PROJECT REPORT

ON

PRICE SENSITIVITY OF LIFE INSURANCE PRODUCTS

BY AJAY KUSHWAHA (08BS0000184)

NAME OF THE ORGANIZATION GEOJIT BNP PARIBAS FINANCIAL SERVICES LIMITED

IBS, KOCHI

GEOJIT BNP PARIBAS FINANCIAL SERVICES LIMITED
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PROJECT REPORT ON PRICE SENSITIVITY OF LIFE INSURANCE PRODUCTS

BY AJAY KUSHWAHA (08BS0000184)

NAME OF THE ORGANIZATION GEOJIT BNP PARIBAS FINANCIAL SERVICES LIMITED
DATE OF SUBMISSION: 20th MAY, 2009

Company Guide Ms. Swapna Nair Branch manager Geojit BNP Paribas Financial services ltd.

Faculty Guide Prof. T.N. Ramakumar IBS, kochi

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DECLARATION
I hereby declare that this report on ‘‘Price sensitivity of life insurance products’’ has been written and prepared by me during the academic year 2009-10. This project was done under the guidance and supervision of company guide, Ms. Swapna Nair, branch manager, Geojit BNP Paribhas Financial Services Limited and faculty guide Prof. T.N Ramakumar, ICFAI Business School, kochi, in partial fulfillment of the requirement for the Master of Business Administration course of the ICFAI Business School. I also declare that this project is the result of my own efforts and has not been submitted to any other institution for the award of any degree or diploma.

Place: Kochi Date:

Ajay Kushwaha (08BS0000184)

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ACKNOWLEDGEMENT
I express my gratitude to Ms. Swapna Nair, Branch Manager, Geojit BNP Paribas Financial Services Limited, infopark branch for giving me the opportunity to work and learn and to be the part of Geojit BNP Paribas Financial Services Limited and for being my company guide. I would like to thank my faculty guide Prof. T.N. Ramakumar for helping and providing regular guidance for the completion of the project. I would like to show my gratitude towards Ms. Swapna Nair for her direction and assistance at each and every step of the project and for giving valuable time out of her busy schedules to me and rendered assistance in terms of information and guidance. I would like to thank the branch manager of Geojit BNP Paribas Financial Services Limited, Ms Swapna Nair for providing me the opportunity to learn more about the share market also. I would like to thank all the staffs of the Geojit BNP Paribas Financial Services Limited for sparing their time with me and providing their support for the completion of the project. I would like to thank the nature for giving the favorable conditions and I would also thank my flat mates for helping and encouraging me for the completion of the project. Finally, I would like to thank Micro-soft Corporation for their best user friendly MS office software package. With this software only I am able to complete my project.

AJAY KUSHWAHA
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EXECUTIVE SUMMARY
The Summer Internship Program in Geojit BNP Paribas Financial Services Ltd. started from 23rdof February, 09. The objective of the project is to know that the impact of premium charged by Insurance companies on their life products have any impact on life insurance investment pattern in Ernakulam. As we know that there are various factors which affect the consumption and investment behavior of individuals. Factors include: Price of the product Income of the consumers Type of goods available in the market Tastes and preferences of individuals, etc So our work was that to know about the perception of individuals with respect to price i.e. premium charged by life insurance companies on their life insurance products. Our work was also to find out various reasons which are considered by people to choose one company from other. For our study we have chosen infopark area because likely respondents of this area could be sharing certain demographic, age, income and other similarities. The steps or the points that we have covered in our study as follows:         Studying the contours of Indian insurance industry. Learning about the basics of insurance. Defining the objectives and scope of the research. Evolving a proper methodology. Devising a suitable questionnaire. Administering the questionnaire to selected respondents. Finally analysis of the feedback received. Conclusion.

INITIAL STAGE:
At the outset we have started our research with studying the basic tenets and features of insurance business in India. Various types of insurance policies in use are studied for this purpose
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The objective of the study is to find out the various insurance policies now available in the market. By administering the suitable questionnaire, the preferences of customers in terms of choice for a particular policy, from the particular company and the reasons thereof are sought to be elicited. While doing this special importance is given on the price sensitivity of life insurance products at infopark area. The respondent base for this exercise is chosen from infopark area, kakkanad. The assumption here is that the respondent base is more or less uniform in terms of geography, income levels, age and other parameters. We have planned to cover around 100 respondents.

SECOND STAGE:
In the second stage we are using two techniques for analyzing the Indian insurance industry. Techniques are: 1. PEST analysis 2. Michael porter’s five factor analysis.

FINAL STAGE:
In the final stage we have prepared the questionnaire (see annexure A) consisting of 20 questions to collect the information from individuals at infopark area. We have met with 100 individuals and collected data from them. We have also conducted personal interview to collect the information regarding the perception of investors on several factors while investing in life insurance products. We have given more focus on premium as a factor of deciding investment in life insurance products.

CONCLUSION:
 Yes premium charged by life insurance companies on their life insurance products have impact on investment pattern of individuals. The reason is the percentage of income spent on life insurance products is high. So if high percentage of income is spent on life insurance products, then the particular individual will not be able to do other things. But premium is not only the important variable. It is concluded that if investors will sure that they will get
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 

the return then they will definitely take any type of policy which their income level permits. Research shows that there is correlation between income of the people and their investment behavior. More than 50% of the respondents who have income level of below Rs. 2lakhs (both who have taken life insurance products and who haven’t taken life insurance products) considered price i.e. premium payable on life insurance products as the most important factor while investing in life insurance products. The reason given by them is the affordability. It means if the premium is affordable then only they shall able to buy the policy. Respondents who have income level of more than Rs. 2lakhs (those who have already taken life insurance policy) considered both premium and reputation of the insurance company as the first most important factor while investing in life insurance policies. Our research clearly shows that around 32% of the respondents have ranked both premium and reputation as first most important factor and again 23% have ranked it as second most important factor. For them premium is not that much important if the reputation of the company is good because they can get the return on their investment. It means they are ready to pay higher premium for reputed companies in the market. There are various factors which are considered by respondents while investing in life insurance products. They are: Premium charged by life insurance companies on their life insurance products. Reputation of the company in the market Their total income Their total savings Variety of life insurance products Location of the company Familiarity with the agent People prefer one company over another because of various reasons. Premium charged by life insurance companies and their

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   

past services and the reputation in the market are the important reasons. Respondents are aware about various types of life insurance products. And the demand for money back policy is higher than any type policy by the respondents. The reason for higher investment in money back policy is because of the higher expected return on investment on the periodic intervals. Most of the people have taken and wants to take policy with rider. They are ready to pay higher premium on additional benefits. It is clear that people still have great confidence on government entity. It is clear that people used to invest by the recommendation and suggestions of their friends and relatives. This corroborates in marketing notion that word of mouth is the best vehicle of advertisement. The preference for ULIPs is also considerable lower than money back. It shows that people have awareness about the innovations of new products in the market. Preference for term insurance is very less instead of their low price i.e. premium. Because it is uncertain that whether investor will get benefit or not.

RECOMMENDATIONS:
 Geojit can give some incentive or bonus points to their clients who have already taken policy from them if they recommend their friends and relatives to buy the policies from Geojit BNP Paribas financial services limited.  Agent can give information about life insurance products and the company better than anyone else. So Geojit may have to focus on their agent base.  Our research shows that ICICI Prudential and SBI life other than LIC also have good potential for growth. So they have to focus more on ICICI Prudential and SBI life and not on LIC to sell life insurance products (because customers already have preference for LIC).

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TABLE OF CONTENTS
Declaration…………………………………………………………………………………………….05 Acknowledgement…………………………………………………………………………………06 Executive summary………..………………………………………………………………………07 Chapter.1-Introduction ………………..………………………………………………….13-20 1.1. Objective of the research……………….………………………………………………..16 1.2. Scope of the research……………………………………………………………………...17 1.3. Methodology ………………………………………………………………………………….18 1.4. Methods ………………………………………………………………………………………...18 1.5. Population and sample…………………………………………………………….…..…18 1.6. Sampling technique…………………………………………………………………………19 1.7. Data collection………………………………………………………………………………..19 1.8. Data analysis……………………………………………………………………………….….19 1.9. Limitation of the project………………………………………………………………….20 Chapter.2-Insurance ………………………………………….……………………….…21-26 2.1. Meaning …………………………………………………………………………………………22 2.2. Insurance and Assurance……………………………………………………………..….22 2.3. General principles of insurance……………………………………………………….23 2.4. Types of insurance……………………………………………………………………..……25 2.5. Re-insurance…………………………………………………………………………………...26 Chapter.3-Company profile……………………………………………………………27-33 3.1. Company background……………………………………………………………………..28 3.2. Milestones of the company………….………………………………………………….29 3.3. Board of directors……………………………….…………………………………………..32 3.4. Management ………………………………………………………………………………...32 3.5. Subsidiary companies and overseas joint venture…………………….……..33 Chapter.4-Insurance industry analysis……………………………………………34-49 4.1. Overview ……………………………………………………………………………………..…35 4.2. Life insurance in India………………………………………………………………………37 4.3. Investment pattern of life insurers-ULIPs dominant………………………...37
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4.4. Non-life insurance in India……………………………………………………………….38 4.5. Road ahead……………………………………………………………………………………..39 4.6. Low penetration and untapped semi-urban and rural areas……………39 4.7. Network expansion and product innovation…………………………………….40 4.8. Raising household savings……………………………………………………………….40 4.9. De-tarrifing in general insurance…………………………………………….……...41 4.10. Pest analysis……………………………………………………………………………….…42 4.11. Michael Porter’s five forces analysis………………………………………………43 4.12. List of life insurance companies in India……………………………………..46 4.13. List of general insurance companies in India………………………………47 4.14. Market share of insurance companies in Indian insurance market48 4.15. Pie-chart for analysis………………………………………………………………….…49 Chapter.5-Life insurance……………………………………………………………….50-58 5.1. Meaning ………………………………………………………………………………………...51 5.2. Evolution ………………………………………………………………………………………..51 5.3. Life insurance products…………………………………………………………..……….52 5.4. Traditional insurance plans…………………..…………………………………………53 5.5. Unit linked insurance policy (ULIP)…………………………………………………..55 5.6. Premium …………………………………………………………………………………………56 5.7. Calculation of age…………………………………………………………………………...57 5.8. Calculation of premium……………………………………………………………………58 Chapter.6-Survey Analysis……………………………………………………..……..59-87 6.1. Analysis of primary research………………………………………………………..….60 6.2. Why particular sample is chosen? ………………………………………………..…60 6.3. Questionnaire Analysis ……………………………………………………………………61 6.4. Findings and analysis……………………………………….………………………..…...63 6.5. Conclusion…………………………………………………………………………………….…85 6.6. Recommendations……………………………………………………………………….….87 References …………………………………………………………………………….…………..88 Annexure………………………………………………………………………………………….…89 A Questionnaire……………………………………………………………………………89

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Chapter- 1 Introduction

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INTRODUCTION

Growth in the Indian economy has steadily increased since 1979. Indian economy is on boom at this time and it shows the overall growth of Republic of India. Today Indian people are becoming more and more aware of investing money in market and this is the biggest reason behind this boom. People are investing through various investment schemes like:        Direct investment in stock market, Mutual fund schemes, Insurance (life insurance and ULIP schemes), Bank deposits, Real estate, Debt instruments and Government schemes.

Insurance market is becoming more and more competitive. New companies are coming to this field and seeking opportunities for business. People working for these products are earning well and they are financially strong, have potential to invest huge money. This study is basically based on life insurance products and different class of customers. So this study helps to understand the behavior of customers on the premium payable on life insurance products. There are three main factors that determine the demand for any product in the market. They are:  Price of the product  Income of the consumer  Price of the related goods So for our research we have taken price i.e. the premium charged on life insurance to determine its demand. Price sensitivity of life insurance products means price determines the demand for life insurance products in the market. It means how change in price i.e. the premium charged on life insurance products have an impact
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on the investment pattern of individuals in life insurance products. Actually price elasticity of demand is a measure of the sensitivity of quantity demanded to changes in price. It is measured as elasticity that is it measures the relationship as the ratio of percentage changes between quantity demanded of a good and changes in its price. In simpler words, demand for a product can be said to be very inelastic if consumers will pay almost any price for the product, and very elastic if consumers will only pay a certain price, or a narrow range of prices, for the product. Inelastic demand means a producer can raise prices without much hurting demand for its product, and elastic demand means that consumers are sensitive to the price at which a product is sold and will not buy it if the price rises by what they consider too much. For example: Drinking water is a good example of a good that has inelastic characteristics in that people will pay anything for it (high or low prices with relatively equivalent quantity demanded), so it is not elastic. On the other hand, demand for sugar is very elastic because as the price of sugar increases, there are many substitutions which consumers may switch to. But if we take the example of highly price goods like diamond and low priced goods like salt have low price elasticity of demand, because their consumers are not responsive to price changes. So for diamond and salt price is very less sensitive. So the Investment in life insurance products needs major part of the income of individuals. Most of the individuals take life insurance products as a saving of tax instruments and life security of their families. Hence we need to understand the price sensitivity of life insurance products with reference to the income of the individuals.

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1.1. OBJECTIVE OF THE PROJECT
This project basically aims to know that the impact of premium charged by Insurance companies on their life products have any impact on life insurance investment pattern in Ernakulam. The purpose of the study is to find out if the demand for the life insurance product is affected by the change in price i.e. premium charged on life insurance products or not. The main objective is to know the perception and knowledge of customers on the premium charged by the insurance companies on their life insurance products. The objective of the study is also to find out the reasons why customers prefer one company over the other and one product over the other and determine whether price is an important variable in the choice of these decisions.

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1.2. SCOPE OF THE RESEARCH
i. ii. iii. iv. Helps to know that the customers who are investing on life insurance products. Helps to know about the investment pattern of different class of investors. Helps to know about the different types of life insurance products. Helps to find out the better market opportunities for insurance companies for their life insurance products in terms of size of the market, quality of services and number of clients. Helps to know the awareness and knowledge of life insurance products and the company at infopark area in Ernakulam.

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1.3. METHODOLOGY
This methodology is based on Primary research which was carried out at Ernakulam in infopark area. The research involves: 1. 2. 3. 4. Investor’s perception on the premium paid and the company brand. Finding out the awareness level of Investors. Past investment patterns Suggestion

1.4. METHODS
2. Primary Data: the information and the perception of the individuals will be collected by meeting personally with the help of structured questionnaire. 3. Secondary Data: data regarding the insurance companies and their life insurance products will be collected with the help of company websites, newspapers and their advertising tools. 4. Data analysis with the help of MS-Excel and SPSS: the collected data of individuals will be analyzed with the help of MS-Excel and SPSS software.

1.5. POPULATION AND THE SAMPLE
The population that we have taken for our study was the people in Ernakulam. The sample from the above population for our study had consisted of around 100 individuals. The sample includes both type of individual who have taken life insurance products and who haven’t taken life insurance products in infopark area in Ernakulam.

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1.6. SAMPLING TECHNIQUE
Sampling has been done by using judgment sampling technique.

1.7. DATA COLLECTION
Data collection for this research has been done with the help of structured questionnaire. The questionnaire contains the questions based on the personal information of the individuals who are working in infopark area. Data has been collected by meeting personally with the individuals in infopark area.

1.8. DATA ANALYSIS
After collecting the data by structured questionnaire, the collected data is analyzed by using SPSS and Microsoft Excel software.

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1.9. LIMITATION OF THE STUDY
i. ii. The main important limitation of our project is the time constraint. The time period for the project is limited. The total population in Ernakulam is large and the sample that we have taken is too small. So the results may not be 100% reliable because of small sample. We have chosen Judgemental sampling technique for the selection of sample instead of pure random sampling technique. Conclusions derived in this study are only tentative or exploratory and it needs to be supported by further research.

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Chapter- 2 Insurance

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INSURANCE
2.1. MEANING OF INSURANCE:
Insurance is a contract under which one party agrees in return for a consideration to pay an agreed amount of money to another party to make good a loss, damage, or injury to something of value in which the insured has a pecuniary interest as a result of some uncertain event. In a very simple words insurance is a contract between two parties i.e. insurer (the company) and the insured (the customer), where insurer promise to compensate the loss, damage, or injury of something value of insured in consideration of price (the premium paid by insured) after the happening of uncertain events.

2.2. INSURANCE AND ASSURANCE:
The two terms insurance and assurance are often used in the insurance business to mean one and the same thing. But the terms are not synonymous. Assurance refers to a contract under which the sum assured is bound to be paid sooner or later. A contract of insurance is a contract for compensation for damage or loss as in the case of fire or marine insurance. In these types of insurance the insured must suffer a pecuniary loss before he can claim compensation from the insurer. If there is no such loss, the claim doesn’t arise. Contrary to the above a contract of assurance is an out and out contract, e.g., a contract of life insurance. In such a contract the payment of the sum of money assured is bound to be made either on the maturity of the policy or the death of the assured. Thus, the term insurance is used when the risk is uncertain and it may or may not happen or is used where compensation is guaranteed to be paid only on the happening of an event, which may or may not happen. The word assurance is meant for the contract which assures the payment of a certain sum on the happening of an event, which is certain.
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2.3. GENERAL PRINCIPLES OF INSURANCE:
i. Utmost good faith: a contract of insurance is contract uberrimate fidei, that is to say a contract founded on utmost good faith. It is a condition of every insurance contract that both the parties, the insured and the insurer, should display utmost good faith towards each other in regard to the contract. This duty continues till the time the negotiations for the contract are completed and is equally applicable to both the parties. In case of insurance contract proposer has to tell the insurer all the material facts that he/she knows or ought to know about the subject matter of the proposed insurance. Similarly the insurer is bound to exercise the same good faith in disclosing the scope of the insurance, which he/she prepared to grant. Insurable interest: another principle of insurance contract is that the insured must have an insurable interest in the subject matter of insurance. Insurable interest means some pecuniary interest in the subject matter of insurance contract. Without such interest the contract will be regarded as gambling and, therefore, void.

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Indemnity: important principle in case of insurance of property like fire and marine insurance is that of indemnity. A contract of fire or marine insurance is a contract of indemnity under which the insurer or underwriter promises to indemnify the insured in case of any financial loss suffered by him/her on the happening of uncertain event. It means the insurer undertakes to compensate the insured for the loss caused to him/her by the damage or destruction of the property insured. The compensation payable and the loss suffered are to be measured in terms of money. It should be noted that the principle of indemnity is not applicable to personal insurance, such as life insurance because a contract of life insurance is not based on the principle of compensation.
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Contribution: it applies to any insurance, which is a contract of indemnity. The insured is not prevented from taking out two policies on the same property. But in case there is a loss, when there is more than one policy on the same property, the insured will have no right to recover more than the full amount of his actual loss. In such a case the principle of contribution will be applied according to which all the insurers will contribute to the loss of insured in the proportion of the amount of policy taken by the concerned person. Subrogation: it applies to all insurance contracts. After the insured is compensated for the loss or damage to the property insured by him/her, the right of ownership of such property passes on to the insurer. Because if the damaged property has any value left or lost property is recovered that cannot be allowed to remain with the insured because in that case insured will realize more than the actual loss which is against the principle of indemnity.

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Causa proxima: the principle of causa proxima means that in case of loss arising out of any mishap the most proximate cause, i.e. the nearest cause of the mishap should be taken into consideration. Mitigation: the principle of mitigation emphasizes the duty of the insured to take all possible steps to minimize the loss or damage to the property covered by insurance policy, in case of mishap happens. This principle aims at making sure that the insured behaves as a prudent person and does not become careless after taking a policy to cover any risk.

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2.4. TYPES OF INSURANCE
In India, insurance business is classified primarily as life and non-life or general. 1. Life insurance: includes all the risks related to the lives of the human beings. 2. Non-life or general insurance: it covers the rest other than life. It includes: a) Fire insurance: it deals with all fire related risks. Under a fire insurance contract, the insurer, in return for the premium paid by the insured, undertakes to pay or make good loss suffered by the insured as a result of damage caused by fire to the property covered by the policy. b) Marine insurance: it deals with all transport related risks and ships. It is a contract under which the insurer or underwriter undertakes to indemnify the insured against losses, incidental to marine adventure. It may be defined as a form of insurance covering loss or damage to vessels or to cargo during transportation on the high seas. The risks insured against are those commonly known as perils of the sea, such as a storm, collision of one ship with another, against rocks, etc. and fire as well as action of the master or crew of the ship.

c) Fidelity insurance: it is used to protect an employer from the dishonesty of an employee. Banks, loan companies and other businesses commonly use such insurance policies for cashiers and other employees who handle company funds. The employer is insured against loss up to the amount of policy.

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d) Miscellaneous: it deals with all others like liability, motor, crop, engineering, construction, aviation, personal accident, etc.

2.5. Reinsurance: it refers to the arrangement under which an insurer enters into contract with another insurer for the assumption of a part or whole of the risk insured by the first insurer. In this case, the reinsurer undertakes to insure the first insurer against loss from some or all of the risks he/she has insured.

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Chapter-3 Company Profile

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GEOJIT BNP PARIBAS FINANCIAL SERVICES LIMITED
3.1. COMPANY BACKGROUND: Geojit was founded by Mr. C.J. George and Mr. Ranajit Kanjilal as a partnership firm in the year 1987. After the retirement of Mr. Ranajit Kanjilal from the firm in 1993, Geojit became a proprietary concern of Mr. C .J. George. In 1994, it became a Public Limited Company by the name Geojit Securities Ltd. The Kerala State Industrial Development Corporation Ltd. (KSIDC), in 1995, became a co-promoter of Geojit by acquiring 24% stake in the company, the only instance in India of a government entity participating in the equity of a stock broking company. Geojit listed at The Stock Exchange, Mumbai (BSE) in the year 2000. In 2003, the Company was renamed as Geojit Financial Services Ltd. (GFSL). The board of the company consists of professional directors; including a Kerala government nominee with 2/3rd of the board members being Independent Directors. With effect from July 2005, the company is also listed at The National Stock Exchange (NSE). Geojit is a charter member of the Financial Planning Standards Board of India and is one of the largest DP brokers in the country. On March 13, 2007 the formation of Geojit BNP Paribas Financial Services Ltd., was announced in Mumbai and Paris. Through a preferential allotment, BNP Paribas had taken 27% stake in Geojit, which will eventually increase to 34.35%. With this final step, the French banking major has become the largest shareholder in Geojit Financial Services Limited. BNP Paribas has one of the largest international banking networks with significant presence in Asia and the United States. With this take over Geojit has become Geojit BNP Paribas Financial Services LTD in April 2009. Currently Geojit BNP Paribas has more than 500 branches, 4.7 lakhs clients and offers services in equities, futures and options, mutual funds, life and general insurance, portfolio management services, loan against shares.

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3.2. MILESTONES OF COMPANY:The company crossed the following milestones to reach its present position as a leading retail broking house in India. 1986 Geojit becomes a member of the Cochin Stock Exchange. 1994 The Kerala State Industrial Development Corporation (KSIDC), an arm of the Government of Kerala, becomes a co-promoter of the company by acquiring 24% equity stake in Geojit Financial Services Ltd. This is the only venture in India where a state owned development institution is participating in the equity of a stock broking company. Geojit becomes a corporate broking house. 1995 Geojit becomes a member of the National Stock Exchange (NSE) and installs its first trading terminal in Cochin, Kerala. 1996 The company launches Portfolio Management Services after obtaining required registration (Portfolio Management) from Securities Exchange Board of India (SEBI). 1997 Geojit becomes a Depository Participant under National Securities Depository Limited (NSDL) and begins providing Depository Services through its branches. 1999 Geojit becomes a member of The Bombay Stock Exchange, Mumbai (BSE) and activates Bombay Online Terminals (BOLT) in different branches.

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2000 Geojit becomes the first broking firm in the country to offer online trading facility. The then SEBI Chairman, Mr. D.R.Mehta inaugurates the facility on 1st February, 2000. Commences Derivative Trading after obtaining registration as a Clearing and Trading Member in NSE. Establishes the first Bank Gateway in the country for Internet Trading. 2001 Becomes India's first DP to launch depository transactions through Internet. Establishes Joint Ventures in the UAE for serving NRI clients. The company issues bonus shares in the ratio of 1:1. 2002 Geojit ties up with MetLife for the marketing and distribution of insurance products across the country. The company becomes the first online brokerage house to launch integrated internet trading system for both cash and derivatives segments. 2003 Geojit Commodities Limited, a wholly owned subsidiary of Geojit, becomes member of National Multi-Commodity Exchange of India Ltd., National Commodity & Derivatives Exchange Ltd., Multi Commodity Exchange and launches Commodity Futures Trading in rubber, pepper, gold, wheat and rice. Geojit Commodities Limited launches Online Futures Trading in multiple commodities namely, agri-commodities, precious metals like gold and silver, other metals like steel, aluminium, etc. and energy futures namely, crude oil and furnace oil. Geojit raises more than Rs.100 million through issue of preferential shares.

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2005 Customer base of Geojit crosses 250,000. Geojit's reach spreads through a network of more than 300 branches. Geojit Credits, a subsidiary of Geojit Financial Services Ltd. registers with Reserve Bank of India as a Non-Banking Financial Company (NBFC). The company implements Employees Stock Option Scheme. The company opens a first of its kind - all women's branch in Cochin. 2006 Geojit relaunches Internet trading on Reuters TIB Mercury Platform. 2007 On March 13, 2007 the formation of Geojit BNP Paribas Financial Services Ltd., was announced in Mumbai and Paris. Through a preferential allotment, BNP Paribas had taken 27% stake in Geojit, which will eventually increase to 34.35%. With this final step, the French banking major has become the largest shareholder in Geojit Financial Services Limited. 2008 BNP Paribas Securities India (P) Ltd. – a Joint Venture between BNP Paribas and Geojit Financial Services for Institutional Broking. First brokerage to offer full Direct Market Access (DMA) execution in India for institutional clients. 2009 Launch of online Currency Derivatives trading. Renaming of Geojit into Geojit BNP Paribas in April 2009.

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3.3. BOARD OF DIRECTORS OF THE COMPANY:
Name Mr. A. P. Kurian Mr. C. J. George Mr. Manoj Joshi Mr. Mahesh Vyas Mr. Rakesh Jhunjhunwala Mr. Ramanathan Bupathy Mr. Punnoose George Mr. Olivier Le Grand Mr. Pierre Rousseau Designation Non - Executive & Independent Chairman Managing Director & Chief Promoter Non - Executive & Independent Director Non - Executive & Independent Director Non - Executive Director) Non - Executive & Independent Director Non - Executive Director Non - Executive Director Non - Executive Director

3.4. MANAGEMENT:
Name Mr. C. J. George Mr. Satish Menon Mr. A. Balakrishnan Mr. K. Venkitesh Mr. Stefan Groening Mr. Jean-Christophe G Mr. Binoy .V.Samuel Mrs. Jaya Jacob Alexander Designation Managing Director Director (Operations) Chief Technology Officer National Head - Distribution Director (Planning and Control) Director (Marketing) Chief Financial Officer Chief of Human Resources

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3.5. SUBSIDIARY COMPANIES AND OVERSEAS JOINT VENTURE:SUBSIDIARY COMPANIES: Geojit Technologies (P) Limited  Geojit Financial Distribution (P) Limited  Geojit Financial Management Services (P) Limited  Geojit Credits (P) Limited  Barjeel Geojit Securities L.L.C. OVERSEAS JOINT VENTURES: Barjeel Geojit Securities  Aloula Geojit Brokerage Company Registered Office: 5th Floor, Finance Towers, Kaloor, Kochi 682017, Kerala, India. Phone: + 91 484 2405501/2, Fax: + 91 484 2405618. SEBI registration Nos.: NSE:INB/INF/INE 230806739 | BSE: INB/INF 010806736 | NSDL: IN-DP-NSDL-24-97 | Portfolio Manager: INP000000316

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Chapter- 4 Insurance Industry Analysis

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INSURANCE INDUSTRY ANALYSIS

4.1. OVERVIEW OF INDIAN INSURANCE SECTOR
The insurance business in India has grown at an excellent rate postliberalization. The market size went up to US$ 47.89 billion in 2008 from US$ 21.71 billion in 2000, increasing at the rate of 120%. During FY00 to FY07, total premium in the life insurance segment grew at a CAGR (cumulative aggregate growth rate) of 28% and its share in the total insurance premium increased to 86%. On the other hand, total premium in the non-life insurance segment grew at a CAGR of 16% and its share in the total insurance premium declined to 14%. At present, 33 private players entered the sector. Interestingly, eight players-four each in life and nonlife insurance - entered the arena during March 2007 to August 2008. On the basis of several macroeconomic factors like increase in literacy rate and per capita income, decrease in death rate and unemployment, better tax rebates, growing GDP etc., we estimate that the Indian insurance sector will grow by $28.65 billion and reach $76.54 billion by 2011 with a CAGR of 12.44% and a growth of 59.82%. Further, the country’s insurance sector is likely to grow 17% in the current financial year if the economy continues to expand at the pace as it did in the September quarter of 2008. India’s economy grew at 7.6% in JulySeptember period. Currently, the insurance sector comprises 1 re-insurance, 21 life Insurance, and 19 general insurance companies. General Insurance Corporation (GIC) is the sole insurer in the re-insurance market in India. Besides, there are three specialized general insurers, namely, Agriculture Insurance Company of India Ltd. (AIC) that provides crop insurance, Export credit guarantee corporation (ECGC) that offers export credit insurance, and Star Health and Allied Insurance Co. Ltd. that exclusively underwrites health, personal accident and travel insurance.

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Insurance business has been traditionally classified into:  life insurance and  Non-life insurance (general insurance). Non-life insurance broadly covers: fire, marine, fidelity and Miscellaneous insurance (health, engineering and cattle insurance).

motor,

burglary,

Life insurance has been viewed as a tax saving option for a long time in India; but this perception is slowly changing and insurance is being taken irrespective of tax benefits. The insurance market now offers insurance products that suit people’s specific requirement and various demographic characteristics. Among the various products offered by life insurers, the most common are:      Endowment assurance, Money back policy, Whole life policy, Term assurance and Unit linked insurance plans (ULIPs).

Out of these, endowment assurance and ULIPs are the most widely used. ULIP is one of the biggest innovations of the market and ones popularized by private players give various options to investors. In a ULIP, a part of the premium paid goes towards life cover and the remaining is invested in units like mutual funds. Lately, these products have been gaining popularity owing to sustained bullish trend in the Indian capital market. IRDA ha issued guideline for ULIP products that specify the minimum level of sum assured, minimum period of premium payment and several other requirements, including NAV computation methodology. Furthermore, life insurance companies have identified the need for structured retirements plans, for instance, long-term fund management
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and pension are some opportunities that life insurers are waiting to capitalize on.

4.2. LIFE INSURANCE IN INDIA
India is the fifth-largest life insurance market in Asia and eleventh in the world. In FY07, India’s total life insurance premium volume was $34.59 billion which is 1.6% of the total world life premium and 5.9% of the total Asian life premium. The Indian life insurance market generated total revenues of $41.36 billion in 2008 representing a CAGR of 11.84% for the period 2000-08. The performance of the market is forecast to accelerate, with an anticipated CAGR of 9.78% for the three year period 2008-11 expected to drive the market to a value of $65.96 billion by the end of 2011. The Indian life insurance market has been traditionally dominated by LIC, which controlled about 99% of the total life insurance premium in FY02. As per the latest data, it controlled around 48.1% of market share in 2008. However, liberalization has increased private players’ presence in the life insurance market. Private players have adopted aggressive growth strategies. They have introduced many innovative products that were customized to customer requirement and developed alternative distribution channels. As a result the premium of private players grew at a CAGR of 153% during FY02-07, while that of LIC grew by 21%.

4.3. INVESTMENT DOMINANT

PATTERN

OF

LIFE

INSURERS-ULIPs

The share of life funds in the total investments made by life insurers has fallen from 85% in FY05 to 77% in FY07. However, it still remains the largest fund for life insurers and during FY05 to FY07. It grew at a CAGR of 13% to reach Rs 4,655.55 billion. Unit linked funds have also done remarkably well during the same period; its share in the total investments made by life insurers went up from 2% in FY05 (Rs 75.28 billion) to 11% in FY07 (Rs 670.5 billion), registered a CAGR of 198%.
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Pension and general annuity fund registered a CAGR of 76% and its share in the total investments doubled from 3% in FY05 (Rs 120.24 billion) to 6% in FY07 (Rs 370.63 billion) during the same period. Group funds’ (excluding group pension and annuity fund) reported a decline of CAGR 10%, reducing its market share from 10% in FY05 (Rs 426.8 billion) to 6% in FY07 (Rs 345.11 billion). One of the main reasons for private players’ remarkable growth was popularity of unit linked products. LIC also rolled out many unit linked products to gain its lost market share; its share in the total unit link fund increased from 37% in FY05 to 54% in FY07.

4.4. NON-LIFE INSURANCE IN INDIA
India is positioned fifth in the non-life insurance market in Asia and twenty-fifth in the global market. India’s total non-life insurance premium volume was USD 6.07 billion in FY08, which is just 0.4% of the total world non-life premiums and 3.1% of total Asian non-life premiums. India still has a lot of ground to cover to grab a major pie in the global non-life insurance market. The gross direct premium of non-life insurers in India was Rs 123.85 billion in FY02, of which public insurers (four players) had a 96% share and private insurers (eight players excluding specialized insurers), contributed the rest. During FY02-FY07, the gross premium of Indian non-life insurers increased at a CAGR of 16% to Rs 259.3 billion. During the same period, the gross premium of public insurers reported a CAGR of 8%, which was below the industry average; nevertheless, the public players continued to dominate the market with a 67% share. On the other hand, the private insurers’ gross premium grew at an impressive CAGR of 79% and its share in total Indian non-life gross premium grew from 4% in FY02 to 33% in FY07 due to aggressive growth strategies adopted by them. The private players’ strategies included higher spending on awareness and branding, better production innovation, providing better coverage and higher returns and development of more effective distribution channels. Expertise brought-in by foreign joint venture partners is also one of the reasons for rapid expansion of private non-life insurers in India.

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4.5. ROAD AHEAD
In FY08, the insurance penetration in India was as low as 4.7% as compared to other developed and developing countries including the US (8.9%), the UK (15.7%), Taiwan (15.7), South Korea (11.8%), and Hong Kong (11.8%). Similarly, insurance density in India is estimated to be at a low level of USD 46.6 as compared to the Asian average of USD 210.7. Within the insurance density, life insurance density is at USD 40.4 and non-life density is at USD 6.2. Low insurance density and penetration in India hold huge opportunities for players; in fact, the Indian insurance market has been growing rapidly as compared to other Asian and world markets. During FY02FY07, the total insurance premium of India grew at a CAGR of 28.86%, which was higher than any other Asian country during the same period and better than Asia’s total premium growth of 5.92% (CAGR). During the same period, India’s share in Asian total premium grew from 2.0% in 2001 to 6.47% in 2007.

4.6. LOW PENETRATION AND UNTAPPED SEMI-URBAN AND RURAL AREAS:
The insurance market in most developed countries has been well covered and is likely to saturate soon; hence, many global players are looking towards India. Insurance penetration and density in India is also at low levels. The survey conducted by Right Horizons has indicated that 41% of the respondents aged between 21 years and 30 years forms the bulk of India’s population didn’t have any insurance cover. The survey indicates that maximum insurance penetration was in the age group of 30-39 years (29%). Incidentally, the survey also indicated that 48% of the respondents didn’t have medical/health insurance (tax benefit in the form of sec. 80 (D) is available for this product). Hence, insurance players, both Indian and global, have ample opportunities to expand their reach and presence in the untapped

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semi-urban and rural areas. During March 2007-August 2008, eight new players entered the market.

4.7. NETWORK EXPANSION AND PRODUCT INNOVATION:
In recent years, insurers have introduced many innovative products that cater to and meet requirements of people across the country. More than innovation, it is the expansion of distribution channels and aggressive marketing strategies that have boosted insurance business growth because a new product can be easily emulated. Traditional channels of distribution have become unreliable due to huge turnover of agents. Other concerns pertaining to lack of professionalism, inadequate training and low productivity are also prevalent. Therefore, insurance players have started looking beyond agents to sell their products. They are opting for direct distribution by opening branches and extension counters at various locations and are thus creating a direct contact with their customers. Bancassurance, which means using established distribution network of banks to sell insurance products in tie-ups, has also been a very successful phenomenon in insurance distribution; however, as insurers need to make huge investments for network expansion and new customer acquisition, smaller players may not be able to hold on and may fade out in coming years. Nevertheless, this is a huge opportunity for bigger players, who have the support of global players, local corporate houses and banks.

4.8. RAISING HOUSEHOLD SAVINGS:
As per the preliminary estimates by RBI, the gross financial savings of household sector grew by 15.6% to Rs 7,346.9 billion in FY08 as compared to the previous fiscal. The household sector’s investment in insurance funds has improved by 40 basis points from 2.3% in FY06 to 2.7% in FY08.

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4.9. DE-TARIFFING IN GENERAL INSURANCE:
Post-2007, IRDA decided to move towards complete de-tariffing in a phased manner to minimize excessive price cut and for smooth transition from regulated tariff to free pricing. The first phase came into effect in January 2007, when pricing deregulation was applied to three products including fire, engineering, and auto own damage. A maximum discount of 50% was set on old regulated rates and around 20% on auto damage rates. During the second phase, which came into existence from January 2008, detariffication of non-life insurance was completed in India and insurers were given freedom to set up their own price for insurance products. Indian private players have been gaining market share postderegulation but growth has been slow. Going ahead, the non-life insurance is expected to stabilize and settle for risk-based pricing practice, which in term will push up growth. De-tariffing may cultivate cut throat competition among insurers, mostly among private players, as they may cut prices of insurance products to get a bigger market share. This trend is seen in many countries that have undergone price deregulation. The Indian non-life insurance market is still at a very nascent stage in terms of de-tariffing regime and its effects can only be clearly visible in next few years. All in all, improved awareness, high competition, product innovation, network expansion, robust economy, improving household income and huge untapped insurance market in the country provide immense opportunities for existing players and make the market lucrative for new entrants.

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4.10. PEST ANALYSIS:
1. POLITICAL FACTORS:
a. Increased service tax on premium: with the finance bill 2004 coming into effect from September 10, life insurance premiums now come under the service tax net. The life insurance policy holders will have to pay 10.2% of service tax when they pay their next round of premium. Existing policy holders are also liable to pay up the 10% service tax plus 2% education cess. b. 5% discount on corporate premium: at present there is a 5% discount on corporate premium. c. Hike in FDI limit: the policy of the government regarding foreign direct investment has an important role in any industry. Indian government has approved hike in FDI limit to 49% from existing 26%.

2. ECONOMIC FACTORS:
Increase in gross domestic savings: there is an increase in gross domestic savings over the last five years. In the financial year 2007-08 the gross domestic savings rate was 36%.

3. SOCIAL FACTORS:
a. Low insurance coverage: the Insurance coverage in India is very low. As per industry estimates, out of 78% Indian households that are aware about life insurance, only 24% own a policy. Especially in rural India the insurance coverage is very low. b. Rice in elderly population: the life expectancy, which was 29 years in 1947, is now closer to 65 years. The same is expected to increase to 71 years by 2026. Hence the number of older population is expected to increase by more than double from 76millions in 2006 to 173 millions in 2026. By the year 2016 it is projected that 51% of the elderly population would be women. c. Changing Indian perception: the perception of Indian population has totally changed. By the improvement in the educational system, the literacy rate continuously goes on increasing. The awareness level of Indian consumers is also
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increasing day by day. Every individual wants to secure his family from unwanted future. d. Increase in life style diseases: lifestyle-related diseases, such as cardiovascular disease, diabetes and hyper tension are on the rise in India. These diseases have already become the number one killer in India. India leads the world in diabetes. A government study estimated the number of diabetics to be about 38 million in2004, and it is projected to rise to 57 million in 2025.

4. TECHNOLOGICAL FACTORS:
a. Automation of process: the replacement of a manual business process with an automated one, usually through the use of advanced technologies is known as business process automation. Today each and every insurance firm is using latest information technology to minimize cost and to provide best services to customers b. Increase in CRM solutions: today every insurance firm is using customer relationship management solutions to deal with tough competition and to satisfy the customers. A good CRM solution provider in insurance industry has the tools that enable the organization to enhance customer experience. c. Internet driven information era: today everything is connected with internet. Each and every individual can easily get information about various life insurance products and associated premium and the service providers.

4.11. MICHAEL PORTER’S FIVE FORCES ANALYSES:
1. BUYER/CUSTOMER POWER:
a. Widening product range: today the range of insurance products in the market is very wide and hence buyers have extreme power. b. Large corporate clients: at present the number of corporate clients in the insurance industry is very large, hence buyers have more choice. c. Sale of Bancassurance: Bank and insurance firms unite to sell life and non- life insurance products is known as bancassurance. Because of the bancassurance the customers
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have the choice to purchase the insurance products from banks also hence they again have the power. d. Multiple distribution channels: insurance companies are using different types of channels i.e. an individual agent, broker, stock trading firms and banks, etc for selling their insurance products to the customers.

2. SUPPLIERS POWER:
a. Limited actuaries in the market: the number of actuaries (the person who uses statistics to calculate insurance premiums) is limited. Hence they have enough power over insurance companies. b. Reinsurance concentration: today most of the insurance companies are trying to reduce the risk of insurance by again reinsuring the concerned risk with other insurance companies. Hence the reinsurers are enjoying the extreme power. c. Dependence on IT providers: latest technology is one of the important resources of any type of company to deal with competition and to provide customer services. Insurance companies are highly dependent information technology providers for their effective business.

3. RIVALRY AMONG COMPETITORS:
a. Industry concentration on life and non-life business: all the Insurance industry firms are only concentrating on life and non-life business. Hence there is strong rival competition. b. Low penetration of insurance: there is very low penetration of insurance in India. The survey conducted by Right Horizons has indicated that 41% of the respondents aged between 21 years and 30 years forms the bulk of India’s population didn’t have any insurance cover. The survey indicates that maximum insurance penetration was in the age group of 30-39 years (29%). Incidentally, the survey also indicated that 48% of the respondents didn’t have medical/health insurance (tax benefit in the form of sec. 80 (D) is available for this product). There has been a rising interest in medical insurance, with Budget-2007 increasing the limit to Rs 15,000 from the previous Rs 10,000 per year.
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Another interesting point is the low penetration of other taxsaving products, with traditional products (insurance, NSC and PPF) dominating the preference. Only 5% of the respondents said that had chosen to invest in equity linked saving schemes (ELSS) of mutual funds. The interesting fact is that 30% of the respondents continue to depend on the provident fund for which they contribute, along with employers. About 62% of the respondents said they had no investment in ELSS while 22% had made these investments. The low penetration of ELSS among respondents clearly indicates that the mindset has not changed, with traditional products continuing to dominate investor preference.

4. BARRIERS TO ENTRY:
a. FDI celling: the government has the power to fix the maximum amount of foreign direct investment in insurance industry. So with low celling the international firms cannot enter in the Indian insurance industry. b. Capital requirement: capital is one of the most important resources for doing any business activity. In insurance industry the amount of capital requirement is very high. Hence the capital is the barrier to entry.

5. THREAT OF SUBSTITUTE PRODUCTS:
a. Government Pension Scheme: Individuals are using government pension scheme in place of life insurance products. So there is a threat of government pension scheme as a substitute of life insurance products in the insurance industry b. Tax Saving Instruments: customers used to purchase life insurance products to reduce the amount of tax burden. But there are the other tax saving instruments in the market (employee provident fund, public provident fund, national saving certificates, bank fixed deposits, senior citizens’ savings scheme, etc) which are easily available. Hence there is a threat of these products for life insurers. c. Dependence on Children in Rural India: there is a culture in rural India that most of the families are dependent upon their children. Hence because of this culture, insurance companies are not able to sale their products in the rural market.
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4.12. LIST OF LIFE INSURANCE COMPANIES IN INDIA
Life insurer in public sector Life Insurance Corporation of India Life insurer in private sector i. ICICI Prudential Life Insurance. ii. Bajaj Allianz. iii. MNYL life Insurance. iv. Sahara Life Insurance. v. Tata AIG Life Insurance. vi. HDFC Standard Life. vii. Birla Sunlife. viii. SBI Life Insurance. ix. Kotak Mahindra Old Mutual Life Insurance. x. Aviva Life Insurance. xi. Reliance Life Insurance Company Limited-Formerly known as AMP Sanmar LIC. xii. Metlife India Life Insurance. xiii. ING Vysya Life Insurance. xiv. Max New York Life Insurance. xv. Shriram Life Insurance. xvi. Bharti AXA Life Insurance Company Limited. xvii. Future General life Insurance Company Limited. xviii. IDBI Fortis Life Insurance Company Limited. xix. Aegon Religare Life Insurance Company Limited. xx. DLF and Pramerica (will soon launch the operations).

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4.13.LIST OF GENERAL INSURANCE COMPANIES IN INDIA
General insurer in public sector i. National Insurance Company India Limited. ii. New India Assurance Company Limited. iii. Oriental Insurance Company Limited. iv. United India Insurance Company Limited. General insurer in private sector i. Bajaj Allianz General Insurance Company Limited. ii. ICICI Lombard General Insurance Company Limited. iii. IFFCO-Tokio General Insurance Company Limited. iv. Reliance General Insurance Company Limited. v. Royal Sundaram Alliance Insurance Company Limited. vi. TATA AIG General Insurance Company Limited. vii. Cholamandalam General Insurance Company Limited. viii. Export Credit Guarantee Corporation. ix. HDFC Chubb General Insurance Company Limited. Reinsurer General Insurance Corporation of India

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4.14. MARKET SHARE OF VARIOUS INSURANCE COMPANIES IN INDIAN INSURANCE MARKET
The market share of various life insurance companies in India at the end of financial year 2008 as follows: COMPANY NAME LIC ICICI Prudential Allianz Bajaj SBI Life HDFC Standard Birla Sunlife Reliance Life Max New York OM Kotak AVIVA Tata AIG Met Life ING Vysya Shriram Life Bharti Axa Life Others MARKET SHARE 48.1% 13.7% 10.3% 6.2% 4.1% 3.4% 3.4% 2.4% 1.9% 1.8% 1.5% 1.4% 1.2% 0.3% 0.2% 0.1%

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4.15. Pie-chart for analysis
LIC

ICICI Prudential

Allianz Bajaj

SBI Life

HDFC Standard

Birla Sunlife

Reliance Life

Max New York

OM Kotak

AVIVA

Tata AIG

Met Life

ING Vysya

Shriram Life

Bharti Axa Life

Others

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Chapter- 5 Life Insurance

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LIFE INSURANCE
5.1. Meaning of life insurance:
Life insurance is a contract under which one person, in consideration of a premium paid either in lump sum or by monthly, quarterly, halfyearly or yearly payments, undertakes to pay to the person for whose benefit the insurance is made, certain sum of money either on the death of a person whose life is insured or on the expiry of a specified period of time. The important points in insurance: i. ii. iii. iv. Insurer: the person who agrees to indemnify. Insured: the person whose life is insured. Premium: the consideration paid to the insurer. Sum assured: amount of coverage.

5.2. Evolution of life insurance business:
Life insurance in its modern form is a western concept. Although it has been taking shape for the last more than 300 years, it came to India with the arrival of Europeans. The first life insurance company was established in India in 1818 as Oriental life insurance Company mainly to provide for widows of European. The companies that followed mainly catered to Europeans and charged extra premium on Indian lives. The first Indian company ensuring Indian lives at standard rates was Bombay mutual life insurance company, which was formed in 1870. This was the year also when the first insurance act was passed by the British parliament. The years subsequent to the Swadeshi movement saw the emergence of several insurance companies. At the end of the year 1955 there were 245 insurance companies and provident societies out of which 16 were non-Indian companies. All the companies were nationalized in 1956 and brought under one umbrellaThe life insurance corporation of India (LIC) - which enjoyed a monopoly of the life insurance business till near the end of 2000. By setting of the insurance regulatory development authority (IRDA) in
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April, 2000 the government of India effectively ended LIC’s monopoly and opened the doors for private insurance companies.

5.3. Life insurance products:
Life insurance products are usually known as ‘plans’ of insurance. These plans have two basic elements: i. ii. Death cover: in this case the benefit being paid on the death of the insured person within a specified period of time. Survival benefit: in this case the benefit being paid on the survival of a specified period of time. Term assurance: it is the plan of insurance that provide only death cover. Pure endowment: it is the plan of insurance that provide only survival benefit. If the insured dies within the specified period no payment is made under this type of plan.

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5.4. TRADITIONAL LIFE INSURANCE PLANS:
All traditional life insurance plans are the combination of term assurance and pure endowment plans. Features of traditional life insurance plans: i. ii. Type of person (insured): individual adults, children (minors) and two or more persons jointly under one policy. Sum assured: some plan stipulate a minimum sum assured. There can be maximum limits also for SA as well as certain benefits, like accident benefits. Sum assured could be payable on death or on survival. Sum assured could be payable in one lump sum or in installments. The term (duration) of the policy determines the period during which the specified event should occur for the SA to be payable. Some plans provide for benefits even beyond term. Premium: variations are in the frequency of payment (monthly, quarterly, half-yearly or yearly), as well as the period during which it is payable. Some plans provide for premiums to be paid for a period less than the term. Sum Assured can increase because of participation in surplus and bonus additions or because of guaranteed increase in SA. There are additional benefits, also called supplementary benefits and may be provided by way of riders, in addition to the basic covers.

iii. iv. v.

vi.

vii. viii.

Types of traditional life insurance plans are: i. Whole life policy: under this form of policy the insured sum becomes payable to the beneficiary only on the death of the assured. It means that the whole life policy is to run for the whole life of the assured. The premiums on such policies may be payable for fixed period (20 or 30 years) after which the payment of premium ceases but the policy runs on till the death of the assured. Endowment assurance plan: a term assurance plan along with a pure endowment plan, when offered as a single product is called
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ii.

iii.

iv.

v.

vi.

endowment assurance plan, under which the sum assured is paid on survival of the specified period or on earlier death. It means the insurer undertakes to pay the assured a specified sum on the attainment of a particular age or on his death, whichever is earlier. Thus the endowment policy matures after a limited number of years. Double endowment assurance plan: a term assurance plan with a pure endowment plan of double the value is known as double endowment assurance plan, under which the amount payable on survival is double the amount on death. Money back or anticipated endowment: it is a policy under which say 20% of sum assured is paid on survival every 5 years and 40% on survival for 20 years and full sum assured on death at any time within the 20 years. It is effectively a combination of a term assurance plan for 20 years for full sum assured and different pure endowment plans (20% SA for 5 years, 20% of SA for 10 years, 20% of SA for 15 years and 40% of SA for 20 years). Limited payment policies: in this type of policies the premium can be made payable for a short period. If the limited period is only 1 year, a single premium would be payable at the beginning of the policy. Annuities: in annuity contracts, a person agrees to pay to the insurer a specified capital sum in return for a promise from the insurer to make a series of payments to him so long as he lives, while in insurance , the insured pays a series of payments in return for a promise of a lump sum on his death. Types of annuity are: a. Immediate annuity: the annuity may commence immediately after the contract is concluded. The purchaser of an immediate annuity pays the purchase price in a lump sum. b. Deferred annuity: the annuity payment will start after the lapse of a specified period, called deferment period. The purchase price can be paid as a single premium at the commencement or may be paid in installments during the deferment period.
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5.5. UNIT LINKED LIFE INSURANCE POLICY (ULIP):
A ULIP is a life insurance policy which provides a combination of life insurance protection and investment (in capital market). In case of a ULIP, the proposer offers to pay a certain sum towards premium. Insurers insist that this amount should be in multiples of say Rs.500 or Rs.1000 with a minimum of say, Rs.5000 or Rs.10000. The term of the policy is also specified. It should not be less than 5 years or age 70 for Whole life plans. The premium may be paid as a single premium at the start or periodically over the term or less, as in the case of limited payment policies in yearly, half-yearly, quarterly or monthly installments. The SA or death cover, payable in the event of death during the term, is related to this premium, usually as a multiple like 5 times the annual premium or 1.5 times the single premium. The minimum SA, according to IRDA guidelines, has to be 1.25 times single premium or 5 times, annual premium. Out of the premium, annual or otherwise as the case may be, a certain amount is adjusted towards the cost of the insurance (death) cover. Some portion may be adjusted towards charges. The balance, called the allocated premium is invested in a fund that proposer chooses, from among a set of options (equity fund, debt fund, money market fund and balanced funds). The allocated premium is used to buy a certain number of units in the chosen fund at the price at which the units are being offered on that day. This price is called net asset value (NAV), which varies every day.

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5.6. PREMIUM:
The consideration paid to insurer by insured is known as premium. In a contract of insurance, the insurer promises to pay to the policy holder a specified sum of money, in the event of a specified happening. The policy holder has to pay a specified amount to the insurer, in consideration of the promise. Premium is the name given to this consideration that the policy holder has to pay in order to secure the benefits offered by the insurance contract. Risk premium: the cost to meet the risk of death for one year at a particular age is called risk premium. The risk premium is calculated on the basis of an expectation as to how many persons are likely to die within a year in an age group. This expectation, regarding the number of persons likely to die within a year, at each age is calculated by actuaries on the basis of past experiences and made available as mortality tables. The risk premium would be adequate to pay the claims that would arise, if all the policies provided benefits only in the event of death within one year. Net premium or pure premium: the premiums collected by insurers every year are not utilized for payment of claims. This is so far many reasons. One is that the real experience may be different from the probabilities indicated by the mortality tables. Secondly, the portion of the premium is meant to meet survival benefits and must be kept aside. The balance premium kept aside, after outgoes of various kinds, will be invested and will earn some interest. To the extent of these interest earnings, the premium charged can be reduced. The premium worked out after taking into account the interest likely to be earned, is called the net premium or pure premium. Loadings: the net or pure premium has to be increased for various reasons. Such increases are called loadings. One of the loadings is because of expenses. The expenses of the insurer, to procure and to administer the business, have to be met out of the premiums paid by the policy holders.
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Level premium: the premium charged by the insurer is constant throughout the term of the policy to protect the interest of the policy holder is known as level premium. Office premium: the premium figures arrived at after loading the net premium or pure premium is called office premium. Extra premiums: it may be charged on any particular policy. This may happen because of the grant of some benefit in addition to the basic benefits under the plan, like accident benefit or premium waiver benefit. Extra premium may become chargeable because of decisions relating to the extent of risk in any particular case.

5.7. Calculation of age:
The premium to be charged will vary according to the age of the life assured. Premium rates for each plan of assurance are calculated for each age.Note: if after the policy is issued, the age is found to be different from the age stated in proposal, the premium mentioned in the policy will be changed from inception. The age would be only in complete years not months and date. Three methods for age calculation are: i. ii. iii. Age next birthday (birthday coming after the date of commencement of policy) Age last birthday (birthday prior to the date of commencement) Age nearest birthday (birthday within 6 months of the date of commencement whether before or after)

Example: If a person is born on 20th February 1970 and the policy has commenced on 10 th March 1996. Then Age next birthday: 27 years Age last birthday: 26 years Age nearest birthday: 26 years
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5.8. Premium calculation:
Steps in premium calculation: Step .1: Find out tabular premium (premium quoted in published premium rates), for given age for the relevant plan and term. This premium is usually stated as Rs. per thousand sum assured. Step .2: Deduct adjustment for large sum assured if applicable. Step .3: Make adjustment for mode of payment of premium. Step .4: Add extras. Step .5: Multiply by sum assured Final amount of premium…………………..

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Chapter- 6 Survey Analysis

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6.1. ANALYSIS OF THE PRIMARY RESEARCH
This project basically aims to know that the impact of premium charged by insurance companies on their life products have any impact on life insurance investment pattern at infopark area in Ernakulam city. The purpose of the study was to find out if the demand for the life insurance product is affected by the change in price i.e. premium charged on life insurance products or not. The main objective was to know the perception and knowledge of customers on the premium charged by the insurance companies on their life insurance products. The objective of the study was also to find out the reasons why customers prefer one company over the other and one product over the other and determine whether price is an important variable in the choice of these decisions. So my work is to know that the demand for life insurance products is price sensitive or not. Generally all the life insurance companies quote the price i.e. premium according to the age of the proposer and sum assured. And the premium also increases because of the riders i.e. additional benefits taken by proposer. Hence our work is to know whether the premium is the important factor while choosing any life insurance products. Actually price elasticity of demand is a measure of the sensitivity of quantity demanded to changes in price. The responsiveness of quantity demanded of the commodity to change in its price level is known as Price elasticity of demand. It is calculated by dividing percentage change in quantity demanded of the commodity to the percentage change in price level.

6.2. WHY PARTICULAR SAMPLE IS CHOSEN?
The respondent base for this exercise is chosen from infopark area, kakkanad. The assumption here is that the respondent base is more or less uniform in terms of geography, income levels, age and other parameters. We have planned to intent covering around 100 respondents.
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6.3. QUESTIONNAIRE ANALYSIS:
The questionnaire is prepared to collect the response of people working in the Infopark, Kochi. It also includes the investors of Geojit BNP Paribas Financial Services Ltd. The questionnaire is having both open ended as well as close ended questions. The open ended questions are mainly aimed to collect response of respondent in his own words. It is provided to probe for unstructured responses We have prepared a questionnaire consisting of 20 questions for conducting our research. We have taken those questions which are directly or indirectly supporting our research. We have taken questions like: i. Marital status: generally speaking people tend to be more conservative in their spending habit after marriage. In short the likelihood people becoming more price sensitive with financial products like life insurance is more pronounced after marriage. Occupation: By this question we come to know about the regularity of the income of the proposer. It will also affect the investment pattern of the individuals and considering the premium as a factor for choosing the life insurance products. Annual income: It helps to know about the different class of investors. A stratified sample is more feasible when disposable annual incomes are known. Type of policy taken: It helps to know about the awareness level of various types of life insurance plan and the premium charged. Choice of type of annuity (pension plan): It helps to know about whether investors are paying single premium or regular premium as per the term of the policy. Policy with rider: It helps to know that whether investor is ready to take the policy at increased or higher premium. Ranking of the life insurance companies: It helps to know the preference of investors

ii.

iii.

iv.

v.

vi. vii.

61

viii.

ix. x.

xi.

xii.

xiii.

xiv.

Investor’s opinion about the life insurance product: It helps to know whether the investment is meant for protection or investment or for other purpose. Preference of investors over life insurance product: It helps to know the objective of investing in life insurance products. In thinking about life insurance which company in your mind comes first: it helps to know that after giving any clue which is the company considered by investors i.e. by saying life insurance which company comes first in mind of investors. Source of information: it helps to know about the various sources from which investors are getting information about life insurance products and the life insurance companies. Ranking of factors that limits the choice of life insurance policy: It helps to know about the most important factor while choosing any life insurance policy. Why premium is the strongest preference: It helps to know about why investors are considering premium while taking life insurance products. Why premium is not the strongest preferences: It gives us idea about why investors are not taking premium as a important factor and how change in premiums on life insurance products does not affect the investment pattern of investors in life insurance products.

Where we met with the respondents for getting information:
We met with the respondents at the time when they are going to take their lunch outside the company, cafeteria, canteens and when the investors come to Geojit BNP Paribhas Financial Services Ltd.

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6.4. FINDINGS AND ANALYSIS

Gender:
Gender Cumulative Percent 92.0 100.0

Frequency Valid male female Total 92 8 100

Percent 92.0 8.0 100.0

Valid Percent 92.0 8.0 100.0

female 8%

male 92%

The ratio of male in comparison to female is 92:8. This shows that 92% of the respondents are male and only 8% are female. This research shows the behavior of males because majority of respondents are male.

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Age:

N Age Valid N (listwise) 100 100

Minimum 21.00

Ma ximum 54.00

Mean 27.2100

Std. Deviation 4.77429

120 100

80 60 100
40 20 21 0

54 27.21 4.774289307 N Minimum Maximum
Age

Mean

Std. Deviation

In this analysis the minimum age of the respondent was 21 years and maximum age was 54 years. The average age of all 100 respondents was 27.21 years. So this research shows that we have majority of the responses of 100 individuals are from younger generation.

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Marital status:
Cumulative Percent 33.0 100.0

Valid

married unmarried Total

Frequency 33 67 100

Percent 33.0 67.0 100.0

Valid Percent 33.0 67.0 100.0

Marital_status Frequency
married unmarried

33%

67%

The ratio of married in comparison to unmarried is 33:67. The marital status shows the spending behavior of individuals. Married people need to maintain their family and plan their future and their spending behavior is affected by their future planning. But unmarried people used to spend more on any type of product.

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Occupation:
Occupation Cumulative Percent 4.0 53.0 54.0 97.0 100.0

Frequency Valid business profession government service private service student Total 4 49 1 43 3 100

Percent 4.0 49.0 1.0 43.0 3.0 100.0

Valid Percent 4.0 49.0 1.0 43.0 3.0 100.0

3% 4%

business profession 43% 49% government service private service student

1%

In our analysis we have divided the occupation of the respondents in five categories. It includes business, profession, government service, private service and student. In this analysis 49% of the respondents are from profession, 43% from private service, 4% from business, 3% are student and only 1% from government service. It is clear that most of the responses are from profession and private service and we can understand the thinking and behavior of them only.

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Policies taken by those 81 respondents who have already taken life insurance products from the following companies are:

no.of respondents
70 60 50 40 30 20 10 0 LIC Reli Ne ICIC Baj anc w I aj e Indi Pru Alli life a den anz Ins tial ur… no.of respondents 63 3 2 5 1 ICIC Me HD Tat Ma I tlife FC a x Lo Sta AIG Ne mb nda w ard rd yor life k 1 2 2 1 1
Axis Title

Research shows that 78% of the respondents (63 respondents who have already taken life insurance products) have taken policies from the state controlled Life insurance Corporation of India. The reason for the maximum number of policies taken from LIC is the faith on the government company. Everyone has confidence on the government that they will definiely get the return and future benefits from the company. And rest 22% of the respondents (18 respondents who have already taken policy) have taken policies from Reliance life, New India insurance company, ICICI Prudential, Bajaj allianz, ICICI lombard and Met life, etc. Around 8% of the respondents have taken life insurance products from ICICI Prudential

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Ranking of life insurance companies as per their order of preference (from 1 to 6) 1 being the first choice by the 19 respondents who have not taken life insurance products:
1st rank 16 1 1 1 0 0 2nd rank 2 1 8 7 1 0 3rd rank 1 7 3 5 3 0 4th rank 0 6 2 4 6 1 5th rank 0 4 5 1 9 0 6th rank 0 0 0 1 0 18

LIC Met life SBI life ICICI Prudential Tata AIG Others

20

LIC

no. of respon dents

18 16 14 12 10 8 6 4 2 0 SBI life Met life

ICICI Prudentia l Tata AIG 1st rank 2nd rank 3rd rank 4th rank 5th rank 6th rank

ranks

Others

Those who have not taken life insurance products (19 respondents), around 84% of them have ranked Life Insurance Corporation of India as their first choice of preference for purchasing life insurance products. The reason for the above is the faith and confidence on government entity. After the post liberalization period many private insurers came but still people have preference for LIC. The reason for the above is the faith on the government.
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42% of the respondents have ranked SBI life as their second most strongest choice after LIC, again the government entity for the preference for purchasing life insurance products. 36% of the respondents have ranked ICICI Prudential as their second most strongest choice for the preference of purchasing life insurance products. The reason is the changing perception and the awareness of the people.

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Source of getting information:
friends no. of respondents 61 relatives newspaper magazine internet 26 29 21 29 agent 38

204 multiple responses given by 100 respondents

People are getting information about life insurance products and the company from various sources like friends, relatives, newspaper, magazine, internet and agent, etc. As we know that customer’s consumption and buying behavior changes because of their society in which they live. Friends and relatives are very important part of our society. Hence customers have great faith and confidence on their friends and relatives. They don’t have that much faith and confidence on the advertisement shown by the company. Research shows that out of 100 respondents, 61 respondents are getting information from friends and twenty six are from relatives about life insurance products and the companies. This shows that their investment behavior changes because of their friend circle and the relatives. It is also clear that agents (38 responses) are also playing effective role in providing information to customers. The reason for this is customers can get information about life insurance products and the company directly from the agents. They can get their doubt clear from the agents. They can ask any question from the agents regarding the products benefits and all.

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Preference of Life Insurance Company by giving any clue i.e. life insurance:
Tata AIG 83 HDFC ICICI Reliance standard Met life Prudential SBI life life life 2 1 6 6 1 1

LIC

1%

1%
2% 1%

6%

6%

LIC Tata AIG Met life ICICI Prudential 83% SBI life Reliance life HDFC standard life

83% of the respondents have replied that in thinking about life insurance Company, Life insurance Corporation of India comes first. 6% of the respondents said both ICICI Prudential and SBI life, 2% said Tata AIG and 1% of the respondents said Reliance life and HDFC Standard life. This shows that people still have faith on government company not private company.

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At first we have divided the total respondents into two parts i.e. the respondents who have taken life insurance products and the respondents who haven’t taken life insurance products:
life_insurance_policy Cumulative Percent 81.0 100.0

Frequency Valid yes no Total 81 19 100

Percent 81.0 19.0 100.0

Valid Percent 81.0 19.0 100.0

no. of respondents who have taken life insurance policy no. of respondents who haven't taken life insurance policy

19%

81%

We have divided total responses of the people into two parts: 1. Respondents who have taken life insurance products. 2. Respondents who haven’t taken life insurance products. The reason for the above division is to know about the perception of both types of respondents. This division suggests the perception and the knowledge of both type of respondents i.e. respondents who have taken life insurance policy and who haven’t taken. In our analysis 81% of the respondents are having life insurance products and 19% of the respondents are not having any life insurance products. So it shows that majority of the respondents are having life insurance products.
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i.

THOSE WHO HAVEN’T TAKEN LIFE INSURANCE POLICY (19 RESPONDENTS):
For our analysis again we have divided all respondents on the basis of their income level i.e. below 2lakhs and more than 2lakhs because only income of the individual is the most important factor for any type of consumption and investment behavior. Division on the basis of less than 2lakhs and more than 2lakhs is because all the people (less than 2lakhs income) needs to pay very small amount of tax but the tax liability of the people (more than 2lakhs income) increases with the increase in income. Hence all income earning people cannot take the tax benefit on investing in life insurance products.

Below 2lakhs 9 No. of respondents

More than 2lakhs 10

more than 2lakhs 53%

below 2lakhs 47%

53% of the respondents who have not taken life insurance products have income level of more than Rs.2lakhs and 47% are there who have income level of less than 2lakhs.

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 BELOW 2LAKHS INCOME LEVEL (9 RESPONDENTS):
 Eight are unmarried and only one is married  Four have chosen money back policy, three have ULIPs, two have endowment policy and two have annuity.  89% of the respondents want to take policy with rider. It means they are ready to pay higher premiums.  Eight respondents have chosen life insurance products as protection and only two have chosen as investment. It means they are very conscious about their future security.  Reason for preference in investment in life insurance products:
flexibility in life guaranteed return on future tax paying coverage return investment benefits benefits premium no. of respondents (9) 6 5 4 2 8 0

25 multiple responses from 9 respondents: People choose to prefer investment in life insurance products because of several reasons like life coverage, guaranteed return, return on investment, future benefits, tax benefits and flexibility in paying premiums. Maximum responses for life coverage and tax benefits.

 Premium and other factors that limits the choice of investment in life insurance products:
There are various factors that people used to consider while investing in not only life insurance products but also choosing the particular company for investment. Following factors are as follows: Price i.e. premium charged by life insurance companies on their life insurance products Total income of the individual Total savings of the individual Reputation of the life insurance company Location of the company Variety of life insurance products
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Familiarity with the agent Rankings of the factors (from 1 to 7) 1 being the most important factor by 9 respondents: In our analysis we have considered rank 1 and 2 as the very important rank on rank 1 to rank 7 basis analysis.
1st rank premium total income total savings reputation of the company location of the company variety of life insurance products Familiarity with the agent 5 0 1 3 0 0 0 2nd rank 0 2 1 4 0 0 2 3rd rank 3 4 2 0 0 0 0 4th rank 1 1 3 2 0 2 0 5th rank 0 1 0 0 0 5 3 6th rank 0 0 2 0 3 2 2 7th rank 0 1 0 0 6 0 2

7

premium total income

no. of respo ndent s

6
5 4 3 2

total savings
reputation of the company location of the company variety of life insurance products 2nd 3rd rank 4th rank 5th rank 6th rank 7th rank familarity with the rank agent

1 0 1st rank

ranks

55% of the respondents who have income level below 2lakhs ranked price i.e. the premium charged by insurance companies on life insurance products as the first most strongest factor while buying life insurance products. But 33.33% of the respondents replied reputation and the brand value of the company as the most important factor while investment in life insurance products. And 44% responded reputation of the company as the second most important factor after premium.

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 MORE THAN 2LAKHS INCOME LEVEL (10 RESPONDENTS):
 Six are unmarried and four are married.  Out of ten responses there is a demand of one each i.e. annuity (pension plan) and term insurance and two endowment policy and six money back policy.  All of them want to take policy with the rider.  Out of 11 responses eight respondents have chosen protection and three have chosen investment as their opinion about life insurance products.  Reason for preference in life insurance products:
flexibility life guaranteed return on future tax in paying coverage return investment benefits benefits premium no. of respondents (10)

6

1

4

4

10

0

25 multiple responses from 10 respondents 100% of the respondents have chosen tax benefits as the important the reason for preference in life insurance products. No one has given any preference for flexibility in paying premiums. Life coverage also have good preference.

 Premium and other factors that limits the choice of investment in life insurance products:
Rankings of the factors (from 1 to 7) 1 being the most important factor by 10 respondents:
1st rank premium total income total savings reputation of the company location of the company variety of life insurance products Familiarity with the agent 4 2 3 1 0 0 0 2nd rank 1 5 2 2 0 0 0 76 3rd rank 4 1 1 4 0 0 0 4th rank 1 2 4 3 0 0 0 5th rank 0 0 0 0 1 7 2 6th rank 0 0 0 0 4 2 4 7th rank 0 0 0 0 5 1 4

8

premium total income

no. of respon dents

7

6
5 4

total savings
reputation of the company

3
2 1 0

location of the company 1st rank 2nd 3rd rank 4th rank 5th rank 6th rank 7th rank rank
variety of life insurance products Familiarity with the agent

ranks

40% of the respondents who have income level of more than Rs. 2lakhs ranked price i.e. premium charged by insurance companies on life insurance products as the first most strongest factor while buying life insurance products. 30% are replied that their total savings are the first most important factors that affect their buying behavior for life insurance products. 50% of the respondents ranked their total income as the second most important factor while investing in life insurance products.

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THOSE WHO HAVE TAKEN LIFE INSURANCE POLICY (81 RESPONDENTS):
 BELOW 2LAKHS INCOME LEVEL (15 RESPONDENTS):
 Thirteen are unmarried and two are married.  Type of insurance policy taken:
money whole back term life endowment annuity policy insurance ULIPs policy policy 1 10 1 2 4 0

0% 5%
22%

annuity money back policy term insurance

11% 56%

ULIPs whole life policy endowment policy

6%

The investment in money back policy is very high i.e. 56% of the respondents have taken this policy. The premium payable on money back policy is high in comparison to other type of policies available in the market. But people have invested in this policy. The reason for the above is high expected rate of return on investment. Premium payable on term insurance is low in comparison to other type of policies. But people haven’t investment in this product. The reason is no guaranteed return on investment.

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 Out of 15 respondents 11 have taken rider with policy and 4 haven’t taken. It shows that more than 73% of the resondents have taken policy at higher premium.  68.42% responded life insurance products as for protection and 31.58% for investment. It shows that they are really concerned about their unwanted future.  Reason for preference in life insurance products:
flexibility life guaranteed return on future tax in paying coverage return investment benefits benefits premium no. of respondents (15)

10

5

1

6

15

0

37 multiple responses by 15 respondents 100% of the respondents have chosen tax benefits as the important the reason for preference in life insurance products. No one has given any preference for flexibility in paying premiums. Life coverage also have good preference (10 respondents have given preference).

 Premium and other factors that limits the choice of

investment in life insurance products:
Rankings of the factors (from 1 to 7) 1 being the most important factor by 15 respondents:
1st rank premium total income total savings reputation of the company location of the company variety of life insurance products Familiarity with the agent 8 1 3 3 0 0 0 2nd rank 3 7 2 3 0 0 0 3rd rank 2 3 4 4 1 1 0 4th rank 1 3 3 3 0 3 2 5th rank 1 1 1 1 3 4 4 6th rank 0 0 1 1 3 5 5 7th rank 0 0 1 0 8 2 4

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9
8

premium total income

no. of 7 respon 6 dents
4 3

5

total savings reputation of the company
location of the company 1st rank 2nd rank 3rd rank 4th rank 5th rank 6th rank 7th rank variety of life insurance products Familiarity with the agent

2 1
0

ranks

Around 53% of the respondents who have income level of below 2lakhs (who have taken life insurance products) have ranked premium as the first most important factor while investing in life insurance products. They have given reason for the above is the affordability i.e. if the premium on particular policy is affordable for them they will definitely go for that product. Around 47% of the respondents have ranked their total income as the first most important factor while investing in life insurance products. If they have income then only they can go for the particular policy is the reason given by respondents. 27% of the respondents have ranked that their total savings and the reputation of the insurance company as the third most important factor which is to be considered while investment in life insurance products. The reason for the above is if the company has not good market reputation then there may be chance that they will not get the insurance benefits.

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 MORE THAN 2LAKHS INCOME LEVEL (66 RESPONDENTS):
 Thirty nine respondents are unmarried and twenty seven are married.  Type of life insurance policy taken:
money whole back term life endowment annuity policy insurance ULIPs policy policy 12 38 9 20 7 3

3%
8% 22% 43% 14% annuity money back policy term insurance

10%

ULIPs whole life policy endowment policy

The investment in money back policy is very high i.e. around 43% of the respondents have taken this policy. The premium payable on money back policy is high in comparison to other type of policies available in the market. But people have preferred to invest in this policy. The reason for the above is high expected rate of return on investment. Premium payable on term insurance is low in comparison to other type of policies. But only 10% of the respondents have invested in this product. The reason is no guaranteed return on investment. Investment in ULIPs is also considerable i.e. around 23%. This shows that there is proper awareness of new type of policies available in the market. With the investment in ULIPs investor can get both the option of investment in capital market and protection of his/her life.

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 33.33% have taken immediate annuity and 66.67% have taken deffered annuity. It shows that 33.33% of the respondents have paid very higher amount of premium on immediate annuity plan.  93% of the respondents have taken rider with policy and 7% haven’t taken. This shows that investors are ready to pay higher premiums.  Around 54% responded life insurance products as for protection ,45% for investment and only 1% said for others.  Reason for preference in life insurance products:
flexibility life guaranteed return on future tax in paying coverage return investment benefits benefits premium no. of respondents (66)

34

27

19

18

66

4

168 multiple responses by 66 respondents 100% of the respondents have chosen tax benefits as the important the reason for preference in life insurance products. Only 4 respondents have given preference for flexibility in paying premiums. Life coverage also have good preference (34 respondents have given preference).

 Premium and other factors that limits the choice of

investment in life insurance products:
Rankings of the factors (from 1 to 7) 1 being the most important factor by 66 respondents:
1st rank premium total income total savings reputation of the company location of the company variety of life insurance products Familiarity with the agent 21 9 11 21 0 2 2 2nd rank 15 17 9 15 1 3 6 82 3rd rank 14 20 14 13 1 3 1 4th rank 10 16 22 12 2 2 2 5th rank 4 2 7 3 8 28 14 6th rank 0 2 2 2 14 15 31 7th rank 2 0 1 0 40 13 10

45 40 no. of 35 responde 30 25 nts 20 15 10 5 0 1st rank 2nd 3rd rank 4th rank 5th rank 6th rank 7th rank rank

premium
total income total savings reputation of the company

location of the company variety of life insurance products
Familiarity with the agent

ranks

Around 32% of the respondents have ranked premium as the first most important factor which is to be taken into consideration while investing in life insurance products and 23% ranked premium as second most important factor while investing in life insurance products. Around 32% of the respondents have ranked reputation of the life insurance company as the first most important factor which is to be taken into consideration while investing in life insurance products and 23% ranked reputation as second most important factor while investing in life insurance products. 26% of the respondents ranked their total income as the second most important factor while investing in life insurance products. This shows that people consider not only the premium charged by life insurance companies but also their total income and the reputation of the company in the market while investing in this company. Around 67% of the respondents have ranked location of the life insurance company as the least important factor while investing in life insurance products. This shows that with the invention of internet the location of the company doesn’t have that much impact.

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ONE HYPOTHETICAL EXAMPLE:
An individual whose date of birth is 22/02/1988 and he/she is planning to buy some life insurance policies from Life Insurance Corporation of India for 20 years for the sum assured Rs.100000. The premium payable in (Rs.) for different life insurance products as follows: 1. Money back policy (LIC plan no.89): Yearly Halfyearly Premium 6229 3164 Quarterly 1606 Monthly 563

2. Endowment assurance policy-limited payment (plan no.48): Payment term 10 years Yearly Half-yearly Quarterly Monthly Premium 7495 3806 1933 677 3. Whole life policy (plan no.2, payment till age 59): Yearly Half-Yearly Quarterly Premium 1903 967 491

Monthly 172

4. Term insurance (two year temporary assurance policy,age 18 to 60): Sum assured- Rs. 500000 So monthly premium will be Rs. 2600 5. Annuity plan (New Jeevan Suraksha, age needed 40 to 75): 22/02/1964 Notional Cash Option Rs. 100000 Deferment period- 10 years yearly Half-yearly Quarterly Monthly Premium 9108 4619 2329 781 The premium payable for money back policy is high in comparison to other policies but the demand for this product is also high. The reason for the above is the return on the investment from the investment.
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6.5. CONCLUSION
 Yes premium charged by life insurance companies on their life insurance products have impact on investment pattern of individuals. The reason is the percentage of income spent on life insurance products is high. So if high percentage of income is spent on life insurance products, then the particular individual will not be able to do other things. But premium is not only the important variable. It is concluded that if investors will sure that they will get the return then they will definitely take any type of policy which their income level permits.  Research shows that there is correlation between income of the people and their investment behavior.  Respondents who have income level of below Rs. 2lakhs (both who have taken life insurance products and who haven’t taken life insurance products) considered price i.e. premium payable on life insurance products as the most important factor while investing in life insurance products. More than 50% of the respondents have replied premium as an important factor. The reason given by them is the affordability. It means if the premium is affordable then only they shall able to buy the policy. They have also considered their income level for investing in life insurance products.  Respondents who have income level of more than Rs. 2lakhs (those who have already taken life insurance policy) considered both premium and reputation of the insurance company as the first most important factor while investing in life insurance policies. Our research clearly shows that around 32% of the respondents have ranked both premium and reputation as first most important factor and again 23% have ranked it as second most important factor. For them premium is not that much important if the reputation of the company is good because they can get the return on their investment. It means they are ready to pay higher premium for reputed companies in the market.

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 There are various factors which are considered by respondents while investing in life insurance products. They are: Premium charged by life insurance companies on their life insurance products. Reputation of the company in the market Their total income Their total savings Variety of life insurance products Location of the company Familiarity with the agent  People prefer one company over another because of various reasons. Premium charged by life insurance companies and their past services and the reputation in the market are the important reasons.  Respondents are aware about various types of life insurance products. And the demand for money back policy is higher than any type policy by the respondents.  The reason for higher investment in money back policy is because of the higher expected return on investment on the periodic intervals.  Most of the people have taken and wants to take policy with rider. They are ready to higher premium on additional benefits.  It is clear that people still have great confidence on government entity.  It is clear that people used to invest by the recommendation and suggestions of their friends and relatives. This corroborates in marketing notion that word of mouth is the best vehicle of advertisement.  The preference for ULIPs is also considerable lower than money back. It shows that people have awareness about the innovations of new products in the market.  Preference for term insurance is very less instead of their low premium. Because it is uncertain that whether investor will get benefit or not.

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6.6. RECOMMENDATIONS
 Geojit can give some gifts in kind to their clients who have already taken policy from them if they recommend their friends and relatives to buy the policies from Geojit BNP Paribas financial services limited.  Agent can give information about life insurance products and the company better than anyone else. So Geojit may have to focus on their agent base.  Our research shows that ICICI Prudential and SBI life other than LIC also have good potential for growth. So they have to focus more on ICICI Prudential and SBI life and not on LIC to sell life insurance products (because customers already have preference for LIC).

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REFERENCES Books:
i. Pearson Education, Inc. 2003. Principles of risk management and insurance: Published by Pearson Education (Singapore)Pte.Ltd., Indian branch, 482 F.I.E. patparganj Delhi IC-33 Life Insurance, first edition-2007: Published by Shri S.J.Gidwani, Secretary-General, Insurance Institute of India, Universal Insurance building, Sir P.M. Road, Mumbai-400 001 Business law, twenty-eighth edition, 2004 by N.D.Kapoor: Published by Sultan Chand & Sons.

ii.

iii.

Websites:
i. ii. iii. iv. v. vi. vii. viii. ix. http://www.licindia.com/download_forms.htm
February 27,2009) (accessed on

http://www.thehindubusinessline.com/businessline/iw/2001/07 /15/stories/0715g051.htm (accessed on March 2, 2009) http://www.metlife.com/individual/insurance/lifeinsurance/index.html#overview (accessed on March 3, 2009) http://www.bharatbook.com/Market-Research-Reports/IndiaThe-Next-Insurance-Giant.html (accessed on March 3, 2009) http://www.directories-today.com/insurance.html (accessed on
April 8, 2009)

http://india.dalalstreet.biz/earningsnews/2008/05/marketshare-of-life-insurance.html (accessed on April 10, 2009) http://www.economywatch.com/indianeconomy/indianinsurance-companies.html (accessed on April 13, 2009) www.geojit.com (accessed on May 3, 2009) www.google.com

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ANNEXURE-A
QUESTIONNAIRE
The following questionnaire is for the purpose of my research project as a part of my MBA (IBS kochi) curriculum on ‘Price sensitivity of life insurance products’. It is assured from us that any information given by the respondent will not be disclosed by any means. With this assurance I expect accurate data from respondents to help me for my project. Name: Gender: a. Male b. Female Age: Marital status: a. Married b. Unmarried 5. Contact no. : 6. Address: 7. Occupation (please tick ) a. Business b. Profession c. Government service d. Private service e. Student 8. Annual Income in Rs. (please tick): a. Below2lakhs b. 2lakhs to 4lakhs c. 4lakhs to 6lakhs d. 6lakhs to 10lakhs e. more than 10lakhs 9. Do you have any present investments? a. Yes b. No 10. If yes, in which financial instrument have you invested? a. Equity shares b. Bank deposit c. Insurance d. Real estate e. Government securities f. Debt instruments 11. What makes you to invest in these instruments? a. High return b. Flexibility c. Low risk d. Others 12. Have you taken life insurance policy? a. Yes b. No If your answer is yes, then I. What type of policy you have taken? a. Annuity (pension plan) b. Money back policy c. Term insurance d. Unit linked insurance products e. Whole life policy f. Endowment policy II. If annuity (pension plan), then which type of plan have you taken? a. Immediate annuity b. Deferred annuity III. Name of the policy……………………………………………………………………………………... IV. Have you taken a policy with rider? a. Yes b. No V. Term of the policy………………………………………………………………………………………………………… VI. Name of the company………………………………………………………………………………………………….. VII. Sum assured…………………………………………………………………………………………………………………. VIII. Amount of premium…………………………………………………………………………………………………….. 1. 2. 3. 4.

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If your answer is no, then I. What type of policy you wish to take in future? a. Annuity (pension plan) b. Money back policy c. Term insurance d. Unit linked insurance products e. Whole life policy f. Endowment policy II. Rank the following companies as per your order of preference(from 1 to 6, 1 being the first choice): a.LIC b. Met life c.SBI life d. ICICI prudential e. Tata AIG f. Others (specify) III. Will you take a policy with rider? a. Yes b. No IV. Term of policy……………………………………………………………………………………………. V. Sum assured………………………………………………………………………………………………. 13. Reason for your choice of type of policy……………………………………………………………………….. ………………………………………………………………………………………….…………………………………………. 14. As an investor what is your opinion about life insurance products? It is for a. Protection b. Investment c. Others 15. Why do you prefer investment in life insurance products? a. Life coverage b. Guaranteed return c. Return on investment d. Future benefits e. Tax benefits f. Flexibility in paying premium 16. In thinking about life insurance which company in your mind comes first? a. LIC b. Tata AIG c. Met life d. ICICI prudential e. SBI life f. Others (specify) 17. Source of your information: a. Friends b. Relatives c. Newspaper d. Magazine e. Internet f. Agent 18. What factors limit your choice of a life insurance policy? (Rank them from 1 to 7, 1 being the strongest choice): a. Premium b. Total income c. Total savings d. Reputation of the company e. Location of the company f. Variety of life insurance products g. Familiarity with the agent 19. If your strongest preference is Premium, please specify the reasons…....……………………… ………………………………………………………………………………………………………………………………………… …………………………………………………………………………….…………………………………………………………… 20. If your choice is one other than Premium, please specify the reasons…………………………… …………………………………………………………………………………………………………………………………………

Date:

Signature of the respondent

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