HDFC LIFE INSURANCE

INTRODUCTION: The outlook of the modern day investors has undergone a

dramatic change. In the changed fiscal scenario with drastic fall in the interest for
investment and the volatile capital market with limited investment options, ULIP
comes to the rescue of the prudent investors. Investment in insurance has become the
style of the day. The individual looks at buying an insurance policy more of an
investment, which comes with the additional benefits of life cover and tax benefit
also. Unit Linked plans provides one with not only an effective protection against
individual investment risks and inflation but above all it brings along a long-term
growth potential of financial means. Everyone decides on their own what is the right
method of investment for him or her, which predetermines evaluation of deposited
money.

COMPANY PROFILE HDFC STANDARD LIFE INSURANCE HDFC

Standard Life Insurance Company Ltd. is one of India’s leading private life insurance
companies, which offers a range of individual and group insurance solutions. It is a
joint venture between Housing Development Finance Corporation Limited (HDFC
Ltd.), India’s leading housing finance institution and one of the subsidiaries of
Standard Life plc., leading providers of financial services in the United Kingdom.
Both the promoters are well known for their ethical dealings and financial strength
hand are thus committed to being a long-term player in the life insurance industry –
all-important factors to consider when choosing your insurer.

HDFC Limited
• HDFC is India’s leading housing finance institution and has helped build more than
23,00,000 houses since its incorporation in 1977.
• In Financial Year 2003-04 its assets under management crossed Rs.36, 000Cr.
• As at March 31, 2004, outstanding deposits stood at Rs. 7,840 crore. The depositor
base now stands at around 1 million depositors.
• Rated ‘AAA’ by CRISIL and ICRA for the 10th consecutive year
•Stable and experienced management.
•High service standards.
• Awarded The Economic Times Corporate Citizen of the year Award for its long-
standing commitment to community development.
• presented the ‘Dream Home’ award for the best housing finance provider in 2004 at
the third Annual Outlook Money Awards.

Standard Life Group (Standard Life plc. and its subsidiaries)

• The Standard Life group has been looking after the financial needs of customers for
over 180 years.
• It currently has a customer base of around 7 million people who rely on the
company for their insurance, pension, investment, banking and health-care needs.
• Its investment manager currently administers £125 billion in assets.
• It is a leading pensions provider in the UK, and is rated by Standard & Poors as
strong with a rating of A+ and as good with a rating of A1 by Moodys.
 • Standard Life was awarded the Best Pension Provider in 2004, 2005 and 2006 at the
Money Marketing Awards, and it was voted a 5 star life and pensions provider at the
Financial Adviser Service Awards for the last 10 years running. The 5 Star accolades
has also been awarded to Standard Life Investments for the last 10 years, and to
Standard Life Bank since its inception in 1998. Standard Life Bank was awarded the
Best Flexible Mortgage Lender at the Mortgage Magazine Awards in 2006.

Our key strengths• Financial Expertise As a joint venture of leading financial

services groups, HDFC Standard Life has the financial expertise required to manage
your long-term investments safely and efficiently.
• Range of Solutions We have a range of individual and group solutions, which can be
easily customized to specific needs. Our group solutions have been designed to offer
you complete flexibility combined with a low charging structure.
• Track Record so far Our cumulative premium income, including the first year
premiums and renewal premiums is Rs. 1532.21 Crores Apr-Mar 2005 - 06. We have
covered over 1.6 million individuals out of which over 5,00,000 lives have been
covered through our group business tie-ups.

Our Vision
The most successful and admired life insurance company, which means that we are
the most trusted company, the easiest to deal with, offer the best value for money, and
set the standards in the industry. The most obvious choice for all. Our Values that we
observe while we work::
• Integrity
• Innovation
• Customer centric
• People Care “One for all and all for one”
• Teamwork
• Joy and Simplicity Accolades and Recognition
•Rated by Business world as India’s Most Respected Private Life Insurance Company
in 2004.
• Rated as the "Best New Insurer - 2003" by Outlook Money magazine, India’s
number 1 personal finance magazine.

Form of Organization HDFC standard life insurance belongs to a life insurance sector
in India. Life Insurance in India Introduction With such a large population and the
untapped market area of this population, insurance happens to be a very big
opportunity in India. Today it stands as a business growing at the rate of 15-20
percent annually. Together with banking services, it adds about 7 percent to the
country’s GDP. In spite of all this growth the statistics of the penetration of the
insurance in the country is very poor. Nearly 80% of the Indian population is without
life insurance cover and the health insurance. This is an indicator the growth potential
for the insurance sector is immense in India. It was due to this immense growth that
the regulations were introduced in the insurance sector and in continuation the
government in1993 to examine the various aspects of the industry constituted
“Malhotra committee”. The key element of the reform process was participation of
overseas insurance companies with 26% capital. Creating a more efficient and
competitive financial system suitable for the requirements of the company was the
main idea behind this reform.

Since then the insurance industry has gone through many sea changes. The
competition LIC started facing from these companies were threatening to the
existence of the LIC. Since the liberalization of the industry, the insurance industry
has never looked back and today stand as one of the most competitive and exploring
industry in India. The entry of the private players and the increased use of the new
distribution are in the limelight today. The use of new distribution techniques and the
IT tools have increased the scope of the industry in the longer run.

A Brief History The origin of insurance is very old. The time when we were not even
born: man has sought some sort of protection from the unpredictable calamities of the
nature. The basic urge in man to secure himself against any risk and uncertainty led to
the origin of insurance. The insurance came to India from UK: with the establishment
of the Oriental Life Insurance Corporation in 1818.the Indian Life Insurance
Company act1912 was the first statutory body that started to regulate the life
insurance business in India. By 1956 about 154 Indian, 16 foreign and 75 provident
firms were established in India. Then the central government took over these
companies and as a result the LIC was formed. Since then LIC has worked towards
spreading life insurance and building a wide network across the length and the
breadth of the country. After the liberalization the entrance of foreign players has
added to the competition in the market. The general insurance business in India, on
the other hand, can trace its roots to the Triton Insurance Company Ltd., the first
general insurance company established in the year 1850 in Calcutta by the British. In
1957 General Insurance Council, a wing of the Insurance Association of India, frames
a code of conduct for ensuring fair conduct and sound business practices. In1972 The
General Insurance Business (Nationalization) Act. 1972nationalized the general
insurance business in India with effect from 1stJanuary 1973. it was after this that 107
insurers amalgamated and grouped into four companies viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd., and the United India Insurance Company Ltd.

Current Scenario of Insurance Industry India with about 200 million middle class
household shows a huge untapped potential for players in the insurance industry.
Saturation of markets in many developed economies has made the Indian market even
more attractive for global insurance majors. The insurance sector in India has come to
a very high potential and competitiveness in the market. Innovative products and
aggressive distribution have become the say of day. Indians have always seen life
insurance as a tax saving device, are now suddenly turning to the private sector that
are providing them new products and variety for their choice. Life insurance industry
is waiting for a big growth as many Indian and foreign companies are waiting in the
line for the green signal to start their operations. The Indian consumer should be ready
now because the market is going to give them an array of products different in price,
features and benefits. How the consumer is going to make his choice will determine
the future of industry.

CUSTOMER SERVICE Consumers remain the most important center of the

insurance sector. After the entry of foreign players the industry is facing a lot of
competition and thus improvement of the customer service in the industry.
Computerization of operations and updating of technology has become imperative in
the current scenario. Foreign players are bringing in international best practices in
service through use of latest technologies. The one time monopoly of the LIC and its
agents are now going through a thorough revision and training programmer to catch
up with the other private players. Though lot is being done for the increased customer
service and adding technology to it but there is a long way to go and various customer
surveys indicate that the standards are still below customer expectation levels

DISTIBUTION CHANNELS Till date insurance agents still remain the main source
through which insurance products are sold. The concept is very well established in the
country like India but still the increasing use of other sources is imperative. It
therefore makes sense to look at well-balanced alternative channels of distribution.
LIC already has well established and an extensive distribution channel and presence.
New players may find it expensive and time consuming to bring up a distribution
network to such standards. Therefore, they are looking to the diverse areas of
distribution channel to have an advantage. At present the distribution channels
available are:
• Direct selling
• Corporate agents
• Group selling
• Brokers and cooperative societies
• Bancassurance To make all these channels a success companies have to be very alert
and skill full to know how to use these channels in a proper way. Bancassurance is
one of the most upcoming channels of distribution.

BANCASSURANCE India has an extensive bank network established over the years.
What insurance companies have to do is just take advantage of the customers’ long-
standing trust and relationships with banks. This is a mutually beneficial situation as
banks can also expand their range of products on offer to customers, while the
insurance company will also earn profits from the exposure. Another, advantage ids
that banks, with their network in rural areas, help to fulfill rural and social obligations
stipulated by the Insurance Regulatory Development Authority (IRDA) recently.
Insurance companies should see Bancassurance as a tool for increasing their market
penetration in India. It is also good for the one who sees Bancassurance in terms of
reduced price, high quality product and delivery at doorsteps. Everybody is a winner
here. The creation of Bancassurance operations has made an important impact on the
financial services industry at large. This is though a new concept but it has gained a
lot of importance in the industry at present and has a great future.

PRODUCTS At HDFC Standard Life, we offer a bouquet of insurance solutions to

meet every need. We cater to both, individuals as well as to companies looking to
provide benefits to their employees. This section gives you details of all our products.
We have incorporated various downloadable forms and product details so that you
can make an informed choice about buying a policy. For individuals, we have a range
of protection, investment, pension and savings plan that assist and nurture dreams
apart from providing protection. You can choose from a range of products to suit your
life-stage and needs. For organizations we have a host of customized solutions that
range from Group Term Insurance, Gratuity, Leave Encashment and Super
annulations Products.

These affordable plans apart from providing long-term value to the employees help in
enhancing goodwill of the company. Following are the major plans of HDFC:
• Endowment plan.
• Whole life plan
• Pension plan
• Children’s plan
• Money back plan

ENDOWMENT PLAN The HDFCSL Endowment Assurance Plan gives you: An

ideal way to secure your long-term financial goals Valuable protection to your family
by way of lump sum payment in case of your unfortunate death within policy term
Provides lump sum payment (basic Sum Assured plus any bonus additions) on
survival up to maturity date Very flexible benefit options and payment options In case
of your unfortunate demise during the policy term, this participating (‘With Profits’)
insurance plan will pay your family the Sum Assured(together with the attached
bonuses) you had chosen. The plan receives simple Reversionary Bonuses, which are
usually added annually. At the end of the term an additional Terminal Bonus may be
paid expending on the performance of the underlying investment. WHOLE LIFE
PLAN

HDFC Single Premium Whole Of Life Insurance Plan is a tailor-made plan well
suited to meet your long-term investment needs. This participating plan offers you the
following benefits: Whole of life plan aimed at providing long-term real growth of
your money. Single premium investment plan In case of your unfortunate demise
during the policy term, this participating (‘With Profits’) insurance plan will pay your
family the Sum Assured and compound Reversionary Bonuses, which are usually
added annually. An additional Terminal Bonus may be paid depending on the
performance of the underlying investments. During Guaranteed Surrender Periods
you get the Sum Assured and all bonuses vested as at the date of surrender.

PENSION PLANHDFC PERSONAL PENSION PLAN

We understand your need to build a secure future for yourself. Hence, the HDFC
Personal Pension Plan is an insurance policy that is designed to provide a post -
retirement income for life with the freedom to choose your retirement date. You can
choose your premium, the Sum Assured and your retirement date. At the end of the
policy term, you will receive the Sum Assured plus any attaching bonus, which will
provide your post - retirement income. The HDFC Personal Pension Plan is an
insurance policy, which can benefit you in the following ways:

Provides a post retirement income in your golden years

 The plan receives simple Reversionary Bonuses, which are usually added annually.
At the end of the term an additional Terminal Bonus may be paid depending on the
performance of the underlying investment. Don’t compromise on your self-respect,
ever. Go ahead, hold your head high and enjoy life with the HDFC Personal Pension
Plan.

CHILDREN’S PLAN

The HDFC Children Plan gives you: Invaluable financial support to your child Helps
you customize an ideal plan for your child Provides you multiple options for multiple
benefits The HDFC Children’s Plan is designed to secure your child’s future by
giving your child (the beneficiary) a guaranteed lump sum, on maturity or in case of
your unfortunate demise, early in the policy term. The company to give you good
long-term returns invests the premiums, paid by you. The plan receives simple
Reversionary Bonuses, which are usually added annually. At the end of the term an
additional Terminal Bonus may be paid depending on the performance of the
underlying investment (See ‘Bonuses’ for more details).

MONEY BACK PLAN

The HDFC Money Back Plan is a ‘With Profit’ Plan that gives you: A proportion of
the basic Sum Assured as cash lump sums at regular 5- year intervals within the
policy term (see the table given below) – an ideal way to secure your long- term as
well as short-term financial goals A lump sum payment on survival up to maturity
date Valuable protection to your family by way of lump sum payment in case of your
unfortunate death within the policy term. This is over and above any earlier payouts
Making the right kind of investment will enable you to achieve your objectives – be it
your immediate expenses or else securing your future financial needs. Our Money
Back Plan gives you a wide range of terms and cash benefit schedule to choose from.
A summary of Key Benefits including the cash lump sum payments, expressed as a
percentage of Sum Assured is shown below:

Key Benefits Total Policy Death Survival Benefit Term Benefit

1. Within 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. Policy Term 60% + 10 40%
Attaching - - - - Bonuses 100% 40% + Sum 15 30% 30% Attaching - - - Assured
Bonuses + attaching 25% + bonuses 20 25% 25% 25% Attaching - - (Over
Bonuses and 20% + above 25 20% 20% 20% 20% Attaching - the Bonuses earlier
25% + payouts). 30 15% 15% 15% 15% 15% Attaching Bonuses Maturity Value
On maturity you receive survival benefit due at that point of time along with
attaching bonuses for the full Sum Assured calculated for the full term. You can
ensure your financial independence. And be able to live life on your own terms.
Always.
 BARRIERS TO ENTRY
 Capital requirements
 High gestation period
 Access to distribution channels
 Brand equity
 Indian consumer psychology
 Tax avoidance

Capital Requirements
The huge capital requirements pose a major barrier to entry in the insurance sector.
These requirements can be attributed to the costs incurred in setting up your
distribution network. To achieve economies of scale you would require a nationwide
presence, unless you want to cater to a niche group, which would involve setting up a
huge sales force. High Gestation Period On an average a player in the insurance sector
would require around7-10 years to break-even. This comparatively long gestation
period would entail the player to have sufficiently deep pockets to bear the losses till
the time he breaks even. Access to Distributional Channels Given the poor reach of
the insurance companies amongst the Indian public especially in the rural sector the
distribution channels adopted will determine the future growth of the industry. For the
insurance industry to take off in a big way in India companies will have to adopt new
and innovative distribution channels to be able to cover the vast

Majority of the Indian population, which is still not covered by the insurance
companies. Brand equity Customer loyalty in the insurance sector is very high, thus
benefiting players who’ve already been there in the market for a long time. While
going in for an insurance policy, the brand and the trust that it generates are essential
criteria on which the customer makes his judgment. Thus a brand, which has been
there for a long period of time and has managed to serve it customers well, would be
in a position to leverage its brand equity. Indian Consumer Psychology The Indian
customer, liken his global counter part, buys policies for tax benefits and to ensure
secure savings for the future. Although he is price sensitive, he still deserves value
and sound services for his money. Insurance as savings: There is reluctance amongst
Indians to use insurance policies as a means of investment of their savings.
Traditionally Indians have invested the bulk of their savings in bank fixed deposits
followed by the capital markets in spite of the low returns offered by the banks and
the large risk involved in trading in stocks. The changing mindset of the Indian public
will be a key driver for growth in the liberalized era.

Insurance for Tax Avoidance: The urban educated class of Indians

traditionally looked at insurance as a tax avoidance tool. Mindsets are now
changing, but purchase patterns are not. The months of February and March
still are the busiest at LIC. The traditional hook of tax incentives and savings
will take along time to change. Private players need to step up their selling in
terms of need and protection. Due to low consumer awareness of the need for
insurance and benefits attached to it, most of the insurance is still sold through
agents. Other distribution channels like banc assurance are now being
explored.

Growth potential of the Indian insurance market India at a glance Population:

 Billion Economy: 5th largest in the world in terms of Purchasing Power Parity
(PPP) GDP growth Rate: Over 6% per year on an average for the last decade
Savings Rate: Around 26% of GDP Estimated middle class population: 300
Million Insured population: 70 million only

Future Trends The Insurance sector is set to see a whole lot of changes in the way
business was traditionally done with new and innovative products, distribution
networks, etc. Changes in the external environment for the life Insurance market will
have to be suitably understood in order to avoid excessive selling and miss-selling out
of over-enthusiasm. New Products Most of the insurance products offered by the
traditional Indian players are outdated, as they are not suitable to the needs of the
consumers. Hence, old as well as new insurers will be offering innovative products to
the consumers. The consumers are particularly expecting good pension plans, health
insurance, and term insurance and Investment products like unit-linked insurance,
from the life insurers. Similarly, the consumers expect innovative products from the
general insurers for managing healthcare, property insurance, accident insurance and
other products related to the personal line of insurance. The consumer’s also expect
reduction in the premium of the insurance products as the mortality rate in India has
come down by three times in the last 50years. 34

Consumer Education Very soon the market will be flooded with a large number of
products by a fairly large number of insurers operating in the Indian market. Even
with the limited range of traditional insurance products, the consumers are confused.
Their confusion will further increase in the face of a large number of products in the
market. The existing level of awareness of the consumers for insurance products is
very low. This is because only 65 percent of the Indian population is literate. Even the
educated consumers are ignorant about the various products of insurance. Moreover,
there is a shortage of trained agents and brokers. It is necessary that all the insurers
should undertake extensive plans for educating the consumers.

UNIT LINKED INSURANCE PLAN

Now one should know what it means… Unit Linked Insurance Imagine an ideal
combination of insurance and life savings that will help One in the future to finance
lofty plans, whether referring to purchase of a car, contribution to education of
children or grand children or just some extra income when retired. Unit Linked
provides you with not only an effective protection against individual investment risks
and inflation but above all it brings along a long-term growth potential of financial
means. Everyone decides on his or her own what is the right method of investment for
him or her, which predetermines evaluation of deposited money. Financial means
invested into Unit Linked are evaluated in the course of insurance period through four
financial funds. It is one oneself that decide on division of the invested means. One
can at any time reallocate One’s money among the funds. The four funds for
investments are: Balancer, Maximizer, Protector, Preserver.