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Project Study Report

Training Undertaken at

HDFC Standard Life Insurance Company Ltd.

“A Feasibility study to identify the highly network individual for HDFC
Standard Life Insurance Co. Ltd. ”

Submitted in partial fulfillment for the

Award of degree of
Master of Business Administration

Submitted By: - Submitted To:-

Shikha Garg Ms. Priti



I, SHIKHA GARG Roll No 91 Class MBA 3rd sem . of the SIMCS Jaipur, hereby declare that
the Summer Training Report entitled, “ A Feasibility study to identify the highly network
individual for HDFC Standard Life Insurance co. Ltd. ” is an original work and the same
has not been submitted to any other institute for the award of any other degree. A seminar
presentation of the Training Report was made on 18 th May 2009 till 25 th June 2009 and the
suggestions as approved by the faculty were duly incorporated.

Presentation in charge Signature of the Candidate


Director/Principal of the Institute

To Whom It May Concern

This is to certify that Ms. Shikha Garg, student of Subodh Institute of Management and
Career Studies, Jaipur, has undergone summer internship as a part of institute curriculum
at HSLIC LTD. from 18th May 2009 till 25 th June 2009. During this program she has
undergone a project for our company. The project title has been A Feasibility study to
identify the highly network individual for HDFC Standard Life Insurance co. Ltd.

She has completed the project well in time and has been found hardworking and sincere.

We wish her all the best for all her future endeavors.

Thanks & regards.

(Your name sign n seal)


Difference in academic life & practical life is revealed when we enter the real life where
there is cut throat competition & in order to exist in this world of competition one has to be
fully aware of all the aspects of Industrial life.

Practical Knowledge is the lifeblood of the management .This Practical Knowledge is

termed as field knowledge in marketing management. In professional course of
management, this field of knowledge makes us understand about the consumer behavior,
his response to your product, the interpersonal skills, how to make yourself positive till the
end of the day, etc.

Practical training is the most important part of management study. During the course of
training a trainee learns to correlate the practical problems & situations to possible theory
knowledge A professional course like HDFC Standard Life, has to have a provision of these
type of practical practices during its course time, to enhance the skill in corporate world & to
meet this requirement in our management curriculum “ Project Study ” is provided. I have
undergone two months training at HSLIC, Jaipur.

This report shows how I conducted the survey for Financial Consultant in HSLIC.


I express my sincere thanks to my project guide, Mr. Dushyant Handa for guiding me right
from the inception till the successful completion of the project. I sincerely acknowledge
him/her/them for extending their valuable guidance, support for literature, critical reviews of
project and the report and above all the moral support he had provided to me with all stages
of this project.

I would also like to thank the supporting staff for their help and cooperation throughout our

Shikha Garg


This report is a representation of all rules regulations and structure required to become
financial consultant (FC) for HDFC SL.
Along with an overview of Insurance sector, the report provides details on various
aspects of life insurance. It details about history, what life insurance is all about.
This report also provides idea an about regulatory aspects of insurance sector, and the
norms imposed by IRDA regulatory body of Insurance business in India.
It also provides an idea about the working culture of HDFC SL which covers its operational
method, sales structure, financial strength etc.
This report also provides us good idea about financial consultant, how it operates what are
the norms imposed by IRDA, what is commission structure, How HDFCSL provide support
to its Financial Consultants.
If somebody is interested in happening events of insurance sector, this report will help him
The report also provides fair idea about the competitors of HDFCSL present in the market.
Last but not least this report is a sincere attempt to cover all the aspect of life insurance

Topics Page
1. Introduction To The Industry (Insurance Sector) No.
1.1) Introduction
1.2) Insurance Sector – Breif History
1.3) How Big Is The Insurance Sector
1.4) Why Open Up The Insurance Industry
1.5) Future Course Of Insurance Business
1.6) Bottlenecks – Government/Rbi Regulation
1.7) Benefits Of Insurance
2. Life Insurance
2.1) The Life Insurance Scenario In India
2.2) What Is Life Insurance
2.3) Benefits Of Life Insurance
2.4) Need For Life Insurance
2.5) Principles Of Life Insurance
2.6) Pecularities Of Life Insurance
2.7) Why Insurance Is Superior To Other Form Of Savings
2.8) Premium
2.9) Underwriting
2.10) Classification Of Risk
3. Regulatory Aspect Of Insurance Sector
3.1) Glimpse On Malhotra Committee Report
3.2) Irda Norms And Regulations
3.3) Insurance Rules
4. Introduction To The Organisation (Hdfc Standard Life Insurance Company
Limited)4.1) About Hdfc
4.2) Reputation For Quality
4.3) Hdfc Standard Life
4.4) Performance Achived
4.5) Products Of Hdfc Life Insurance
4.6) Sales Structure Of The Organisation
5. Distribution Strategy Mainly Followed
5.1) Distribution Scenario In Indian Market
5.2) What Companies Should Look
5.3) Basic Channels Followed By Companies
5.4) Retail Distrbution Strategy

Topics Page
6. Research Methodology No.
6.1) Title Of The Study
6.2) Duration Of The Project
6.3) Objective Of The Study
6.4) Type Of Research
6.5) Sample Size And The Method Of Selecting Samples
6.6) Scope Of S tudy
6.7) Limitation Of Study
7. Acgency Of Financial Consultant
7.1) Regulations For Financial Consultant Imposed By Irda
7.2) Selection Criteria For Fc
7.3) Eligibility Crireria For Fc As Per Hdfc Sl
7.4) Role Of Hdfc Sl Agent – The Consultant
7.5) Application Format For Financial Consultant
7.6) Commission Structure For Financial Consultant
8. Analysis And Interpretation
8.1) Objective Of The Project
8.2) Project Plan
8.3) Study Plan
8.4) Methodology Followed
8.5) Detail Description And Analysis
9. Swot Analysis
9.1) Prudential – Icici
9.2) Birla Sun Life
9.3) Max Newyork Life
9.4) Life Insurance Corporation Of India Ltd.
9.5) Tata Aig
9.6) Why Customer Should Go For Hdfc
10. Conclusion And Limitations
10.1) Conclusion
10.2) My View About Project
10.3) Limitations
11. Biblography


1.1) Introduction

ABSTRACT: Insurance is an Rs.400 billion business in India and yet its spread in the
country is relatively thin. Insurance as a concept has not been able to make headway in
India. Presently LIC enjoys a monopoly in life insurance business while GIC enjoys it in
general insurance business. There have been very little options before the consumers to
decide the insurer. A successful passage of the IRA Bill have clear the way of private sector
operators in collaboration with their overseas partner. It is likely to bring in a more
professional and focused approach. Moreover the foreign players would bring sophisticated
actuarial techniques with them, which would facilitate the insurer to effectively price the
product. It is very important that trained marketing professionals who are able to
communicate specific features of the policy should sell the policy. In the next millennium all
these activities would play a crucial role in the overall development and maturity of the
insurance industry

Insurance Sector
1.2) – a brief h

The insurance sector in India dates back to 1818, when Oriental Life Insurance Company
was incorporated at Calcutta. Thereafter, few other companies like Bombay Life Assurance
Company, in 1823 and Tritron Insurance Company, for General Insurance, in 1850 were
incorporated. Insurance Act was passed in 1928 but it was subsequently reviewed and
comphrensive legislation was enacted in 1938. The nationalisation of life insurance
business took place in 1956 when 245 Indian and Foreign Insurance provident societies
were first merged and then nationalised. It paved the way towards the establishment of Life
Insurance Corporation (LIC) and since then it has enjoyed a monopoly over the life
insurance business in India. General Insurance followed suit and in 1968, the insurance act
was amended to allow for social control over the general insurance business. Subsequently
in 1973, non-life insurance business was nationalised and the General Insurance Business
(Nationalisation) Act, 1972 was promulgated. The General Insurance Corporation (GIC) in
its present form was incorporated in 1972 and maintains a very strong hold over the non-life
insurance business in India. Due to concerns of relatively low spread of insurance in the
country the efficient and quality functioning of the Public Sector insurance companies. The
untapped potential for mobilizing long-term contractual savings fund for infrastructure.

The (Congress) government set up an Insurance Reforms committee in April 1993. The
Committee submitted its report in January 1994, recommended a phased program of
liberalization, and called for private sector entry and restructuring of the LIC and GIC. The
United Front government moved an insurance bill but it did not pass. The BJP government
moved an insurance bill again in 1998, which had also to be referred back to a select
committee of parliament. But now the parliament has given a nod to the Insurance
Regulatory and Development Authority (IRDA) bill with some changes in the original

1.3) How big is the insurance market?

Insurance is a Rs.400 billion business in India, and together with banking services adds
about 7% to India’s GDP. Gross premium collection is about 2% of GDP and has been
growing by 15-20% per annum. India also has the highest number of life insurance policies
in force in the world, and total ingestible funds with the LIC are almost 8% of GDP. Yet
more than three-fourths of India’s insurable population has no life insurance or pension
cover. Health insurance of any kind is negligible and other forms of non-life insurance are
much below international standards.
To tap the vast insurance potential and to mobilize long-term savings we need reforms
which include revitalizing and restructuring of the public sector companies, and opening up
the sector to private players. A statutory body need to be made to regulate the market and
promote a healthy market structure. Insurance Regulatory Authority (IRA) is one such body,
which checks on these tendencies. IRA role comprises of following three functions:
(a) Protection of consumer’s interest.
(b) To ensure financial soundness and solvency of the insurance industry, and
(c) To ensure healthy growth of the insurance market.

1.4) Why open up the Insurance Industry?

An insurance policy protects the buyer at some cost against the financial loss arising from a
specified risk. Different situations and different people require a different mix of risk-cost
combinations. Insurance companies provide these by offering schemes of different kinds.
Unfortunately the concept of insurance is not popular in our country. As per the latest
estimates, the total premium income generated by life and general insurance in India is
estimated at around a meagre 1.95% of GDP. However India’s share of world insurance
market has shown an increase of 10% from 0.31% in 1996-97 to 0.34% in 1997-98. India’s
market share in the life insurance business showed a real growth of 11% thereby
outperforming the global average of 7.7%. Non-life business grew by 3.1% against global
average of 0.20%. In India insurance spending per capita was among the lowest in the
world at $7.6 compared to $7 in the previous year. Amongst the emerging economies, India
is one of the least insured countries but the potential for further growth is phenomenal, as a
significant portion of its population is in services and the life expectancy has also increased
over the years.
The nationalized insurance industry has not offered consumers a variety of products.
Opening of the sector to private firms will foster competition, innovation, and variety of
products. It would also generate greater awareness on the need for buying insurance as a
service and not merely for tax exemption, which is currently done. On the demand side, a
strong correlation between demand for insurance and per capita income level suggests that
high economic growth can spur growth in demand for insurance. Also there exists a strong
correlation between insurance density and social indicators such as literacy. With social
development, insurance demand will grow.

1.5) Future course of Insurance Business

One of the main differences between the developed economies and the emerging
economies is that insurance products are bought in the former while these are sold in latter.
Focus of insurance industry is changing towards providing a mix of protection / risk over
and long-term investment opportunities.


Yes No Maybe

Insurance over
the phone/mail
through Banks
Planning services
Online premium

Some of the major international players in the insurance business, in Indian market, are –
Sun Life of Canada, Prudential of the United Kingdom, Standard Life, and Allianz etc.
Following might be the future strategies of insurance companies.
(1) The new entrants cannot compete with the state owned LIC on price alone. Due to its
size, LIC operates at very low costs and their premia on policies that offer pure protection
are on a par with comparable schemes across the globe. What the new insurance
companies will probably offer is higher returns than the annualised 9-10% one can hope to
earn from LIC’s policies. This will put pressure on LIC to offer more attractive returns.
(2) Consumers can expect more product innovations. For instance, at present, LIC provides
cover for permanent disability and what the new companies could offer is temporary
disability insurance as well.
(3) Apart from the basic term insurance, most insurance products worldwide are sold as
long-term investment opportunities with the protection component being clearly spelt out in
the scheme.
(4) LIC’s policies are not flexible according to the customer’s needs. So new entrants and
the present insurance players have planned to offer universal life and variable life insurance
products that allow the holder flexibility in deciding how his premia are split between
protection and savings. New products would also enable product combinations that allow
greater customisation.
(5) Private insurers would compete furiously on the service platform. These would not only
include faster claims settlement and other after-sales service but there agents would be
trained in pre-sales interaction to usher in a customer-oriented approach. They would be
better qualified in assisting clients in financial planning.
(6) Foreign companies would also use superior software (like APEX) that will give them an
edge over the in-house LIC software. This technology will help private insurers in product
development and customising products to suit individual needs.
(7) The foreign players will probably introduce a lot of innovation and competition on
Surrender value. LIC pays surrender value only after three years but private insurance
companies are likely to offer sops by way of better and timely surrender value to clients.
(8) Access to insurance too will probably become more widespread. Role of intermediaries
would decrease and sale of insurance through direct channels and banks would increase.
Simple products like term insurance might be sold through the telephone or direct mail to
high net worth clients.
(9) In reaction to foreign player’s strategies one might expect LIC to react and drop its
premia and upgrade its services.

Joint Ventures

Indian Company Foreign Partner

Kotak Mahindra Old mutual
Tata Group AIG
Sundaram Finance Winterthur
Sanmar Group GIO of Australia
Spic MetLife
ILFS Cigna
Bajaj Allianz
20 th Century Canada Life
Vyasa Bank ING
Cholmandalam Axa
SBI Alliance Capital
HDFC Standard Life
ICICI Prudential
Hindustan Times Commercial Union
IDBI Principal
Max India New York Life
The privatization of the insurance sector would open up exciting new career options and
new jobs would be created. A few insurers estimated a figure of 1lakh, after comparing the
work forces in India and the UK.
At present, life products comprise a big chunk, or 98%, of LIC’s business. Pension
comprises a mere 2%. Now with increase in life expectancy rate, people have to start

planning their retirements. Hence pension business is expected to grow once the industry
The demand for healthcare is growing due to population increase, greater urban migration
and alarming levels of pollution. Healthcare insurance is more important for families with
smaller savings because they would not be able to absorb the financial impact of adverse
events without insurance cover. Foreign insurance companies like Aetna (world’s largest
healthcare insurance provider) and Cigna have been providing Managed Care services
across the globe. Managed Care integrates the financing and delivery of appropriate health
care services to covered individuals.

1.6) Bottlenecks – Government / RBI regulations

The IRDA bill proposes tough solvency margins for private insurance firms, a 26% cap
on foreign equity and a minimum capital of Rs.100 crores for life and general insurers and
Rs. 200 crores for reinsurance firms. Section 27A of the Insurance Act stipulates that LIC is
required to invest 75% of its accretions through a controlled fund in mandated government
securities. LIC may invest the remaining 25% in private corporate sector, construction, and
acquisition of immovable assets besides sanctioning of loans to policyholders. These
stipulations imposed on the insurance companies had resulted in lack of flexibility in the
optimisation of risk and profit portfolio. If this inflexibility continues, the insurance companies
will have very little leverage to earn more on their investments and they might not be able to
offer as flexible products as offered abroad.
The government might provide more autonomy to insurance companies by allowing
them to invest 50 % of their funds as per their own discretions.
Recently RBI has issued stiff guidelines, which had dealt a severe blow to the plans of
banks and financial institutions to enter the insurance sector. It says that non-performing
assets (NPA) levels of the prospective players will have to be 1% point lower than the
industry average (presently 7.5%). RBI has also stipulated that all prospective entrants
need to have a net worth of Rs. 500 crores. These guidelines have made it virtually
impossible for many banks to get into the insurance business. Also banks and FI’s who are
planning to enter the business cannot float subsidiaries for insurance.
RBI has taken too much caution to make sure that the new sector does not experience
the kind of ups and downs that the non-bank financial sector has experienced in the recent

past. They had to rethink about these guidelines if India’s strong banks and financial
institutions have to enter the new business.
The insurance employees’ union is offering stiff resistance to any private entry. Their
objections are (a) that there is no major untapped potential in insurance business in India;
(b) that there would be massive retrenchment and job losses due to computerization and
modernization; and (c) that private and foreign firms would indulge in reckless profiteering
and skim the ‘urban cream’ market, and ignore the rural areas. But all these fears are
unfounded. The real reason behind the protests is that the dismantling of government
monopoly would provide a benchmark to evaluate the government’s insurance services.

1.6) List Of Private insurance Companies

Life Insurance List:
Sl.No. Registration Date of Reg. Name of the company
1. 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.
2. 104 15.11.2000 Max New York Life Insurance Co. Ltd.
3. 105 24.11.2000 ICICI Prudential Life Insurance Company Ltd.
4. 107 10.01.2001 Om Kotak Mahindra Life Insurance Co. Ltd.
5. 109 31.01.2001 Birla Sun Life Insurance Company Ltd.
6. 110 12.02.2001 Tata Aig Life Insurance Company Ltd.
7. 111 30.03.2001 SBI Life Insurance Company Ltd.
8. 114 02.08.2001 ING Vysya Life Insurance Company Pvt. Ltd.
9. 116 03.08.2001 Allianz Bajaj Life Insurance company Ltd.
10. 117 06.08.2001 MetLife India Insurance Company Pvt. Ltd.

General Insurance List:

Sl.No. Registration Date of Reg. Name of the Company
1. 102 23.10.2000 Royal Sundaram Alliance Insurance Company
2. 103 23.10.2000 Reliance General Insurance Company Ltd.
3. 106 04.12.2000 IFFCO Tokio General Insurance Co. Ltd.
4. 108 22.01.2001 TATA AIG General Insurance Company Ltd.
5. 113 02.05.2001 Bajaj Allianz General Insurance Company Ltd.
6. 115 03.08.2001 ICICI Lombard General Insurance Company Ltd.
Yr: 2001-2002: (From 1st Jan 2001 to till date)
Life Insurance List:
1. 121 03.01.2002 AMP SANMAR Assurance Company Ltd.

1.7) Benefits of Insurance

Insurance is the instrument of Security, saving and peace of mind. It provides 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.


2.1) The Life Insurance Scenario in India

Since 1956, with the nationalization of insurance industry, the state-run Life Insurance
Corporation of India (LIC) has held the monopoly in that country's life insurance sector.
General Insurance Corporation of India (GIC), with its four subsidiaries, was its counterpart
in the casualty sector. Over time, taking advantage of its monopoly and virtual prerogative
in establishing premiums, LIC has evolved into a monolith. With around 600,000 agents in
every nook and corner of the vast country, it has created an enviable brand name,
particularly among the rural population of the country. It has around $40 billion as its life
fund and is a strong player in the financial sector. However, on the qualitative side, it has
very little to take pride in. And there lies the potential for foreign players to challenge this
As is typical with monopolies, the premium rates charged by LIC are among the highest in
the world, and its track record in customer service can, at best, be called shabby. With a
huge unionized, rigid workforce mostly in the clerical category, LIC runs the risk of high
fixed cost, which will be the deciding factor in productivity in the competitive scenario. While
boasting full-scale automation of its operation, the truth is that its technology is outdated.
The new players, with the state- of-the-art technology under their belt, will be in an
advantageous position. 80% of LIC's business is procured by 20% of its ill-trained agent
force. The foreign player, with the domestic partner's strong brand value, can test the
unconventional distribution channels like brokers, the Internet, the banking distribution
system, etc. Although foreign players may be tempted to keep their operation in the big
cities for the 'creamy layer' of the society, the real market lies in rural India, which accounts
for the lion's share of LIC's present business. The foreign player must learn to adapt to
Indian realities. The well-publicized failures of world famous consumer goods companies
like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian psyche and sentiments
demonstrate the concept. They failed in the areas of realistic pricing, product promotion and
reaching to the consumer. The foreign companies need to know the "ground realities" to the
Political Scenario
Until recently, India continued to be one of the few remaining countries of the world to
remain insulated from the direct foreign investment in its insurance sector. However, things
are changing now with the passage of Insurance Regulatory Development Act (IRDA)
through Indian Parliament in late 1999. A much awaited and much debated act, it met with
strong resistance from the political institutions of India and took almost six years to see
daylight. Though first recommended by Malhotra Committee on Insurance Reforms in 1994,
what emerges is a diluted form of the original recommendations. However in the long
awaited period of its passage, the issue was nationally debated and was finally 'de-
politicized,' meaning that the reform path is 'irreversible.'
IRDA, for the time being, prohibits 100% foreign equity in insurance. It requires the Indian
promoter to invest either wholly in an insurance venture or team up with a foreign insurer,
with a cap of 26% of equity for a foreign partner. The Indian promoter is permitted to divest
only after 10 years to the Indian public, through a public offering of shares, at which time
the equity structure will provide for equal participation between the Indian and foreign
partner with a share of 26% each in the share capital. The underlying tone of the 26% cap
for the foreign insurer is to ensure that financial interest substantially vests with the Indian
promoter, permitting the foreign co-promoter a definite say in direction and management
(By Indian Company Law, 26% is the minimum equity to move a resolution or vetoing a
resolution in Board of Directors' Meeting). It is important to note that the 26% level is the
bargained solution by the privatization proponents (read Government) in the face of stiff
political resistance. The main two political poles of Indian politics – the Congress Party and
the Bharatiya Janata Party (BJP) - are both in favor of the reform. Only the extent of the
reform and who-will-bell-the-cat-and-get-the-(dis)credit factor bar them in reaching a
consensus for more sweeping reforms. The populist out-of-fashioned socialistic jingoism,
masking these parties' rightist ideology, is fast losing its appeal to the masses. This will only
hasten the reform process.

2.2) what is life insurance?

Life Insurance is universally acknowledged to be an institution which eliminates 'risk' and

provides the timely aid to the family in the unfortunate event of death of the breadwinner.
Life Insurance is a contract for payment of a sum of money to the person assured (or
nominee) on the happening of the event insured against. The contract provides for the
payment of premium periodically to the Insurance Company by the assured.
The contract provides for the payment of an amount on the date of maturity or at specified
dates at periodic intervals or at unfortunate death, if it occurs earlier.
2.3) Benefits of life Insurance as:

Protection: Life Insurance guarantees full protection against risk of death of the assured. In
case of death, full sum assured is payable.
Long term saving: Life insurance encourages long term saving. By paying a small premium
in easy installments for a long period a handsome saving can be achieved.
Liquidity: Loan can be obtained against a policy assured whenever required.
Tax Profit: Tax relief in income tax and wealth tax can be availed on the premium paid for
Life Insurance.
By the year 1956, 154 Indian insurance, 16 non-Indian insurance and 75 provident societies
were carrying on Life insurance business in India. On 1st September 1956 all the Insurance
Companies were nationalized. On September 1956, LIC Act was passed by Indian
Parliament and the state run Life Insurance Corporation of India (LIC) has held the
monopoly in countries life insurance sector.
In the year 1999, the Insurance Regulatory Development Act (IRDA) was passed in Indian
Parliament. By this act a door was open for private companies with foreign equity Life
Insurance. By this act an Indian promoter can invest either wholly in an insurance venture
or team up with a foreign insurer, with a cap of 26 percent of equity for a foreign partner.

2.4) Need for life insurance

Old age provision – providing for a lump sum amount after the active income earning years
of the life assured.
Children benefit – provision fore education, marriage, and start in life.
Protection against inflation- provision for capital asset appreciation to combat inflation.
Family protection- protection of the interest of the family members against the loss of the
income due to the death of the breadwinner.
Provision for special needs- protection on financial difficulties arising out of accident,
disability, sickness, loan repayment on death.
Protection against business losses- key men insurance and partnership insurance.

2 .5) Principles of life insurance

Principle of Utmost Good Faith

Contract of insurance are governed by the principle of utmost good faith (uberrimae fides)
as apposed to the general principle of buyer behaviour (caveat emptor). The reasons for
the above are:
The proposer is the only person aware of the present state of his own health.
The insurer not in the position to find out facts unless expressly declared by the proposer.
Principle of Utmost Good Faith, there is a positive duty on the proposer to voluntarily
disclose, accurately and fully all Material Facts of the risk proposed, whether requested or
A Material Fact is a fact which would influence the decision of a prudent underwriter in
deciding whether to insure a particular risk or the terms on which to insure it.
According to Section 45 of the Insurance Act, 1938, a policy of Insurance cannot be called
in question after a period of 2 years from the date of acceptance of the risk unless the
Insurer establishes the following points.
A) The statement by the proposer was inaccurate or false, and
B) Such a statement was material to the contract, and
C) The statement was deliberately and fraudulently made, and
D) The proposer knew the correct facts at the time of making the false statement.

The Consultant has a responsibility both toward the Insurance Company and also towards
the Client in this regard.
1) He must encourage his client to disclose all material facts and must explain to him the
importance of full disclosure, in Insurance Contracts.
2) He must make independent enquiries and report to the Company in case he is aware of
any material fact.

Non Disclosure does not benefit anybody.

1) The Client may not get the Claim Amount.
2) The Consultant will get a bad name in case the Claim is not paid and will also be liable to
3) The Company gets a bad name.

B)Principle of insurable interest
Insurable interest refers to the relationship the person has with the subject matter of
insurance ( human life in life insurance ), whereby, he suffers a pecuniary financial loss on
the happening of the event insured.
The following are examples of Insurable Interest in Life Insurance Contracts.
1) A person has insurable interest on his own life to an unlimited extent. This provision
is made in law as it is difficult to prove in normal circumstances.
2) Husband and wife have insurable interest in each others lives. However in practice there
are certain restrictions in insuring ladies without any income.
3) A Creditor has insurable interest in the life of the Debtor to the amount of loan involved.
4) A Surety has insurable interest in the life of the principal debtor to the extent of the surety
5) Partners in business have insurable interest in the lives of their co-partners to the extent
of the amount payable on death by the firm.
6) A company has insurable interest on the lives of its key employees.

2.6) Peculiarities of the life insurance

Risk is certain in life insurance

Life insurance is a long term contract
There is a difficulty in determining human life value
Indemnity principles are not strictly applicable to life insurance

2.7) Why insurance is superior to other form of savings

An immediate state is created in favor of the policyholders

Protection in case of death
Aid in thrift- economical management of resources
Insurance is a long term saving vehicle. It enjoys the benefits of long term assets and the
benefit of smoothing with profits
Tax relief- income tax, gift tax and wealth tax.
Policies can be taken under M.W.P Act 1874, to protect against creditors.
Policies can be offered as a collateral security.

2.8) Premiums

The basic elements of premiums are as follows

Rate of interest
Premium loading or expenses
The above are only main elements in premium. Other factors like future bonus, lapses,
reserves, profits etc are also taken into account while determining the premiums.
Mortality Table is a Table giving the probabilities of Survival and Death at successive ages.
In Theory Life Insurance can be arranged as yearly contracts under which premium
charged for a given year are just sufficient to pay the claims incurred during the year. This
method is known as Assessmentism. General Insurance and Group Insurance business is
on this basis.
In Life Insurance Assessmentism causes:
1) Resentment against the Insurer due to variation in premiums.
2) Heavy burden at higher ages.
In Assessmentism premiums at higher ages are prohibitive. This difficulty is removed by
charging level premium. The Level Premium is the mathematical equivalent of the
increasing premium payable year after year.
Level premium is more than Claims in early ages and less than Claims at higher ages. Thus
a reserve of fund is created.
The excess is invested and Interest earned is taken into account.
The level premium together with interest should be adequate to meet the claims as well as
expenses of the Insurer.

Adverse Selection
The tendency on the part of under average lives to go in for insurance to a larger extent,
thereby upsetting proportions of healthy and unhealthy lives in a group continuing insurance
is called Adverse Selection. There is Adverse Selection in case of Lapses also where
healthy lives resort to surrender of the policies.

To protect against Adverse Selection, the Insurer has to select lives. The data required for
the selection is obtained through the proposal form, personal statement of health and a
Medical Examiners report.
The Consultant has to the Responsibility to protect the Company against Adverse Selection
in the following manner.
1) By recommending insurance only to Healthy Lives.
2) By informing the Company of any factors that may increase the risk.
3) By ensuring that the policies sold by him are kept in full force.

2.9) Underwriting

Underwriting is the function of selection, classification and accepting risks under an

insurance policy.
The objectives of underwriting are:
1) To maintain homogeneity of the insured groups, thereby ensuring that the mortality
experience of the new entrants is nor significantly different from the existing policyholders.
2) To distinguish between Standard lives and non standard lives.
3) To protect against adverse selection.

2.10) Classification of risks

Risks in Life Insurance can be classified as follows:

1) Those relating to Physical Hazards.
2) Those relating to Occupational Hazards.
3) Those relating to Moral Hazards.
4) The risk of living too long (covered in annuities)
5) Financial Risks.

Factors relating to Physical Hazards

1) Age: Higher the age greater the risk.
2) Sex: Female lives experience greater longevity. Risk of pregnancy and childbirth are
peculiar to female lives.

3) B uild: (Body Shape) - Height, Weight and distribution of the weight is an important factor
in assessing the risk. Overweight at higher ages and underweight at lower ages is a distinct
4) Physical Condition- The condition of the nervous, digestive, cardio vascular, respiratory
and the genito-urinary system.
5) Personal History: Past Illness, operations and Insurance history.
6) Habits- Continued use of a thing - excessive food, smoking, drinking, exercise etc.
Healthy habits are indicative of longer longevity.
7) Family History - Inheritable and Infectious diseases and death at early ages in the family.
8) Hobbies - e.g. dangerous hobbies like mountain climbing, competitive racing, aviation

Factors relating to Occupational Hazard

1) Workers working with heavy machinery, at heights, underground mines high voltages.
2) Workers affected by dust - workers in mines, stone mills, abrasive industry.
3) Workers working under air pressure- divers, tunnel workers
4) Workers affected by temperature- Furnace workers, refrigeration plant workers.
5) Atomic Plant workers- workers affected by radiation.
6) Stunt men, jockeys, mountaineers, etc need to be rated separately.

Factors relating to Moral Hazard

Moral Hazard involves good faith, personal reputation, character business ethics,
environment, speculation, departure from normal social behavior etc of the applicant.
We do not do a Moral judgment in Life Insurance but are only concerned about the factors
which affect the mortality.
No amount of rating can compensate for Moral Hazard, hence cases involved moral hazard
are generally declined.
Some situations which indicate that Moral Hazard is involved are:
1) Insurance not supported by Insurable Interest.
2) Insurance on the lives of children without insurance of parents.
3) Large amount of Insurance not commensurate with income of the proponent.
4) Large amount of Insurance for the first time at a very advanced age.
5) Previous Insurance declined or rated up.

6) Insurance proposed at a place other than the normal residence
7) Address of the proponent c/o Agent.
8) Nominee other than a close relative.


3.1) Glimpse on Malhotra Committee Report

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N.
Malhotra, was formed to evaluate the Indian insurance industry and recommend its future
direction. In 1994, the committee submitted the report and gave the following
Government stake in the insurance Companies to be brought down to 50%
Government should take over the holdings of GIC and its subsidiaries so that these
subsidiaries can act as independent corporations.
All the insurance companies should be given greater freedom to operate.

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the
No Company should deal in both Life and General Insurance through a single entity.
Foreign companies may be allowed to enter the industry in collaboration with the domestic
Postal Life Insurance should be allowed to operate in the rural market
Only one State Level Life Insurance Company should be allowed to operate in each state.

Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up .

Controller of Insurance (Currently a part from the Finance Ministry) should be made

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75%
to 50 %
GIC and its subsidiaries are not to hold more than 5% in any company (There current
holdings to be brought down to this level over a period of time)
Customer Service
LIC should pay interest on delays in payments beyond 30 days. Insurance companies must
be encouraged to set up unit linked pension plans.
Computerization of operations and updating of technology to be carried out in the insurance
Overall, the committee strongly felt that in order to improve the customer services and
increase the coverage of the insurance industry should be opened up to competition.
But at the same time, the committee felt the need to exercise caution as any failure on the
part of new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by stipulating the minimum
capital requirement of Rs.1 bn. This amount is not very high for foreign firms, as it
translates to only about US$25 million. Further, to date it is unclear whether equity should
be payable in one go or should be brought in as installments. Also, the foreign equity
participation was to be restricted to only 40%.
The committee felt the need to provide greater autonomy to insurance companies in order
to improve their performance and enable them to act as independent companies with
economic motives. For this purpose, it had proposed setting up an independent regulatory
The industry and analysts find that there is lack of clarity in the following areas:-
Though coverage of rural areas was to be made compulsory, it raises the question as to
who would subsidies the rural policies as they would be difficult to service and hence costs
will go up.
There is some confusion with respect to investments. Where the funds should be invested?
Currently 70% of the funds with LIC & GIC are invested in Government securities. Would
new entrants be allowed to invest in GOI securities?

The report also does not enumerate exit options available to the new entrants. In the event
of failure, there should be an arrangement made whereby the other companies pool in to
bail the customers, who in all probability would be middle class individuals.
On the basis of the report, the then Finance Minister P. Chidambaram proposed the
opening up of insurance to the private sector, including multinational companies.

3.2) IRDA norms and regulations

ABC is foreign company having diverse business interests, including the marketing and
selling of insurance products in the United States of America (USA). It has a strong
infrastructure, good customer base and brand equity. ABC has heard that the Indian
insurance market has opened up and seeks some information about opportunities there.
ABC wants to tie-up with an Indian company ("XYZ") by forming a joint venture and wants
to know the amount of equity it can hold in an Indian joint venture company and the
insurance products it can sell in India. The company has distributable profits in three (3)
preceding financial years, prior to the year in which shares with differential rights are to be
Further, ABC has a subsidiary in India (the "ABC Sub"), which is engaged in manufacturing
car tyres. ABC wants to know whether ABC Sub can enter into a joint venture with XYZ.
ABC also wants to know about the new regulatory regime, capitalization and related issues.

Observation and Comments

The Indian government has recently passed the Insurance Regulatory Development
Authority Act, 1999 (the "IRDA") whereby amendments have been made to the existing
insurance laws prevailing in the country, namely, the Insurance Act, 1938 (the "Ins Act"),
the Life Insurance Corporation Act, 1956 (the "Life Act"), and the General Insurance
Business (Nationalization) Act, 1972 (the "GIB Act"). An authority called the Insurance
Regulatory Development Authority (the "Authority") has been established to regulate the

insurance sector. (Section 3 of the IRDA) The Authority, inter alia, will have the power to.

Issue to applicants a certificate of registration; renew, modify, withdraw, suspend or cancel

such registration. (Section 14(2)(a) of the IRDA) A certificate of registration will have to be
renewed annually. (Section 3A of the Ins Act r/w the First Schedule of the IRDA)
Prescribe prudential norms such as solvency margins and investment guidelines for
insurance companies (Section 14(2)(k) and (l) of the IRDA)
Protect interests of policyholders in matters concerning assignments of policies,
nominations by policyholders, insurable interest, settlement of insurance claims, surrender
value of policies, and other terms and conditions of contracts of insurance. (Section 14(2)
(b) of the IRDA)
However, the Indian Government has retained with itself the power to issue directions on
questions of policy. (Section 14(2)(b) of the IRDA)
The definition of an "Indian insurance company" has been amended to include "any insurer
being a company-
Which is formed and registered under the Companies Act, 1956; in which the aggregate
holding of equity shares by a foreign company, either by itself or through its subsidiary
companies or its nominees does not exceed twenty-six per cent (26%) of the paid-up
capital; and whose sole purpose is to carry on life insurance business or general insurance
business or re-insurance business." (Section 2(7A) of the Ins Act r/w the First Schedule of
the IRDA) The explanation to this section provides that a "foreign company" is a company
that is not a domestic company. (Section 2(23A) of the Income-tax Act, 1961 r/w section
2(7A) of the Ins Act r/w the First Schedule of the IRDA)
The IRDA by amending the Ins Act clearly provides that the aggregate holding of equity
shares by a foreign company, either by itself or through its subsidiary companies or
nominees should not exceed 26% of the paid-up capital of the insurance company. It has
been clarified that the twenty-six per cent (26%) cap applicable to foreign companies will
also apply to foreign institutional investors, non-resident Indians and overseas corporate
bodies. (Section 2(7A)(b) of the Ins Act r/w the First Schedule of the IRDA)
Thus, a foreign company is now permitted to own unto 26% of the equity in an Indian joint
venture company. Therefore, if ABC proposes to form a joint venture with XYZ, ABC's
shareholding will be restricted to a minority shareholding of 26% in the joint venture
company. It must be noted that the Indian insurance company must be a public limited
company. (Section 2C of the Ins Act)

Now, let us assume that ABC has a subsidiary company in India (the "ABC Sub") in which it
owns a fifty-one per cent (51%) equity and decides that ABC Sub should enter into the
insurance joint venture with XYZ. This will not be permissible. According to recent informal
pronouncements of the Authority, Indian companies that are subsidiaries of overseas
companies will not be allowed to tie-up with other Indian companies to do insurance
business. The Authority perceives this as violation of the twenty-six per cent (26%) equity
cap by foreign insurance companies.
ABC can, however, along with several other foreign companies have a stake in an
insurance company operating in India as long as the combined equity stake of all foreign
companies does not exceed twenty-six per cent (26%).
The Authority will not register any new insurance company carrying on the business of life
or general insurance unless it has a minimum paid-up capital of Rs. 100 crores (approx.
US$ 23,255,800). No composite license for life and non-life business will be granted. For
companies in the reinsurance sector, a minimum paid-up capital of Rs. 200 crores (approx.
US$ 46,510,000) is required. (Section 6 of the Ins Act) The foregoing paid-up share capital
must be brought into the new company within six (6) months of issue of the license.
(Section 6 of the Ins Act r/w the First Schedule of the IRDA) In addition, every insurer will
be required to undertake such percentages of life insurance or general insurance business
in the rural or social sector, as specified in the Official Gazette by the Authority in this
behalf. (Section 27D of the Ins Act r/w the First Schedule of the IRDA) Furthermore, a new
insurance company will be permitted to invest policyholders' funds only in India. (Section
27C of the Ins Act r/w the First Schedule of the IRDA) Every insurer shall, in respect of its
life insurance business, be required to deposit with the Reserve Bank of India, either in
cash or in approved securities, a sum equal to one per cent (1%) of its total gross premium
written in India, not, however, exceeding Rs. 10 crores (approx. US$ 2,325,580). In respect
of the general insurance business, this sum will equal three per cent (3%) of its total gross
premium written in India, not, however, exceeding Rs. 10 crores (approx. US$ 2,325,580).
In respect of re-insurance business, this sum will equal Rs. 20 crores (approx. US$
4,651,160). (Section 7(i) of the Ins Act r/w the First Schedule of the IRDA)
There appears to be a grey area in the IRDA. It has been provided that an Indian promoter
holding more than twenty-six per cent (26%) of the paid-up equity capital of an Indian
insurance company will have to divest in a phased manner the share capital in excess of
twenty-six per cent (26%), after a period of ten (10) years from the date of commencement
of business by the Indian insurance company. (Proviso to section 6AA of the Ins Act r/w the

First Schedule of the IRDA) On the one hand, the Indian government seeks to restrict
foreign equity ownership in Indian insurance companies to twenty-six per cent (26%)
whereas on the other hand, it wants Indian partners to divest their equity holdings to twenty-
six per cent (26%) after ten (10) years. It is unclear whether the foreign partner will be
permitted to purchase the equity to be divested. Additionally, what if there are no takers of
the equity required to be divested! All these points will have to be adequately considered
when formulating the regulations in respect of divestment.
The IRDA proposes to allow three kinds of insurance brokerage firms to operate in the
country, namely, insurance, re-insurance, and composite brokerage firms. The twenty-six
per cent (26%) equity cap will apply to such firms too, except that, composite brokers may
enjoy a higher equity cap of forty- nine per cent (49%).
c) Company formation consideration
On complying with the registration formalities, ABC and XYZ will have to enter into a
shareholders agreement. The main issue that arises here is exercise of control in the
functioning of the joint venture company. Generally, exercise of control can be at two levels.
Board of Directors; and Shareholders
Under the Companies Act, 1956 (the "Cos. Act") a company can carry on activities by
passing either of two resolutions, special resolutions and ordinary resolutions. Ordinary
resolutions can be passed by shareholders having 50% plus one share with voting rights in
the company, whereas special resolutions can be passed only by shareholders having 75%
shares with voting rights in the company. A special resolution is, inter alia, required to
amend the Memorandum and Articles of Association of a company, to issue further shares
through a rights issue, to give loans or guarantees to other companies, etc. With a twenty-
six per cent (26%) equity stake, ABC will only be in a position to block special resolutions. It
will not be able to control the day-to-day functioning of the joint venture company.
Additionally, the Authority has prescribed that foreign insurance companies cannot retain
Board control in Indian insurance joint venture companies. Therefore, ABC will not be able
to appoint majority directors on the joint venture company's Board. Another pertinent point
that arises is infusion of funds to the extent of seventy-four per cent (74%) of the equity of
the joint venture company by the Indian partner, namely, XYZ. XYZ will have to bring in a
minimum amount of US$ 17,209,292, if the joint venture company seeks to enter into the
business of life or general insurance. Further, in the event of increase of share capital, XYZ
will have to pump in an amount equal to its seventy-four per cent (74%) equity stake. This
can cause some problems. It should be noted that preference shares cannot be issued by

companies carrying on life insurance business (Section 6A(1)(i) of the Ins Act). As such, the
joint venture company carrying on life insurance business cannot comply with the
capitalization stipulations by issuing preference shares to ABC
In such circumstances, the parties can consider entering into a three-way joint venture
either with another Indian company or with a bank. The Reserve Bank of India ("RBI") has
permitted banks to enter into the insurance sector and to invest up to fifty per cent (50%) of
their paid-up capital in insurance joint ventures.
d) Share transfer issues
Various issues arise if one of the shareholders in the joint venture company decides to
transfer its shareholding. The transfer conditions depend upon the shareholders agreement.
As per the guidelines stipulated under the IRDA, where the nominal value of the shares
intended to be transferred by any individual, firm, group, constituents of a group, or body
corporate under the same management, jointly or severally, exceeds one per cent (1%) of
the paid-up capital of the insurer, previous approval of the Authority must be obtained to
effect such a transfer. (Section 6A(4)(b)(iii) r/w the First Schedule of the IRDA) Further,
where, after the transfer of shares, the total paid-up holding of the transferee in the shares
of the company is likely to exceed five per cent (5%) of its paid-up capital, or where the
transferee is a banking or an investment company, is likely to exceed two and a half per
cent (2 ½ %) of such paid-up capital, prior approval of the Authority must be obtained in
respect of the transfer. (Section 6A(4)(b)(ii) r/w the First Schedule of the IRDA) The
aforesaid regulations will have to be complied with by ABC and XYZ in case of transfer of
shares in the joint venture company.

3.3) Insurance Rules

To regulate, promote and to ensure orderly growth and also to protect the interests of
policyholders, Insurance in India is regulated by certain rules and regulations. This section
is aimed at familiarizing the user with the Insurance Laws.
Agent's Licensing Course/ Syllabus
Syllabus of the examination to be held by IRDA for Agents to attain license.
Application for Training Institutes
Application for approval of training institutions for the purpose of training agents, as
specified by IRDA.
Appointed Actuary Regulations, 2000
Contains rules and regulations that guide the appointment of Actuaries.
The Insurance Advisory Committee (Meetings) Regulations, 2000
Rules and Regulations that would govern the meetings of the “The Insurance Advisory
Agents Regulations, 2000
Contains detailed rules and regulations laid down by IRDA for an individual to become an
Assets, Liabilities, and Solvency Margin of Insurers Regulations, 2000
Specifies the minimum solvency margins to be maintained by Insurers. In addition, it also
specifies the reporting procedures to be followed by insurers.
General Insurance - Reinsurance Regulations, 2000
Regulations governing Reinsurance business(General Insurance) in India.
Investment Regulations, 2000
All about investment and exposure norms for Life and General Insurance business as
notified by IRDA.
Investment (Amendment) Regulations, 2001
Contains details of the amendments made to the Investment Regulations 2000, as given by
Insurance Surveyors and Loss Assessors ( Licensing, Professional Requirements and Code
of Conduct) Regulations, 2000
Contains detailed rules and regulations laid down by IRDA for individuals/corporate to
become Surveyors and Loss Assessors
Life Insurance - Reinsurance Regulations, 2000
Regulations governing Reinsurance business(Life Insurance) in India.
Registration of Indian Insurance Companies Regulations, 2000
Contains detailed procedure to be followed by companies to register and carryout
Insurance business in India.
Third Party Administrators- Health Regulations, 2001
Regulations issued by IRDA governing third party administration in Health insurance sector.
Insurance Advertisements and Disclosure Regulations, 2000
Norms laid down by the IRDA governing advertising and promotional aspects for Insurance
Preparation of Financial Statements And Auditor's Report Of Insurance Companies
Regulations, 2002

Regulations addressing matters relating to Financial statements, management reports and
auditor's reports to be submitted by insurance companies.
Obligations Of Insurers To Rural Social Sectors Regulations, 2002
Insurer’s obligations towards Rural and Social Sectors as laid down by IRDA.
Insurance Regulatory and Development Authority (Meetings) Regulations, 2000
Procedure to be followed by the authority to conduct meetings for transaction of business.
Insurance Regulatory and Development Authority is a statutory body formed by an Act of
Parliament on 19th April 2000.

Licensing Of Corporate Agents Regulations, 2002

Contains detailed rules and regulations laid down by IRDA for Corporates to become an
Manner of Receipt of Premium Regulations, 2002
Contains details of the amendments made to allowed modes of premium payments.
Protection Of Policyholders' Interests Regulations, 2002
Regulations laid down by IRDA to protect the interest of the policy holders.
Protection of Policyholders' Interests (Amendment) Regulations, 2002 (Contains details
of the amendments made to the "Protection of Policyholders' Interests Regulations, 2002",
as given by IRDA
(Rules are given in detail at the back of this report)


4.1) About HDFC

Founded in 1977 HDFC today is the market leader in housing finance in India and has
extended financial assistance for more then 19 lakhs homes. HDFC has over 120 offices in
India presently. It also has one international office in Dubai and service associates in
Bahrain, Kuwait, Qatar, Saudi Arabia and Sultanate of Oman. HDFC’s asset base amount
to over Rs 21450 crore its financial strength is reflected in highest safety ratings of AAA
and MAAA awarded by CRISIL and ICRAtwo of India’s leading credit rating agencies
respectively, for the last 7 years consecutively. It has depositor base of over 13 lakhs
depositors and a deposit agent, force of over 50000. Of the total deposits, 82% are sourced
from individual and trust depositors, which demonstrates the tremendous confidence that
retail investors have in the company.
HDFC promoted companies have emerged to meet the investors and customers needs.
HDFC Bank for commercial banking, HDFC mutual for mutual products, HDFC’s standard
life insurance and pension products and HDFC Chubb for general insurance products.
Being an institution that is strongly committed to the highest standards of quality and
excellence, HDFC has won several accolades in the past few years. One such award is
“Ramakrishna Bajaj National Quality Award ” for the year 1999. this award was instituted
to award reorganization to Indian companies for business excellence and quality
management HDFC is the only company so far to receive this award in the services

4.2) Reputation for Quality

Year Award

1997 One of the best Indian Boards

1997 Most competitive Indian company

1995 & 96 India’s best managed company
1991 United Nations Scroll of Honour
4.3) HDFC Standard Life

a) The Partnership :
HDFC and Standard Life first came together for a possible joint venture, to enter the Life
Insurance market, in January 1995. It was clear from the outset that both companies shared
similar values and beliefs and a strong relationship quickly formed. In October 1995 the
companies signed a 3 year joint venture agreement.
Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the
The next three years were filled with uncertainty, due to changes in government and
ongoing delays in getting the IRDA (Insurance Regulatory and Development authority) Act
passed in parliament. Despite this both companies remained firmly committed to the
In October 1998, the joint venture agreement was renewed and additional resource made
available. Around this time Standard Life purchased 2% of Infrastructure Development
Finance Company Ltd. (IDFC). Standard Life also started to use the services of the HDFC
Treasury department to advise them upon their investments in India.
Towards the end of 1999, the opening of the market looked very promising and both
companies agreed the time was right to move the operation to the next level. Therefore, in
January 2000 an expert team from the UK joined a hand picked team from HDFC to form
the core project team, based in Mumbai.
Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in
HDFC Bank.
In a further development Standard Life agreed to participate in the Asset Management
Company promoted by HDFC to enter the mutual fund market. The Mutual Fund was
launched on 20th July 2000.

b) Incorporation of HDFC Standard Life Insurance Company Limited:

The company was incorporated on 14th August 2000 under the name of HDFC Standard
Life Insurance Company Limited.
Our ambition from as far back as October 1995 was to be the first private company to re-
enter the life insurance market in India. On the 23rd of October 2000, this ambition was
realized when HDFC Standard Life was the only life company to be granted a certificate of
HDFC are the main shareholders in HDFC Standard Life, with 81.4%, while Standard Life
owns 18.6%. Given Standard Life's existing investment in the HDFC Group, this is the
maximum investment allowed under current regulations.
HDFC and Standard Life have a long and close relationship built upon shared values and
trust. The ambition of HDFC Standard Life is to mirror the success of the parent companies
and be the yardstick by which all other insurance company's in India are measured.

c) Our Mission:
The most successful and admire life insurance company, which means that we the most
trusted company, the easiest to deal with, offer the best value of money, and set the
standards in the industry. In short, “The most obvious choice for all”.
This doe’s not just mean being the largest or the most productive company in the market;
rather it is a combination of several things like-
Customer service of the highest order
Value for money for customers
Professionalism in carrying out business
Innovative products to cater to different needs of different customers
Use of technology to improve service standards
Increasing market share

d) Our Values:
SECURITY:Providing long term financial security to our policy holders will be our constant
endeavour. We will be do this by offering life insurance and pension products.
TRUST: We appreciate the trust placed by our policy holders in us. Hence, we will aim to
manage their investments very carefully and live up to this trust.
INNOVATION:Recognizing the different needs of our customers, we will be offering a
range of innovative products to meet these needs.
Our mission is to be the best new life insurance company in India and these are the values
that will guide us in this.

4.4) Performance achieved

HDFC Standard Life declares results for FY 2002-03, premium from new business more
than three and a half times over last FY
Insurance coverage crosses Rs. 5000 crore mark
HDFC Standard Life participating policyholders to benefit from third successive bonus
HDFC Standard Life Insurance Company Limited, the first private sector life insurance
company to start operations , declared its annual results for the financial year ending
March 31st, 2003. The company generated premium from new
business of Rs. 132 crore in 2002-03, as compared to Rs. 36 crore in the previous
financial period, registering a year-on-year growth of over 260%.
Another significant achievement for HDFC Standard Life was that the cumulative
Insurance coverage, i.e. the sum assured for the policyholders, crossed the Rs. 5000
crore mark during the year. During this period, HDFC Standard Life extended life
Insurance coverage to over 1, 50,000 lives.
According to Mr. Deepak Satwalekar, Managing Director and CEO, HDFC Standard
Life, the exceptional growth in business in the past twelve months had been driven by
the rising expectations of the consumer. This in turn had resulted in HDFC Standard
Life introducing new insurance solutions, establishing an increased presence across
locations, increasing its sales force of trained financial consultants and adding
corporate agents to its distribution mix, he added.
The Directors of HDFC Standard Life at their Board meeting on 29th April, 2003, also
declared the company’s third bonus for participating policyholders.
Commenting on the bonus declaration Mr. Deepak Parekh, Chairman, HDFC Standard
Life, said “We have declared reversionary bonus rates this year equal to the interim
bonus rates we declared last year. Long term interest rates have fallen by over 1%
since we declared our bonus last year, and this has had an impact on the rates of
interest that all financial institutions can pay their customers. In recognition of this fall in
long term interest rates we have reduced our interim bonus rates this year, and unless
there is a recovery in long term interest rates, reversionary bonus rates will also have to
be reduced in future years.”
Details of the bonuses declared are given in the Annexure attached along with this

HDFC Standard Life’s current product portfolio caters to all the needs of the individual
– protection, investment, savings and pension. Mr. Satwalekar said, “Our products are
in fact integrated financial solutions that can offer them stability of returns along with
total protection. We would, going forward, continue to add to our “insurance solutions
portfolio to offer increased flexibility in structuring individualized insurance solutions.”
A new addition to HDFC Standard Life’s product portfolio was the HDFC Children’s
Plan in February 2003. This customized solution has found wide acceptance amongst
policyholders towards ensuring a bright future for their children, whether it is education,
marriage or establishing a professional career. Besides the Children’s Plan, the HDFC
Personal Pension Plan also continued to gain in popularity during the year. Amongst
private insurers, HDFC Standard Life currently has a 25 percent market share in the
pension segment.
With offices in 49 locations , HDFC Standard Life has nearly doubled its physical
presence across the country in the last twelve months. Ajmer in Rajasthan was the
latest in the company’s list of cities that it operates from.
Also contributing to the growth in business were more than 10,500 financial
Consultants trained to understand the needs of the consumer, provide the right advice
and maintain high service standards.
With the modified corporate agency regulations allowing banks to sell insurance
products, HDFC Standard life entered into tie-ups with HDFC Bank, Union Bank of India
and Indian Bank. Emphasizing the importance of this distribution channel, Mr.
Satwalekar said that given the right circumstances, corporate agents, and
bancassurance, which is a specialized form of corporate agents, could emerge as
significant intermediaries in the year ahead.
He pointed out that the success of bancassurance will, however, be dependent on
appropriate products being sold through the bank branches and exploiting the strengths
of the branch network. A significant change in the Indian financial services industry is
imminent with banks and insurance companies increasingly realising the strategic
significance of bancassurance in the future viability of their businesses, he added.

HDFC Standard Life’s group business also grew significantly in 2002-03 covering
22,000 lives for a sum assured of over Rs. 2000 crores.

Details of Bonus declared by HDFC Standard Life for participating policyholders for
the financial year 2002-03
Reversionary Bonus
a) Regular premium policies
The Directors declared a reversionary bonus at the annual rate of 3.75% of the sum
assured for all regular premium HDFC Endowment Assurance policies, HDFC
Children’s Plans, HDFC Money Back policies and HDFC Personal Pension Plans that
were still in force on 31st March, 2003, and have paid all premiums in full when due.
b) Single Premium Whole of Life Policies
The Directors declared a reversionary bonus at the annual rate of 7.00% of the sum
assured plus attaching bonus for all HDFC Single Premium Whole of Life policies that
were still in force on 31st March, 2003.
c) Single Premium Personal Pension Plans
The Directors declared a reversionary bonus at the annual rate of 7.00% of the sum
assured for all single Premium HDFC Personal Pension Plans that were still in force on
31st March, 2003.
These rates of bonus will apply for the financial year from 1st April, 2002 to 31st March,
Interim Bonus
a) Regular premium policies
The Directors declared an interim bonus at the annual rate of 3.25% of the sum assured
for all regular premium HDFC Endowment Assurance policies, HDFC Children’s Plans,
HDFC Money Back policies and HDFC Personal Pension Plans that become claims
before the next bonus declaration and have paid all premiums in full when due.
le Premium Whole of Life Policies
The Directors declared an interim bonus at the annual rate of 6.00% of the sum assured
plus attaching bonus for all HDFC Single Premium Whole of Life Policies that are still in
force and become claims before the next bonus declaration.
c) Single Premium Personal Pension Plans

The Directors declared an interim bonus at the annual rate of 6.00% of the sum assured
for all single premium HDFC Personal Pension Plans that are still in force and become
claims before the next bonus declaration.
1. Reversionary Bonus
A bonus that is added to policies throughout their term, the bonus rate changes over the
term of the policy, the bonus rate is usually declared annually. Once added to the policy
the full value of the bonus is guaranteed to be paid on death or maturity provided that all
premiums are paid in full when they are due.
2. Interim Bonus
A bonus that is added only to policies which become claims in the period between this
bonus distribution and the next. Such policies receive interim bonus to compensate
them for the reversionary bonus they have earned up until the date of claim but will not
receive because they will no longer be in force at the next bonus declaration. The
interim bonus rate is usually declared annually.
3. Calculation of reversionary and interim bonuses
Reversionary and interim bonuses accrue on a monthly basis, so that policies will
receive one twelfth of the annual rate of bonus for each complete and part month they
qualify for bonus during the period to which the bonus applies.

4.5) Products of HDFC Standard Life Insurance

1) Child P lan

Children’s Plan is designed to provide a lump sum to the child at maturity. It also provides
financial security to the child in the future, even in case of the insured parent’s unfortunate
death during the policy term. Children’s Plan receives simple reversionary bonuses, which
are usually added annually. This is a flexible plan with three options for you to choose from,
depending on your requirements. The details of these options are explained in the next

What are the options that are available with this plan?

On the death of the

Option insured parent during On maturity
the policy term

Future premiums waived

Sum assured + bonuses
Maturity Benefit Plan and the policy continues till
On the survival of the
insured parent to the
Accelerated Benefit Plan Sum assured + bonuses
paid and the policy stops. maturity date, sum assured
+ bonuses paid.
Sum assured paid, future
premiums waived, and the Sum assured + bonuses
Double Benefit Plan
policy continues till paid.

2) Money Back Plan

It is a participating (with profits) insurance plan that offers the following features:
Ø Payment of cash lump sums, each of which is a proportion of the basic sum assured,
at 5-year intervals during the term of the policy. (Please refer to the table given below.)
Ø On survival up to maturity, a payment equal to the basic sum assured plus any bonus
additions less the cash lump sums paid earlier is provided.
Ø In case of the unfortunate death of the life assured within the term of the policy, the
basic sum assured plus any bonus additions is provided. This is over and above the earlier

Schedule of cash lump sum
(as a % of basic sum assured)

Total Policy Term Number of Years from policy date

5 10 15 20 25
10 40%
15 30% 30%
20 25% 25% 25%
25 20% 20% 20% 20%
30 15% 15% 15% 15% 15%

3) Term assurance Plan

Under this plan, a sum assured is payable in case of death of the life assured during the
term of the contract. One can choose the lumpsum that would replace the income lost to
one's family in the unfortunate event of one's death. Since this non-participating (without
profits) plan is a pure risk cover plan, no benefits are payable on survival to the end of the
term of the policy.

Why should you buy this product?

If you have a family that you care for, you should consider what would happen in case of
your unfortunate death. The emotional void cannot be filled, but financial insecurity can be
avoided. By taking this affordable life insurance plan, you can
provide for the well-being of your family in case of your unfortunate death. This plan comes
to you at a minimal cost and is well-suited for the value-conscious customer.

4) Personal Pension Plan

Before you enter into any financial contract, it is important that you understand what the
product is, how it works, the risks involved and what a decision to buy could mean for you.
We recommend that you read this document before you purchase a policy from HDFC
Standard Life Insurance Company.

Purpose: The policy is basically a savings contract, which is designed to provide an
income for life from retirement, with an option to take the lump sum elsewhere to buy the
annuity, provided it is permitted by the prevailing regulations.

Your commitment: You agree to pay a single premium or level premiums with installments
due every quarter, half-year or year throughout the deferment period
of the policy, after which you will start receiving your pension.

Risk factors: If you cease to pay premiums we may pay a surrender value. This will be
determined at our discretion. If any of the information which you provide is incorrect, we
reserve the right to vary the benefits which may be payable and, further, if there has been
non-disclosure of a material fact then we may treat your Policy as void. We will not pay out
if a claim arises from an excluded cause of death. Future bonuses are not guaranteed.
They are dependent on our future experience. The principal elements of experience are our
investment performance and expenses.
How does your Personal Pension Plan work?
This participating (with profits) plan is basically a savings contract, which is designed to
provide an income for life from retirement. It does this by providing a notional lump sum on
retirement, comprising of sum assured plus any attaching bonus. Subject to the prevailing
regulations, part of this lump sum can be taken in form of cash and the rest converted to an
annuity at the rate then offered by HDFC Standard Life. Alternatively, if it is permitted by the
prevailing regulations, the notional lump sum can be used to buy an annuity with any other
insurance companywho will accept such business. On earlier death after the first year, for
Regular Premium policies all premiums paid to date will be returned with interest at 8% per
annum, subject to a maximum of the sum assured plus bonuses declared to date. For
Single premiums, it is sum assured plus bonuses declared to date.
Normally, we will declare a reversionary bonus once a year. Once added, it cannot be
reduced. Reversionary bonus will take the form of a simple addition to your policy benefits.
In addition, on maturity, a terminal bonus might be payable. On death, an interim bonus,
reflecting the period since the last addition of reversionary bonus, might also be payable.
5) Endowment Plan

It is a participating (with profits) insurance plan that offers the following features:
Ø Provides financial support to the family by way of a lumpsum payment in case of the
unfortunate death of the life assured within the term of the policy.
Ø Provides a lump sum payment to the life assured on survival up to maturity.
Why should you buy this product?
This plan is a with profits saving plan and is well suited for saving money for your long term
financial goals. This plan also helps provide for the needs of your family in your absence by
paying out a lump sum in the event of your unfortunate death during the term of the policy.
6) Loan Cover Term Assurance
This plan provides a lump sum on the unfortunate death of the life assured during the term
of the plan. The lump sum will be a decreasing percentage of the initial sum assured. As
the outstanding loan decreases as per the loan schedule, the cover under the policy
decreases as per the policy schedule. Since this is a non-participating (without profits) pure
risk cover plan, no benefits are payable on survival to the end of the term of the policy.
Why should you buy this product?
If you are taking a loan to buy a house for your family, this plan can help you ensure that
life's uncertainties do not affect their shelter. It is an affordable plan that has been designed
to help your family repay the outstanding loan in case of your unfortunate death.

4.6 Sales structure of the organization

Managing Director

General Manager

Head - Head - Customer Central Distribution

Retail Sales Group Sales Service Manager Support

Branch Manager Sales


R e p r e s e n t a t i vBeu sOi fnfei sc se D e v e l o pCmo er np to r a t e Training
R e s i d e n t M a n aMg ae nr a g e r ( B D M ' sA) g e n t s

Team of BDM
T e' sa m o f C o n s u l t a n t s Management

Team of Consultants


5.1) Distribution scenario in Indian market

In today's Indian insurance market, the challenge to insurers and intermediaries is two-
Building faith about the company in the mind of the client
Intermediaries being able to build personal credibility with the clients
Traditionally tied agents have been the primary channels for insurance distribution in the
Indian market; the public sector insurance companies have their branches in almost all
parts of the country and have attracted local people to become their agents. The agents
are from various segments in society and collectively cover the entire spectrum of society.
A person who has lived in the locality for many years sells the products of the insurance
company with a local branch nearby. This ensures the last mile touch point being closer to
the customer. Of course, the profile of the people who acted as agents suggests they may
not have been sufficiently knowledgeable about the different products offered, and may not
have sold the best possible product to the client. Nonetheless, the customer trusted the
agent and company. This arrangement worked adequately in the absence of competition.
In today's scenario agents continue as the prime channel for insurance distribution in India,
as is the case in most markets, supported by call centers to a small extent. Almost all the
new players follow this model primarily because the regulations for other channels are yet
to be put in place.
However there is great excitement in the industry over the impending broker regulations,
and companies are planning possible channels in their enthusiasm to increase volumes.
The belief that all these channels will grow and seamlessly integrate to bring in business
seems a fallacy.
What has emerged is a much more difficult and evolving market scene with existing
players, more new players coming in, and global marketing practices and ideas being
tested. But none of this has changed the fundamental character of the market, which we
believe will take more time than expected.

5.2) what companies should look?

Basically companies have to take a look at the intermediaries they are using, whether it is
optimal to use them, and what are the alternatives?
The new companies have attempted appealing only to the middle, upper middle and elite
classes in the major cities. Contrasted with Public sector insurance companies, with their
offices across the country, the new companies have miles to go before they reach
anywhere. They must overcome the mindset of the customer that life insurance is Life
Insurance Corporation of India (LIC) and general insurance is General Insurance
Corporation of India (GIC) if they hope to grow in the market. Meanwhile, the public sector
companies are going to great lengths to revamp their image to look and feel more

Both the public and new private sector companies are fighting their own battles from the
perspective of customer perception management:

Public Sector Companies Private Sector Companies

Identity is well established, but the Have to build their identity in a
perception of " poor service market where the public does not
providers" is a stigma. distinguish them.
Products are not attractive and Remove the perception that anything
flexible enough but expensive. that looks good is expensive
To retain their creamy layer clientele Work against the people's mindset
who are the most likely to be wooed that they are not here for the long
by the new companies term
Retain and attract good Attract intermediaries especially
intermediaries agents with the requisite
qualifications and attributes who can
market the company and the
Match the aura created by the new Run the risk of tapping an already
companies in the urban market insured market for repeat insurance
instead of tapping new virgin pockets
in the market

In this process all are targeting the same market --the existing pie is being cut up further,
but no attempt is being made to increase the size of the pie. For example, while attempts
are made to complete the quota of rural insurance in percentage terms, the rural market
potential is yet to be tapped, as the new insurers are not able to attract the right kind of
talent into their distribution force to address this. Intelligent segmentation of distribution
channels to match the market segmentation is what will help the companies to move in this

5.3) Basic channels followed by companies

a) Agents

Today's insurance agent has to know which product will appeal to the customer, and also
know his competitor's products in the same space to be an effective salesman who can sell
his company, the product, and himself to the customer. To the average customer, every
new company is the same. Perceptions about the public sector companies are also
cemented in his mind.
The new companies are looking for educated, aware individuals with marketing flair, an elite
group who can be attracted only with high remuneration and the lure of a fashionable job,
all of which may not be possible in this business with its price pressures and the complexity
of selling insurance. Unable to attract this segment, they have started easing recruitment
conditions as against the stringent norms they had earlier, thereby diluting the process.
While the public sector companies are able to attract agents, they continue to suffer from
high attrition rates due to indiscriminate agent appointment. The most successful of these
companies' tied agents are hardly of the elite variety of salesman. They are still the
neighborhood do gooders -- the postman, the schoolteacher, and the shopkeeper -- who
know the people and are themselves known in the community. The challenge here is the
lack of knowledge of the competitive market and the inability to do intelligent comparisons
with the competitor's products. Educating and training these agents is a serious challenge
for the insurance company.
The relevance of this kind of agent continues even today as agents are sought or contacted
by families by word of mouth. Insurance companies are advised not to follow the path of
FMCG's/credit card companies, believing that a suited and booted customer care
consultant or financial consultant will necessarily appeal to the average Indian customer.
Another social feature in the market is the considerable respect for age in Indian society
and a belief that an older person knows better. A very young up-market agent who is a
typical salesman may not appeal to a large segment of the middle class, which is looking
for a solid trustworthy person from whom they can buy insurance.
In this context it might be a rewarding exercise to recruit some older people (who have
taken VRS 2 from banks and other financial institutions) to sell some lines of products like
pension plans, annuities etc.
Gender of agents is another relevant feature in the rural context that makes a difference,
especially for the female population. Women to whom the customers can relate --e.g.,
nurses, gram sevikas 3 -- can target the female segment of the population more effectively.
What is applicable for the rural women and children health programs and population control
programs is equally applicable for insurance selling also. Max New York Life has adopted a

version of this strategy by appointing gram sahayaks 4 to sell and service the rural
With this kind of segmentation of intermediaries the challenge for the insurance company
lies in training and educating these people to become effective sales persons. But this in no
way diminishes the benefits of intermediary segmentation.

b) Banks
Banks in India are all pervasive, especially the public sector banks. Can they also become
the foremost channel for distribution of insurance? Perhaps in the future. The public sector
banks, with their vast branch networks, are also plagued by a rigid unionized workforce and
archaic systems, and lack vision of a broader service spectrum encompassing non-banking
products. The newer banks are constrained by their lack of reach and meager branch
strength. For banks to become a predominant channel for selling insurance will require a
paradigm shift.
But the encouraging fact for insurance companies waiting for bancassurance to take off is
that bank branches are here to stay, and customers do want them. A customer survey by
Deloitte Consulting 5 in the western developed markets found that for banking activities,
customers place high importance on having convenient branches in their banking
relationships. This is good news for the Indian banks with their many branches, and also
makes a strong case for taking up bancassurance.
The major lines of business that can be sold through bancassurance successfully are term
insurance, creditor insurance, and non-life products like Property, Motor and Personal
accident, Homeowners comprehensive insurance etc.
An example is SBI Life, 6 which is waiting for the broker regulation to be put in place in order
to move ahead aggressively with the bancassurance model. One of their major product
lines is creditor insurance, and they have launched their first creditor insurance product,
which covers the liabilities of the creditor in case of death of debtor. SBI Life is planning a
similar product for home loan borrowers of State Bank of India. This model has high
relevance in the Indian context with far-flung villages where the insurance potential is in
volume and not in high per capita premiums. Some advantages and disadvantages are:

Advantages of bancassurance Disadvantages of bancassurance

High credibility (as trustworthy Economic viability for the banks to
caretakers of money) with the take up as bancassurance is a
public volume business
A ready customer base Training of people and lack of
vision and awareness
Low cost channel for selling simple Useful for selling only certain lines
vanilla products of products
Extensive reach including the rural Initial investment in systems and
pockets processes and people training

The strategy should be to use multiple banks according to their presence in different
regions. Success would come by using bancassurance where it will be most effective – i.e.,
selling simple, cheap products to the masses at a low cost. This awareness is growing and
is evident from the fact that nearly every insurance company has partnered with one or
many banks to implement bancassurance.

c) Brokers
With the broker regulation under review and expected any time, this could be the next hope,
especially for the urban market. This will be a new experience for the insurance customer,
accustomed to brokers in financial services, real estate, and travel and tourism. For
historical reasons the image that 'broker' carries in the minds of the customer is not very
favorable. Thus the new breed of insurance brokers face the challenge of establishing
The positives are that brokers in the urban arena can attract the elite and the upper middle
class customer. Brokers represent the customer and will sell the products of more than one
company. They seek to determine the best fit for the client and can effectively address the
mind block faced by the public about the various companies. This is applicable in the case
of life insurance for the high-end and corporate/group segment.
In the non-life segment, broking is not entirely new, as reinsurance brokers were arranging
exotic covers. For individual customers also, with a wide range of competitive products, the
broker can get a good deal. The corporate broking companies will have to play a prominent
If NGOs based in rural areas can be attracted into the rural sector cooperatives arena, they
stand a good chance of succeeding and can help the new players get a foothold in the rural
market. These are the players with the potential to make the difference, as they have the
trust of the people. We envisage scenarios like that in Bangladesh's micro lending growth

and the milk co-operatives 7 in Gujarat selling insurance in addition to milk production and
distribution. It would be a new dawn in Indian insurance distribution! With the right impetus
the Indian rural insurance scenario could be one with high business volume and
tremendous growth potential.
ICICI Prudential Insurance and HDFC Standard Life Insurance have already partnered with
NGOs 8 to sell some low cost insurance in rural areas.
However, the challenge lies in establishing regulations that protect the customer and attract
the right players into the brokerage market rather than creating another middlemen
segment eroding the premium.

d) Work site marketing

This area needs to be tapped, as in any country one of the biggest markets is through the
worksite. With changes in human resources management polices and compensation
packages, group products or work site products do have a definite market that cannot be
Here the advantages would be:
Captive customer base
Potential to sell individual insurance and group insurance
High trust factor
High hit ratio for the intermediaries
The challenges would be the cost effectiveness, product customization and efficient post
sales servicing, which would determine continued business. Technology has a key role to
play in worksite marketing to ensure cost benefits. Banks and financial institutions have
been successfully marketing credit cards and other financial products using this channel. If
not an identical model a similar approach can be used for selling insurance.

e) Internet
Though India is joining the fast growing breed of net users, using net for transactions has
not yet caught up. Though a few banks provide online banking, the usage is still a small
fragment. The insecurity associated with transactions over the net is still an inhibiting
factor. At present most of the insurance companies have product information and/or
illustrative tools on the web.
We do not see the web evolving into a means for direct selling of insurance in the current
scenario. In the Indian market, where insurance is sold after considerable persuasion even

after face-to-face selling, the selling over the net, which must be initiated by the client,
would take some more time.
While the technology capability is there, improvements in bandwidth and infrastructure are
needed. Also needed are simpler products where auto-underwriting is feasible.
Automobile insurance, one of the segments of insurance purchased "off the shelf" in India,
would be the ideal segment to start with. On the life side, term assurance for standard lives
with simplified underwriting is a possibility.
These channels by themselves will not be able to overcome the mindset of the people, but
rather can only be enablers for the human channels.

f) Invisible Insurer
In this model, the insurance company or its representative is not the entity marketing the
products. The insurance cover is sold by an automobile /credit card company as an add-on
product leveraging the brand of the retailer. The risk is carried by the insurance company,
which underwrites it. . Products like creditor insurance, automobile insurance, and credit
card related insurance could be distributed using this channel. This model can be adopted
in all market segments for the lines of business mentioned. It is already prevalent in some
areas like credit card insurance and crop insurance for agricultural loans.
The new players are also attempting this model. The venture of Maruti 9 into insurance by
setting up two subsidiaries MIDS 10 and MIBL 11 to sell automobile insurance is a case in
point. These firms will largely arrange insurance cover for Maruti's captive customer base.
MIDS has been registered as a corporate agent with an exclusive arrangement with Bajaj
Allianz General Insurance, while MIBL has linked up with state-owned National Insurance
Company Limited.
What makes these arrangements attractive is the low distribution cost and captive customer
base. However, repeat business or renewal of business cannot be assured. In the life
segment, group creditor insurance may be the most suitable product for this channel.

The current state of insurance distribution in India is still in flux. On one hand, insurers are
awaiting regulations to be approved for brokerages and bancassurance to be truly
launched. On the other hand they are trying the corporate model of intermediaries in
addition to the traditional models in the market.

There is no right and wrong in all this. The success of marketing insurance depends on
understanding the social and cultural needs of the target population, and matching the
market segment with the suitable intermediary segment.
In addition a major segment of the Indian population has low disposable income, meaning
that every penny won will be obtained after a lot of persuasion and the expected value for
money is high.
All intermediaries can't sell all lines of business profitably in all markets. There should be
clear demarcation in the marketing strategies of the company from this perspective. Clients
should also receive price differentials for using different channels. This is not a new
concept, as the Public sector Property&Casualty companies are giving discounts in lieu of
agency commission. The channel composition should not be homogeneous but should
reflect the larger society.
For example:
Agents from different economic, social strata and different age and gender.
Bancassurers ranging from multinational banks to micro credit lending agencies.
Brokers stretching from corporates to NGOs to milk co-operatives
These intermediaries need to be empowered with the right learning, training and sales tools
and technology enablers. Coupled with the right product mix, this will help the insurers to
survive and flourish in this competitive market.
Let us conclude with a story of a retired postal clerk who became a success story for selling
postal savings and insurance in his village in Punjab in Northern India. The person is the
father of our colleague, who is a retired postal employee and took up agency for postal
savings and insurance to supplement his meager retirement earnings.
Today -- 10 years later -- he is one of the top agents selling postal savings and insurance in
his village, assisted by his illiterate wife and grandson (a seven year old computer literate)
doing all the administrative work from home on a small Personal computer using a package
(developed by our friend who is a programmer) to handle his client portfolio!
The entire village population trusts him with the investment advices that he doles out and
has no qualms in handing over small amounts of cash to him for depositing in the post
office. He is their trusted customer care or financial consultant. This we feel is the essence
of distribution of financial products in India.

5.5) Retail Distribution strategy followed by HDFCSL



a) Financial consultants
The company’s agent would be a professional salesperson and would be given the
designation of a “consultant” by the company.
The consultant would act as financial advisor to the customer. He or she would:
Analyze the customer’s financial requirements.
Help them plan their goals.
Recommend appropriate solutions, so that the customer is able to meet his/her financial
objectives in the most optimum manner. He or she shall provide support to customers on an
ongoing basis.

The company would also support the consultant by providing the required training and
information so that he or she is able to provide best service to customers. Thus, the
company’s consultant would have a far wider role to play than the typical insurance agent.

b) Corporate agent
according to the licensing of insurance agents regulation,2000,Corporate agent is defined
as ‘a person other then an individual as specified in clause (1) i.e. a firm a company formed
under the companies act, 1956, and includes a banking company as defined in clause (4A)
of section 2 of the act’.
Presently Union bank is acting as a corporate agent for HDFC Std Life Insurance.
Present regulations
Tied agency with only one life insurer or general insurer or both, at a time.
One director and employees in the business need to undergo a necessary practical training
so as to hold an insurance licence issued by IRDA.
The Memorandum of association or the partnership deed should include as its main object
the carrying out or soliciting of insurance business.

c) Broker
As per IRDA norms broker is an entity other then an individual who is licensed to sale the
product of all the companies in the market.
The restriction imposed by IRDA is that no broker can generate more then 50 % of its
business by selling plans of one company.



“A Feasibility study to identify the highly network individual for HDFC Standard Life
Insurance co. Ltd.”


From 18 th May 2009 till 25 th June 2009


The basic objective of the project was to find out the Highly Network Individual those can
act as a Financial Consultant for HDFC standard Life insurance.
The basic features which were essential and which I tried to look out in order to find out
suitable Financial Consultant are as follows.
• Financial background and prior experience in selling financial services and products.
• Strength of promoters and market standing.
• Credibility in the financial market.
• Business intent of the firm or individual
• Desire and commitment to offer range of financial products.
• Their ability to exploit rural and semi urban areas.
• Ability to sustain in the market.
• Quality of resource available for the distribution of insurance.


The study was conducted through a rigorous follow up method, the detail description of
various calls are as follows:
1) In first call following ideas were provided:
a) Overview of business growth in India
b) Idea what they will get after associate with this business
c) Idea about HDFC Std Life insurance
The basic idea of this call was to find out whether the person is interested in the proposal
and whether future follow up is required or not.
2) After second call I was accompanied by my project guide Mr. Dushayant Hada in
order to convenience them to become the part of HDFC Std Life Insurance.


In order to find out the interest of the financial consultant, information was gathered directly
from survey.
Method of contact
Personal Meeting was the method chosen in order to provide idea about Financial


The study was conducted at JAIPUR

The firms or individual who were contacted were as follows:
1) Owner of huge public dealing firm
2) Chartered Accountants
3) Director or owner of professional coaching Centers
Like: institute for C.A, Computer Institute etc
4) MBA students,
The total number of firms which were contacted was 50 which were according to me fair
enough to find out suitable Financial consultant for the company.


The major limitations which I faced during this project are as follows
1) lack of awareness of people about this sector
2) Blindly faith on LIC
3) Though pvt. Insurance companies have made a big way in the last two years, but still
the doubt about the credibility of pvt. Companies are there. People still believe that
pvt. Companies will create problems while paying Death/ maturity claim.


7.1) Regulations’ For Financial Consultant imposed by IRDA

According to the Licencing of Insurance Agents Regulation, 2000.
Clause 3 of the regulations provide that an agent (Financial Consultant) can
can represent
represent only
one life insurance or one general insurance or both, at a time.

This implies that the agent
will have toto terminate his/her
life oror general
joining another
another life
lifeororgeneral insurer.
general A person
insurer. having
A person having
agencies, life and general insurer shall be known as Composite Agent.
In addition to this, all Licences renewed prior to
to notification
notification of
of the
the new
new regulations
regulations will
will valid
only for the period mentioned in the Licence. All new licences issued therafter shall
shall be
be valid
for a period of three years.

An insurance agent should satisfy the following requirements:
standard or equivalent
1. where
thea minimum education
standard or equivalent where the
applicant resides in a place with a population of five thousand or more as per the last
census in
in any
any other
other place
place the
the applicant
applicant should
should satisfy
satisfy aa minimum
minimum educational
qualification of 10 th standard or equivalent.
2. Complete 100hours
100hours (100) ofof practical
practical training
trainingin inLife
an an
approved institution where the applicant is seeking a Licence for the first time to act
as an Insurance agent. This training recruitment is relaxed in certain institution where
the applicant possesses professional qualification.
3. Pass the pre-recruitment test based on an examination conducted by the Insurance
Institute of India or another approved body.
4. Have the requisite knowledge to solicit and procure insurance business.
5. Be capable of providing necessary service to the policyholder.

Agents licensed before the regulations where notified will be exempted from the
requirements pertaining to minimum educational qualification, practical training and
certificate requirements.

7.2) Selection criteria for Financial Consultant

The following criteria are considered while short listing/signing up with aspiring Financial

• Fulfills the prerequisites of IRDA on Life insurance Agency (Present regulations)

• Financial background/Experience in selling financial services / products
• Strength of promoters (esp. if it is a subsidiary floated)
• Self motivated.
• Credibility in the financial market
• Business intent - extremely important
• Business Plan - with the underlying assumptions
• Desire and commitment to offer range of financial products (financial consultant role)
• Client base - should possibly be exploiting rural / semi-urban client base
• Long term player
• Geographical spread

7.3) Eligibility Criteria for Financial Consultant as per HDFCSL

Eligibility criteria in terms of business requirements is as follows
th • Possess a minimum education
12 standard or equivalent where the

applicant resides in a place with a population of five thousand or more as per the last
census in
in any
any other
other place
place the
the applicant
applicant should
should satisfy
satisfy aa minimum
minimum educational
qualification of 10 standard or equivalent.
• Complete 100hours
100hours (100) ofof practical
practical training
trainingin inLife Insurance
Life business
Insurance fromfrom
business an an
approved institution where the applicant is seeking a Licence for the first time to act
as an Insurance agent. This training recruitment is relaxed in certain institution where
the applicant possesses professional qualification.
• Pass the pre-recruitment test based on an examination conducted by the Insurance
Institute of India or another approved body.
• Have the requisite knowledge to solicit and procure insurance business.
• Be capable of providing necessary service to the policyholder.

7.4 Role of HDFC Standard Life Agent- The Consultant

The company’s agent would be a professional sales person and would be given the
designation of a “Consultant by the company.
The consultant would act as a financial advisor to the customer. he /she would

• Analyze the customers financial requirements
• Help them plan their goals and
• Recommended appropriate Insurance solutions,
So that the customers is able to meet his/her financial objective in the most optimum
manner. He /she shall provide support to customer on an ongoing basis. the company
would also support the consultant by providing the required training and information so
that(s) he is able to provide the best service to customers. Thus, the company’s consultant
would have a far wider role to play than “the typical “Insurance agent.

7.5) Application Format for FINANCIAL CONSULTANT

Regd. Office: Ramon House, 169, Backbay Reclamation, Churchgate, Mumbai 400020
Corporate Office: 5 th Floor, The IL&FS Financial Centre, Plot C-22 'G' Block, Bandra Kurla
Complex, Bandra (East), Mumbai 400 051



1. This application form must be filled in by Individuals only and the applicant must be
atleast 18 years old.
2. Information provided in this application is meant for use by the company, for the propose
of appraisal of the applicant..
3. This is not amount to an applicant to IDRA for licence and also does not constitute an
offer from the company.

Personal Details

Title: Mr. /Mrs. /Ms. /Dr.

Name: ---------------------------------- --------------------------------
First Name Middle Name Surname
Are you known by any other name? If yes, please mention: --------------------------------------
Date of Birth: ------/-------/------- Sex: Male Female Nationality---------------------
Marital Status: single Married Other Number of Dependents: -------
Father’s/Husband’s Name: ------------------------ --------------------------
First Name Middle Name
Educational Qualification: 10 th 12 th Graduate Post Graduate

Please mention: Name of the Board/Institution--------------------------------------------------------

[Please note: If you reside in a place with a population of 5000 and more, the minimum
educational qualification is 12 th . For population less than 5000, it is 10 th standard]

Are you an Associate /Fellow of the Insurance Institute of India/Institute of Chartered

Accountant of India/Institute of Cost and works Accountants of India/Institute of Company
Secretaries of India/Actuarial Society of India? If “Yes”, Please mention your qualification/s
and membership number/s: Yes N.A

Are you a Master of Business Administration or possess any professional qualification

in Marketing from any Institution/University recognized by a state or
Central Government? If “yes”, please mention the name of the qualification and
Institute /University: Yes N.A

What infrastructure do you have? Telephone Fax Internet Connection

Photocopier Car Two Wheeler


How many people work in your office? ----------------------------------------------- [if applicable]

Home Address: Office Address [If different from Home

Name of Employer [if any] -----------------------
House/Flat no/Village: ----------------------------- House/Flat no/Village: -------------------
Building/street/colony/society ------------------- Building/street/colony/society----------
Ward/Block: ------------------------------------------ Ward/Block:
Pin code------------------------------------------ Pin
Tel. No-------------------------------------------- Tel. No----------------Fax
Mobile No--------------------------------------- Pager
E-mail:------------------------------------------ E-

• Are you applying on behalf of a firm/company as an Employee/Authorized

signature/ Partner/ Director? Yes N.A
If Yes, please mention name of the firm/company: -------------------------------------------------
[Please note: Corporate Agency applicants have to fill a form applicable to Corporates also]

Details of Experience in Selling Insurance Products/other Financial Products

• Do you hold a Licence to act as an Insurance Agent for Life/General/Composite

insurance? Yes N.A
If yes , please mention : Licence No:-------------- Issue Date: ---/---/-------
Date of Expiry: ----/----/--------.
• Do you hold a life and /or General Insurance Agency? If yes , please mention

• Have you given a letter to your Life Insurer asking for termination of your life
Agency? Yes N.A
• Has your Insurance Licence and /or Agency ever been cancelled and/or terminated?
If yes, please mention cancellation/termination date, name of the insurer and reason
Name: ----------------------Date: -------------------Reason:

• Have you ever surrendered an insurance Licence and/or Agency ever?

If yes, please mention, name of the insurer, date of surrender and reason
• If you are making an application for Composite Agency, mention:
Name of General insurer: ---------- Hrs. of training already completed------------
(if applicable)

• Have you already passed the agents pre-recruitment test conducted by an IDRA
approved examination body?
Marks received: --------Date of examination------------ Yes N.A
Name of examination body: -----------------------------Centre--------------------------
• Please give experience details of your Insurance Agency and/or financial
consultancy in the following table:

Please write N.A for “Not Applicable” and attach sheet where required.
Entity Number of Total Total Size of Client
years of Premium commission base (Nos)

Agency Income/Fund income
s mobilized in earned in last
last 2 years 2
(Rupees) years (Rupees)
-----/-- ----/--- ---/--- ---/---
Life Insurer
General Insurer
Mutual Funds
office saving
[If your spouse/parent/child/relative has any of the above agencies, you may supply details
in a separate sheet .]

What is your gross annual income from all sources: Rs. _________________________

Are you in service / self employed? Give details: _______________________________

• How many years of work experience do you have?-----------------------------[No]

• Is your client base largely : Urban Rural Mix of both
• Most of your clients are from High Income Middle Income
Low income Groups

• How much Life Insurance business can you bring to our company in one year?
Sum Assured: Rs--------------Premium income: Rs-------------No. Of Policies: --------

Are you a: Full time Agent Part time Agent

You will work from: Home Office

Other Information – Anything else you would like to share with us?

[E.g. Club Membership, Awards, Other qualifications etc.]-----------------------------------------

Introduction & References

Have you been introduced to our company by our consultant/employee? If yes, please give
details: Yes N.A


-- 65
Please provide two references – one personal and one professional. The Company may
write/speak to them.
1. Name-----------------------------------------


----------------------Pin code--------------- ----------------------Pin


Tel.No. (O) -------------------(R) ------------- Tel.No. (O)--------------(R)


Nomination (applicable on death only)

Name of

Name of Guardian [if Nominee is a minor]:-------------------------------------------------------------

Relationship of Nominee------------------------------ Address of Nominee---------------------------


I hereby declare that I am a citizen of India and the information contained in this
application is true and correct in all respects. I undertake to inform the company
in my home/ office address as and when such change occurs. I accept and
acknowledge that the company reserves the right to reject this application without
providing a reason. I authorize the company to verify/check/investigate and share
or reveal to any other person or authority as the company may deem fit, any or all
the information provided in this application.

Place :-
Date :-------------------------- signature of Applicant


1. Four [4] latest passport/stamp size photographs [stick Yes No
1, staple 3] N.A
2. Proof of Age [Birth certificate/school leaving Yes No
certificate/Passport/Voters ID card/ Driving N.A
3. Proof of Educational qualification Yes No
[10th /12th /Graduation/Post Graduation/Professional] N.A
5. Proof of Licence/termination of Life Agency, if any Yes No
5. Proof of training completed/passing of pre-recruitment Yes No
test, if any N.A
6. Commission statements of your two best agencies Yes No
[last year’s], if any N.A

For Office Use Only

Application received on: ------------RO/Branch: ---------------- State: ------------------------------

Immediate Supervisor Code: ---------------------Name: ------------------------------------------------

Agency Type: Rural Urban References Checked: Yes No

Recommended Training: Programe: ----------------------------- No. of Hrs. ----------------


Authorized by: ___________ _____________ _______________ _______________

(Sales) (Date) (Branch Manager) (Date)

7.6 Commission structure for Financial Consultant
The limits on commission as provided in the Insurance Act 1938 are as under:
Type of Policy Commission limits

Immediate Annuity 2%of premium

2% of premium
Deferred Annuity

Deferred Annuity 7.5% of the 1 st year premium

(regular premium) 2% of each renewal premium

All Other Cases A maximum of 40% of the first year

(Endowments, Money- back etc) A maximum of 7.5% of the 2 nd & 3rd
year premium
A maximum of 5% of the 4 th & 5th
years premium
Thereafter, 5% of the renewal
Total Commission payable in the
first 5 years cannot exceed 60% of
the annual premium payable on the


8.1) Objective of the project

The basic objective of the project was to find out the Highly Network Individual those can
act as a Financial Consultant for HDFC standard Life insurance.

The basic features which were essential and which I tried to look out in order to find out
suitable Financial Consultant are as follows.

• Financial background and prior experience in selling financial services and products.
• Strength of promoters and market standing.
• Credibility in the financial market.
• Business intent of the firm or individual
• Desire and commitment to offer range of financial products.
• Their ability to exploit rural and semi urban areas.
• Ability to sustain in the market.
• Quality of resource available for the distribution of insurance.

8.2) Project plan

In order to find out the interest of the financial consultant, information was gathered directly
from survey.
Method of contact
Personal Meeting was the method chosen in order to provide idea about Financial

8.3) Study plan

The study was conducted at JAIPUR
The firms or individual who were contacted were as follows:
1) Owner of huge public dealing firm
2) Chartered Accountants
3) Director or owner of professional coaching Centers

Like: institute for C.A, Computer Institute etc
4) MBA students,
The total number of firms which were contacted was 50 which were according to me fair
enough to find out suitable financial consultant for the company.

8.4) Methodology followed

The study was conducted through a rigorous follow up method, The detail description of
various calls are as follows:
1) In first call following ideas were provided:
a) Overview of business growth in India
b) Idea what they will get after associate with this business
c) Idea about HDFC Std Life insurance
The basic idea of this call was to find out whether the person is interested in the proposal
and whether future follow up is required or not.
2) After second call I was accompanied by my project guide Mr. Dushayant Hada in order
to convenience them to become the part of HDFC Std Life Insurance.

8.5) Detail description and analysis

a) Individuals those who I have contacted are as follows :

Name Address:-
Mr.Yougesh Bani Park
Mr.Ashutosh Bani Park
Mr.Himansu Bani Park
Mr.Deepak Bani Park
Mr.Santosh Agrawal
Ms.Prabha Agrawal
Mr.Ram Prasad Agrawal
Mr.Mukesh Joshi Shastri nagar
A.M.P Agency Chand pole bazar
Mr.kdiya Chand pole bazar
Mr.Ashok Shinghal Chand pole bazar
Mr.Kdabat Chand pole bazar
Mr.O.P.Gupta Chand pole bazar
Mr.J.P.Gupta Chand pole bazar
Director Gangori Bazar
Director Vijay path Tilak Nagar
Mr.Vikram Sharma Shastri nagar
Director Malviya Nagar
Mr.lavanya Tilak Nagar
Mr.Ajit Sani Tilk Nagar
Ms.Tanu Kaushal Tilk Nagar
Mr.lavanya Tilk Nagar
Mr.Gaurav Chandra Tilk Nagar
Mr.Nitesh Gupta 9/88 Vidhya Dhar Nagar
Mr.vikram Ranba City Plaza
Owner City Plaza
Mr.Dinesh Vijay 58-Bari Nagar sodala
Mr.lalit Parikh Bhram Puri
Director Bani Park
Mr.Vijendra Mathur Shastri nagar
Mr.Abadh Chaudhry 63,Indra coloney,Bani Park
Mr.Raju KD Electronics
Director,Excel Study Point.Institute for
Mr.Shaurav Jain C.A,
Mr.Dipesh Chabara Fashion Hut
Mr.Hanish Student 2nd year
Mr.Prem Prakesh Director, Lohiya Institute for C.A,
Mr.Raj Kumar Owner Sports & Game
Mr.Sharad Sales Executive Hutch
Mr.Ashok Cloth Merchant
Mr.Sukh Dev Singh
Rathod Royal Rajesthan Tour
Mr.Namit Taluka Tent Decorators
Mr.Avinasah Massay 1st yr. MBA student
Mr.Nardev Aryan Financer
Mr.Devendra Kumar
Ms.Mumta 1st yr Student with 3 Ex
Mr.Fardin Khan

b) Response of various Individuals

Name Response
Mr.Yougesh Interested
Mr.Ashutosh Interested
Mr.Himansu Interested
Mr.Deepak Interested
Mr.Santosh Agrawal Not sure
Ms.Prabha Agrawal Not interested

Mr.Ram Prasad Agrawal Not interested
Mr.Mukesh Joshi Interested
Md.Ismil Interested
A.M.P Agency not sure
Mr.kdiya Not interested
Mr.Ashok Shinghal Not inetrested
Mr.Kdabat Not interested
Mr.O.P.Gupta Not sure
Mr.J.P.Gupta Not sure
Director Interested
Director Interested
Mr.Vikram Sharma Not sure
Director Not interested
Mr.lavanya Not sure but can provide data base
Mr.Ajit Sani Interested
Ms.Tanu Kaushal Not S ure but She will give data base.
Mr.lavanya Not Interested
Mr.Gaurav Chandra Not Interested
Mr.Nitesh Gupta Not S ure
Mr.vikram Ranba Interested
Owner not sure
Mr.Dinesh Vijay not sure
Mr.lalit Parikh
Director Not S ure but will provide data base
Mr.Vijendra Mathur Interested
Mr.Abadh Chaudhry Interested
Mr.Raju Interested
interested & can provide data base of C.A
Mr.Shaurav Jain student
Mr.Dipesh Chabara Not S ure
Mr.Hanish Not S ure
Not S ure but he will provide data base of C.A
Mr.Prem Prakesh student
Mr.Raj Kumar Not Interested
Mr.Sharad Interested
Mr.Ashok Not Interested
Mr.Sukh Dev Singh
Rathod Not S ure
Mr.Namit Interested
Mr.Avinasah Massay Interested
Mr.Nardev Aryan Not S ure
Mr.Manish Interested
Mr.Devendra Kumar Interested
Ms.Mumta Interested
Mr.Chirag Interested
Mr.Fardin Khan Not interested
Mr.Niraj Not interested

C) Name of individuals and firm

Name Organization
Mr.Santosh Agrawal C.A
Ms.Prabha Agrawal C.A
Mr.Ram Prasad Agrawal C.A
Mr.Mukesh Joshi Nexel Computers
A.M.P Agency
Mr.kdiya Kdiya company
Mr.Ashok Shinghal Ashok Singhale company.
Mr.O.P.Gupta C.A
Mr.J.P.Gupta C.A
Director Elite,An Institute of education
Director First computer center
Director COMP RO
Mr.lavanya NIS
Mr.Ajit Sani Director First computer
Ms.Tanu Kaushal F-Tech computer education
Mr.lavanya NIS
Mr.Gaurav Chandra Rakesh Computers
Mr.Nitesh Gupta Agency of Nizone
Mr.vikram Ranba Faission world
Owner show room Jhon player
Mr.Dinesh Vijay Agent LIC
Mr.lalit Parikh Director, National Computer Education Mission
Director Royal commerce Point
Mr.Vijendra Mathur B.E
Mr.Abadh Chaudhry Stockiest "Bikaji"
Mr.Raju KD Electronics
Director, Excel Study Point. Institute for
Mr.Shaurav Jain C.A,
Mr.Dipesh Chabara Fashion Hut
Mr.Prem Prakesh Director, Lohiya Institute for C.A,
Mr.Raj Kumar Owner Sports & Game
Mr.Sharad Sales Executive Hutch

Mr.Ashok Cloth Merchant
Mr.Sukh Dev Singh
Rathod Royal Rajasthan Tour
Mr.Namit Taluka Tent Decorators
Mr.Avinasah Massay 1st yr. MBA student
Mr.Nardev Aryan Financer
Mr.Devendra Kumar
Ms.Mumta 1st yr Student with 3 Ex
Mr.Fardin Khan

not intrested

intereste d

not s ure

interested not interested not


Not Interested Not sure

13 20 17

d) Presentation steps GROWTH



9.1) Prudential-ICICI

On its basic Save’n’Protect endowment assurance product, Pru-ICICI have issued a sales
aid that advertises guaranteed bonus rates for the first 7 years of a 20 year policy. The
details are
Age 30 years
Term 20 years
Annual premium 8868
Sum assured 200000
There is a guaranteed reversionary bonus of 3.5% compound for the first 7 years.
Suppose only the guaranteed payments are made to the policyholder. The maturity value
would then be Rs.254,456. Ignoring the cost of life cover, the rate of return to the
policyholder would be only 3.3% per annum. At a time when inflation is approximately 8.2%
per annum (wholesale price index, all commodities), what is the value of such a guarantee
to the policyholder?
However, the cost of such a guarantee could be high. Consider:
The guarantee may be said to bite if at maturity, the accumulation of the premiums, less
each policy’s share of the company’s expenses, plus its share of investment income, less
any other charges levied , is lower than the guaranteed amount. Note that these charges
need not be explicit.
There is a possibility that such a guarantee will bite. Naturally, the higher the guarantee, the
greater the possibility that it will bite.
If there is such a possibility, the company is required by the Regulator to set aside assets
sufficient, in all probability, to meet any shortfall.
The only people available to provide these assets are shareholders.
For tying up their money in this way, they will require to be rewarded.
The only people available to provide this reward will be the policyholders.
The reward to the shareholders will be provided by the policyholders through charges levied
on their policies.
In order to reduce the size of this charge, the insurance company should reduce the
probability of a shortfall. To do so, it must invest the policyholders’ assets to a great extent
in safe assets whose returns are guaranteed. It is well known however that riskier assets,
over long terms, earn more money. Therefore investing in safe assets will depress bonus
rates overall.
All other things being equal, higher guarantees will result in lower overall payouts.
By keeping our guarantees relatively low, we retain the freedom to invest in these higher
earning assets at the time when we deem the time is right. Our philosophy is to return to the
policyholder the accumulation of his/her premiums less expenses and charges plus
investment returns. By keeping the guarantees low, we enhance the overall returns. We are
confident that the lower level of guarantee is not material to a well-informed investor.
We at HDFC Standard Life believe that we offer the policyholder the right balance of
security and performance.
Premium rates for critical illness and surgical assistance are review able after 5 years. Our
rates are all guaranteed throughout the term.
The critical illness benefit provides only accelerated cover, i.e. the main policy terminates
on a critical illness claim, without payment of any benefit. Our critical illness is a stand-alone
type, i.e. the main policy continues after a claim for CI, and will pay out a claim value on
death or maturity.

On money back, their total guaranteed payouts on survival are higher than the sum assured
on death. This is being presented as an extra benefit. We can turn the argument round and
say the death benefit is lower than the survival benefits. It is just as much a weakness as

On the money back, their premium rates are much lower than ours. Everything stated
above regarding the implications of high guarantees applies. In addition, the counter
argument to this is:
The schedules of money back installments are quite different.
We pay out more money earlier. Money is worth more at an earlier date. Consider: would
you rather have had Rs.10,000 ten years ago or today?
Therefore our premium rates are expected to be higher.
Their riders are generally cheaper than ours. For critical illness our benefits are superior.
For other riders, the counter argument is:
Riders are with profits.
Even if a rider does not benefit directly from bonus, any significant profit (or loss) earned on
them affects the bonus on the basic policy.
The price of a rider reflects the company’s estimate of the probability of future claims. We
are confident our estimate is reasonable.
Therefore, we think we have got the prices right. If however, we have overpriced, we will
reflect this in bonus.
By the same token, if our competitors who are cheaper have got their prices wrong, their
bonuses will be adversely affected.
On critical illness, they cover 9 illnesses but we cover only 6. The counter argument is that
our 6 illnesses cover the vast majority of serious illnesses. We could cover their 9 illnesses
but it would cost more. In our judgement, the extra cost outweighs the the extra benefit to
the policyholder.
They provide 5 years of ‘free’ life cover after maturity of the policy. The counter argument is
that no company does anything for free. If they are giving cover, they are charging for it
implicitly by declaring a lower bonus. How much lower? If you look at their current premium
rates for single premium term assurance, they would charge a 50 year old man a single
premium of Rs.3750 for 5 years’ cover of Rs.100,000. We don’t know what they’ll charge in
a few years but we do know it won’t really be free. So if the policyholder is being asked to
pay, should the he/she not be given a choice? What is the advantage of this strange

9.2) Birla Sun Life

1. In the Birla Sun Life sales aid for their endowment plan, it states in the section About The
Plan, Investment Option , "A part of the premium that you pay regularly will be invested in an
'investment fund'."
How much of the premium will be invested is not clear. The actual policy value will depend
crucially on how much of each premium is so invested.
The policy value will also depend on the charges levied on the investment fund. We do not
know what charges Birla Sun Life intends to levy, and whether the guarantee is net of any
such charges.
However, the important thing to the policyholder is what he gets back after all such charges.
Guaranteed policy values are given in the big table at the back of their sales aid.
2. The table shows minimum policy values, assuming investment in the 'Builder' fund
(guaranteed growth rate = 4.5%).
The guaranteed surrender value at maturity (which I take to be a guaranteed maturity
value) is 120 370.96 for
Male aged 35 at inception
Sum assured on death = 1, 00,000
Term = 20 years
Annual premium = 5148
If we assume that only the guaranteed amount is paid on maturity, ignoring the cost of
death benefits, the rate of return to the policyholder is 1.47% per annum. Does the
policyholder consider this worthwhile?
3. On our E A, for a sum assured on death of Rs.100,000, we would charge a premium of
Rs 4929 per annum. However, this would not guarantee a policy value at maturity of Rs
120371. For that sum assured, we would charge an annual premium of Rs. 5902. Note that
for this higher premium, we give policyholder more guaranteed death cover.
4. For both companies’ products, the great unknown is future performance. In neither case
does the guaranteed policy value provide an attractive rate of return to the policyholder. Our
sum assured will grow with future bonuses that reflect our performance, principally
investment performance. Their policy value will also grow with investment performance.
5. It is not at all clear how on Birla Sun Life's policy how the guaranteed surrender values
would be affected by alteration to paid-up, or change of investment fund. In practice,

alterations are not uncommon as an individual's circumstances can change over such a
long time period.
6. What happens to Birla Sun Life's policy if the markets crash one month before maturity?
They would only be obliged to pay the advertised guaranteed amount. Their payout
could therefore be highly sensitive to market conditions, though subject to a minimum.
For us, the year on year volatility of with profits payouts is smoothed out to some extent.
This should afford considerable piece of mind. Furthermore, our minimum payout will
have built up with reversionary bonuses.

7. Our with profits fund will have the freedom to invest, subject to the same regulations as
Birla Sun Life's funds, in order to achieve stable long term growth. To do this, we shall use
our judgement to invest in the sectors we deem best. We do not tie ourselves to investing in
sectors that might become low performing.
Note that the earliest premiums are not available to pay a surrender value. The vast bulk of
any eventual policy value results from the proceeds of investments made after the initial
period of the policy. We do not know what investment circumstances will be when those
premiums are invested. Is it wise to tie ourselves to an investment structure in advance? Of
course, if investment circumstances change, Birla Sun Life might introduce new funds. But
on moving to the new funds, the advertised surrender values would no longer be

The web site states the company’s intention to file riders and options shortly. However,
agents are already distributing fliers advertising:
Accidental death and dismemberment;
Term assurance; and

Critical illness.
In the absence of any detail concerning the benefits, it is difficult to make meaningful
comparisons of premiums. However, it appears that is priced at 1.44 per mille for all ages

and terms, and both sexes, and its benefits are superior to ours. The CI rider covers fewer
conditions and it is not clear whether it offers accelerated or stand alone cover.

Free look period. The counter argument to this is that we do not engage in high pressure
sales, and therefore do not see the need for a free look period.
Guaranteed surrender values that are high relative to ours. The counter argument is that
the guaranteed surrender values still do not represent good value for money. Nobody would
invest if all they got back were the guarantee.
Apparently transparent. From the questions and issues raised above, it is clear that many
things are not well defined in this product. It is better described as opaque than transparent.
If the policyholder cannot keep up premium payments, funds from earlier payments are
deployed to meet future premiums. It is not clear whether this is done through the loan
facility or through withdrawals from the holding account. In either case, it cannot add value
to the policy, since it is just shuffling money about from one part of the policy to another.
The principal beneficiary will be the recipient of renewal commission, and the policyholder
pays for that.
On death, the sum assured is payable on top of the Insurance Fund. Therefore, the charges
to cover the cost of death are high. This will make their projected policy values appear low if
uniform rules can be adopted.

9.3) Max New York Life

Endowment assurance
Only a term of 20 years is available on the endowment assurance.
Bonus is payable only after 2 years in force.
Term assurance
On term assurance, only a term of 5 years is available. While renewability is guaranteed at
normal rates, we cannot tell what those rates will be. One would expect mortality
improvements, and hence a downward trend in the rates over time, but we do not know
what pricing assumptions have been made. However, as the individual policyholder’s age
increases, so will his premium.

The term assurance is convertible, and implicitly, a premium will be charged for this option.
We should question whether such a benefit is actually what the policyholder needs. If the
policyholder wants more endowment cover, he should take out an endowment now. If he
wants protection, he can take out a term assurance rider.
Whole of life
This is essentially a protection contract. It is available as participating and non-participating.
While a cash value is built up, it appears to be discretionary at all dates, subject to a very
low guarantee. The cash value is not subject to any underpin from bonuses, and may not
be subject to any smoothing. Therefore, the policyholder is subject to market volatility if he
ever wants his money.

The term rider is available only for 5 years or 10 years, not for the term of the basic
contract. There appears to be no right to renew the rider on normal terms on its expiry.
Therefore, at the very ages when the likelihood of ill-health and death is greater, the
policyholder might end up paying higher premiums.

Free look period of 10 days. The counter argument is as for Birla Sun Life.
Terminal illness benefit: on diagnosis of a terminal illness, 50% of the benefits payable are
paid immediately, the rest on death or maturity. This is rather like accelerated critical illness.
It is a useful benefit but the charge for it is implicit within the premium rate. It is better, if a
policyholder is worried about his/her health, to offer the choice of taking out our critical
illness, which offers superior benefits.

N.B. We have little information on the prices of any rider.
Option to Purchase Paid-up additions (OPP). This option allows addition of subsequent
single premium term assurance without health evidence. None of the other new companies
has an equivalent rider. The counter argument would be that the benefit of this rider is only
the right to buy further insurance. The terms and conditions of such future insurance, and
its price, are as yet unknown. We could question whether the customer considers this
valuable, and offer immediate insurance cover instead.

Guaranteed Insurability Rider (GIO). The GIO gives the right of future purchase of whole of
life policies without evidence of health. The counter argument is as above.
Spouse insurance rider. This is a good benefit, but its cost is as yet unknown to us. It
should be comparable to that of a term assurance.
The accidental death and disability rider appears to be priced at 1.35 per mille for all ages.
It offers an additional death benefit plus, on permanent disability, 20% of the benefits under
the rider will be paid out for each of the next 5 years, or until recovery if earlier, plus limited
waiver of premium.

9.4) Life Insurance Corporation of India Ltd.

LIC’s strength and weakness are its track record. Its strength is that it has one where none
of its competitors does. Its weakness is that it has given low returns. Below is an analysis of
LIC’s returns to policyholders.
Endowment policies are essentially savings-oriented products with an element of protection
in them. People invest in these products in the belief that, if they survive to the end of the
policy term, the returns from the policies will be good. One way of assessing the returns is
to compare them with the inflation index.
In the tables below, we give the nominal returns offered by the LIC along with the real
returns. To calculate the real return, we have factored out inflation related growth, as
measured by the all commodities wholesale price index, and calculated the residual yield.
We note that the real returns on LIC’s policies maturing on 31 December, 2000 are
negative, apart from short term policies.
Returns on LIC’s Endowment Assurance.
Term Annual Maturity Nominal Rate Real
Premium * Benefit of return Rate of
return †
10 10,295.40 164,700.00 8.39% 0.55%
15 6,750.05 203,800.00 8.33% 0.32%
20 4,926.45 231,000.00 7.56% -0.44%
25 3,946.75 252,220.00 6.68% -1.21%

Table 1 – Returns on LIC’s Money Back.

For a Male aged 35 years at the start of the policy, with Sum Assured of
†Source: Table 29 (Wholesale Price Index - Annual) : Office of the Economic Adviser, Ministry of Industry, Government of India.
Term Annual Total Nominal Rate Real
Premium * Benefit of return Rate of
return †
12 9,553.35 177,000.00 7.27% -0.78%
15 8,088.65 194,200.00 7.65% -0.24%
20 6,463.90 216,600.00 6.79% -1.21%
25 5,406.60 230,520.00 5.55% -2.06%

Note that the above analysis ignores the effect of the cost of life cover.

To counter the fact that LIC has a track record, we can use the brands of our parent
companies. A sales aid on the strength of the brands is being developed.

9.5) Tata AIG

1. Only limited terms are available:
Product Available
Security and 10, 20 or 30
growth years
Golden years Matures at
age 60
Money Saver 21 years

2. It is not clear what if any riders are being offered, or what their prices are.

A guaranteed addition, payable at maturity, is declared after 10 years. The counter
argument is that this is obviously to be offset against other bonuses.
On the Money Saver , there is an option to reinvest the money-back installments. Whether
this proves attractive really depends on the rates of interest offered and the accessibility of
the funds.

9.6) Why customer should go for HDFC

Because of the facts shown by following comparative study











TERM 20 30 20 30 20 30 20 30 20 30
. . .

AT AGE 30 2680 N.A. 2920 3430 290 N.A. 4830 6630 371 N.A.
0 0





10.1) Conclusion

To conclude, The concept of Financial Consultant can be achieved and is feasible only with
proper support structure from the company’s side.
During this project I outstretched myself to disseminate the idea of CA to the concerned
people about corporate agency business.
I also tried my level best to provide a view, how HDFCSL can be a reliable associate and
can create, long, sustainable and successful The following are the details who can become
our likely FC
These firms are ready to become corporate agent for HDFCSL

10.2) My views about project

Indeed, this project was a great learning experience for me and following points describe
about my understanding of this project.
Evaluation of insurance sector
1) role of IRDA
2) people are still unaware about this sector
3) people are still having blind faith over LIC
4) It’s really difficult for the people especially in rural sector to trust upon private
5) I also got the fair idea about the standing of HDFC as a brand as compared to other
6) As insurance sector is really my passion and I really want to opt this sector as my
career, so really I am looking forward to work with presitious organization HDFCSL.
7) And last but not least as organization is for people, and organization succeed only
when its employees succeed.
According to me, for HDFCSL its Financial Consultant’s plays a major role in success.
8) And I am really impressed by the way HDFCSL satisfied its employees by providing
them lot of benefits through various contests and star membership reorganization

10.3 Limitations

The major limitations which I faced during this project are as follows
1) lack of awareness of people about this sector
2) Blindly faith on LIC
3) Though pvt. Insurance companies have made a big way in the last two years, but still
the doubt about the credibility of pvt. Companies are there. People still believe that
pvt. Companies will create problems while paying Death/ maturity claim.

Training Support
HDFC SL believes in building up "sound advice" & "quality of sale" and endeavors to do it
continuously by way of providing training inputs on product, soft-skills through a team of in-
house training managers. However, we may agree on certain number of people that we
may undertake to train at our expense towards mandatory 100-hours training of your sales
staff dedicated for selling HDFC SL products.


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