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Final research project report on CUSTOMERSS PERCEPTION TOWARDS LIFE INSURANCE

submitted to Punjab Technical University , Jalandhar.


In the partial fulfillment for the award of the degree
of MASTER OF BUSSINESS ADMINISTRATION

Submitted by: Rahul Sharma Roll no 7116223099

RIMT- INSTITUTE OF MANAGEMENT AND TECHNOLOGY


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Mandi Gobindgarh

Declaration
I hereby declare that the present project is my original work and has not been submitted anywhere else in any form

Rahul Sharma Roll no. 7116223099

Certificate
This is certify that Mr. Rahul Sharma has completed his project titled CUSTOMERSS PERCEPTION TOWARDS LIFE INSURANCE under my supervision . The project is recommended for further evaluation.

Ms. Shilpi Goel Project Guide

I nde x Chapt e r 1
Overview..7 Why life insurance11 Tax saving through insurance..14 Role of insurance..18 Customer service in life insurance..21

Chapt e r 2
History of insurance sector .27 Players in the field..29 Political scenario..34 Lure of Indian insurance37 LIC- still dominant42 IRDA-controlling authority43

Chapt e r 3
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Objectives of the study.47 Scope of the study..48 Research methodology...49

Chapt e r 4
Data analysis and interpretation.53 Suggestions.71 Findings72 Recommendations..74 Limitations77

Chapt e r 5
Bibliography.80 Annexure81

Chapter 1

OVERVIEW Life insurance is one of those things that no one really likes to think or talk about but if you don't you may leave your family unprotected. Its hard to think about those you would leave behind if something happens to you. Life insurance can help take care of those you love. Life insurance is all about making sure your family has adequate financial resources to make those plans and dreams come true. It provides financial protection to help your family or business to manage after your death. "Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event." Insurance companies collect premiums to provide for this protection. A loss is paid out of the premiums collected from the insuring public and the insurance companies act as trustees to the amount collected.
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Insurance is a tool, by which fatalities of a small number are compensated out of funds (premium payment) collected from many. Insurance companies pay for financial losses arising out of occurrence of insured events, e.g. personal accident, fire and other allied incidents like riots, strike, and explosion etc.

The term insurance can be best understood by referring to two important schools of thought on the subject viz., i) transfer school and ii) pooling school. According to transfer school, Insurance is a device for the reduction of uncertainty of one party, called the insured, through the transfer of particular risks to another party, called the insurer, who offers a restoration, at least in part, of economic losses suffered by the insured. On the other hand, according to the pooling school, The essence of insurance lies in the elimination of uncertain risk of loss for the individual through the combination of a large number of similarly exposed individuals.

Thus in the case of an individual, insurance is a transfer mechanism, through which he passes on risk to the insurer whereas, for the insurer, insurance is a pooling mechanism, by which he reduces risk in the context of his business. The salient features of insurance are: It is a commercialized form of distributing risks amongst a group of persons The fundamental idea underlying insurance is co-operation in the bearing of losses, which are likely to happen to any of the large group of persons. The insured is relieved of a certain risk by an insurance contract and he incurs a certain loss in the shape of premium for this relief. Thus it covers a few heavy losses by a good many small ones. The insurance company does not run any risk, for the amount of the big loss known to it in advance is collected by it in small premiums. It is superior to an ordinary savings plan Unlike other savings plans, it affords full protection against risk of death. In case of death, the full sum assured is made available under a life assurance policy whereas under other savings schemes only the accumulated savings alone will be made available. Allows administering the legacy for beneficiaries An insurance policy allows a policyholder to arrange that in the event of his death, the beneficiary should receive instead of single sum payment of net
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claim amount by equal installments over a specified period of years or payment of the claim amount by smaller monthly installments over the selected period followed by a lump sum at the end. Hedge risk against unforeseen circumstances Insurance of a life or an asset hedges the risk against any damages arising as a result of unforeseen circumstances. Eliminates worry and increases initiative An insurance policy relieves the policyholder of future worry and increases his efficiency. Thus possession of an adequate life and health cover causes the average policyholder to eat better, sleep better, feel better and as a result of these, to work better. Affords protection against claims of the insured's creditors The desire for such protection is perfectly natural and also important in view of the hazard of bankruptcy. Mostly insurable amount exempted from creditors' claims is limited to some reasonable amount. Furnishes a safe and profitable investment Life insurance contains an accumulating investment feature, which is absolutely safe and reaches large proportions in the later years of the policy.

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WHY LIFE INSURANCE! Though something none of us wants to face, Life insurance is something all of us needs. Planning for the financial consequences of a premature death is an essential part of every financial plan. Generally, the consequences are simply too large to ignore and cannot be totally covered with your own resources. It is normal human tendency to believe that we can continue to maintain the present life style and even improve upon it over the years. While this may turn out to be true in many cases, we cannot afford to ignore the stark reality that untimely death, injury, theft or destruction of property could shatter one's life style or that of his family. It is to provide for these contingencies that insurance is needed. In the course of our life we are accosted by risk-that of failing health, financial losses, accidents and so on. Insurance is a means by which life's uncertainties are addressed in financial terms. It offers a monetary compensation against those losses.

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Every person has some future plans and dreams. Life insurance is all about making sure your family has adequate financial resources to make those plans and dreams come true. It provides financial protection to help your family or business to manage after your death. As life insurance became more established, it was realized what a useful tool it was for a number of situations, including <> RISK COVERAGE: By taking life insurance a person can have peace of mind and need not worry about the financial consequences in case of any untimely death.
SUPERIOR SAVING INSTRUMENT:

Encourages and forces compulsory savings unlike other saving instruments, wherein the saved money can be easily withdrawn. Superior to an ordinary savings plan as it provides full protection against risk of death.
INVESTMENT:

Put simply, the building up of savings while safeguarding it from the ravages of inflation. Unlike regular saving products, investment products are traditionally lump sum investments, where the individual makes a one off payment.

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RETIREMENT:

While it is heartening that people are living longer, there is the attendant problem of sickness, reduction in income, dependence etc. The pension products and health packages of the various insurance companies cater to some of these needs.

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TAX SAVING THROUGH INSURANCE Insurance is one of the investment vehicles, which qualifies for income tax exemptions and rebates as per the Income Tax Act 1961. Some of the sections under which tax rebates and exemptions can be availed are Section 88: Under section 88 of the Income Tax Act, certain percentage of rebate is allowed on investment in the form of insurance premium with any of the insurance company approved by IRDA. Tax rebates can be availed on premium paid to keep in force an insurance policy on his/her life, his/her spouse, his/her children including adult children and married daughter. Percentage of rebate can be up to a maximum of 30% and varies depending upon the tax bracket one falls. This rebate is deductible from the tax payable by the individual. The total amount of investment in the form of insurance premium and other specified investments like PPF, NSC, etc. is restricted to Rs 70,000 per annum for the purpose of tax. Section 80 CCC (I): Under Section 80 CCC (I) a deduction up to a maximum of Rs. 10,000 per annum is allowed from gross total income, when a contribution or deposit is made towards any of the pension policies recognized by IRDA.

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These schemes are useful for people in higher tax slabs because taxable income gets reduced.

Section 80 D:
EligibleAssessees

Individual and Hindu Unified Families (HUF) only Scope Premium paid under:

Medical insurance scheme of The General Insurance Corporation approved by the Central Government, or

Any other insurer approved by the Insurance Regulatory & Development Authority (IRDA)

Mode of Payment Any mode of payment is accepted including payments made through credit cards, except cash.

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Deduction

For non-senior citizens: The amount of mediclaim insurance premium paid or Rs. 15000, which ever is less

For senior citizens: The amount of mediclaim insurance premium paid or Rs. 20000, whichever is less.

Scope of Coverage

For an individual: Insurance paid on the health of an assessee, spouse, dependant parents, and dependent children

Section 80 DDA: Under this section a deduction up to Rs. 40,000 per annum is allowed from gross total income, when a contribution or deposit is made with the any of the insurance company approved by IRDA, for the maintenance of a handicapped dependent. Section 10 D (D): As per this section all monies received from life insurance Company including sum assured, bonus, guaranteed additions, loyalty additions etc are
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exempt from income tax. (10D) Any sum received under a life insurance policy, including the sum allocated by way of bonus on such policy other than any sum received under sub-section (3) of section 80DDA or under

Keyman insurance policy.


Explanation : For the purposes of this clause, "Keyman insurance policy" means a life insurance policy taken by a person on the life of another person who is or was the employee of the first mentioned person or is or was connected in any manner whatsoever with the business of the first person;

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THE ROLE OF INSURANCE IN PERSONAL FINANCIAL PLANNING

An entity without a properly budgeted plan is likened to an ocean linear merrily cruising along, blissfully unaware of the rocks that it is going to hit. Personal financial planning can be considered as the process by which an individual or family can develop and implement an integrated plan to accomplish the objectives. As such, it entails a two-stage process: First to identify the overall goals and objectives; then to develop and implement an integrated plan to achieve them. This process of personal financial planning used to be a much simpler exercise in the older days, which comprised of earning a certain amount of money; saving a little; arranging for childrens education; and making some provisions for a secured retired life. The process has become much more complex in the modern world for various reasons. One of them is the greater economic uncertainty, which comes from such variables as the everchanging interest rates and inflation. Another reason for complexity is the constantly changing rules and regulations.
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Above all, with various financial instruments hitting the markets, the process of personal financial planning has indeed become a very complex act. Added to the above problems, one has to deal with such considerations as sentimental and emotional reasons like the need to provide for ones death, disability, old age or retirement and any other unwelcome eventuality. In the Indian scenario, this problem is much worse as majority of the people is still resigned to its fate and adopts some sort of fatalistic attitude. Thankfully, these tendencies are on the wane and people have started looking at insurance as a major part of their personal financial planning although there is still a log way to go before insurance become an integral part of ones personal financial planning. While talking about personal financial planning, one should appreciate that life insurance creates an estate the moment the contract is concluded. To elaborate, suppose a person opens a Recurring Deposit (RD) account in a bank and at the same time obtains a life insurance policy; in case of immediate unfortunate death, what is payable in the case of the life insurance is the total contracted amount or the sum assured, while he may get back only the installment amount in case of the RD account. This way life insurance is a unique form of saving and cannot be compared with anything else.

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The importance of insurance is very well understood in the more developed economies, whereas it is not treated in the right way in our country. This is because we still do not fully understand the role that insurance can play in our financial planning. It should be understood that the function of insurance is to protect one against losses that one cannot afford. As the concept of insurance is still not understood in the right perspective. It is here the there is a great responsibility on the part of all those involved to ensure that insurance awareness is spread across the population and is thoroughly understood.

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CUSTOMER SERVICE IN LIFE INSURANCE Customer service is important in any kind of industry. And due to the increasing competition in Indian Life Insurance sector, players are adopting every possible strategy to enhance service quality and retain the customer for a longer period. Customer service involves all acts, which are associated with the basic product or service that are done before delivering, while delivering and after delivering it. This involves how the product behaves with customer; what additional facilities are given; how quickly it is done; how complaints are handled etc. Customer service becomes more important, when it is a one-time purchase and majority of the customers are unaware of product variations available in the market. Life insurance is one such industry. Defining customer service in this industry is looking at how an agent serves the client; how fast the client gets cover approval; what advise a client gets from the insurer etc. In the case of life insurance, there is no frequent interaction between the company and the client; and a third party is also involved, namely the agent or the broker who does the job of intermediation between the two forces. When there is lack of interaction, the only way a company can retain its clients is customer service.
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As a satisfied customer is the greatest brand ambassador, one negative experience by any customer may cost very dearly to the insurance company, which will ultimately result in a difficult situation of retaining the customer and attracting the new customers. If the situation goes beyond this, it may result in loss of existing customers also for the life insurer. Some of the areas where life insurers can really look at their customer service function critically are need analysis, lapsation advice; nominations and assignments; loans against the policy values; and transfer of policies, especially those serviced under the salary savings schemes. Unfortunately in India, this is not being achieved in many cases for various reasons like: oThe distributor is not aware of the nuances of the product to strike a successful match between the needs and the products. oThe distributor is motivated by other factors like his remuneration, ease to sell and the term of the contact. These reasons are responsible for most of the lapsations that are observed in LIC contracts. Several studies and surveys in this regard have come out with glaring facts like the policy being thrust upon them, improper/ insufficient education of the prospect with the details of the policy by the intermediary etc.

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If there were to be a comprehensive analysis of the need of the customer and identification of a suitable product, the retention ratios of the insurance companies are bound to improve. Another area where an efficient service is required to be rendered is nominations in a life insurance contract. The policyholder should be encouraged to make proper nominations or assignments in the policy so that there is no need for legal intervention at the end of a long term.

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INSURANCE-THE INDIAN SCENE A thriving insurance sector is of vital importance to every modern economy. First because it encourages the savings habit, second because it provides a safety net to rural and urban enterprises and productive individuals. And perhaps most importantly it generates long-term investible funds for infrastructure building. The nature of the insurance business is such that the cash inflow of insurance companies is constant while the payout is deferred and contingency related. The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. Insurance has always been a politically sensitive subject in India. Within less than 10 years of independence, the Indian government nationalized private insurance companies in 1956 to bring this vital sector under government control to raise much needed development funds. Since then, state-owned insurance companies have grown into monoliths, lumbering and often inefficient but the only alternative. They have been riticized for their huge bureaucracies, but still have millions of policy holders as there is no alternative.
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Any attempt to even suggest letting private players into this vital sector has met with resistance and agitation from the powerful insurance employees unions. The Narasimha Rao government (1991-96), which unleashed liberal changes in Indias rigid economic structure, could not handle this political hot potato.

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Chapter 2

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History of the Insurance sector in India


Life Insurance has come a long way from the earlier days when it was originally conceived as a risk-covering medium for short periods of time, covering temporary risk situations, such as sea voyages. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:

1912 The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928 The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938 Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

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1956 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

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Players in the field


Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers: Life Insurers:

Life Insurance Corporation of India (LIC)

GIC had four subsidary companies, namely ( with effect from Dec'2000, these subsidaries have been de-linked from the parent company and made as independent insurance companies.
1. 2. 3. 4.

The Oriental Insurance Company Limited The New India Assurance Company Limited National Insurance Company Limited United India Insurance Company Limited.

Yr: 2000-2001 : ( From 2nd April '2000 to 31st December'2001) Insurance Industry in the year 2000-2001 had 12 new entrants, namely:

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Life Insurers: S.No. Registratio Date n Reg. Number 1 2 3 4 5 6 7 8 9 10 11 101 104 105 107 109 110 111 114 116 117 133 of Name of the Company

23.10.200 HDFC Standard Life Insurance Company 0 Ltd. 15.11.200 Max New York Life Insurance Co. Ltd. 0 24.11.200 ICICI Prudential Life Insurance Company 0 Ltd. 10.01.200 Kotak Mahindra Old Mutual Life Insurance 1 Limited 31.01.200 Birla Sun Life Insurance Company Ltd. 1 12.02.200 Tata AIG Life Insurance Company Ltd. 1 30.03.200 SBI Life Insurance Company Limited . 1 02.08.200 ING Vysya Life Insurance Company Private 1 Limited 03.08.200 Bajaj Allianz Life Insurance Company 1 Limited 06.08.200 Metlife India Insurance Company Ltd. 1 04.09.200 Future
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Generali

India

Life

Insurance

7 12 135

Company Limited

19.12.200 IDBI Fortis Life Insurance Company Ltd. 7

Yr: 2001-2002 : (From 1st Jan 2001 to Dec. 2002) Insurance Industry in this year, so far has 2new entrants; namely Life Insurers: S.No. Registration Date Number Reg. 1 121 of Name of the Company

03.01.2002 Reliance Life Insurance Company Limited.

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14.05.2002 Aviva Life Insurance Co. India Pvt. Ltd.

Yr: 2003-2004 : ( From 1st Jan 2003 till Date) Insurance Industry in this year, so far has 1new entrants; namely Life Insurers: S.No. Registration Date Number Reg. of Name of the Company

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127

06.02.2004 Sahara India Insurance Company Ltd.

Yr: 2004-2005 : Insurance Industry in this year, so far has 1new entrants; namely Life Insurers: S.No. Registration Date Number Reg. 1 128 of Name of the Company

17.11.2005 Shriram Life Insurance Company Ltd.

Yr: 2006-2007 : Insurance Industry in this year, had 1new entrants; namely Life Insurers: S.No. Registration Date Number Reg. 1 130 of Name of the Company

14.07.2006 Bharti AXA Life Insurance Company Ltd.

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Yr: 2007-2008 : Insurance Industry in this year, had 2 new entrants; namely S.No. Registration Date Number Reg. 1 2 133 135 of Name of the Company Life Insurance

04.09.2007 Future Generali India Company Limited

19.12.2007 IDBI Fortis Life Insurance Company Ltd.

Yr: 2008-2009 : Insurance Industry in this year, so far has 3 new entrants in Life namely Life Insurers: S.N Registra Date of Name of the Company o. tion Reg. Number 1 2 136 138 08.05.2 Canara HSBC Oriental Bank of Commerce Life 008 Insurance Company Ltd. 27.06.2 Aegon Religare Life Insurance Company Ltd. 008 27.06.2 DLF Pramerica Life Insurance Company Ltd.

140

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008 4 142 Star Union Dai-ichi Life Insurance Co. Ltd.,

Political Scenario- The Catalyst


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. The IRDA Bill provides for the establishment of an authority to protect the interests of the holders of insurance policies, to regulate, promote and insure orderly growth of the insurance industry and amend the Insurance Act, 1938, the Life Insurance Act, 1956 and the General Insurance Business (Nationalization) Act, 1972.
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 bill stipulates tough solvency margins -- Rs 500 million for life insurance firms, Rs 500 million or a sum equivalent

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to 20 per cent of net premium income for general insurance and Rs 1 billion for reinsurance business. 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. The important functions of the IRDA, as per the IRDA Act, 1999, include the following: Licensing and regulating the insurance sector by acting as an Specifying requisite qualifications, code of conduct and Protecting the interest of the policyholder in matters Regulating investment of funds by insurance companies. Calling for information from undertaking, conducting enquiries

independent and regulatory body.

practical training for insurance intermediaries and agents.

concerning assigning of policy, settlement of insurance claims etc.


and investigations including audit of insurers and other organizations connected with the insurance business.

Regulating maintenance of margins of solvency of the insurer.


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Adjudication of disputes between insurer and intermediaries. Supervising the functioning of the Tariff Advisory Committee. Promoting efficiency in the conduct of insurance business.

Efforts are underway to bring about internationalization of regulations in the insurance sector so as to take care of development and health of insurance sector.

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Lure of Indian insurance sector


India at a glance

Population Economy

1.15 Billion 5th largest in the world in terms of Purchasing Power Parity (PPP)

GDP growth Rate

Over 6% per year on an average for the last decade

Savings Rate Life insurance premium Estimated population Insured population middle

Around 26% of GDP 1.77 per cent of GDP

class 300 Million

75 million only Table 1.2

India is the world's largest democracy and democracy is deep- rooted in its social and political institutions. The executive and the judiciary system are
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the continuation of British legacy, which ruled India for 200 years. English, the unofficial language of correspondence and instruction, is well spoken by the educated. Another strength is its abundant highly educated skilled workforce. India's stride in the fields of software and logical ability is well known in the world. The savings rate is quite high in US standards. All this makes India an attractive destination of US insurance companies. An insurance survey by LIC and KPMG reveals interesting facets of the emerging trends in the Indian insurance industry. The annual growth in the average insurance premium in India has been 8.2 per cent compared with the global average of 3-4 per cent. Despite these opportunities, however, there is also a rough ride ahead for the new players in India. This is because, unlike in the West, insurance is sold more as an instrument of savings in India than as a product offering protection and security. The growth of the debt market, which hitherto had been a neglected child of the capital market, will also get a boost as the funds from insurance companies start flowing into the kitty of the corporate sector. Once again this will boost demand and growth by raising employment levels. Similarly, stock market investments will further aid the growth of the capital market
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and equity cult. The multiplier effect will be enormous. Policyholders will get better pricing of products from insurance majors. Permission to invest more in corporate equity and debt instruments would also enhance returns on policy funds. Once the benefit of opening the sector becomes noticed in the society, the misplaced concern regarding 'flight of money outside the country' will be removed from the mindset of people, which should aid in garnering popular support for the free, competitive liberalized economy. The other reason why these large MNCs are interested in India is the economies of the insurance market. Insurance companies survive on the principle of spreading of risk. No matter what the size of each player, an insurer cannot afford to operate in a niche market. Operating in a particular region would expose them to the economic downtrends in the region and derail their profits. Insurance companies, being long-term players, also have to avoid sudden dips in earnings to inspire confidence among investors to invest long-term funds. This can be achieved by spreading their operations over a wide geographical area. Moreover, for them, big is not just beautiful, but essential for survival. Which brings us to the avenues for growth.

Facing the reality of a saturated home market, the US insurance companies are looking outward and concentrating on the real growth economies like
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India. Since the gestation period of the typical insurance business is around ten years, it is high time to make their presence felt in India. The new players will have to prove their creditworthiness. It will be a time consuming and difficult task to win customers away from LIC and gain their trust. Their track record and brand value in overseas market will not help them much in getting immediate brand recognition in India. Though they may piggyback on the brand names of their local partner, in the long run, it is their persistent track record and creditworthiness, which will matter. So, being among the first will be a deciding factor in the success in this business. Already several companies have entered into the market and a dozen companies have joined with foreign partners (see table).

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LIC still dominant force


To say that private players have some catching up to do with LIC would be an understatement of sorts. After all, given the massive head start the latter has over the private insurers, coupled with its army of agents that gives it enormous distribution leverage, its strength is staggering, to say the least. Moreover, as the private players have been around for only about three years, it would not be possible for them to make a substantial dent in LIC's market-share either. A look at the business underwritten by all the players, including LIC, indicates that LIC continues to be the dominant player in the life insurance business.

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IRDA-the Controlling Authority


Composition of Authority under IRDA Act, 1999 As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority The Authority is a ten member team consisting of (a) Chairman; (b) five whole-time members; (c) four part-time members, (all appointed by the Government of India)

Duties,Powers and Functions of IRDA Section 14 of IRDA Act, 1999 laysdown the duties,powers and functions of IRDA..(1) Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. (2) Without prejudice to the generality of the provisions contained in subsection (1), the powers and functions of the Authority shall include, 42

(a) issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; (b) protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; (c) specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; (d) specifying the code of conduct for surveyors and loss assessors; (e) promoting efficiency in the conduct of insurance business; (f) promoting and regulating professional organisations connected with the insurance and re-insurance business; (g) levying fees and other charges for carrying out the purposes of this Act; (h) calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organisations connected with the insurance..business; (i) control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938); (j) specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries; (k) regulating investment of funds by insurance companies;
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(l) regulating maintenance of margin of solvency; (m) adjudication of disputes between insurers and intermediaries or insurance intermediaries; (n) supervising the functioning of the Tariff Advisory Committee; (o) specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (f); (p) specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; (q) exercising such other powers as may be prescribed

Profiles of Chairman and Members of The Authority

Shri J. Hari Narayan (Chairman) Mr. C. R. Muralidharan, Member(F & A) Mr. K. K. Srinivasan Non-Life) Mr. G. Prabhakara, Member(Life) Mr. R. Kannan, Member(Actuary)

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Chapter 3

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O BJECTI V ES O F STUD Y

There is an old proverb if you do not know where you are going no road can take you there. In other words clarity of objectives is the key to their achievement. The specific objectives of this study are given below: To study the reasons and the factors which are considered by customers while applying for an insurance policy. To find out the inclination of customers towards privatized insurance sector in India. To find out the grievances of the customers with regard to services provided by insurance companies.
To check the level of aswareness of customers

regarding various

insurance policies.

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SCO PE OF TH E STUDY
The scope of study is confined to current time period. For the sake of study survey was limited to Punjab specifically to Sirhind. An appropriate sample was selected to fulfill the various objectives of the study and diverse customers were selected having different social economic background so that all types of respondents are covered.

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RESEA RCH M ETH O DO LOG Y


RESEARCH DESIGN: A research design is the arrangement of conditions for the collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. My research is exploratory & descriptive in nature. Three lines of attack were implied here, which will be study of secondary sources of information, survey of individuals who owns life insurance policy or planning to do so. So after careful relocation I interviewed people of sirhind. The major emphasis in the study is on the discovery of ideas and insight. The research process that was followed consisted of the following steps: 1. Defining the problem and research objectives It is said, A problem well defined is half solved. The first step is to define the project under study and agree upon the research objectives. Therefore, the study to be undertaken and the objectives of the study have been clearly defined in the previous pages.

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1. Developing the Research plan The second step of the study consists of developing the most efficient plan for gathering the relevant data. The following factors were under focus in the research plan: Data Design: The data design involves different aspects like the nature of data, the data sources, the data frequency and the data tools. Nature of data: The nature of the data that has been used in the project under study is both primary and secondary in nature. The term data can be defined as the facts, figures and information, systematically collected and presented for the purpose of drawing inferences. The first hand informations bearing on any research, which has been collected by the researcher, or his agent or assistant is called primary data. The results based on primary data are bound to be empirical and of great utility. Once the primary data has been put to use, the original characters disappear and the data becomes secondary. The data, which has already been collected, compiled and presented earlier by any agency, may be used for the purpose of investigation.

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Data sources: Following are the methods of collection of data: Collection of Primary Data: Interview method/ Personal meetings with the concerned persons. They are first contacted for an appointment and then meeting is held. Collection of Secondary Data 1. Various publications of Insurance in the form of annual reports, various papers and journals published from time to time. 2. Through Internet. SAMPLING DESIGN A sampling design is a definite plan for obtaining a sample from a given population. It refers to the technique or the procedure the researcher would adopt in selecting items for the sample. The sampling plan or design calls for the following decisions: Universe: Research sample unit refers to the geographical area that I have covered while conducting the research. The universe to be studied for this project comprises of the people of sirhind.

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Sample Unit: Who is to surveyed? The target population must be defined that will be sampled. It is necessary to develop a sampling frame so that everyone in the target population has an equal chance of being sampled. The sample unit pertaining to my study is people who owns life insurance policy or are planning to do so in sirhind. Sample Size: How many people will be surveyed? This refers to number of respondent to be selected from the universe to constitute a sample. An optimum sample is one that fulfils the requirement of efficiency, reliability and flexibility. The sample size of 100 serves the purpose of study.

Sample Method: The sampling method used is non-probability convenience sampling (where the researcher selects the most accessible population members from which to obtain information).

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Chapter 4

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DATA ANALYSIS AND INTERPRETATION


For the purpose of analysis of data, information has been collected from the primary sources as well as secondary sources. In the primary sources a questionnaire has been used, coupled with personal interview of the exporters and in the secondary sources data has been collected from various reports, journals and web sites. The data has been presented in the form of tables and charts. Averages and percentages have been calculated to help in the analysis of the data. Effort has then been made to analyze and interpret the data in the lucid and easy language.

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1. Status of respondents whether they are insured or not.


It is important to know about the respondents before they can be further probed. So the first question has been formulated to ask respondents about their current status, whether they are insured or not.

Status Of Respondents Insured No. of Respondents 82 Table 5.1


non insured 18%

Not insured 18

insured non insured

insured 82% Chart C1: Status of respondents

It is revealed from the graph that 82% of the respondents are insured through different life insurance schemes and 18% are not covered under any life insurance scheme. So 18% of the sample population of sirhind provides opportunity for life insurance companies.
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2. Who is the insurer or whom would they like to be their insurer?


Objective of this question is to know the whether the respondents prefer Life insurance companies or Private Life insurance companies. Preference of Respondents LIC No. of respondents 60 Table 5.2
12%
LIC Both Private companies

Private companies 18

Both 10

None 12

18%

None

60%

10% Chart C2: Preference of Respondents

60% Respondent are insured through LIC because LIC has been in the market for a longer time and has a wider reach.

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18% respondents have taken insurance policies from private companies due to their high level of customer service. 10% respondents are insured from both LIC and private co.s to have taste of both. They are shifting from public to private companies in search of better service.

Still 12% of sample population refuses to accept any insurance policy in near future.

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3. Who is the financial advisor if insured.


Objective is to know who was the influencer or advisor if the respondent is insured.

Financial Advisor of the respondents Professional No. of Respondents 40 Table 5.3 Friend/Relative 55 Others 5

5% 40%
Professional Friend Others

55%

Chart C3: Financial Advisor

It is revealed from the chart that insured persons are more influenced by their relatives or friends than the representatives of the company. As 55% of the respondents have taken policies through their friends or relatives.

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40 % of them are approached by the professionals in the field through references or cold calls. Only 5% of the respondents haven policies off the shelf i.e. they themselves approached the company.

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4. Satisfaction Level of insured people


Objective is to know whether the respondents are satisfied with their existing insurers or insurance companies if they are insured or not.

Satisfaction level of insured respondents Satisfied No. of Respondents 36 Table 5.4 Neutral 6 Dissatisfied 58

6%

58%

36%

Satisfied Neutral Dissatisfied

Chart C4: Satisfaction level of insured people

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36% of the respondents are satisfied with the services of their insurers such as timely services, details about the policy and good amount of bonuses are provided.

58% of the respondents are dissatisfied with the services of their insurers. 6% of the respondents are neutral.

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Grievances of Clients if not satisfied.


Objective of this question is to find out the grievances or complaints that the clients of various insurance companies might have regarding the working or services offered by life insurance companies. In todays scenario, agents or consultants become very crucial from the customer service point of view. Targeting to them customers complain like the policy being thrust upon them, lack of professionalism among them. The respondents said that they couldnt develop any personal relationship with the company because of ever-new faces at the offices of insurers. The biggest dissatisfaction is at the time of claim settlement, which the clients (LICs) face. Regarding the insurance products, customers need assured returns with least premiums. They proposed that some short-term products should be introduced by the insurance companies. However while taking any insurance policy there are so many formalities that people want to get rid of. It is not unusual to hear the comment even among educated circle that the entire that has been paid over the past so many years has not yielded any positive benefit.
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5 . Preference of respondents regarding the private companies. Objective is to know the favorableness of the respondents regarding the privatization of life insurance sector in India.

Against 28%

In favor 72% Chart C5: Attitude Towards Privatization

Majority of the respondents (72%) are in the favor of privatization of insurance sector in India. They believe that there is a hope of getting better quality products at low cost with the emergence of competing private companies. However as private companies are coming with giant foreign partners their standards will be high with better customer service.

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Still there is small population (28%) who believe that private companies will exploit people. They perceive it as flight of money outside the country.

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6. Comparison of Private Companies with LIC.


The objective of this question is to know how people grade the private companies in comparison to LIC.

12% 18%

25%
Excellent Good Fair Poor

45% Chart C6: Private Life Insurers Vs LIC

The above graph shows that (45%) people consider private companies average or good compared to LIC. People generally favour LIC because:

It is government backed It is safe and give high returns It is trusted and tested

However there is small portion (25%) of population that consider private companies excellent to LIC. People are giving preference to private companies as:

It offers good services It give more benefits vis a vis LlC


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7. The purpose behind taking an insurance policy

FACTOR Rank Risk coverage Regular savings Investments (returns) Tax savings Oblige relatives or friends Pension 1 3 23 8 50 2 14

NO. OF RESPONDENTS 2 11 40 9 15 7 18 3 30 13 16 13 16 12 4 21 12 32 10 18 7 5 15 8 30 5 36 6 6 20 4 5 7 21 43 306 446 318 474 258 298

Table 5.5: Purpose behind taking an insurance policy

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500 450 400 350 300 250 200 150 100 50

Investments (returns)

Tax savings

Oblige relatives or friends

Risk coverage

Regular savings

Chart C7: Purpose behind taking an insurance policy.

Most of the times Insurance scheme is bought for the wrong reasons i.e., for tax saving. Every respondent first take insurance as tax saving device and then consider anything else.

Next reason for owning insurance policy is saving, as insurance is superior to any other saving tool. 23 per cent of insurance-buyers look at insurance products first as a means of savings.

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Pension

8. Factors that are considered while taking an insurance policy


Objective of this question is to find out the factors that affect a persons decision making while taking an insurance policy. Trust of insurer Various obligations
90% 70% 60% 45% 30% 10% Trust of insurer Maturity period Convenience Tax benefits Various obligations Premium Service Bonus 24% 65%

Tax Service benefits

Premium Convenience

Maturity period Bonus

Chart C8: Factors affecting the purchasing decision It is revealed that the foremost factor that is considered while taking an insurance policy is tax benefits. People first see how much tax deductions and rebate is associated with a particular insurance policy.

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Another factor that is considered is the trust on the insurer that is built through Brand image of insurer, years of existence of the insurer and experience with the company in some cases.

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9.Given a chance where people generally invest at first instance.


No. of RESPONDENTS No. of RESPONDENTS

OPTION

OPTION

Bank P.O. /Recurring deposit Fixed Deposits

10

Stocks Mutual Funds Insurance

22

12

16

NSC

30

Others

Table 5.6: Investment options

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30% 22% 16%

10%

12% 5% Fixed Deposit Post office 3% Mutual Funds Insurance 2% Others

Bank

NSC/KVP

Chart C10: Investment options

Majority of the respondent (30%) would prefer to invest in NSC. NSC can be used for raising loans against them and for saving taxes. That is the reason people like to invest in NSC.

Only 16% of the respondent would prefer to invest in life insurance. 22% of the respondent would prefer to save in banks and fixed deposits. Very rarely (5%) invest in shares because it involves greater risk.

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Suggestions to Insurance Industry in general and private companies in particular


There should be quick claim settlement. Premiums should be lower down. Plans should be introduced that are of short duration. Private companies should create healthy competition that does not kill the competitors or exploit the consumers. Should set an example for govt. co.s for customer friendly services Should get rid of cumbersome procedures and provide efficient services. Formalities for claim settlement should be made simpler and quicker. Criteria for giving claims to dependents of policyholders after death should be made full proof so that money goes to right persons. Should provide welfare and beneficial schemes for poor. Should adopt customer friendly approach along with more incentives. Companies should provide online services of paying premiums and details of policies taken. There should not be any union that would hamper functioning. Should cover that area of insurance where existing companies have not entered so far.

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FINDINGS
Most of the respondents (82%) have already taken up the insurance

policies and majority of them are insured through LIC as there was no alternative some time ago and `LIC' was a byword for insurance in the customers' mind..
There is lack of awareness among people regarding various issues of

insurance.

They

have

many

apprehensions

towards

private

companies; some does not know even their existence. Many respondents have got insurance just to oblige their friends or relatives who are agents of different insurance companies. 58% of the respondents are dissatisfied with their existing insurers on account of claim settlement, less returns, customer services like timely reminders, cooperation from the financial consultants etc.

Majority of the respondents (72%) believe that the working and

efficiency of the government companies will improve due to privatization. Actually they will have to otherwise they will find

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themselves striving for mere existence in such a competitive and open play field.

On comparison of private companies with that of LIC people prefer

private co.s because of services offered by them. However there is small proportion of people who thinks that private companies cannot be relied on, as their future existence is questionable. They may take away their money. However with the emergence of so many private companies it is very difficult to compare their offerings.
Most of the respondents take insurance policies just to save tax .

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RECOMMENDATIONS

MAXIMUM CUSTOMERS SATISFATION

Providing maximum satisfaction to each segment of the society will be the challenge the insurance industry will have to face in the future. The three key areas to be tackled in this respect are: Speedy and correct insurance documentsQUALITY ASSURANCE Expeditious disposal of claimsEFFICIENCY Proper response from agents and companySERVICE These can be achieved trough introduction of technology,

decentralization of authority, systems and procedures, innovativeness in product development, simplification of policies and procedures, requisite marketing strategies and delivery systems, emphasis on training, upgrading and development of skill of surveyors and instilling a spirit of outward looking attitude at all levels among members of the industry.

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Crucial areas such as pricing of products, policy wordings, methodology of claim settlement and recent trend in legal interpretation etc require continuous study and updating. SHORT SPAN POLICIES SHOULD BE INTRODUCED

In this fast changing era people dont want to block their money for a long time. So short tem investment policies should be introduced offering high returns and low risk. AWARENESS Very soon market will be flooded by a large number of products by a fairly large number of insurers. It will create confusion in the minds of customers. So policies should be transparent to customers in terms of returns and new reforms. SEMINARS IN CORPORATES AND INSTITUTIONS

Seminars by professionals and experienced persons should be held in corporate and institutes. This will be a great source of awareness in potential customers. PROMOTIONAL ACTIVITIES

Sales promotional activities like free gifts (token of the company identification) should be introduced that will create a sense of belonging and act as an identity of company.
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WORKSITE MARKETING

A potential channel that reduces the need for an owned distribution network is worksite marketing. Insurers will be able to market pensions, health insurance and even other general covers through employers to their employees. These products may be purchased by the employer or simply marketed at the workplace with the employers cooperation. MEETINGS

Systematic monitoring of customers complaints gives opportunity for identifying service deficiencies. Insurer must have regular meeting with their customers in order to get suggestions or any problems they are facing.

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LIMITATIONS OF THE STUDY


It is said, What is worth doing is worth doing best. In other words a person should aim at perfection. However in real life this is not always possible. Humans have to work within the limitations set by nature and society. That is to say even though every possible effort to make this project report authentic and comprehensive has been made, however many constraints were also at play. The major limitations of the study are: Hard enough to fetch information. It was not an easy task. The respondents were not always open and forthcoming with their thoughts and views. LIMITED SCOPE. Scope of study is limited to sirhind only . So results of study may not be generalized for India as a whole. RESULTS MAY BE INACCURATE. This study is based on the assumption that responses are true and factual although at times that may not be the case. EXISTENCE OF BIASES, another limiting factor could be the existence of biases in the respondents mind. Though every care has been taken to eliminate such biases, but considering the human factor the possibility of small bias having come up cannot be ruled out altogether.

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Chapter 5

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BIBLIOGRAPHY

1. 2. 3.

www.insuranceworld.com www.irdaindia.org . www.irdaindia.org/annualreport.html

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Annexure Questionnaire
Name= 1. What is your insurance status? Insured Not insured Date= ..

2.Which companys policy do you have? LIC Private company Both None

3.Who is your financial advisor ? Professional Relative/Friend Others

4. What do you feel about your insurer ? Satisfied Dissatisfied Neutral

5. On what basis do you have dissatisfaction ? Customer Services Return


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Claim Settlement

Less

6 .What you think about private companies ? Favor Against

7. What do you think while comparing LIC with private companies? Excellent Good Fair Poor

8. What is the purpose behind taking an insurance policy ? Risk Coverage Tax saving Regular Savings Obligations Investment Pension

9. What you consider while taking an insurance policy ? Trust Services Tax Premium Bonus Maturity Period Others

10. What is your first preference to invest ? Bank Others Post Office Share Market Insurance

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