of Rs100, which was affordable to that particular segment of
society.
Max New York Life offered cash bonus in May 2003 to its Whole Life policyholders,
who joined before February 6, 2002. As a value added service, this bonus could be
used in five different ways: accumulated with the company and earn interest, buy
paid up additions to raise the death benefit of the base policy, offset against future
payable premiums, taken in cash or buy an additional term cover for one year.
In 2003, Max New York Life realized that it needed a new workflow system, as the
existing one was unable to meet the customer requirements efficiently. Therefore, it
tied up with nugent to supply business process management tools. These
technological improvements helped to reduce the turnaround time for customer
23
Max New York Life Insurance
Max New York Life also fixed benchmarks on claim processing time, processing of
complaints and customer satisfaction and monitored these regularly. All these
measures served to enhance customer service levels in the company.
At the outset, the mission and vision of Max New York Life clearly defined its
objective to be the most admired and preferred insurance company in India. It then
went about doing a SWOT analysis that formed the basis for its marketing strategy. It
had the advantage of variety of products from New York Life, a leading insurance
player in the US, which had to be introduced with Indian perspective.
The largest threat was LIC, which had a big distribution network. Max New York
Life also saw an opportunity in the under-penetrated insurance market where
insurance policies are considered as an investment or tax-saving tool. Using this
market analysis it went about building its distribution network through direct sales
personnel called “agent advisors”.
Special attention was given to training them so that they could go beyond selling and
offer professional advice to customers. Max New York Life leveraged the fact that
insurance policies were mainly treated as tax savers or investment tools.
Max New York Life mainly used the concept of protection against risk to promote its
products. It felt that existing insurance products, although having a money-back
offer, did not offer protection to the customer.
24
Max New York Life Insurance
The “Whole Life” policies of Max New York Life, therefore concentrated on a
unique combination of protection and saving that appealed to the customer. Along
with this, riders in the form of supplementary policies served as an additional benefit
to the customer.
Another first for Max New York Life was its cash bonus offer which offered cash
back on certain policies. As a value addition, there were various options wherein this
cash could be invested with the company. Continuing with its innovations, Max New
York Life also offered a free-look for 15 days, which later became the norm for
insurance industry.
With a focused approach to the rural areas, Max New York Life introduced a rural
policy with minimum investment to suit the pockets of the lower income groups
residing in villages. To make this section of customers understand the benefits of
their policies, they adopted a unique strategy of appointing schoolteachers and social
workers as agents, who being opinion leaders helped convince the villagers about the
product.
Other distribution channels like banks and corporate alliances were a means to
expand the customer base of Max New York Life via customers visiting these places.
The direct selling agents established personal rapport with customers on one-to-one
basis, thereby increasing goodwill and loyalty towards Max New York Life.
To support their products and distribution, they built a customized business process
system using the web platform to generate quick customer response.
This model also helped them to track complaints and measure customer satisfaction.
The improved productivity and low costs helped to improve Max New York Life’s
profits and gave them increased business.
25
Max New York Life Insurance
1. BONUS STRATEGY
Bonus is a function of surplus funds available after adjusting for future liabilities and
current assets. This is based on actuarial experience.
Therefore, based on actuarial experience, bonuses will be announced not before three
years of operations.
Max New York Life offers innovative and immediate (not reversionary) bonus
options, which add value to customers. Bonuses can be received in cash, employed to
offset premium, left on deposit with interest, used to buy additional insurance by way
of paid-up additions or term insurance.
2. RURAL STRATEGY
Max New York Life recognizes the rural market and social sectors as being distinct,
requiring different selling and product strategies. Therefore, Max New York Life
have designed specific products and appointed village cooperatives in various
districts across India. These village cooperatives help increase awareness of life
insurance.
3. COMMUNICATION STRATEGY
Max New York Life objective is to build India’s most admired Life Insurance
Company. Max New York Life seeks to build trust with customers.
Max New York Life focus on life insurance and experience of over 158 years has
helped position us as life insurance specialists.
The selling strategy is to provide a consistent brand experience across all stakeholders
— customers, shareholders, employees, agents, regulator and the public.
The brand experience will be based on positioning of being a trusted life insurance
specialist that can partner the customer for life.
26
Max New York Life Insurance
Max New York Life is also sparing no efforts to increase awareness for the true value
of life insurance, which lies in risk protection.
Max New York Life has over 3,000 agents / advisors. Max New York Life believe in
a quality approach to business and therefore select and train only the best in class
people so that they can deliver value to the customer.
The company places a lot of emphasis on its selection process, which comprises four
stages — screening, psychometric test, career seminar and final interview.
The agents are given in-house training to ensure optimal control on quality.
Commission is purely a function of the business that they generate. Given approach
to business it will not be unusual to see some agents earn more remuneration than the
managing director of the company.
27
Max New York Life Insurance
Speaking to newspersons, he said, "we are in the early stages of talks with a general
insurance company for a tie up for the micro insurance foray." He, however, declined
to give any time frame when the company is likely to go for the venture. It is going
to be a great opportunity for the insurance company, he said adding, the next phase of
development of the life insurance industry will be in rural areas.
Capital infusion
Speaking about the fresh capital infusion, Mr Analjit Singh, Chairman, Max India
Ltd and Max New York Life, said, the company planned to raise its paid-up capital to
Rs 1,000 crore in next two years and eventually to Rs 1,500 crore. Currently, the
paid-up capital of the company stands at Rs 617 crore.
The company expects to break even by 2008-09. The company, which registered
more than 100 per cent growth last year, intends to roll out about seven new products
28
Max New York Life Insurance
next year.
FDI limit
Asked about the foreign direct investment limit (FDI) in the insurance sector, New
York Life Insurance Co, Chairman and Chief Executive Officer, Mr Sy Sternberg,
said the company wants the Indian Government to raise the FDI in the insurance
sector. "Our highest priority at the moment is to see the FDI cap lifted. It will help us
scale up our investment in India," he added.
New York Life has 26 per cent equity — the highest permitted at present and has
committed to increase its stake to 49 per cent, when the Government raises the cap.
Problems
Consumer awareness level is still off the mark. According to the recently conducted
FICCI survey on the Present State of Indian insurance industry, a copy of which is
available with all of you, the awareness levels regarding Insurance are still in the
realm of medium to low. This clearly indicates the onerous task that companies have
in creating awareness about "need to Insure" and also tremendous potential they have
in expanding the markets by getting more customers in their fold by increasing
awareness levels.
Another potential channel that reduces the need for an owned distribution network is
worksite marketing. Insurers will be able to market pensions, health insurance and
even other general covers through employers to their employees. These products may
29
Max New York Life Insurance
Finally, some potential Indian entrants into insurance hope to ride their existing
distribution networks and customer bases. For example, financial organizations like
ICICI, HDFC or Kotak Mahindra intend to tap the thousands of customers who
already buy their deposits, consumer loans or housing finance. Other hopeful entrants
anticipate specific alliances such as with hospitals to provide health cover.
International Experience
Cross-country experience shows that nowhere in the world have the entry of foreign
firms threatened the position of domestic companies. Whether it is Malaysia, where
the insurance sector has been open for more than 50 years and foreign companies
account for about 10 per cent of market penetration or it is Indonesia, Thailand,
China or the Philippines, where the market has been opened more recently, the total
market share of foreign companies is less than 10 per cent except in Indonesia where
it is about 20 per cent. Closer home, we have the experience of the banking sector
where despite the presence of 42 foreign banks, their share in total banking assets is
less than 10 per cent.
Today hardly 20 per cent of the population in India is insured and insurance premium
(life as well as non-life) account for just 2 per cent of GDP as against the G-7
average of 9.2 per cent. Consequently, the fear that new companies will displace
public companies is misplaced. There is room for more for not only the existing
companies but also for any number of competitors.
30
Max New York Life Insurance
LIFE INSURANCE
Life Insurance is a contract for payment of a sum of money to the person assured (or
failing him/her, to the person entitled to receive the same) on the happening of the
event insured against.
Usually the insurance contract provides for the payment of an amount on the date of
maturity or at specified dates at periodic intervals or at unfortunate death if it occurs
earlier. Obviously, there is a price to be paid for this benefit. Among other things, the
contract also provides for the payment of premiums by the assured. Life Insurance is
universally acknowledged as a tool to eliminate risk, substitute certainty for
uncertainty and ensure timely aid of the family in the unfortunate event of the death
of the breadwinner. In other words, it is the civilized world's partial solution to the
problems caused by death
In a nutshell, life insurance helps in two ways: premature death, which leaves
dependent families to fend for itself and old age without visible means of support.
Benefits of Life Insurance:
Unlike any other savings plan, a life insurance policy affords full protection against
risk of death. In the event of death of a policyholder, the insurance company makes
available the full sum assured to the policyholders' near and dear ones. In
comparison, any other savings plan would amount to the total savings accumulated
till date. If the death occurs prematurely, such savings can be much lesser than the
sum assured. Evidently, the potential financial loss to the family of the policyholder
is sizable.
Encourages and Forces Thrift
A savings deposit can easily be withdrawn. The payment of life insurance premiums,
however, is considered sacrosanct and is viewed with the same seriousness as the
payment of interest on a mortgage. Thus, a life insurance policy in effect brings about
compulsory savings.
31
Max New York Life Insurance
A life insurance policy is the only financial instrument the proceeds of which can be
protected against the claims of a creditor of the assured by effecting a valid
assignment of the policy.
Administering the Legacy for Beneficiaries
A life insurance policy can, after a certain time period (generally three years), be
surrendered for a cash value. The policy is also acceptable as a security for a
commercial loan, for example, a student loan. It is particularly advisable for housing
loans when an acceptable LIC policy may also cause the lending institution to give
loan at lower interest rates.
Disability Benefits
Death is not the only hazard that is insured; many polices also include disability
benefits. Typically, these provide for waiver of future premiums and payment of
monthly installments spread over certain time period.
Accidental Death Benefits
Many policies can also provide for an extra sum to be paid (typically equal to the
sum assured) if death occurs as a result of accident.
Tax Relief
Under the Indian Income Tax Act, the following tax relief is available
a) 20 % of the premium paid can be deducted from your total income tax liability.
b) 100 % of the premium paid is deductible from your total taxable income.
When these benefits are factored in, it is found that most polices offer returns that are
comparable/ or even better than other saving modes such as PPF, NSC etc. Moreover,
the cost of insurance is a very negligible
32
Max New York Life Insurance
COMPETITORS:
4. MET LIFE
5. BAJAJ ALLIANZ
STRENGTHS
• Knowledge based
• Being quality conscious rather than quantity oriented
• Providing in-house training to advisors rather than online training
• Cost effective organization
• Persuasiveness of customer service representative to address the problems.
• Effective customer Personal consulting for customized policy.
• Perceived financial loyalty programmers.
• Customized policies that cover the specific terminal disease.
WEAKNESSES
• Are pulled by the engine of powerful brands like TATA AIG and
Bajajallianz.
OPPORTUNITIES
34
Max New York Life Insurance
THREATS
35
Max New York Life Insurance
CHAPTER-2
2.1SIGNIFICANCE
It plays a very important role in the day-to-day activities of the common man,
business houses, industries, agriculturists and other service providers. Insurance not
only provides protection for individual and industry through risk coverage; it also
mobilizes funds for economic activity, and encourages savings. Thus an insurance
cover is considered an important tool for economic stability. The insurance industry
is a key sector in the economy of any country.
36
Max New York Life Insurance
2.3 OBJECTIVES
Objective One
To study the insurance sector in India with special consideration to Max New York
Life Insurance.
Objective Two
37
Max New York Life Insurance
RESEARCH DESIGN
Primary Data
The primary sources of data refer to the first hand information Primary data is
collected during the survey with the help of Questionnaires.
Secondary Data
Secondary data is one which already exists and is collected from the published
sources.
The sources from which secondary data was collected are:
• Newspapers and Magazines like Economic Times
• Internet
SAMPLING METHODOLOGY
Sample Size: 50
Limitation:
1. The duration of time for the study was limited & hence a
comprehensive & elaborate study could not be undertaken.
38
Max New York Life Insurance
4. Study was restricted to Delhi and NCR, which might not give the
national picture.
39
Max New York Life Insurance
CHAPTER-4
DATA ANALYSIS
QUESTIONNAIRE ANALYSIS
Other reasons
Purpose of LIP
8%
Pension Benefits
2%
Tax Benefit
Risk Mgmt Tax Benefit
Safe Investment
6% 38%
Returns
Returns Risk Mgmt
23%
Pension Benefits
Safe Investment
Other reasons
23%
Fig 1.1
Factors YES NO
% 92% 8%
100
% 80
60
40
20
0
Yes No
Factors
Fig 1.2
41
Max New York Life Insurance
Factors YES NO
% 40% 60%
In %
60
50
40
% 30
20
10
0
Yes No
Factors
Fig 1.3
42
Max New York Life Insurance
Others
3%
ICICI HDFC
8% 2%
LIC
87%
Fig 1.4
Other
Reasons
Higher 13%
Returns Brand Name
12% 43%
Product
Features
6%
Customer
Service
26%
Fig 1.5
1. 43% say brand name is a strong reason that lets the
people decide their company.
2. 26% say that customer service is the reason
3. 6% favored the company because of it’s strong
product features.
4. 13 % respondents gave returns as the reasons.
5. 12 % respondents gave higher returns.
44
Max New York Life Insurance
Fig 1.6
45
Max New York Life Insurance
Risk
Higher Returns 3% Riders Available
20%
29%
Maturity Period
9%
Others Premium Amount
15% 24%
Fig 1.7
46
Max New York Life Insurance
CHAPTER-5
From the above graphs 42 % respondents prefer money back policy because it
provides twin benefits of saving cum protection and generates return after fix
intervals. Investor always believes in early returns, they are conservative in their
investment matters and want to minimize the risk.
16% relay on child care policy because of too much competition and increase in
educational expenditures.
3% wants to save their future especially after retirement that is why they prefer
pension policy.
39% respondents are diversified in nature and prefer different endowment policy,
which is wide in nature.
78% respondents always prefer to buy insurance policies through agents because of
the personal relations with their agents. He also insures them about the reliability of
policy as well as the company.
11% respondents prefer to buy their policies from the banks because they felt that a
bank is a safe institution to buy an insurance policy, which also provides all the
information’s.
7% buy their policies directly from the companies because the insurer companies
provide best solution to them as per their requirements.
RECOMMENDATIONS
47
Max New York Life Insurance
Conclusion
What is a life insurance policy? As the old saying goes, it’s really nothing more
complicated than “A drop of ink, a piece of paper and a promise to pay.”
In other words, the real value of your policy rests entirely on how well – and for how
long – an Insurer can keep its promises.
Total investment portfolio of the insurers in India, as at the end of March 2005 was
Rs4, 65, 864 cr. .The total premium collected by the insurers both life and non-life in
2004-05 was Rs.1, 00,335crore. The major contribution came from life insurance.
The insurance penetration i.e., premier as percentage of GDP was 3.17 per cent in
2004. While this ratio is steadily increasing, it is far below the world average of 8.06
per cent. This shows the vast potential that exists.
The insurance industry in our country underwent a big change in 2000 when private
participants were allowed into the industry along with a streamlined regulatory and
supervisory regime. There are at present 14 private life insurance companies along
48
Max New York Life Insurance
with LIC and 12 entities in non-life sector. There is evidence to show that
competition has done well to insurance industry. The rate of growth of the industry
in the post liberalization period has been faster. It has also developed in terms of
product innovation and the use of alternative distribution channels.
In some sense we can say that insurance appears simultaneously with the appearance
of human society. We know of two types of economies in human societies: money
economies (with markets, money, financial instruments and so on) and non-money or
natural economies (without money, markets, financial instruments and so on). The
second type is a more ancient form than the first. In such an economy and
community, we can see insurance in the form of people helping each other. For
example, if a house burns down, the members of the community help build a new
one. Should the same thing happen to one's neighbor, the other neighbors must help?
Otherwise, neighbors will not receive help in the future. This type of insurance has
survived to the present day in some countries where modern money economy with its
financial instruments is not widespread (for example countries in the territory of the
former Soviet Union).
The mission of the insurance sector in India should be to extend the insurance
coverage over a larger section of the population and a wider segment of activities.
The three guiding principles of the industry must be to charge premium no higher
than what is warranty given by strict actuarial considerations, to invest the funds for
obtaining maximum yield for the policyholders consistent with the safety of capital
and to render efficient and prompt service to policyholders. With imaginative
corporate planning and an abiding commitment to improved service, the mission of
widening the spread of insurance can be achieved.
49
Max New York Life Insurance
Annexure
Questionnaire
REGULAR INCOME
YES NO
YES NO
4. From which company have you been insured to suit your needs?
50
Max New York Life Insurance
PRODUCT FEATURES
OTHERS
RIDERS MATURITY
PREMIUM RISK
RETURNS OTHERS
AGENTS BANKS
OTHERS
51
Max New York Life Insurance
Income
Gross sales 176.61 142.35
Less: Sales returns (1.21) (0.87)
Excise duty (20.06) (16.63)
Net sales 155.34 124.85
Service and other income 40.37 23.97
Total Income 195.71 148.82
Expenditure
Manufacturing and other expenses 164.61 129.66
Financial expenses 4.92 9.54
Depreciation and amortization 5.76 6.10
Total Expenditure 175.29 145.30
Profit before Tax 20.42 3.52
Tax expense 6.20 (2.37)
Profit after Tax 14.22 5.89
6007.88
720.13
ICICI Prudential
52
Max New York Life Insurance
53