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“MACRO

ANLYSIS OF INDIAN INSURANCE SECTOR AND MARKETING OF ICICI PRUDENTIAL PRODUCTS”

With reference to karvy consultancies

A summer training project report submitted to fulfill the award of MBA Degree

Submitted by PRATIK J. SHAH BHAVESH C. PATEL VISHAL R. BAROT Roll No. 70 Roll No. 42 Roll No. 05

PROJECT AT:

S.K.PATEL INSTITUTE OF MANAGEMENT & COMPUTER STUDIES GHANDHINAGAR
Year: JUN 2004

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CERTIFICATE
This is to certify that the project work titled “MACRO ANLYSIS OF INDIAN INSURANCE SECTOR AND MARKETING OF ICICI PRUDENTIAL PRODUCTS”

Is work out by students
PRATIK J. SHAH BHAVESH C. PATEL VISHAL R. BAROT

I certify that the candidates have successfully completed their work in course of time in summer training project.
Date: Sign of project guide
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ACKNOWLEDGMENT

Sincere thanks to ICICI Prudential and Karvy Groups Ltd. For giving us an opportunity for working on this project which in turn helped us having an overview of the insurance industry in general and ICICI Prudential Life Insurance Company Ltd. We are also thankful to karvy management for providing the required peripheral facilities. This project will make a considerable impact on the future scopes of our placement and also provide enough experience of working with an organization. We also contributed to the selling of the insurance products for the ICICI prudential with great help form them for providing special product training and equipments provided for sales.

-Thank you

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INDEX
Project Theme Chapter – I Chapter – II Chapter – III Chapter – IV Chapter – V Chapter – VI Section – VII  Bibliography Fundamental of Insurance Insurance Industry: Phases from Origin to Growth Nationalized Players: LIC Winds of Change: Privatization Nationalized Player Vs Private Players My Experience and Contribution During my summer training Conclusion 5 6 14 19 21 46 52 57 59

Project Theme
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This project was made with an objective to provide a general idea about the Indian insurance sector (Especially today’s environment when many private insurance companies in the Indian market). And specially emphasizing on ICICI Prudential on which we have taken our summer training. Our work was divided in two phases. In first phase we were introduced about the general idea of insurance in India, other financial products related to karvy consultancies and special five days product training of ICICI prudential. Second phase was related to practical implementation of the theoretical knowledge we earned. In this phase we went for actual selling in market. Firstly it started form reference market and then leads were provided to us by the telecaller. So here we generated some sales and proved ourselves that, we can be good future employees for the organization.

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The Risk The insured The insurer General definition: In the words of John Magee. predictable packages ♦ What is Insurance? “Insurance is a financial service for collecting the saving of the public and providing them with a risk coverage.Chapter 1: Fundamentals Of Insurance Insure .” Contractual definition: In the words of justice Tindall.” Thus in insurance. “Insurance is a plan by which large number of people associate and transfer to the shoulders of all risks that attach to individuals.then you can welcome the unexpected because future rarely comes in neat.” 6 . “ Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.

fire. earthquake are perils. when it could be expected that the income will normally cease or the person could have made some other arrangement to meet the continuing needs.  A human life is also an income-generating asset. Yet there is uncertainty about risk. These would have been made on the basis of some expectations like he may live for another 15 years or that his children will look after him. Fire. Such possible occurrences are called perils. Certain risk includes events like death. Insurance is done against this contingency. If it happens around the time of retirement. Death will happen.  In case of a human being. accident. insurance is necessary to help those dependent on income. If the property. These are risks. Accident may or may not happen.  Satisfaction of economic needs require generation of income from some sources. marriage. education. etc. pension. but the timing is uncertain. This asset also can be lost through unexpectedly early death or made non-functional through sickness and disability caused by accident. But if it happens much earlier when the alternative arrangements are not in place. ill-health etc. floods. Uncertain risk includes events like theft. The risk only means that there is possibility of loss or damage. break down. The damage that these perils may cause the asset is the risk that the asset is exposed to. retirement. 7 .  Assets are insured because they are likely to be destroyed or made non functional through an accident occurrence. he may have made arrangements for his need after his retirement. It may or may not happen. which need to be safeguard against thorough insurance.♦ Why do you need Insurance cover? Insurance will help provide protection to investors from certain or uncertain risks. is lost fully or partially. Living too long can be as much a problem as dying too young. which is the source of income. If any of these expectations would become inadequate and there could be difficulties.

insurance is extended to intangibles. Insurer brings together persons with common insurance interest or 8 . In some countries the voice of a singer may be insured though benefit of spread is not available in these cases. economic policies or political disturbances. The purpose of insurance is to safeguard against such misfortunes by making good the losses of the unfortunate few through the help of the fortunate many who were exposed to the same risk but saved from the misfortune. An exporter runs the risk of the importers in the other country defaulting as well as loses due to sudden changes in currency exchange rates. burglary. the income too will stop.called Insurer. Thus the essence of insurance is to share the losses and substitute certainty by uncertainty.permanently or temporarily.  Other objectives of insurance could be:  Family of insured is protected. The amount in question can be fairly large beyond the capacity of individuals to bear.  The concept of insurance has been extended beyond the coverage of tangible assets. Doctors run the risk of being charged with negligence and subsequently liability for damages. These risk are now insured.  Provision of retirement and old age  To provide funds for education. These are insured. expropriation and nationalization programme which will insure a permanent investment outside a company’s home base operation.  For multinational corporations political risk is one of the many factors that need to be assessed and manage throughout the life time of an oversees project and Investment. fire etc ♦  Business of Insurance Business of Insurance is done by Insurance companies. marriage. These investments related exposure can be covered by a confiscation. ill-health  To get tax relief from income tax and wealth tax. accident. Thus. the premium paid as well as the sum assured  To cover the risk from theft.

It spreads the loss of an individual over the group of individuals who suffer common risk People who suffered loss get relief because their loss is made good. ♦ Categories Of Insurance Insurance The following are major categories of Insurance Life Health Medical General Endowment Whole Life Mutual fund return And risk coverage partially Pension/Annuity contracts with profit or Without profit for fixed amounts on maturity ♦ General Structure of Insurance Market  Buyers: 9 . That is to say that the management of business requires care to prevent entry into the group of people whose risk are not of the same kind as well as playing claims in losses that are not accidental. People who do not suffer loss are relieved because they were spread the loss. Insurer collects the share of contribution called premium from all of them and pay compensation called Claim to those who suffer.  The business of Insurance is nothing but one of the sharing.  The insurer is in position of trustee as it is managing the common fund for and on behalf of the community. It has to ensure that nobody is allowed to take undue advantage of the arrangement.who are sharing common risk called Insured.

10 . This business is not being transected in India. Insurance Consultant:  There are large numbers of Insurance consultant in Insurance Industry who advise the insured in a manner similar to that of broker or an agent. He is remunerated in the form of commission expressed as a percentage of premiums payable on the business introduced. An Insurance Booker is deemed to be an independent profession.  Intermediaries:  Insurance Agent: An Insurance agent is a person who works for insurer. He will be remunerated by the customer and not from the insurer for providing this service.  Insurance Broker: A broker is an individual or a firm whose full time occupation is the placement of insurance business with insurance companies. commercial & industrial organizations who are exposed to risk and uncertainties and want to safeguard their interest.  The home service representative: Industrial Life Assurance business requires service of these representatives to call at home of the policyholders to collect the weekly/monthly premium and hopefully to sell further policies. His job is to bring in customer for the insurance company.It includes individuals. So far law in India does not require such Insurance consultant to be registered under the law . The broker receives brokerage expressed as a % of premiums from the insurer. however it is used extensively in developed countries. In India broker has been absent in insurance market except those operating internationally especially in Reinsurance field.

Its head office is located at Hyderabad. which has business in excess of its capacity. KARVY CONSULTANCIES LTD is Ahmedabad based company where I have undergone my summer training. There are several such different organizations for insurers. In India. Buyer is the insurer. Karvy’s network includes 25 branches all over India. Karvy Consultants Limited 11 . which provides insurance to the buyers. and seller is the insurer. Karvy is basically a group of companies in the business of financial products. which has spar capacity to take the business that is offered to it. Karvy Groups includes four different types of functional areas as stated below. insurance companies are subject to be governed by IRDA. 14 Investor’s point and it has more than 5500 Sub broker and agents with it. Reinsurance Broker The transaction of reinsurance business is commonly done with the help of Reinsurance Broker who brings the buyer and seller together. The insurance law normally provides guidelines about the minimum requirement for such institutions. KARVY CONSULTANCIES LTD.  Insurance companies: These are the institution. They approach to the customers either directly or through agents and brokers.

To maintain a life style. many of us take on loans and other facilities and other financial products. Think of a situation where a couple works hard for 10 12 . Transfer agency services for corporate & mutual funds  Registrar for IPO / book building  Depository Participant services  Registered with both NSDL / CDSL  IT enabled services MT/call center / data classification  Karvy. where the Indian consumer is savoring a variety of products and services.Hyderabad Stock Exchange (HSE) Karvy Stock Broking Limited  Secondary market trading  Member . sometimes far in excess of our incomes.com a comprehensive financial advisory site Karvy Investor Services Limited  Merchant banking & corporate finance  Distribution of fixed income and other financial products Karvy Securities Limited  Distribution of equity & other financial products  Member .National Stock Exchange (NSE)  Trading through BSE I nsurance has become Sine quo non-in today’s environment.

your house hold belongings. and even your pets. To cater to such needs. Can they ever build it? Yes if they are adequately insured. 13 . Today you have insurance products that will cover the risk to your life. and provide you professional indemnity or protect you against product liability. insurance have introduced a range of new products.years to set aside money for their dream house and house is destroyed in a fore or an earthquake.

14 . The Indian Life Insurance sector. Let’s have a tour to the insurance sector from the inception stage to the present developments and look into the probable future. The Non-life insurance business was nationalized in 1972 under the aegis of General Insurance Corporation. the Greeks and the Romans. was nationalized in 1956 and The Life Insurance Corporation of India was formed. Marine insurance is the oldest form of insurance followed by life insurance and fire insurance. which established four subsidiaries who would compete among themselves! And now the government intends to give both the LIC and the GIC some real competition by privatizing the insurance sector. The earliest references to insurance have been found in Babylonia. which was dominated by private players. Privatization to Nationalizations and back to Privatization. Insurance in the modern form originated in the Mediterranean during 13/14th century.Chapter 2: Insurance Industry: Phases from Origin To Growth The evolution of Indian insurance industry has reached a full circle Insurance Industry: Phases from Origin To Growth India is witnessing its insurance industry take a full turn. Insurers worldwide are spreading wings to have a bite in the vast Indian Insurance pie. As the doors are being opened. The use of insurance appeared in the account of North Italian merchant banks who then dominated the international trade in Europe at that time.

The first life insurance policy was issued on 18th June 1583. As a result. on the life of William Gibbons for a period of 12 months. (1793) and Oriental Life Assurance Company (1818) was formed to issue life assurance policies in India. the insurance business witnessed a set back. The first insurers of life were the marine insurance underwriters who started issuing life insurance policies on the life of master and crew of the ship. and the merchants. During the period from 1870 to 1900. Among such societies the Amicable Society (1705). Different insurance companies like Bombay Insurance Company LTD. Government of India passed the Insurance Act on the model of British Assurance Act. the West Minister Society (1792) was the important societies. the first Indian Company named as Bombay Mutual Life Insurance Society Ltd. was formed in Dec. a large number of Indian companies were formed under the Indian Companies Act. During the period from 1900 to 1912. 1870. It was in the eighteenth century. The underwriters issued annuities and pension for a fixed period or for life to provide relief to widows on the death of their husbands. by issuing policies exclusively on the lives of European soldiers and civilians. During the period from 1912-1930.Life Insurance in India The early developments of life insurance were closely linked with that of marine insurance. The Equitable Life Assurance Society (1762). 1866. The business was confined to few communities and occupations only. The early insurance contracts took the nature of policies for a short period only. They sometimes issued policies on the lives of Indian’s by charging extra. The premium rates were varied in view of reputation and the health condition of the insured. the insurance business attracted attention among middle class people. societies began to be formed for issuing life insurance policies. Gradually. 15 . The British companies started life insurance business in India.

1999 could be passed by the Parliament During November 1999. January 1956 the management of life insurance business of 245 Indian and foreign insurers and provident societies were taken over by the central Government with a capital contribution of Rs. and than nationalized on 1 st September 1956 in the Parliament an Life Insurance Corporation (LIC). The insurance Regulatory Authority was set up. ♦ To sum up Inception to Growth stage of Insurance in India: 16 . 16 foreign insurers and 75 provident societies were carrying on life insurance business in India. At that time life insurance business was concentrated in urban areas and confined to the higher strata of the society. The Narasimha Rao government unleashed liberal changes in India’s rigid economic sector. The Indian insurance market was restricted sector. Only two government giants namely LIC & GIC ruled it till it was set open to the private players. the Government of India passed Insurance Act.50 mn. 1938.N. By 1956. The Rao government appointed a Committee of Reforms in the Insurance sector in April 1993 under the chairmanship of R. Malhotra. IRDA open its window for Application for giving new licenses to the prospective players on 16th August. After over five years Insurance Regulatory & Development Authority (IRDA) Act. 154 Indian insurers.After several changes have been made for the period from 1930 to 1938. The act still applies to all kinds of insurance business by instituting necessary amendments from time to time. 2000.

 1938: Indian Insurance Act was reenacted in present form  1956: Life Insurance business of 245 private operators was taken over by Government. Indian Partner HDFC Reliance Foreign Partner Standard life UK No Partner Specialization Life Non-life Present Status In operation Operation to begin shortly 17 . 1818: Europeans started Oriental life Insurance company in Kolkata  1870: First Indian Insurance company: Bombay Mutual Life Insurance  1912: First Indian Insurance Act was passed.  2000: IRDA. independent insurance authority like SEBI established in April 2000.  Private insurance companies are allowed since September 2000. Life Insurance Corporation of India was established  1999:Insurance Regulatory and Development Authority bill was passed in Parliament in December 1999. The following players have applied and some have got licenses and even started operations in India.

Non-life Birla Sun life Life Cardif france ING CGNU. UK + Zurich Life Life Life Life. Non-life 18 . Non-life Japan AIG. USA Life.Sundaram Max India Bajaj Auto Kotak Mahindra ICICI ICICI IFFCO Royal & Sun Alliance New York Life Allianz Old Mutual south Prudential. Tata group Aditya Group SBI Vysya Bank Dabur Hero Group Punjab Lombard Non-Life Tokiyo Marin. UK Non-life Life Non-life and Life Life Life In operation In operation Applied for licence Started operation In Operation Applied for licence Received Licence In operation In operation Received licence Received licence To apply To apply.

154 Indian insurers. and by providing resources for economic development. And this is a story behind the genies of the Indian Insurance giant Life Insurance Corporation Of India. Life Insurance Corporation ensures and enhances the quality of life of people through financial security by providing Life Insurance products and services of high quality. which ruled the Indian insurance sector for almost 50 years. ♦ The objectives of LIC is as follows: 19 . At that time life insurance business was concentrated only in urban areas and confined to the higher strata of the society.50 million. 16 foreign insurers and 75 provident societies were carrying on life insurance business in India. The GOI nationalized these 245 Indian and foreign insurers and provident societies with a capital contribution of Rs.Chapter: 3 Nationalized Player: Rescue your dreams Life Insurance Corporation Prior to 1956.

Involve all people working in the Corporation to the best of their capability in furthering the interests of the insured public by providing efficient service with courtesy. pride and job satisfaction through discharge of their duties with dedication towards achievement of Corporate Objective. • • • • • • • Since 1956 LIC had a monopoly of life insurance business in India till the privatization of the sector. Act as trustees of the insured public in their individual and collective capacities.• Spread Life Insurance. To invest funds to serve the best interests of both the policy holders and the nation Conduct business with utmost economy and with the full realization that the moneys belong to the policyholders. Meet the various life insurance needs of the community that would arise in the changing social and economic environment. Promote amongst all agents and employees of the Corporation a sense of participation. 20 . Maximize mobilization of people's savings by making insurance-linked savings adequately attractive. provide life insurance protection to the masses at reasonable cost.

Let us see rationale for opening up an insurance sector in India. health. therefore. 21 . In bid to make it more effective. The life insurance market of India. The remaining 80% have no insurance cover. Winds of Change: Privatization Need for privatization Prerequisites New Entrants & Likely Players What privatization will bring with it? Smell the cheese often so that you can know when it is getting old. and disability and pension plan products. is practically untapped.Chapter 4. The low level of penetration of life insurance in India compared to other developed nations can be judged by a comparison of per capita life premium. Out of this only 20% have insurance -and that too covers only 25% of their needs and financial capacity. The Indian insurance is no exception.  Untapped Potential • Life Insurance: India has an amorphous middle-class of about 300 million people who can afford to buy life. the government has opened up insurance sector for private players. Need for privatization Liberalistion and reforms have the potential to change the complexion of an industry.

Country Japan UK USA India Life Premium Per Capita US $ in 1994 3. The insurance business in India is pegged at $6. All these are sure indicator of the untapped potential in the Indian insurance industry.  Motor Insurance: The story of motor insurance is no different. 22 . With an insurable population of 300 million. there is considerable scope to raise per capita life premium if the market is effectively tapped. Only about 60% of motor vehicles and only 46% of two wheelers are insured.6 billion whereas industry leaders feel privatization would open up as much as $26 billion.817 1.$300 and hence the market can expand by 50 to 75 times over the existing size through the extensive and efficient reach to this untapped area by private players.280 964 4 4000 3500 3000 2500 2000 1500 1000 500 0 Japan UK USA India Life Premium Per Capita US $ in 1994 Clearly. per capita life premium can be raised to a level of US $ 200 .

Only 26% see insurance as old age pension while just about 18% consider insurance a provision for risk and uncertainties. Now customers prefer more options. The potential of insurance products as risk–compensators has always been underemphasized. Life expectancy. insurance is traditionally considered as an instrument of savings. Rural India’s contribution is just 54. there is an increasing need for pension insurance products. They want not just basic insurance products but investment based insurance products. disintegration of the traditional joint family system and rising cost of health care are bound to make market clamour for variety of insurance products with need based features. According to finding of an LIC survey as many as 40% of insurance buyers consider insurance products avenue for compulsory savings. 23 .7% of total LIC policies and 47% of LIC’s total sum assured during 1998-99. The reason could be incentives are based on new business generation and not in satisfactory servicing of existing customers. Untapped Rural Potential: Huge rural segment is another instance of untapped potential. Servicing existing customers satisfactorily has not been a priority for them. Factors such as increasing life expectancy. pension products and health care products as well.  Poor Customer Service: Most agents and Business development officers are interested only in procuring new business. The result: a long retired life. which was just 32 years during fifties moved up to an average of 61 years during 1996-97.  Growing Need For insurance: In India. This is when the rural population constitutes 74. Moreover LIC and GIC have no tied agents. This trend is in for a change soon. Naturally.3% of country’s population.

There is no proper research in clams and this premium are not scientifically determined. But. LIC and GIC can enhance investment yields within the ambit o these restrictions by being more proactive 24 .-guaranteed marketable securities. Indian insurance companies are too slow in revising their premium. The last time LIC revised its premium. which drive us towards privatization.  Low investment yield: Inefficient asset management and low investment yield are also responsible factors. and PSU securities.. On an average LIC could generate a yield of just 12. a minimum of 10% in state govt. Privatization will create competitive environment and provide customer friendly services. They are always desperate to fulfill their quotas of business and have little time to explain policy features to prospective customers. HUDCO and DDA. a minimum of 5% in the national Housing bank. The remaining 25% can be invested in private sector and in loans to policyholders. and a minimum of 25% in the social sector. High insurance premium is one of them.  High Premium: There are host of factors that have caused insurance potential to remain untapped. Investment restrictions have been responsible for low yields.96%. not less than 25% in the state govt. GIC has its own restrictions in investment. securities. LIC has to invest not less than 20% of its fund in central govt. securities. securities including govt.37% on its investment during 1997-98. Currently LIC premium are determined by macro inputs related to the years between 1991 and 1996. Ditto for general insurance. More than 10% of LIC policies are surrendered or get elapsed every year. It has to invest a minimum of 25% in central govt. for housing projects and the remaining 30% can be invested in equities. term loan and debentures. investment restrictions are there. No doubt. a minimum of 35% in loans to state govt.Even Existing agents are not buyer-friendly. was after a gap of 12 years. During 1998-99 the figure was still lower at 11.

Insurance awareness is low. They do not trade in the securities they have invested in. Training of agents is woefully inadequate. 25 .        Insurance penetration is low. Prerequisites For Entering into insurance Any private player wants to enter insurance sector has to comply with the following requirement without which it will not be considered eligible for obtaining license. Insurance products offered by public players are not customer friendly.in managing their investment. improved Services. They create products and go out to find customers. Insurance covers are expensive. What they do is invest and then sit back. There is dearth of innovative and buyer friendly products Opening of Indian insurance sector promises a drop in premium. Returns from insurance products are low. development of need based product and deeper penetration of insurance. To summarize we can say that. They do not create products that the market wants. Marketing network is weak.

 Share Holding:  The promoters' holding in private insurance company should not exceed 40% and should. It should be ensured that such insurers do not avoid writing small policies.  No person other than the promoters should be allowed to hold more than 1% of the equity. be less than 26% of the total paid-up capital. the Indian promoter will come to hold 74 per cent stake in the venture initially. It is also proposed that the Indian promoter will have to mandatory lower its stake in the private insurance firm from the initial 74 per cent to 26 per cent in a period of ten years.  Minimum Rural Business:  New entrants in life insurance should be required to transact a certain minimum business in rural areas. The minimum paid-up capital for new entrants is mentioned below.  Similarly. at no time. they have to enter the market by way of joint venture with Indian partners. Minimum capita requirements: The private sector is allowed to enter insurance industry.  Equity Participation for Joint Venture: It is proposed that in the private insurance joint venture.  Entry of Foreign Players: If and when entry of foreign insurance companies is permitted.  Minimum paid-up capital for life and non-life insurance companies of Rs 1 billion  Minimum paid up capital for reinsurance companies is Rs 2 billion. leaving the foreign partner with 26 per cent. 26 . new general insurers should also write a certain minimum rural non-traditional business.

Private Players in the Market Following the entry of new private players back in the early 21 st century. Facilitating the customer has been their motto and this has been reflected in the product features. The NPA should not be more than 5% of the total out standing and advances of the institutions. virtually every man. Those who fail to comply with these stipulations should be subject to a penal assessment by the Insurance Regulatory Authority. woman and child in the country know the importance of insurance and total risk protection. service and means of collecting premiums. Bank post 27 . The new entrants into the Indian insurance sector are able to press upon the eminent need for individuals to buy insurance. Walk into any super market.  Requirements for Financial Institutions  The RBI has stipulated that a minimum of 15% of Capital Adequacy Ratio for FI to enter in insurance sector.

returns and tailor made insurance schemes. New players are offering flexibility to the customers in terms of the choice of features instead of the standard policies. insurance is the highest selling product. or departmental store today. Thus the life insurance and General insurance monopoly enjoyed by the public sector is being challenged now.  Today ICICI Prudential is the leading private life insurance company in India. The Private players are confident that they will be able to make inroads into this segment on the basis of better services.  ICICI Prudential insures one life every 3 minutes! 28 . one of India’s leading financial institutions and PRUDENTIAL. it is the servicing of a product that distinguishes an insurance company.  Initial Capital base: Rs. The result is newer products in the form of better services for customers. one of the world’s largest life insurance companies. Internet Kiosk. tailored to suit different needs and situations. After all.150 crores. ATM. In course of time. plain vanilla policies offering the standard coverage will give way to a varied range of polices.  A joint venture between ICICI.office.

1. the Government of India and representatives of Indian industry.33 billion as per US GAAP). 12. ICICI Limited. At year-end fiscal 2000. 70.06 billion (Rs.  ICICI Bank is one of India’s largest financial service providers. with the objective of creating a development financial institution. 29 .00.  ICICI Bank is having an asset of Rs. The net profit for fiscal 2000 was Rs. ICICI has stretched the borders of its business to evolve from a traditional project finance institution to a diversified financial services group providing a broad spectrum of financial solutions to corporate and retail customers.  Highest rating of ‘AAA’ by CRISIL. 650 billion (Rs. one of India's largest financial services provider was formed in 1955 and is enjoying a one-year more experience than LIC.000 crores +  Better than sovereign rating (Moody’s)  First Indian company to be listed on New York Stock Exchange.8 billion as per US GAAP). It has evolved from being a traditional development finance institution to a financial conglomerate providing a spectrum of financial solution to corporate as well as retail clients. 9. Over the last four decades. At the initiative of the World Bank. ICICI today operates as a virtual universal bank with a network of 27 subsidiaries. ICICI had assets of about Rs. 781 billion as per US GAAP) and stockholders equity of Rs. PARENTAGE: ICICI Bank About ICICI. 93.  ICICI is Indian Origin Company with the strong brand image of 47 years.3 billion (Rs.

Long Term(Senior) BBB BBB R & I Inc.Long Term BB BB S&P FC . With a network of over 26. FC .  Prudential has started operations in 1848 in UK.: Rating and Investment CARE: Credit Analysis & Research Limited.  Prudential is one of the largest life insurance and mutual funds company in the world. India ICRA: Investment Information & Credit Rating Agency Limited.000 agents and staff.AAA CARE Rupee .CREDIT RATINGS Agency India ICICI Limited Moody's FC . Prudential plc is one of the largest life insurance and retail mutual funds company in the United Kingdom with over US$ 270 billion in funds under management worldwide.Short Term BB B JCRA FC . Founded in London in 1848.  It has a presence in over 15 countries and caters to the financial needs of over 10 million customers.Long Term BBB BBBRupee .Short Term A1+ Moody's: Moody's Investor Services S & P: Standard & Poors JCRA: Japanese Credit Rating Agency R & I Inc.AAA Care .Long Term Care .Short Term PR1+ Rupee .Long Term LAAA LAAA ICRA Rupee . India FC : Foreign Currency Prudential About Prudential. Prudential has life insurance and mutual fund operations/offices in 11 markets in Asia (not including India). 30 .Long Term Ba2 Ba1 FC .

It has a presence in 7 cities. Ensuring that the service providers and support providers work like an ICICI Pru team. for company. 53. The company has sold 6387 schemes with a total sum assured of over Rs.  PUNCH LINE: “We cover you at every step in life” MARKETING STRATEGIES ICICI Prudential . Both these factors have worked to their advantage.S.  Already established as one of the biggest mutual fund companies in India (Prudential ICICI AMC) • INDIAN PLANS: The Company has launched six schemes till date. training and motivating the employees who man these support systems. THE 4 R’s 31 . Motivating the employees. Its experience as professional fund manager has proved to be very beneficial. Service standard and stability of returns work as U.  It has solid reputation build over 150 years. Investor deposit base in UK alone exceeds Rs.  USP: The Company is backed by the string credentials of parent and enjoys strong brand equity.100 crores. the ICICI Prudential striving at the following: 1) 2) 3) 4) Training employees effectively who come in direct contact with the customers.P. Creating effective support systems.Internal Marketing To achieve customer satisfaction.200 crores.

A careful examination of the market situation would help us in getting a better understanding of the process. 2) Getting Repeat business from customers. The era of marketing is of providing solutions to the customers. A satisfied customer is the ultimate goal of ICICI Pru. what the marketer and the marketing apparatus can possibly do are enumerated below. 1) Retention of customers. 32 . Adding new customers and penetrating new markets is a sine queue known for marketing organization. 3) More Referral from existing customers. 4) Creating Relationship with the customers.Applying market dynamics to insurance and pension plans. Making his life simpler delighting and surprising is to the level of the customers’ expectations.

500 crores and has offices spread across 40 cities. It has an experience of 156 years in the life insurance business.   33 . Joint Venture: It is a joint venture between Kotak Mahindra Group and Old Mutual Plc. It has net worth of Rs. Initial Capital base: Rs. London. banking and general insurance. 125 crores About Partners: Kotak Mahindra Group is one of the healthiest finance companies in the country. Old Mutual Plc is an international finance service group based in London with expanding operations in life insurance. asset management.

34 . Standard Life is Europe’s largest mutual life company.000 policies in the first year of operations.  Initial Capital base: Rs. The company has targeted sales of approximately 30. It hopes to launch more products and reach out to more cities by the end of the year. it offers investment and saving opportunities for households. Indian Plans: OM Kotak Mahindra life insurance has operations in seven cities and has set a target of 13 cities by the end of this year. Besides home loans. Head office in Mumbai. AD Line: “Jeene ki Azadi”   Joint Venture: It is a joint venture between Housing Development Finance Company and UK based standard life. It is one of the few insurance companies in the world to be awarded AAA rating by two leading credit rating institutions.  Indian Plans: Currently company has three basic products available in the 11 cities. Moody’s and Standard and Poor’s. the company has offices in 98 locations across India and serves customers in over 2400 cities and towns. 168 crores  About Partners: HDFC is India’s largest mortgage finance company.

It is trying to switch insurance selling from tax based to a need-based one. The company also charges lesser premium for female lives in recognition of better mortality rate among women. With business interests ranging from Viscose filament yarn to aluminum. AD Line: “Making life easier for you”  Joint Venture: It is joint venture between Aditya Vikram Birla Group and Sun life Financial of Canada. pension funds. 18000 crores.  Indian Plans: The Company has launched three schemes till date. 26. The company is bringing in customer-orientation by maintaining individual customer accounts. 120 crores  About Partners: Aditya Vikram Birla Group. investment. the group has an asset based of over Rs.P.S. The company has sold 3000 schemes to individuals with premiums totaling Rs. Sun life financial group provides financial solutions in the area of life and health insurance.  U. is one of the largest Indian conglomerates with turnover of Rs. 35 .  Initial Capital base: Rs. It insurance business has been rated AA+ by Standard and Poor for financial strength and AAA1 for claims paying ability by Fitch. It is focusing on technology to serve customers better. 3 crores. headed by Kumarmangalam Birla. cement and textiles. brokerage and banking.000 crores. It has a presence in five cities and sells through its dedicated individual agents and corporate agents.

A. GMR has a track record of over decades with interest in areas like power generation. With 481 retail outlets. infrastructure etc.P. banking and asset management. It offers wide range of financial services including insurance.  Indian Plans: It has around 260 advisors and intends to strengthen it to 1500 advisors. 36 . Kerala. it has string presence in Karnataka. AD Line: “Your dreams our commitment”  Joint venture: It is JV between Vyasa Bank and ING group and GMR group  Initial Capital: Rs. 125 crores  About partners: Vyasa bank is south India based bank. and Tamil Nadu ING group is the largest life and health insurance company in the world.

 Initial Capital: Rs. 125 crores  About partners: 37 .P.  Ad line: With You Always SBI life insurance  Joint venture: It is a joint venture between SBI and Cardif of France. electric power generation in the private sector and computer software.  Indian Plans: It plans to provide life and general insurance solution to individual and corporate. It considers its U.  U. as high quality of service offered to customers.Tata AIG life insurance Limited  Joint Venture: It is a joint venture between Tata group and American International Group inc. AIG is the leading US based international insurance and financial service provider and the largest underwriter of commercial and industrial insurance in the US. It more emphasis on pull strategy by providing services through call centers.125 crores. commercial vehicles.P.  Initial Capital: Rs.  About Partners: Tata Group is most respected industrial conglomerate in India with revenue of more than $ 8 billion. It has been market leader in steel.S.S.

Cardif is a wholly owned subsidiary of BNP paribas. which offer customers a choice between products that are oriented towards risk protection or savings.P. The company aims to provide comprehensive risk protection in a country where a sizable portion of the population of the country is either uninsured or under-insured.S. Max New York Life  Joint Venture: Max New York life is a joint venture between Max India Limited and New York life. It has policy. It has vision to be the most admired life insurance company in India.  Indian Plans: Max New York Life has launched its products in nine cities across India. US. metallised plastic films and BOPP films for the flexible packaging industry.200 crores  About Partners: Max India is a leading Indian company with diversified business interests. The company markets its five products through life insurance agents and advisor.SBI is india’s largest public sector band having the branch network of 14000. one of the top 10 bands in the world and third largest in Europe. The company has over 155 years of experience.  U. Ad line: “Your Partner for Life”  What privatization will bring with it? 38 . It is primarily into the business of pharmaceuticals.  Initial Capital base: Rs. New York Life is a fortune 100 company and claims to be one of the largest provider of life insurance coverage in America.

The insurance industry is a key component of the financial infrastructure of any economy. competition will cause the market to grow beyond the current rates. creating a bigger pie and will offer additional consumer choices through the introduction of new products. Opening up of insurance sector is an attempt to make the insurance sector more dynamic. Let us glance through what impacts privatization will have on Indian Insurance Sector. housing.  Rural Market Penetration A large segment of rural incomes are not reflected in the growth of insurance premium. Post opening of the insurance sector in India. After liberalization of insurance sector. as there is no marketing of products to this segment. services and price options. the other aspect would be the public and private sector companies working together to ensure the healthy growth and development of the sector. While competition in insurance is one aspect of the post liberalization scenario. sector has been opened up for private and foreign players. it has been made mandatory that new entrants 39 .  Market penetration through increasing awareness LIC was having about 80 products to offer but investors knew about only a handful. It has resulted into hype and awareness about insurance products and ultimately turned into increase sales of insurance policies. and agents had little incentives to market them aggressively as they had very low commission. Till now public insurance had failed to educate the customers about the products. motor and industrial insurance were having more than 150 products to sell but the awareness was even less than LIC products. But now. Companies offering general insurance products – like medical. These deep pocket players have extensively launched advertisement and promotional campaign.

It will help to cover rural untapped market. Already many companies have full operation capabilities over a 12-hour period. It will be ensured that such insurers do not avoid writing small policies.50 51.often described as being on par with the thrifty Japan. Facilities such as customer service center are already into 24-hour mode.  Premium as a % of GDS will increase. Africa Japan France US S. This will bring an eight-fold increase in the existing volume of life premium.92 5. it is possible to raise life premium as a percentage of GDP from the existing level of 1. Korea India Life Premium as % of GDS in 1994 52. Life premium as a percentage of GDS (gross domestic saving) is very low in India as the following comparative data adequately demonstrates.95 40 . Country UK S.  Distribution channels Insurance companies will also get savvy in distribution.55 32.20 25. It has helped distribution network became efficient. If the insurance market is properly tapped.29% to 10% . Similarly. Enhanced marketing thus will be crucial.20 21. new general insurers should also write a certain minimum rural non-traditional business.on par with Japan.in life insurance should be required to transact a certain minimum business in rural areas. India has traditionally been a highly savings oriented country .  Premium as a % of GDP will increase.46 26.

Foreign investors through joint venture with Indian partners can invest up to 26% of total paid up capital. information technology and other sectors. Entry of players will be able to effectively exploit the potential by creating and marketing attractive insurance products with high rates of return on premium investments. 41 . It will help the country to accomplish it dire need of long-term funds for investment in infrastructure. insurers worldwide are spreading wings to have a bite in the vast and untapped Indian Insurance pie.  Development of Innovative and Need based products. This would help deepen the market as the same family could opt for different schemes catering to different needs. It had given positive signals to foreign investors and huge funds can be garnered after liberalization of insurance sector.  Fetch Foreign Investment As the Government has opened up doors for foreign players in Insurance sector.60 50 40 30 20 10 0 % of GDS in 1994 UK South Africa Japan France US South Korea India It is possible to raise life premium as a percentage of GDS in India from the existing levels.

or even real estate funds. In effect term policies translates into low premium outgo. immediate annuity or a deferred annuity. The scope of new products is also immense in the non-life segment. entry of technology and high competition imposed by private players has given a different dimension to industry.The customer wants insurance products with need-based features. The customers will get insurance products that suit their specific needs. Apart from the plain vanilla policies.  Reliable customer services through trained life advisors 42 . Long relegated to being sellers market the insurance sector will be driven by buyers and the greater flexibility and options that lie in store will encourage the investor to plan for the rainy days. Apart from term policies. Another opportunity is offered by a pension contract. Insurance companies will introduce more term policies. These will cover simple requirements of the insurance for the investor. workers compensation insurance. LIC and GIC are going to face a tough competition. new entrants will also offer consumers a choice of products with low premiums.  Competition will bring quality of service In the insurance sector. which offer better returns. like disability products. Endowment policies will change too. Instead of current fixed returns schemes insurance companies will issue unit linked schemes. Companies would offer products for niche segment. All this will eventually increase the comfort levels of the consumer vis-à-vis insurance. which frees the capital for investment into other investment vehicles. will be able to invest in a variety of indices or sector specific where in the returns would be higher. and do not offer any returns. in line with his precise risk appetite. Here the options offered could be indexed annuity. renter's coverage and employment practices liability insurance. The insurer. These policies provide protection for a specified time period. indexed funds.

 Distribution channels will become more effective.  Commoditiser insurance products will be just a phone call away.  Settlement of claim will be accurate and faster. Life and General Insurance agents were not required to possess minimum qualification in terms of insurance knowledge. 43 .  Customization of products will be more common.  Insurance products to suit specific needs of customers will be available.  Computerizations will reduce administrative expenses. efficient management and a healthy business culture. Now it has been made mandatory to take insurance training of at least 100 hours to be an agent. To summarize we can say that entry of private players are likely to bring following changes.  Premiums will deep and service standard will improve.  Premium will be market driven and will be based on records of past claim. Thus these trained agents would help and advise the customers to provide them suitable option to their requirement and need.Prior to liberalization.  It will also bring updated technology. This should result in better yield for the private players.  Proactive asset fund management will emerge.

We need to compare them in terms of what they have. Challenges Faced by Nationalized Player: 44 .  Product Comparison  Capital Investment  Branch Network  Distribution Network  Number of policies sold and premium collected. how they are going to deliver it. there have been winds of change in the various products of insurance sector.Chapter 5: Nationalized Player Vs Private players Comparative Analysis Tough Times never last but tough people do. Thus we have compared nationalized players with new entrant on following ground. Product Comparison: From the inception to its liberalization and entrance of new players. Comparative Analysis: Private Players Vs Nationalized Players This project cannot serve its purpose without a comparison between the long existing public players and the newly entered private players.

Kotak Mahindra.  Trust of the People: 45 . If we look at ICICI prudential. is also one of the largest financial services provider of insurance. Challenges Imposed from private insurance companies  Synergy of Experience in Joint Venture: Indian partner and foreign partner of each joint venture is leader in their respective field. HDFC. Whether two giants accept or do not accept. Starting in 1806. Example of it could be SBI. It can capitalize its existing resources and distribution network to penetrate the market further. and ICICI etc. it is a joint venture between ICICI and Prudential Plc. banking and other financial services. entry of private players has threatened their position.The stage has been set for a major transformation in Indian insurance sector with the entry of private players in the market. they are fully aware off the Indian Financial System. Vyasa bank. Monopoly enjoyed by nationalized players is being challenged. which has put raised question of their performance in changing situation.  Presence In Indian Financial System: In most of the cases. It has strong presence in at least 15 countries. We have tried to work out challenges faced by public players. ICICI is amongst India’s largest financial institution and has been providing all services under one roof. over the years SBI has extended its branch network to 14000 across the India. Hence. While Prudential Plc.  Distribution Network: Each of private players has their own distribution channels and has strong hold over it. the Indian Counter-party of the joint venture is engaged in customer services and that too in financial sector.

These schemes have become unviable. Reliance have been in existence for quite long period. where the interest of even RBI bonds are in the range of 9%. Thus their investment is bearing lower return than their interest payment resulting into negative spread. information and Mechanical technology can be availed. thus venture will get benefit of international experience in financial and insurance market of their oversees partners. foreign partners have presence in insurance sector. Players like SBI. ICICI.  Experience of operation in foreign Market: In most of joint venture.Being Market leader in respective field and having good financial image might not create problem of gaining trust of people. Aditya Birla group. HDFC and Max India have also been able to get trust and confidence of people. Not only this. Agent force is not qualified and equipped with latest 46 . but latest Marketing.  Synergy with the existing operations Since. Apart firm this there are certain other challenges which could be described as follows  Low Rate of Return resulting into unviable products The LIC interest bearing schemes give interest of 9 to 10%. Today. players are starting operations afresh. they still have an upper hand in arranging their infrastructure in such a way that they can reduce fixed expenses and can provide better services. Not only these but new generation organizations like Kotak.  Agent’s Capabilities and Competence Indian insurance companies are marketing their products in traditional way through agents.

LIC has more than 2000 branches where as general insurance companies have more than 4000 companies all over India. Weaknesses  Low level of commitment towards customer services  Stringent Rules and Regulation  Low Flexibility in Products 47 . Total asset of LIC is Rs. which shall save huge cost of creating infrastructure.76 crores and a consolidated total asset of GIC is Rs.  Established Brand  Experience of 50 years of operating in Indian market.technology. So training and education of the agents shall be equally necessary as recruitment of qualified agents With these challenges in mind.160935. we can look at SWOT of public insurance companies SWOT Analysis Public players Strengths  Established Organizational Network of Offices all over India and in all corners. who has complete knowledge of the products. Moreover marketing in the new environment shall be a war of information and those will be successful.  Strong Financial Position. 48294 mln.

 Low yield on investment  Non-profitable underwriting Opportunities  Increasing awareness has helped increase sales of LIC polices after privatization  Exploring New Distribution channel  Turn towards Professionalism  Diversification to other financial services like pension fund. retailing  Growing beyond geographical boundaries  Entering into Health Care Insurance Products Threats  Opening up of insurance sector has lead to fierce competition  Service tax of 5% has made saving products of LIC unprofitable Private Players Strengths  Flexible products  Partners having experience in different markets of the world  Synergy with their existing operations 48 .

 Expertise in the field of insurance  Professional management  Good Customer service Weakness  Yet to build a brand name  Low capital base  Yet to build strong distribution network  Cannot tap rural market Opportunity  Untapped market  Banks ready to tie up for as a readymade distribution network for a small fee. Threat  Large distribution network of LIC  Decades of experience and brand name of LIC  service tax on investments Chapter 6: Our Experience and Contribution during Summer Training 49 .

what products should be shown to him. etc. Sample size was 100 people Sample also includes the corporate employees and departmental heads. During these five days training we had done role-plays. Survey mainly covers the four Investment options. way of talking with the client. • Survey Objective: Objective behind the survey was Indian people’s Investment behavior. Which helped us in way of approaching people. The objective behind training was that We could understand the products offering by ICICI Prudential and also develops our selling skills. 1) Insurance 2) Mutual fund 3) Stock broking and Depository Services 4) Fix Deposits 50 . Professional trainer of ICICI Prudential provided training. identifying clients’ needs and based on that how much risk to be cover.Road center. small presentations and other exercises.• Product Training and Selling skills training Five days of Product training programme was held by ICICI Prudential at C.G.

Inferences Fix Deposits 22% Insurance 44% Stock broking 15% Mutual Funds 19% Investment options Insurance Mutual fund Stock Broking Fix Deposits Result in % 44 19 15 22 Survey result shows that major chunk of the people are investing in the Insurance sector than any other Investment options. addresses and contact numbers of the 100 persons that we know well. • My Market 100 What is it? My Market 100 is a book where we have to feel the names. 51 .

And it can be the group of people who are our “natural market”  Relatives  Friends  Neighbors  Colleagues  Existing client base • Direct Selling After identifying My Market 100 we had gone for direct selling of ICICI Prudential Insurance products.We have undergone an exercise of My Market 100. The exercise was about identifying the prospects. Direct selling done through following steps. (I) (II) Prospecting and Qualifying (My Market 100) Pre approach (III) Approach (IV) Presentation (V) Handling of Objections (VI) Closing • Prepared a comparison chart of Endowment policies between leading Insurance companies COMPARISSION OF ENDOWMENT POLICIES BETWEEN LEADING INSURANCE COMPANIES ICICI PRU BIRLA SUNLIFE HDFC STANDARD TATA AIG Save 'N' Protect Birla sunlife Flexi save plan Endowment Assurance Assure Golden Years LIC Endowment with profit LIC Jeevan Mitra Triple cover 52 .

5 8.7 7.7 7.2 7.3 8.Sum Assured (Rs) Term (years) Premium paying Term (years) Annual premium Death Benefit Minimum cover 8th year of policy 16th year of policy Maturity Benefit Upon maturity Interim benefits (Rs) Rate of return (%) Pre-tax Post-tax 100000 25 25 3668 100000 25 25 4320 100000 25 25 4239 100000 25 25 5568 100000 25 25 4047 100000 25 25 5453 100000 142210 202237 100000 131341 193954 100000 142210 202237 100000 147746 257859 100000 162400 224600 100000 131341 428000 300543 Loan available 222198 Loan available 300543 Loan available 308294 295000 300000 Loan available Loan available Loan available 8.7 5.7 5.1 Ratings Premium Death Benefits Maturity Benefit ROR Total of ratings Composite Rating 1 4 2 1 8 1 4 5 5 5 19 5 3 4 2 3 12 3 6 2 1 4 13 4 2 3 4 2 11 2 5 1 3 4 13 4 NOTE: 1) All the figures mentioned above are for a healthy.2 9.7 7. 2) Composite rating’s details: Rating 1 2 3 4 5 Explanation Very Good Good Average Poor Very Poor Inferences 53 .2 6. 35 year old male and are indicative.9 5.

00. Over the years. insurance sector is growing by leaps and bounds.000  Few are still in pipeline Chapter 7: Conclusion It is just the beginning Over the years. insurance has acquired various names and definitions. • Value Addition made to the ICICI Prudential and Karvy consultancies during summer training.  Generated a prospect list of around 135 people  Total calls made during the training are around 200  Taken an appointment of 90 prospect  Sold a policies amounting to Rs. 54 . with Japan in the highest position. This social device provides financial compensation for misfortunes and securities to masses. it’s growing by approximately 4% every year. Globally.Comparison of the endowment policy offered by different leading insurance companies yield the result that ICICI Prudential offers the policy of Save ’N’ Protect with the highest value to the customers. 10.

The private sector being more professionally managed could understand the lacuna what people had with nationalized sector. the professionally managed private sector has provided rays of hope. especially LIC that has been operating since 1956. But. Some of the reasons. The private players have : 1) Customization 2) Customer care 55 . are as follows: 1) Illiteracy 2) Documentation problem faced by laymen 3) Lack of awareness 4) Ill-trained personnel Due to all these problems the nationalized sector did very less to combat the crisis. though its 50% business comes form rural market. The nationalized companies have not adequately captured this vast gap. It is found that people are aware about private sector & are appreciating their services. which can be attributed. Whereas it could have: 1) Designed products based on rural elite as well as rural household sector 2) Evolve clients and area specific products.Although Indian economy is 5th largest in the world in the terms of purchasing power with 26% saving of GDP. LIC in last decade has evolved a number of products. which is pretty high. Especially in rural areas. its insured population is just 7% of the total population of the world. with the opening up of the economy and the vast unexploited segment. which however do not suit the needs of the rural areas.

com o www. AMA Library Websites o www. which contribute nearly 50% to our GDP. The private sector. which still have a firm hold on the market can retain their position if they try to learn from their past flaws. But the fear of security still looms large among the customer for the private sectors.com o www. though being new is becoming “talk of the town” & very soon it may capture a sizeable segment to boast of. On the other hand the nationalized companies.lic-india.indiainfoline.3) Personnel care 4) Better service & grievance handling.google.dhan.walletwatch.com o www. 2003  Freny Patel. so it becomes mandatory for the companies (both nationalized & private) to see that customers don’t suffer at the end of the day & that their product benefits their lives. Lastly.bimaonline.com o www. the insurance industry is a service sector. Bibliography Newspapers & Magazine  Bima Nivesh 2 discontinued Business Standard  Insurance Service. Old Shield. Marketing of Financial Services  Insurance India’s Growth – The Financial Express: Nov.  Insurance Journal. New Warriors.com 56 .com o www. Economic Times.

iciciprulife. SHAH BHAVESH C. BAROT 57 Roll no 70. PATEL VISHAL R. . Roll no 05.o www.com “MACRO ANLYSIS OF IDIAN INSURANCE SECTOR AND MARKETING OF ICICI PRODUCTS” PRUDENTIAL With reference to karvy consultancies A summer training project report submitted to fulfill the award of MBA Degree Submitted by PRATIK J. Roll no 43.

K.PROJECT AT: S.PATEL INSTITUTE OF MANAGEMENT & COMPUTER STUDIES GHANDHINAGAR Year: JUN 2004 58 .