PROJECT REPORT ON “THE POTENTIAL OF POST OFFICES AS A DISTRIBUTION CHANNEL” FOR

PROJECT WORK DONE BY NIRMAL J (BATCH OF 2005)

Under the guidance of Mr. Ramith Team leader Bancassurance and Alliances Division ICICI Prudential Life Insurance Company Ltd Bangalore.

ACKNOWLEDGEMENTS

I would like to thank Mr. Ramith, Team Leader for his direction, assistance, and guidance. His recommendations and suggestions have been invaluable for the project. I also wish to thank Ms. Beena Thomas, Sales Manager, who has given me an opportunity to work with ICICI Prudential Life Insurance Company Ltd, Bangalore. Thanks are also due to all the Bancassurance Officers of the five post offices for their assistance.

My special thanks to Mr.Y.Lakshman Kumar and the placement committee members for getting me this Project. I am indebted to Director Prof. Sankaran and all the Faculty Members for their invaluable academic support throughout the first year, which was really helpful for me in successfully completing this project.

Regards, Nirmal J Batch of 2005 Bharathidasan Institute of Management, Trichy

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TABLE OF CONTENTS Chapter Introduction…………………………………………………………………… Executive Summary…………………………………………………………... Insurance Industry – Global Scenario………………………………………… Indian Insurance Industry…………………………………………………….. Industry Players…………………………………………………………………. Growth Potential……………………………………………………………… About ICICI Prudential Life Insurance Company Ltd……………………….. Product Portfolio……………………………………………………………… Delivery Channels…………………………………………………………….. Project Objective……………………………………………………………… Approach To The Problem……………………………………………………… Questionnaire Preparation…………………………………………………….. Sampling And Pre-Testing The Questionnaire………………………………….. Field Work And Data Collection………………………………………………… Data Analysis………………………………………………………………….. Interpretation And Findings……………………………………………………….. Recommendations………………………………………………………………. Limitations……………………………………………………………………. Conclusion………………………………………………………………………. Annexure……………………………………………………………………… Bibliography………………………………………………………………….. Page Number 4 5 6 9 12 14 17 17 19 20 21 45 46 46 47 58 61 62 63 65 67

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INTRODUCTION What is Insurance? Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party happening of a certain event. Insurance is a protection against a financial loss arising on the happening of an unexpected event. Insurance Companies collect premium to provide for this protection. A loss is paid out of this premium collected from the insuring public. The Insurance Company acts as a trustee to the amount collected through premium. Insurance is generally classified in three main categories,
• • •

Life Insurance Health insurance and General Insurance

To get insurance an individual or an organisation can approach to an insurance company directly, through Insurance Agent of the concerned company or through Intermediaries. Benefits of Insurance Insurance is the instrument of security, savings and peace of mind. It provide several benefits by paying a small amount of premium to an insurance company as:
• • • • • • •

Safeguards oneself and one's family for future requirements Peace of mind-in case of financial loss Encourage saving Tax rebate Protection from the claim made by creditors Security against a personal loan, housing loan or other types of loan Provide a protection cover to industries, agriculture, women and child

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EXECUTIVE SUMMARY The objective of the study is to analyse the potential of post offices as distribution channels for selling the pension products of ICICI Prudential. The data pertaining to the performance of post offices in India, Karnataka and Bangalore in particular, was collected. Also the household savings and investment patterns over the years has been collected and analysed. A questionnaire is prepared to conduct interviews with people visiting the five major post offices in Bangalore. The five post offices selected for this purpose were GPO, Jaya Nagar HPO, Basawangudi HPO, Rajaji Nagar HPO and Indra Nagar HPO. Discussion with the senior postmasters and employees working in key counters such as NSC, PPF, KVP and POMIS was done. Based on the above study and discussions, it has been found that post offices offer very good potential for selling the pension schemes. The following were identified as key parameters for the better performance of this delivery channel.
• • • •

Postal employees participation Senior postmaster’s initiative Visibility of ICICI Prudential’s space in post offices and Awareness about of ICICI Prudential pension products and its tie-up with post offices

And finally, suggestion has been given for improving the performance and participation of post offices as a delivery channel.

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INSURANCE INDUSTRY – GLOBAL SCENARIO World life and non-life insurance premiums, 1993-2002 (DIRECT PREMIUMS WRITTEN, US $ IN MILLIONS) Year 1993 1994 1995 1996 1997 1998 1999 2000 2001 Non-Life 792,087 846,600 906,781 909,100 896,873 891,352 912,749 926,503 969,945 Life 1,010,490 1,121,186 1,236,627 1,196,736 1,231,798 1,275,053 1,424,203 1,518,401 1,445,776 1,536,122 Total 1,802,731 1,967,787 2,143,408 2,105,838 2,128,671 2,166,405 2,336,952 2,444,904 2,415,720 2,626,898

2002 1,090,775 Source: Swiss Re, sigma, various issues

WORLD LIFE AND NONLIFE INSURANCE PREMIUMS, 1993-2002

3,000,000

2,500,000

2,000,000 DIRECT PREMIUMS WRITTEN, 1,500,000 US $ IN MILLIONS 1,000,000

Non-Life Life

500,000

0 1993 1994 1995 1996 1997 1998 YEAR 1999 2000 2001 2002

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The world’s leading insurance countries, 2002 (Direct premiums written, U.S. $ billions) % Change Amount 1,000.3 445.6 236.7 135.8 125.1 84.1 55.4 49.2 44.3 39.8 15.5 from prior year % Of total world

Rank 1 2 3 4 5 6 7 8 9 10

Country United States Japan United Kingdom Germany France Italy South Korea Canada Spain The Netherlands

Non-Life Premium 519.9 91.0 77.0 74.9 44.6 31.6 16.1 28.5 20.4 18.9

Life Premium 480.5 354.6 159.7 60.9 80.4 52.4 39.3 20.7 23.8 20.8 12.3

premiums 10.7 38.08 0.2 7.9 9.7 8.8 23.0 9.7 8.6 21.6 2.2 16.96 9.01 5.17 4.76 3.20 2.11 1.87 1.68 1.51 0.59

19 India 3.2 Source: Swiss Re, sigma, No. 8/2003

COUNTRY RANKINGS, 2002 40 35 30 25 % OF TOTAL WORLD PREMIUM 20 15 10 5 United Kingdom South Korea Canada The Netherlands 10 France United States Japan Germany Spain India 19 0 Italy 6 COUNTRY

1

2

3

4

5

7

8

9

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Top ten global life / health insurance companies, by revenue, 2002 Rank 1 2 3 4 5 6 7 8 9 Company ING Group AXA Nippon Life Insurance Assicurazioni Generali Aviva Dai-ichi Mutual Life Insurance Sumitomo Life Insurance Prudential MetLife Revenue ($ millions) 88,102 62,051 61,175 53,599 49,533 43,134 36,305 35,819 34,104 29,445 Country Netherlands France Japan Italy U.K. Japan Japan U.K. U.S. Netherlands

10 Aegon Source: Fortune

TOP 10 GLOBAL COMPANIES 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Nippon Life Insurance (Japan) Dai-ichi Mutual Life Insurance (Japan) Aegon (Netherlands) Sumitomo Life Insurance (Japan) ING Group (Netherlands) AXA (France) Prudential (UK) Assicurazioni Generali (Italy) MetLife (USA) Aviva (UK)

Revenue in US$ Million

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INDIAN INSURANCE INDUSTRY Introduction – India at a glance Population Economy GDP Growth Rate Savings Rate Estimated middle class population Insured population : 70 million only : 1.027 persons as on 1st March 2001 : 5th largest in the world in terms of Purchasing Power Parity (PPP) : Over 6% per year on an average for the last decade : Around 26% of GDP : 300 Million

India is the largest democracy in the world having a population more than one billion. It is 5th largest in the world in terms of purchasing power parity (PPP). India GDP growth rate is over 6 percent per year on average for the last decade and saving rate is around 26 percent of GDP. The per capita spend on insurance in India is $9, compared with $2,500 in the US and $50-100 in Southeast Asia. The rise in the number of nuclear families will provide an impetus for growth. However, this needs to be supported with parallel developments in the industry. Through India's economic development, it becomes the most lucrative insurance markets in the world. Before the year 1999 there were monopoly of state run Life Insurance Corporation of India (LIC) in life insurance sector and General Insurance Corporation of India (GIC) with its four subsidiaries in general sector. In the wake of reform process and passing Insurance Regulatory Development Act (IRDA) through Indian Parliament in 1999, Indian Insurance was opened for private companies. It has been three years since the Indian insurance market has opened up, and the new entrants into the market have set up shop in every major city.

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The public sector companies have already established themselves in the market. But there are multiple challenges faced by these insurance companies, of which two are critical:
• •

Designing of products suiting the market Using the right distribution channel to reach the customer

While the companies have been quite successful in dealing with the first of these challenges using the existing product features and leveraging the technical know-how of their partners, most are still grappling with the right channel mix for reaching potential customers. History Insurance industries in India have a long history. Life insurance in existing form came in India from UK in 1818 with Oriental Life Insurance Company. The Indian life Assurance companies Act, 1912 was the first measure to regulate life Insurance business. Later in 1928 the Indian Insurance Companies act was enacted, which was amended in 1938. Finally, Government of India amended this act in 1950. Life Insurance Corporation of India was formed in September 1956 by passing LIC Act, 1956 in Indian parliament. The first general insurance company, Triton Insurance Company Ltd. was established in Calcutta in 1850. In 1957 the General Insurance Council a wing of Insurance Association of India formed a code of conduct. In 1961 an insurance act was passed to form General Insurance Company Ltd., which was amended in 1968. General Insurance business was nationalised with effect from 1.1.73 by the General Insurance Business Act. With effect from Dec'2000, the four subsidiaries of GIC have been de-linked from parent company and made as an independent insurance companies.
• • • •

National Insurance Company Ltd., New India Assurance Company Ltd., Oriental Insurance Company Ltd. and United Assurance Company Ltd.

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Regulatory framework The Insurance Act, 1938 had provided for setting up of the Controller of Insurance to act as a strong and powerful supervisory and regulatory authority for insurance. Post nationalization, the role of Controller of Insurance diminished considerably in significance since the insurance companies were owned by the Government. Tariff Advisory Committee is a statutory body under The Insurance Act, 1938 controls and regulates the rates, advantages, terms and conditions that may be offered by insurers in respect of General Insurance Business relating to Fire, Marine (Hull), Motor, Engg. and Workmen Compensation. Effective 22 July1998, the TAC Board has been reconstituted with seven members representing the present General Insurance Industry and eight members from government and Industry. The Controller of Insurance cum Chairman IRDA is the Chairman of TAC. With the opening up of the insurance industry to the private sector, the need for a strong, independent and autonomous Insurance Regulatory Authority was felt. As the enacting of legislation would have taken time, the then Government constituted through a Government resolution an Interim Insurance Regulatory Authority pending the enactment of a comprehensive legislation. The Insurance Regulatory and Development Authority Act, 1999 is an act to provide for the establishment of an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalisation) Act, 1972 to end the monopoly of the Life Insurance Corporation of India (for life insurance business) and General Insurance Corporation and its subsidiaries (for general insurance business). The act extends to the whole of India and will come into force on such date as the Central Government may, by notification in the Official Gazette specify. Different dates may be appointed for different provisions of this Act.

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INDUSTRY PLAYERS In the first two years of insurance market liberalisation (April 2-December 31, 2001) as much as 24 private sector companies including joint ventures with leading foreign insurance companies have entered the Indian insurance sector. Of this, thirteen were under the life insurance category, ten under general insurance and one in the reinsures category. Today the Indian general insurance market is valued at Rs 14,000 crore. It is growing at a rate of 20 per cent and is expected to reach Rs 45,000 crore in about 10 years. Private players have already gained a 10 per cent share in three years. No mean achievement when compared to the growth rates of countries like South Korea and Thailand, where the private sector took 15 years to gain a 15 per cent share of the market. Life Insurance Corporation, LIC, has lost more than 8% market share after posting a marginal 1.9% growth in business when compared to the fiscal year 2002-2003, while private players grew by more than 153% during 2003-04. Despite the flat growth of market leader LIC, the life insurance industry as a whole grew by a modest 10.5% to mop up Rs 18,710 crore (Rs 187.10 billion) in premium income for new businesses in 2003-04, as against Rs 15,977 crore (Rs 159.77 billion) in 2002-03. LIC’s market share in terms of premium collection came down to 87% in March end 2004, from 94.3% in 2002-03, according to data compiled by IRDA. The state-owned insurer mopped up Rs 16,285 crore (Rs 162.85 billion) in premium from new businesses during 2003-04, which is marginally higher than Rs 15,977 crore (Rs 159.77 billion) in 2002-03. LIC mopped up Rs 4,915 crore (Rs 49.15 billion) in March, which is more than one-fourth its total premium income for the entire fiscal. In contrast to LIC, private players grew by 153% by mopping up an aggregate Rs 2,425 crore (Rs 24.25 billion) in premium last fiscal and cornered 13% of the market. The private players had only 5.7% of the market pie in 2002-03. ICICI Prudential led the chart for private players with a market share of 4% followed by Birla Sun Life 2.4%, HDFC Standard Life 1.1%, SBI Life 1.1%, Tata AIG, and Allianz Bajaj 1% each. ICICI Prudential doubled its business to Rs 751 crore (Rs 7.51 billion) last fiscal from Rs 364 crore (Rs 3.64 billion) in 2002-03.
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LIST OF LIFE INSURERS 1. ALLIANZ BAJAJ LIFE INSURANCE CO. LTD 2. AMP SANMAR ASSURANCE CO. LTD 3. BIRLA SUN LIFE INSURANCE CO. LTD 4. DABUR CGU LIFE INSURANCE COMPANY PVT. LTD 5. HDFC STANDARD LIFE INSURANCE CO. LTD 6. ICICI PRUDENTIAL LIFE INSURANCE CO. LTD 7. ING VYSYA LIFE INSURANCE CO. PVT. LTD 8. LIFE INSURANCE CORPORATION OF INDIA 9. MAX NEW YORK LIFE INSURANCE CO. LTD 10. METLIFE INDIA INSURANCE CO. PVT. LTD 11. OM KOTAK MAHINDRA LIFE INSURANCE CO. LTD 12. SBI LIFE INSURANCE CO. LTD 13. TATA AIG LIFE INSURANCE CO. LTD

LIST OF NON-LIFE INSURERS 1. BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD 2. ICICI LOMBARD GENERAL INSURANCE CO. LTD 3. IFFCO TOKYO GENERAL INSURANCE CO. LTD 4. NATIONAL INSURANCE CO. LTD 5. NEW INDIA ASSURANCE CO. LTD 6. ORIENTAL INSURANCE CO. LTD 7. RELIANCE GENERAL INSURANCE CO. LTD 8. ROYAL SUNDARAM ALLIANCE INSURANCE CO. LTD 9. TATA AIG LIFE INSURANCE CO. LTD 10. UNITED INDIA INSURANCE CO. LTD

REINSURERS 1. GENERAL INSURANCE CORPORATION OF INDIA

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GROWTH POTENTIAL Asian markets Asia looks set to continue to deliver some of the world's highest growth rates. With a high propensity to spend on insurance as income increases, there will be remarkable opportunities for insurance companies. The changing market landscape suggests competition will further intensify in Asia's insurance markets, while regulations continue to shift from forms-and-rules-based to solvency-based regimes. This shift also implies the emergence of financially stronger direct insurers with more risk taking capability. In addition, Asia's more affluent consumers will demand new personal lines and investment-linked products, and insurers are now ready to make use of an efficient mix of distribution channels to reach these customers. While these changing market dynamics present major challenges, those insurers who are able to see ahead of the game will most certainly be the winners.
18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1970-71 1972-73 1974-75 1976-77 1978-79 1980-81 1982-83 1984-85 1986-87 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 Savings in Provident and Pension Funds Savings in Life Insurance Funds Savings in Shares and Debentures Net Deposits Currency

The insurance landscape in India is undergoing major change. Closed to foreign competition since nationalization in 1956, the life insurance industry had been protected from competitive pressures. Now, with the re-opening of the sector, several new players have entered the scene. The game is old but the rules are new and still developing. Ensconced in a monopoly run from the
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nationalization days beginning in 1956, the insurance industry has indeed awakened: to a deregulated environment in which several private players have partnered with multinational insurance giants. However, despite its teeming one billion population, India still has a low insurance penetration of 1.95 per cent, 51st in the world. Despite the fact that India boasts a saving rate of around 25 per cent, less than 5 percent is spent on insurance. Competition will surely cause the market to grow beyond current rates, create a bigger "pie," and offer additional consumer choices through the introduction of new products, services, and price options. Yet, at the same time, public and private sector companies will be working together to ensure healthy growth and development of the sector. Challenges such as developing a common industry code of conduct, contributing to a common catastrophe reserve fund, and chalking out agreements between insurers to settle claims to the benefit of the consumer will require concerted effort from both sectors.

60%

50%

40%

Savings in Provident and Pension Funds Savings in Life Insurance Funds

30%

Savings in Physical assets Financial savings

20%

10%

0% 1970-71 1974-75 1978-79 1982-83 1984-85 1988-89 1990-91 1992-93 1994-95 1996-97 1998-99 2000-01 1972-73 1976-77 1980-81 1986-87

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The market is now in an evolving phase where one can expect a lot of actions in coming days. The current impediments for foreign participation – like 26% equity cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory development Authority- the watchdog of the industry) in pension business etc.—are expected to be removed in near future. The early-adopters will then have a clear advantage compared to laggards in gaining the market share and market leadership. The will need to make sure right now that all their infrastructure is in place so that they can reap the benefit of an "unlimited potential."

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ABOUT ICICI PRUDENTIAL LIFE INSURANCE COMPANY LTD ICICI Prudential Life Insurance Company Limited was incorporated on July 20, 2000. The authorized capital of the company is Rs.2300 Million. The paid up capital is Rs. 1900 Million. The Company is a joint venture of ICICI (74%) and Prudential plc UK (26%). ICICI started off its operations in 1955 with providing finance for industrial development, and since then it has diversified into housing finance, consumer finance, mutual funds to being a Virtual Universal Bank and its latest venture Life Insurance. The Company was granted Certificate of Registration for carrying out Life Insurance business, by the Insurance Regulatory and Development Authority on November 24, 2000. It commenced commercial operations on December 19, 2000, becoming one of the first few private sector players to enter the liberalized arena. Established in 1848, Prudential plc. of U.K. has grown to be the largest life insurance and mutual fund company in U.K. Prudential plc. has had its presence in Asia for the past 75 years catering to over 1 million customers across 11 Asian countries. Prudential is the largest life insurance company in the United Kingdom. ICICI and Prudential came together in 1993 to provide mutual fund products in India and today are the largest private sector mutual fund company in India. PRODUCT PORTFOLIO More than 80% of the life insurance business is from Endowment Assurance (Participating), and Money Back (Participating products). The life insurance products can be broadly classified into five categories. Whole life policies cover the insured for life. The insured does not receive money while he is alive; the nominee receives the sum assured plus bonus upon death of the insured. Endowment policies cover the insured for a specific period. The insured receives money on survival of the term and is not covered thereafter.
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In Money back policies the nominee receives money immediately on death of the insured. On survival the insured receives money at regular intervals during the term. These policies cost more than endowment with profit policies. In Annuities / Children's policies the nominee receives a guaranteed amount of money at a pre-determined time and not immediately on death of the insured. On survival the insured receives money at the same pre-determined time. These policies are best suited for planning children's future education and marriage costs. Pension schemes are policies that provide benefits to the insured only upon retirement. If the insured dies during the term of the policy, his nominee would receive the benefits either as a lump sum or as a pension every month. The following are the latest life insurance products available with ICICI Prudential. SAVINGS PLANS
• • • • •

SECUIRE PLUS CASH PLUS LIFE TIME II SAVE 'N' PROTECT CASH BAK

PROTECTION PLANS

LIFE GUARD

PENSION PLANS
• • • •

LIFE TIME PENSION II SECURE PLUS PENSION LIFE LINK PENSION II FOREVER LIFE 18

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INVESTMENT PLANS

LIFE LINK II

GROUP PLANS
• • •

GROUP GRATUITY PLANS GROUP TERM ASSURANCE GROUP SUPERANNUATION PLAN DELIVERY CHANNELS Insurance has to be sold the world over, and the Asian Market is no exception. The touch

point with the ultimate customer is the distributor and the role played by them in insurance markets is critical. It is the distributor who makes the difference in terms of the quality of advice for choice of product, servicing of policy post sale and settlement of claims. In the Asian markets, with their distinct cultural and social ethos, these conditions will play a major role in shaping the distribution channels and their effectiveness. In today's scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance companies. The distinction of channels in the developed markets is: personal distribution systems and direct response systems. Personal distribution systems include all channels like  Agents  Brokers  Bancassurance  Work site marketing

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Direct response distribution systems are the method whereby the client purchases the insurance directly. This segment, which utilizes various media such as the  Internet  Telemarketing  Direct mail  Call centres PROJECT OBJECTIVE To analyse the potential of post offices as a distribution channel for selling the pension products of ICICI Prudential Life Insurance Company Ltd and providing suggestions for improving its performance.

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APPROACH TO THE PROBLEM The following flow chart briefly depicts the methodology followed to achieve the project objective. Conduct exploratory study to identify the key factors that influences a person in pension policy decision making

A brief study on various postal schemes and their delivery channels

A brief study on various pension schemes of ICICI Prudential Life Insurance Company Ltd

Comparison of product features of postal schemes and pension schemes of ICICI Prudential

Identify the postal schemes that have similar features as that of the pension schemes

Data collection process

To collect secondary data from Internet to quantify the potential of post offices

To collect primary data by conducting a survey with post office customers

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Questionnaire preparation

Sampling and selecting the target population

Pre-testing the questionnaire

Fieldwork and data preparation

Data analysis

Interpretations

Conclusion and Recommendations

Limitations

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EXPLORATORY STUDY After the project objective and the methodology were formulated, an exploratory study was done to identify the key factors that influence a person in pension policy decision-making. Discussion with industry experts, project guide, bancassurance officials and the general public has been done. By the end of the discussions, it was found out that the following factors play a major role for investment in pension schemes. Life security Reputation of company Tax benefits Income and Age STUDY ON VARIOUS POSTAL SCHEMES NATIONAL SAVINGS CERTIFICATE (NSC) National Saving Certificates or NSC as they are more popularly known as is a time-tested tax saving instrument that combines adequate returns with high safety. FEATURES Returns NSC provides an interest rate of 8.0%, which is compounded half yearly. Investment Limitation Min Amount Max Amount Rs. 100/- and additional investment in multiples of Rs. 100/No Limit

    

Denominations Rs. 100/-, 500/-, 1,000/-, 5,000/-, 10,000/-, 50,000/Scheme Availability All through the year.
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Mode of Operation * Single * Minor with parent/guardian Tenure of Investment The NSCs have a maturity period of 6 years. Premature Encashment If encashed prematurely, within a year of issue, then only the face value is given. If encashed after a year but before 3 years, then simple interest on the face value, at the rate applicable from time to time, will be paid. The difference between the accrued interest and the simple interest is the discount rate. The Government from time to time specifies the discount rate. Maturity The certificate can be encashed from the issuing post office on the due date by simply discharging the certificates at the back. Transferability The certificates are easily transferable from one person to another through the post office. There is a nominal fee for registering the transfer. Loans / Withdrawal One can avail of a loan against the certificates by pledging it to the bank. The bank will have the NSC assigned in its favour and advance a percentage of up to 75% of face value plus the amount of accrued interest till the date of taking the loan. Tax Benefits Tax benefits are available on amounts invested in NSC under section 88, and exemption can be claimed under section 80L for interest accrued on the NSC. Interest accrued for any year can be treated as fresh investment in NSC for that year and tax benefits can be claimed under section 88. Tips for Investing

* Joint (Two or more) * HUF

A useful instrument for people who invest to save tax. 24

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PUBLIC PROVIDENT FUND (PPF) Public Provident Fund or PPF as it is more popularly known is savings cum tax saving instrument. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them. FEATURES Returns Interest 8.0% p.a. (compounded annually) is credited to the PPF account at the end of each financial year. Investment Limitation Min Amount is Rs. 500/- and additional investment in multiples of Rs 5/-. Max Amount is Rs. 70,000/Scheme Availability A PPF account can be opened at anytime during the year. It is open all through the year. Mode of Operation * Single * Minor with parent/guardian Nomination Nomination can be done at the time of opening the account or during the tenor of the account. Tenure of Investment 15 years from the date of initial investment with a block of 5 years thereafter upto a max of 30 years incl. 15 years. Maturity The PPF account matures after 15 years. One can then exercise on option of continuing the account for an additional block of 5 years or close it.
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* Joint (Two or more) * HUF

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Loans The first loan can be taken in the third financial year from the date of opening of the account, or upto 25% of the amount at credit at the end of the first financial year. The facility can be availed of any before expiry of 5 years from the end of the year in which the initial subscription was made. The loan is repayable either in lump sum or in convenient instalments numbering not more than 36. Interest at 1% would be charged if loan is repaid in 36 months. Such interest should of loan is not repaid within 36 months, interest on outstanding amount of loan would be charged at 6%. Withdrawal A withdrawal is permissible every year from the seventh financial year of the date of opening of the account, of an amount not exceeding 50% of the balance at the end of the 4th proceeding year or the year immediately proceeding the year of the withdrawal, whichever is lower, less the amount of loan if any. Tax Benefits Tax benefits can be availed under sections 88 for the amount invested. Interest accrued is Tax-free. Tips for Investing

Apart from a Post Office, a PPF account can also be opened in SBI & its associates and other select nationalized banks. The most popular tax saving instrument, which gives a tax rebate under section 88. A PPF account cannot be attached by the Govt. or any court of law or through any decree.

• •

KISAN VIKAS PATRA (KVP) These are saving instruments that provide interest income similar to bonds and provide better liquidity by virtue of an exit option after two and half years from the date of allotment. However, they do not provide any tax relief to the investor. FEATURES Returns KVP Scheme doubles money in eight years and seven months.
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Investment Limitation Min Amount Max Amount Rs. 100/- and additional investment in multiples of Rs. 100/-. No Limit

Denominations Rs. 100/-, 500/-, 1,000/-, 10,000/-, 50,000/-. Scheme Availability All through the year. Mode of Operation * Single * Joint (Two or more) * Minor with parent/guardian

Tenure of Investment Money doubles in 8 years & 7 months. Nomination Facility is available at the time of opening the account or anytime during the tenure of the investment. Premature Encashment Premature encashment is permitted after 2.5 years from the date of investment. Lower interest accrued, if prematurely withdrawn. Maturity On providing proper identity and by simple discharge of the certificate on the reverse. Loss of Certificate If the loss is due to theft, fire or the certificate is mutilated, a duplicate certificate is issued after proper verification. Tax Benefits No Tax benefits are available for investments in this scheme under the Income Tax Act

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Tips for Investing

A good investment instrument for all retired persons who would require the money at a later date and for those who do not have taxable income.

POST OFFICE MONTHLY INCOME SCHEME (POMIS) The scheme is meant for those investors who want to invest a lump sum and earn interest on monthly basis for their livelihood. The scheme is, therefore, a boon for retired persons. FEATURES Returns P. O. Monthly Income Scheme provides an interest rate of 8.0% per annum, which is paid monthly. Investment Limitation Min Amount Max Amount Rs. 1,000/- and additional investment in multiples of 1,000/Rs. 3,00,000/- (if Single) or Rs. 6,00,000/- (if held Jointly).

Scheme Availability All through the year. Mode of Operation Single Joint (Two or more) Minor with parent/guardian Minor who has attained age of 10 Depositor can have more than one account in the same post office or in any other. Tenure of Investment PO Monthly Income Scheme has an maturity period of 6 years. Nomination Facility is there at the time of opening the account or anytime during the tenure of the account.
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Premature Encashment Is permitted if deposit is more than one year old. A deduction of 5% is levied from the principal amount if withdrawn prematurely; the 10% bonus is also denied. Maturity A bonus of 10% is paid at the time of maturity. Lost of Passbook A Passbook is issued at the time of opening the account. If the passbook is lost, or it is mutilated, a duplicate is issued on payment of a charge. Tax Benefits Tax benefits can be availed under section 80L. No Tax benefits are provided under section 88. Tips for Investing
• •

A good scheme for the retired to get a fixed income Benefit of a terminal bonus of 10% if the account is maintained till maturity

POST OFFICE RECURRING DEPOSIT (PORD) As the name says it, the RDA is a systematic way of saving money. The scheme is meant for those investors who want to deposit a fixed amount regularly on monthly basis in order to get a tidy sum after 5 years on the maturity of the account in his name or jointly with another. FEATURES Returns Amount repayable for an account of Rs. 10 denomination Rs. 728.90 after 5 years. Investment Limitation Min Amount Max Amount Rs. 10/No Limit

Denominations Rs. 5/(Nirmal J) (Batch 2003 – 2005) (Bharathidasan Institute of Management - Trichy)

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Scheme Availability All through the year. Mode of Operation Single Joint (Two or more) Minor with parent/guardian Tenure of Investment P. O. Recurring Deposit has an investment period of 5 years. Nomination Facility is there at the time of opening the account or anytime during the tenure of the account. Premature Encashment Is permitted if deposit is more than one year old. The interest rate applicable will be that which is prevailing at that time. Maturity The certificate is to be discharged at the back. Loss of Passbook A passbook is issued at the time of opening the account. If there is a loss, theft or the passbook is mutilated, a duplicate is issued on a charge. Tax Benefits Tax benefits can be availed under section 80L. No Tax benefits are provided under section 88. Tips for Investing

A P. O. Recurring Deposit is a novel way of saving a fixed sum every month for a particular period, which will fetch the investor a large sum after 5 years.

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POST OFFICE TIME DEPOSIT (POTD) Just like the bank FDs, these time deposits are meant for those investors who want to deposit a lump sum for a fixed period. However, one of the major differences from an FD is the option of getting the interest earned on an yearly basis rather than on maturity. FEATURES Returns Tenure 1 year 2 years 3 years 5 years Returns 6.25% 6.5% 7.25% 7.5%

Investment Limitation Min Amount Max Amount Rs. 50/- additional investment to be in multiple of Rs 50/No Limit

Denominations Rs. 50/Scheme Availability All through the year. Mode of Operation Single Joint (Two or more) Minor with parent/guardian) Tenure of Investment P. O. Time Deposit has an investment option of 1, 2, 3 and 5 years. Nomination Facility is available at the time of opening the account or anytime during the tenure of the deposit. Premature Encashment
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The account can be closed after 6 months of opening the account. On such closure the amount invested is returned with/without interest depending on the time the deposit was maintained. Lost of Passbook A passbook is issued at the time of opening the account. If the Passbook is lost, or the passbook is mutilated, a duplicate Passbook is issued on a charge. Tax Benefits Exemption within the limits specified under section 80L is available on interest on these deposits. No Tax benefits are provided under section 88. POST OFFICE SAVINGS DEPOSIT (POSD) A savings deposit in a post office is very similar to a savings account in a bank. It is a safe instrument to park those funds, which you might need to liquidate fully or partially at very short notice. Post office savings accounts are especially suited for those living in rural and semi-rural areas where the reach of banks is very limited. FEATURES Returns P. O. Saving deposit provides an interest rate of 3.5% p.a., which is compounded annually. This is applicable for individual/joint and group accounts. 3% per annum is rate applicable for public accounts and Security deposits account. Investment Limitation Min Amount Max Amount Rs. 50/(for ordinary account) (in case of single account holder) (in case of a joint account) Rs. 250/- (for account with a cheque book) Rs. 100,000/Rs. 200,000/-

Scheme Availability
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P. O. Savings deposit scheme is open all through the year. Mode of Operation Single Joint (Two or more) Minor with parent/guardian Nomination Nomination can be done at the time of opening the account or during the running of the account. Tenure of Investment The P.O. savings account is a savings account and money can be deposited or withdrawn at any time. Encashment Withdrawal can be made at anytime after opening the account. Interest is calculated for each calendar month on the lowest balance in the credit of the account between the close of 10th day and the last day of the month. Cheques can be issued when required. The account can be closed anytime by simply giving a letter. Loss of Passbook If the loss is due to theft, fire or the passbook is mutilated; a duplicate is issued through proper verification. A nominal charge is levied for issue of a duplicate passbook. Tax Benefits Interest from P.O. Savings deposit is tax-free. Tips for Investing

A savings account in a post office comes handy if a person is maintaining a Monthly income scheme in the same post office. The monthly interest is directly credited to the account. In such accounts the post office issues chequebook to the customers.

DEPOSIT SCHEME FOR RETIRING GOVERNMENT EMPLOYEES (DSRGE)

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Applicable for retiring government employees. The scheme is operated trough branches of State Bank of India and is subsidiaries and selected branches of other nationalised banks at district headquarters. FEATURES Returns 8.0% per annum. Investment Limitation Min Amount Max Amount Rs 1000/Maximum amount cannot exceed the total retirement benefits.

Tenure of Investment The Scheme has a maturity period of 3 years. Tax Benefits Interest is Tax-free.

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SNAPSHOT OF POSTAL SCHEMES Instrument Limit on Tax Investment Benefit Post Office 5 10.5% Rs 10 per Section Recurring Compounded month – No 80L Deposit quarterly Limit. (PORD) Investments in multiples of Rs 5 Post Office 1 8% Rs 50 – No Section Time Deposits 2 9% Limit. 80L (POTD) 3 10% Investments in 5 10.5% multiples of Rs Compounded 50 quarterly Post Office Not 4.5% Rs 50,000 Section Savings Applicable 10 Account (POSA) Post Office 6 11% Rs 2,04,000: Section Monthly Compounded Single account 80L Income annually Rs 4,08,000: Scheme (10% bonus Joint account (POMIS) on maturity) National 6 11% Rs 100 Section Savings Compounded Rs 500 88, Certificate half-yearly Rs 1,000 Section (NSC) Rs 5,000 80L Rs 10,000 Public 15 11% Rs 100 – Rs Section Provident Compounded 60,000 p.a. 88, Fund (PPF) annually Investment in Section multiples of 10 100 Kisan Vikas 6 Investment Rs 1,000 None Patra (KVP) doubles, Rs 5,000 interest Rs 10,000 compounded annually Deposit 3 10% Rs 1,000 – Section Scheme for Compounded Total 10 Retiring half-yearly retirement Government benefits Employees (DSRGE) (1989) Tenure Interest Liquidity Availability

Premature Head post withdrawal, No offices, Select loan facility sub-post offices Premature withdrawal, Loan facility Head post offices, select sub-post offices

Withdrawal, No Head post loan facility offices, Select sub-post offices Premature Head post withdrawal, No offices, Select loan facility sub-post offices No premature Head post withdrawal, No offices, Select loan facility sub-post offices Premature Select postwithdrawal, loan offices, banks facility Premature Post offices, withdrawal, No brokers/ agents loan facility of LIC, UTI Premature SBI branches withdrawal, No and loan facility subsidiaries, select nationalized branches, select sub-post offices 35

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STUDY ON VARIOUS PENSION SCHEMES OF ICICI PRUDENTIAL ICICI Prudential Life Insurance believes in the philosophy of providing meaningful and comprehensive insurance solutions to plan your retirement. Our insurance solutions are the most optimal tools to plan your retirement because they give you Safety, Liquidity, Tax benefits, Health cover and Life protection and thus ensure that you are comprehensively covered. Free Look period Under the free look period, you now have the flexibility to review your policy. If, during this period, you wish to return your policy after reviewing the terms and conditions, you may do the same, by returning the original policy certificate, the policy document and a letter stating the reasons for the return. We shall refund the premium paid by you, after deducting certain charges. These charges include a proportionate risk premium for the period of cover, the stamp duty on the policy and/ or any expenses borne by the Company on the medical examination. In case of a market-linked policy, your units will be repurchased by us at the unit value determined on the Valuation Date following the date of cancellation after deducting the charges ICICI PRU LIFE LINK PENSION Suitability This plan provides regular income for your life from a specific date, which can be selected by you. The amount you are going to receive would completely depend upon the premiums you pay, the market value of your investment and the option of the annuity chosen. Salient Features It is a pension plan that provides the benefit to you to invest your money in market-linked funds. During the deferment period when, a part of the premium is used to pay for the initial charges and the rest would be invested in the plan of your choice. Entry into the plan will be based on the Unit Value applicable on the date of issuance.

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Benefits Death Benefit You have the flexibility of choosing a zero death benefit or a death benefit of 105% of the premium. In case of the unfortunate event of death, the spouse would get the higher of the death benefit (105% or 0% of the premiums paid) chosen by you or the value of your units as on that date. Your spouse would have the option to either take the higher of the death benefit or the value of units or opt for an annuity. Flexibility Options Choice of Retirement Date: You have the flexibility to start your pension whenever you want after a stipulated age. A choice that lets you make the best of the market conditions by timing the start of your pension. Switch between funds: During the deferment period you can switch between the various plan options to take advantage of the prevailing market conditions or with the change in your priorities. You can do one free switch every year. Top-up of Investments: During the deferment period you have the option of increasing your investment with top-ups (minimum amount of Rs10, 000). Minimum Premium The minimum premium in this plan is Rs10, 000 MODE Yearly Half-yearly Quarterly Monthly PREMIUM Rs.10,000 Rs.5,000 Rs.2,500 Rs.833

Other Conditions Term of the product is 3 years. Minimum age at entry : 18 years Maximum age at entry : 62 yrs Vesting age is between 50 and 70 years of age

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ICICI PRU LIFE TIME PENSION Suitability This policy provides continuous flow of income for your life from a date, which can be chosen by you. The amount you receive would depend upon the premiums you pay, the market value of your investment and the option of the annuity chosen. Salient Features It is a pension plan that provides the benefit to you to invest your money in market-linked funds. During the deferment period when you pay the premiums, a part of the premium is used to pay for the death benefit (if any) opted by you and the rest would be invested in the plan of your choice. Entry into the plan will be based on the Unit Value applicable on the date of issuance. Benefits Death Benefit In case of the unfortunate event of death, your spouse would get the higher of the death benefit chosen by you or the value of your units as on that date. Your spouse would have the option to either take the higher of the death benefit or the value of units or opt for an annuity. Flexibility Options Choice of Retirement Date: You have the flexibility to start your pension whenever you want after a stipulated age. A choice that lets you make the best of the market conditions by timing the start of your pension Minimum Premium The minimum premium in this plan is Rs10, 000 MODE Yearly Half-yearly Quarterly Monthly PREMIUM Rs. 10, 000 Rs. 5, 000 Rs 2, 500 Rs 833

Other Conditions
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Term of the product is 10 years. Minimum age at entry : 18 years Maximum age at entry: 60 yrs Maximum age of vesting : 50 years The following features are common to both ICICI Pru Life Time Pension and ICICI Pru Life Link Pension schemes. Benefits Annuity Benefit On the date of vesting (retirement), you start receiving a regular income for life. This amount would depend upon the annuity option chosen by you and the value of units as on the vesting date. The annuity would also depend upon the annuity rates offered by the company as on that date and are not guaranteed. At vesting, you will have the option of taking up to 25% of the value of units at the time of vesting as lump sum. The remaining will be used to provide with a regular stream of income for life. Tax benefit Up to Rs10, 000 deducted from your taxable income. Choice of Plans: You have the option to choose between our Growth Plan, Income Plan or Balanced Plan. Maximiser (Growth) Plan: This plan offers you the benefit of long-term capital appreciation from a portfolio that is primarily invested in equity and equity linked securities. Protector (Income) Plan: This plan offers you steady returns with a portfolio that primarily invested in debt and debt related securities. Balancer (Balanced) Plan: This plan offers you the flexibility of growth and steady returns with the portfolio being invested in a mix of equity and fixed income securities.

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Increase/Decrease Death Benefit You have the option of opting for a zero death benefit so as to make this a pure accumulation product. In case you opt for a death benefit you have the option of increasing or decreasing the cover during the deferment period depending upon your needs. The increase is @ 25% of the original death benefit subject to a maximum of Rs1,00,000 up to a maximum of three times. Additional Features Critical Illness Benefit - in this rider, in the event of the life assured contracting a critical illness an additional payment equivalent of the sum assured under the rider would be made. The advantage of this is that it is a standalone rider and the cover is available up to a maximum of 65 years of age. Claims for critical illness is not admitted for the first 6 months of the policy. This benefit is payable on the life assured surviving 28 days from such diagnosis. Major Surgical Benefit - this is a cover available against the Major Surgical Procedures. Depending upon the surgery 50%, 30% or 20% of the Sum Assured under the rider is been paid. This provides the cover for the term subject to a maximum of 65 years. Claim for this rider is not admitted for the first 6 months of the policy. Accident and Disability Benefit - on death due to accident the nominee gets additional sum assured under the rider. In case of accident death while travelling by mass surface transport, the nominee will get twice the sum assured under the rider. Accidents can also temporarily impair one’s capacity to earn, in such an event of total and permanent disability 10% of the sum assured is paid out every year for 10 years. Also the premiums for the base policy are waived to the extent of the rider cover. Charges The initial administrative charges are linked to the single premium paid. For premium between Rs.40,000/- and Rs.99,999/- it is 2% of the premium. For premiums between Rs.1,00,000/- and 4,99,999/- it is 1.5% and for Rs. 5,00,000/- and above it is 1.25% of the premium. Other Charges: Annual administrative charges of 1.00% p.a. of net assets for protector (Income) and 1.25% p.a. for Maximiser (Growth) and Balancer (Balanced) options. Annual investment charge of 0.5% p.a. of the net assets for Protector and 1% p.a. of the net assets for Maximiser and Balanced.

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You have the option of increasing your death benefits beyond the 3 times with underwriting. However any increase in the death benefit after the age of 45 years would be subject to underwriting. Once having decreased the death benefit any increase in the same would be subject to underwriting. Your policy acquires a paid up value and surrender value after 1 year. A surrender value equivalent to the value of units would be paid, if you decide to surrender the policy. The Unit Value is calculated bi-weekly on a forward pricing basis. Market/Fair value of the Plan’s investments + Current Assets - Current Liabilities Unit Value = Number of Units Outstanding under the relevant Plan. ICICI PRU FOREVER LIFE Suitability The plan is ideal for people who are currently not in any pension schemes but want to provide regular income for life after a predetermined date. The amount you receive depends on the premium you pay till the predetermined date and the option you choose. It also offers life cover during the deferment (i.e., premium paying) phase. Salient Features The policy is a deferred pension plan wherein pay premiums during the deferment period to purchase an annuity at the end of deferment period. The amount you receive depends on the premium you pay till the stipulated date and the option you choose. It also offers life cover during the deferment (i.e., premium paying) phase. The plan provides for 4 annuity options, which can be exercised at any time within 6 months of the vesting date. Life annuity: annuity for life Life annuity certain for 5, 10, 15 years: Annuity is paid for chosen term and for life thereafter Life annuity with return of purchase price: life annuity with return of purchase price on death to the beneficiary Joint Life, last survivor annuity with return of purchase price: life annuity to you and then to your spouse with return of purchase price to the beneficiary on death of last survivor Policyholder has the option to pay a single premium or spread the premium payment over the deferment period.
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The policyholder has the option to postpone the vesting age up to a maximum of 65 years. During the postponed period your accumulated amount will earn interest as determined by the company from time to time. There will be no life cover during this period. No premiums will be paid during this period. The policyholder also has an option to the pension from any other insurance company. If he wishes to buy the pension from another insurance company, a balance of benefits after commutation, as applicable will be used as purchase price to buy the immediate annuity from that company. If the policy holder decides to terminate his policy, after 3 years premiums are paid, a guaranteed surrender value is payable and the insurance protection provided under this policy will also cease. For a single premium policy - Surrender during the first year is not permitted. But the policy acquires a guaranteed surrender value after the first year, which will be 70% of the single premium after one year, 75% of the single premium after two years and 80% of the single premium after 3 years. Cash value of guaranteed additions already allocated to the policy will also be payable. Premiums paid under the policy are eligible for tax benefits under section 80CCC(1) of IT Act,1961.

One or more of the following add ones can be opted along with the policy, at the time of taking the basic policy, at a marginally incremental cost: Accident and Disability Benefit Critical Illness Benefit Major Surgical Assistance Benefit Level Term (Double Life) Insurance Benefit Benefits On Survival On vesting date insured has the option of taking 25% of the aggregate of the sum assured, guaranteed additions and vested bonuses as an immediate lump sum. And utilise the remaining 75% to provide an annuity. Annuity payment depends on the type of option chosen.

On Death
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On death during the deferment phase, a regular income stream is automatically provided to the insured's spouse. If the spouse is not alive a lump sum amount is paid to the nominees. The amount of annuity payable is determined on the basis of the sum assured plus guaranteed additions plus vested bonuses (if any) as on the date of death. Riders Accident & Disability benefit Additional SA is payable if death is due to an accident Waiver of payment of premiums on disability due to accident 10% of amount of cover payable every year for 10 years from date of disability Additional amount of cover if accidental death occurs while travelling as a passenger in a train or bus. Major Surgical Assistance 43 surgical procedures are covered Major Surgical Procedure - 50% of SA Intermediate Surgical Procedure - 30% of SA Minor Surgical Procedure - 20% of SA Maximum limit for this benefit is 50% of all claims together No benefit on, any claim within first 6 months of policy Level Term Assurance Additional life cover - amount payable only in the event of death, during the term Other Conditions Minimum age to apply Maximum age to apply Minimum sum assured Minimum term is Vesting age ICICI PRU REASSURE Suitability
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Regular Premium 18 60 Rs. 50,000/5 Years 45 to 65 years

Single Premium Policy 32 62 Rs. 50,000/3 years to max 15 years 45 to 65 years

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This policy is best suitable for people who are not allowed for any of the pension scheme. This policy can act as a pension scheme, all the while providing the insurance coverage. Salient Features It is a single premium policy wherein lump sum amounts as a percentage of single premium are paid at the end of every year till the date of maturity. The percentage depends on amount of single premium No proof of age, bank statements or any other documents required. Policy can be availed for 5 or 7 years. Benefits Survival benefits till maturity An amount equal to 8.55% to 9.05% of the single premium is paid at the end of every year as survival benefits till maturity, starting from the end of first year. On maturity date entire amount of premium is paid back to the policyholder. On Death On death occurring after the first policy year, the nominee will receive 110% of single premium paid. In case of death during the first policy year an amount equal to single premium is paid, however if the cause of death is an accident then an amount equal to 110% of single premium is paid. Other Conditions Minimum sum assured Maximum sum assured Minimum age at entry Maximum age at entry Maximum age at maturity : Rs. 50,000 : Rs. 50,00,000 : 07 years : 62 years : 65 years

COMPARISON OF POSTAL SCHEMES WITH PENSION SCHEMES OF ICICI PRUDENTIAL The comparison between the two schemes was done based on the following parameters.  Duration of investment 44

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  

Tax benefits Risk of the investment Return on the investment

It was identified that the following postal schemes have similar features as that of pension policies of ICICI Prudential.     NSC PPF KVP POMIS SECONDARY DATA ON POSTAL SCHEMES Initially efforts were made to collect data from the specified post offices on the various postal schemes over a period of five years. Since the procedure involved to collect the data was complicated and time consuming, it was decided to get the data from Internet. The data pertaining to the postal schemes were collected from the website www.indiastat.com. QUESTIONNAIRE PREPARATION Based on the findings of the exploratory study, a questionnaire was prepared to get the response from the postal customers. The following points were kept in mind while framing the questions. Questions should be simple and unambiguous Order of the questions Objective of the survey Minimum number of questions

   

SAMPLING AND PRE-TESTING THE QUESTIONNAIRE The sample size for the survey was taken as 50 and the target was to get ten samples in each of the five post offices. The duration of the survey was 3 weeks. The target population was of course, the walk in customers of the post offices. Randomised sampling procedure was used.
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Once the questionnaire preparation, sampling and the target population is identified, pretesting of the questionnaire was done to assess the response. Based on the responses the following modifications were done. The ICICI Prudential logo was moved from the front page to the flip side of the questionnaire.  The order of the questions was modified so as to have a sequence.

FIELD WORK AND DATA COLLECTION The survey was conducted over a period of three weeks in all the five post offices. Due care has been given in selecting the respondents so that the sample represents the total population. Responses from different age groups and with different income levels were collected.

DATA ANALYSIS Data analysis was done with the help of the following software packages.   Microsoft Excel and SPSS 46

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SECONDARY DATA ANALYSIS Potential of post offices as an investment avenue The amount invested in the National Savings organisation (NSO) right from 1977 was collected. A graph was drawn with the data collected and it reveals that the savings in NSO by the Indian public has made a good progress over the years. Most of the investments in NSO were done through post offices. This shows that post offices as an investment avenue has a huge potential in the future.

AMOUNT INVESTED IN NSO OVER THE YEARS 50000 45000 40000 35000
Rs. in crores

30000 25000 20000 15000 10000 5000 0 1978-79 1979-80 1980-81 1981-82 1982-83 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1993-94 1994-95 1995-96 1996-97 1998-99 1999-00 1977-78 1983-84 1992-93 1997-98 2000-01 (Provisional)

Top performing districts in Karnataka The data collected from 1998-99 to 2000-01 for investments in NSC in various districts of Karnataka shows that Bangalore Division is the top performer. Bangalore is in the second place and next comes Mysore division. Belgaum Division stood fourth.

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From the above fact, we conclude that the Bangalore post offices have a huge customer base, which can be utilised by ICICI Prudential for selling its pension schemes.

DISTRICT-WISE NSC COLLECTION IN KARNATAKA
100000 90000 80000 70000 60000
Rs. in Lakhs

50000 40000 30000 20000 10000 0 Koppal Haveri Bellary Gadag Udupi Kola r Bidar Kodagu Dharwad Mandya Tumkur Bagalkot Belg aum Shimoga Bangalo re Davanagere Chit radurga Gulb arga Raichur Uttara Kannada Bangalo re (R) Chikmagalu r Dakshin a Kannada Hassan Mysore Bija pur Bangalo re Division Chamaraja Nagar Belg aum Division Gulb arga Divisio n Mysore Divisio n

1998-1999

1999-2000

2000-2001

CUSTOMER PROFILE ANALYSIS Age profile The age profile of the customers is broadly classified into three categories. Age group below 30 48

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 

Age group of 31 to 45 Age group above 45

The pie chart shows the percentage of respondents in each category. The average age of the people surveyed is thirty-seven.

AGE PROFILE
Age > 45 22% Age <= 30 34%

Age 31 - 45 44% Average age is 37

Income profile

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The pie chart for income shows that majority of the respondents were in the income range of one to three lakhs. Next comes less than one lakh and only eight percent of the respondents have income greater than five lakhs.

INCOME

54% 16%

8%

22% < 1 Lakh 1 - 3 Lakhs 3 - 5 Lakhs > 5 Lakhs

Importance of pension

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Eighty-six percentage of the post office customers felt that investment in pension schemes is very important. And out of the fifty respondents, only thirty-six percent have already invested in pension schemes. This provides great opportunity for ICICI Prudential to penetrate in the segment of post office customers.

IMPORTANCE OF PENSION

8%

6%

86%

Very Important

Neutral

Not Important

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Awareness about pension providers The bar chart gives the awareness about the various pension players among the post office customers. Out of the thirteen players in the market, respondents are aware of only six of them. They are LIC, ICICI Prudential, Tata AIG, HDFC, Alliance Bajaj and OM Kotak. Among the private players, respondents are more aware of ICICI Prudential than others.

AWARENESS ABOUT PENSION COMPANIES

HDFC Bajaj Kotak Tata ICICI Pru LIC 0% 2% 2%

8%

12% 40% 86% 20% 40% 60% 80% 100%

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Investment in pension The data collected from the survey tells us that only thirty-six percent of the respondents were invested in pension. Thirty percent have invested in LIC and only eight percent in ICICI Prudential. The bar chart for the same is given below.

INVESTMENT IN PENSION

Bajaj

2%

ICICI

8%

LIC

30%

0%

5%

10%

15%

20%

25%

30%

35%

Overall investment in pension is 36%

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Preferred investment option The customers preferred investment was studied and it was found that investment in house and getting regular rent was the most preferred. The investment option in the order of preference by post office customers and the bar chart is as follows. 1. Invest in building a house and get life long rent 2. Invest in pension schemes and get life long pension 3. Invest in real estate 4. Invest in gold, ornament, etc 5. Invest in share market and mutual funds

PREFERRED INVESTMENT OPTION
Shares and Mutual funds Real estate Gold and Ornaments Pension schemes

92

Investment Option

152

108

171

House rent 0 50 100 150 200

227 250

Preference value

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Risk taking ability The data analysis reveals that the post office customers are ready to take moderate to absolutely risk free investments. This tells us that they are conservative in choosing the investment option. They are very cautious in preserving the capital from being eroded. The risk taking ability of the customers can be generalised and can be seen from the bar chart.
RANK FOR ABSOLUTELY RISK FREE
18 16 14 No. of persons 12 10 8 6 4 2 0 1 2 3 Rank 4 5 8 5 6 17 14 No. of pe rsons 20 18 16 14 12 10 8 6 4 2 0 1 2 3 Rank 4 5 1 6 10

RANK FOR SLIGHTLY RISKY
18 15

RANK FOR MODERATE RISK
18 16 14 No. of persons 12 10 8 6 4 2 0 1 2 3 Rank 4 5 5 2 12 17 14

RANK FOR HIGH RISK
25 20 No. of persons 15 10 6 5 0 1 2 3 Rank 4 5 6 9 6 23

RANK FOR VERY HIGH RISK
40 35 30 No. of persons 25 20 15 10 5 0 1 4 0 2 3 Rank 4 5 4 7 35

RISK TAKING ABILITY OF POST OFFICE CUSTOMERS
More the value less the risk taking ability 180 160 140 120 100 80 60 40 20 0 Absolutely risk free Slightly risky Moderate risk High risk Very high risk 68 85 81 123 153

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Investment in post office schemes Data analysis was done to identify the popular postal schemes among the post office customers. The study reveals that NSC was the most popular investment because of its tax benefits under section 88 of IT Act and a relatively low investment period of six years. The next popular scheme was PPF and then POMIS. KVP is the fourth preferred scheme among the postal schemes. So it is very important for ICICI Prudential to concentrate on the first four schemes and try to attract those customers.

INVESTMENT IN POST OFFICE SCHEMES 35 31 30 25 No. of persons 20 15 11 10 5 0 NSC PPF KVP POMIS PORD POTD 7 3 1 0 0 20

POSA DSRGE

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Key factors in pension investment The analysis of the data tells us that the following factors play a major role for investment in pension schemes.
• • • • • •

Life security Reputation of company Tax benefits Annual savings Income Age

KEY FACTORS IN PENSION DECISION MAKING 350 300 250 Points 200 150 100 50 0 Family size Tax benefits Annual savings Life security Reputation of company Income Education Gender Age 35 93 170 186 154 228 260

312

294

Factors

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INTERPRETATION AND FINDINGS The analysis of the survey has given many valuable insights about the profile of the post office customers and their perception about pension schemes. The findings of the survey were listed in the form of points below.  The average age of the people surveyed is thirty-seven.  Only forty percent of the post office customers have awareness about ICICI Prudential’s pension products. This is very less when compared to LIC’s eighty-six percent. But the encouraging aspect is that ICICI Prudential is just three years old in the insurance business and it is second only to LIC in terms of awareness with post office customers.  Almost eighty-six percentage of the post office customers felt that investment in pension schemes is very important. The critical fact is that only thirty-six percent have already invested in pension schemes. This provides room for ICICI Prudential to penetrate in the segment of post office customers.  The risk taking ability of the customers can be categorised into slightly to moderate risk taking zone. This shows that they are not too conservative and hence are good prospective customers for the pension products of ICICI Prudential.  Another encouraging finding is that investment in pension is the second preferred investment option and is next only to investment in house.  The household income of the people surveyed tells us that seventy-eight percentage of them have household income greater than one lakh. The pension products are really suitable for this income class because they can save tax upto a maximum of Rs. 3300/- U/S 80CCC(1) by investing in pension schemes.

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 Regarding promotional channels, Television and Newspapers have a very good reach when compared to other media. News channels and Udaya are the most frequently watched amongst the Television channels. When comes to newspapers, Times Of India and Deccan Herald attracts more readers than any other newspapers. Hence advertising can be done through these mediums so that it can reach maximum number of post office customers.  NSC, PPF, POMIS and KVP are the most preferred postal schemes by the majority of the customers. Out of the four schemes, only NSC and PPF have tax benefits U/S 88. It was found that most of the people invested in pension schemes have also invested in one of the above four postal schemes.  The above finding is very important in the sense that the cooperation of the employees at these counters is very crucial for ICICI Prudential to sell its pension products successfully. Hence the bancassurance officials should maintain good relationship with these employees of post offices.  Now comes the important aspect of visibility of banners in post offices. Only forty-six percent of the people surveyed said that they had seen the banners in post offices. This tells us that the visibility of advertisement and banners in post offices has to be improved. Due care should be given while placing the banners, such that it is visible to the persons standing in the counters of NSC, PPF, POMIS and KVP.  Only twenty-four percent of the customers are aware of the fact that ICICI Prudential Life Insurance Company has tie-up with India Post for selling their pension schemes. Something needs to be done to improve this, since awareness about the tie-up creates a positive impact in the minds of the customers and their perception about the company.  The most disturbing aspect of the finding is that not even a single referral comes from the postal employees. The contribution from the employee’s side is very important for the success of this distribution channel.

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 The survey reveals that the following factors play a major contribution, when a person decides to invest in pension schemes. Life security Reputation of company Tax benefits Annual savings Income Age

     

This also confirms the outcome of the exploratory study.

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RECOMMENDATIONS To improve the performance of post offices as a distribution channel for selling pension products, the following recommendations will be helpful. The suggestions were made based on three critical aspects of this distribution model. Visibility of ICICI Prudential in Post Offices The visibility of banners in and around post offices has to be improved. This is obvious from the findings that only forty-six percent of the people surveyed said that they had seen the banners in post offices. The following suggestions can be considered to improve on this aspect. Due care should be given for

Placing the banners, such that it is visible to the persons standing in the counters of NSC, PPF, POMIS and KVP. The place at which the advisor sits in a post office is very important. He should be seated in a place where maximum walk-ins are there. The ideal place should be the entrance of the post office as in the case of Jaya Nagar and Rajaji Nagar.

Provide other services, for example tax consultation and financial planning, to walk-in customers of post office.

Product Awareness The awareness about the pension products and its features among the PO customers are not satisfactory. It cannot be improved suddenly and has to be done over a period of time through various promotional tools. Some of the promotional methods are suggested below.  Tie-up with newspaper and magazine agents can be considered. A brief notice about the product features and the contact number of the advisor can be inserted along with the newspapers and magazines. This is a very effective tool since the reach is very good and is cost effective.

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 Asking postal employees working in the counters of NSC, PPF, KVP and POMIS to distribute pamphlets of ICICI Prudential to customers visiting the respective counters. This method of promotion is advantage in the following ways. The perception of the customers of PO about ICICI Prudential can be improved. This mode of promotion also solves the problem of lack of awareness about the tie-up between PO and ICICI Prudential among the post office customers. Tie-Up awareness The postal schemes are perceived by the customers as highly secured and absolutely risk free. Thus the tie-up awareness will make the customers to perceive that ICICI Prudential’s products are trustworthy and risk free, which is already so. Hence the customer awareness about the tie-up between PO and ICICI Prudential is very crucial for selling the pension products. But according to the survey, the finding shows that the awareness level is very poor and needs improvement. This can only be done with the participation of the postal employees, which is absolutely not there at present. Postal employees participation As discussed previously, the participation of the postal employees is very crucial in the progress of this distribution channel. At present, their participation level is absolutely nothing except in very few cases. There are a lot of motivational issues involved in this. The following suggestions can be implemented to improve the employee participation. Arrange some contest sort of things and send the winners to a holiday resort or compensate them with money.  Conduct meetings regularly with the postmasters and the employees in the counters of NSC, PPF, KVP and POMIS. This will make them feel as part of ICICI Prudential team and will improve there involvement.  The relationship between the ICICI Prudential advisors and the employees of post offices can also improve their participation level.

 

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LIMITATIONS OF THE STUDY THERE IS NO PROJECT WORK WITHOUT LIMITATIONS AND EXCEPTIONS. FOLLOWING ARE THE LIMITATIONS OF THE ABOVE PROJECT WORK. The sample size for the survey is less when compared to the total population. The sample size was reduced keeping in mind the duration of the project, the manpower constraints and the target population. The data pertaining to the various postal schemes of the five post offices were not collected because of some procedural difficulties. Hence, the secondary data was collected through Internet and the findings might not be latest.

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CONCLUSION The post office model is the latest distribution model adapted by ICICI Prudential. It was initiated only on November’2003 and is just seven months old. There is no doubt that the post offices in Bangalore offer huge potential for ICICI Prudential for selling its pension schemes. The stakeholders of this channel are employees of both ICICI Prudential and post offices and the post office customers. As observed from the findings, the participation, involvement and dedication of the stakeholders are very important. Finally, the quality of the service provided by the advisors is also very important because they are the ambassadors of the company. The pension products are long term one and the customers are associated with the company for a minimum period of four years to throughout their life. Thus the advisors should not only be focussed in achieving the targets but also in providing after sale services and maintaining good customer relationship.

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ANNEXURE – QUESTIONNAIRE Name: Age:

Kindly help us to serve you better Contact Info:

1) Name some companies that come to your mind when you think of pension schemes. -------------------------------------------------------------------------------------------------------------------2) How important is it for you to allocate a certain amount of your income for the retirement benefits? Not important Neutral Very important 1 2 3 4 5 6 7

3) Have you invested in any pension schemes before? Yes No

(If yes, name of the company-------------------------------------------------------------------------------) 4) Rank (1, 2, 3…) the following risk-return scenarios based on your ability to take risk. * Absolutely risk free with very low returns * Slightly risky with moderate returns * Moderate risk with high returns * High risk with high returns * Very high risk with very high returns 5) Rank (1, 2, 3…) the following investment options based on your priority. * Invest in building a house and get life long rent * Invest in pension schemes and get life long pension * Invest in gold, ornament, etc * Invest in real estate * Invest in share market and mutual funds 6) The consolidated household income of your family < 1 Lakh 1-3 Lakhs 3-5 Lakhs > 5 Lakhs

7) Which media do you watch the most? Television Radio Newspapers Magazines (If yes, which channel-------------------------------------------------------------) (If yes, which program------------------------------------------------------------) (If yes, which papers--------------------------------------------------------------) (If yes, which magazines----------------------------------------------------------) 65

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8) Are you a regular customer / visitor of post offices? Yes No

9) Please tick the various postal schemes in which you have already invested. NSC POTD PPF POSA KVP DSRGE POMIS PORD

10) Have you seen ICICI Prudential Life Insurance Company’s banner, posters in post offices? Yes No

11) Are you aware of the fact that ICICI Prudential Life Insurance Company has tie-up with India Post for selling their pension schemes? Yes No

12) Does any postal employee referred you to ICICI Prudential Life Insurance Company’s official sitting at the desk? Yes No

13) Please rate the relative importance of the following factors you consider in selecting a pension policy Not important a) Age b) Gender c) Income 7 d) Family size e) Annual savings f) Tax benefits g) Life security h) Reputation of company 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 4 4 4 4 4 Neutral 4 4 4 5 5 5 5 5 5 5 5 6 6 6 6 6 Very important 6 6 6 7 7 7 7 7 7 7

i) Education 1 2 3 4 5 6 7 ---------------------------------------------------------------------------------------------------------------------Thank you for your help!

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BIBLIOGRAPHY Websites www.internationalinsurance.org www.themanagementor.com www.timesofmoney.com www.iciciprulife.com www.bimaonline.com www.censusindia.net www.indiastat.com www.mib.com Books Statistics For Managers - Anderson, Sweeny and Williams Marketing Research - Malhotra Principles Of Marketing - Kotlar & Armstrong

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