AVIVA LIFE INSURANCE INDIA

Project Report

In Partial fulfillment of the Bachelors Program in Business Administration, Bharti Vidyapeeth University, Pune

April 2009 EXECUTIVE SUMMARY

Aviva Life insurance is the oldest life insurance company in the world. It is the largest insurer in the UK and is the 28th largest company in the world. In India, the company is marketing life insurance products and unit linked investment plans. From my research at Aviva, I found that the company has a lot of competition from other private insurers like ICICI, HDFC, Birla Sun Life

and Tata Aig. It also faces competition from LIC. To compete effectively Aviva could launch cheaper and more reasonable products with small premiums and short policy terms (the number of years premium is to be paid). The ideal premium would be between Rs. 5000 Rs. 25000 and an ideal policy term would be 10 20 years. Aviva must advertise regularly and create brand value for its products and services. Most of its competitors like HDFC, ICICI, Reliance and LIC use television advertisements to promote their products. The Indian consumer has a false perception about insurance they feel that it would not benefit them if they do not live through the policy term. Nowadays however, most policies are unit linked plans where a customer is benefited even if their death does not occur during the policy term. This message should be conveyed to potential customers so that they readily invest in insurance. Family responsibilities and high returns are the two main reasons people invest in insurance. Optimum returns of 16 20 % must be provided to consumers to keep them interested in purchasing insurance. On the whole Aviva life insurance is a good place to work at. Every new recruit is provided with extensive training on unit linked funds, financial instruments and the products of Aviva. This training enables an advisor/ sales manager to market the policies better. Aviva was ranked 13 in the Best Places to Work survey. The company should try to create awareness about itself in India. In the global market it is already very popular. With an improvement in the sales techniques used, a fair bit of advertising and modifications to the existing product portfolio, Aviva would be all set to capture the insurance market in India as it has around the globe.

TABLE OF CONTENTS

Introduction Insurance.1 Research

to

Design 5 Company Profile ..10 Financial Analysis .34 Competitive analysis..3 6 Marketing problems 40 Analysis and

Interpretation42 Future line of

research.58 Conclusion ..59

References ..60 Appendix ..61

ACKNOWLEDGMENT
I would like to thank Miss. Anjali Sharma for supporting me during this project and providing us an opportunity to learn outside the class room. It was a truly wonderful learning experience. I would like to dedicate this project to my parents and brother. Without their help and constant support this project would not have been possible. Lastly I would like to thank all the respondents who offered their opinions and suggestions through the survey that was conducted by me in Delhi.

CHAPTER I

INDIAN INSURANCE INDUSTRY AN OVERVIEW

THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW
With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7% to the countrys Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and funds available with LIC for investments are 8% of the GDP.

Even so nearly 80% of the Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. A large part of our population is also subject to weak social security and pension systems with hardly any old age income security. This in itself is an indicator that growth potential for the insurance sector in India is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain the economic growth of the country. (Source: www.indiacore.com)

HISTORICAL PERSPECTIVE
The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development. The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

KEY MILESTONES
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 by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

INDUSTRY REFORMS
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 36%, with premium income from new businesses at Rs. 253.43 billion during the fiscal year 2004-

2005. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a companys ownership. Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 14 private life insurance companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. Some of these products include investment plans with insurance and good returns (unit linked plans), multi purpose insurance plans, pension plans, child plans and money back plans. (www.wikipedia.com)

CHAPTER II RESEARCH DESIGN

RESEARCH DESIGN
INTRODUCTION

A Research Design is the framework or plan for a study which is used as a guide in collecting and analyzing the data collected. It is the blue print that is followed in completing the study. The basic objective of research cannot be attained without a proper research design. It specifies the methods and procedures for acquiring the information needed to conduct the research effectively. It is the overall operational pattern of the project that stipulates what information needs to be collected, from which sources and by what methods.

TITLE OF THE STUDY

A Study on Market Segmentation of the Insurance Industry in India for Aviva Life Insurance India Pvt. Ltd.

STATEMENT OF THE PROBLEM

This study was undertaken to identify which type of insurance plans Aviva should market to particular market segments in India. A survey was undertaken to understand the preferences of Indian consumers with respect to insurance. While marketing policies the sole duty of an advisor/ agent is to provide insurance plans as per customer requirements. In effect plans (insurance products) should be flexible to suit individual requirements. This research tries to analyze some key factors which influence the purchase of insurance like the term of the policy, the type of company, the amount of annual premium payable (capacity and willingness to spend), risk taking ability and the influence of advertising. Solutions and recommendations are made based on qualitative and quantitative analysis of the data.

OBJECTIVES OF THE STUDY

To find the market share of various life insurers in India To suggest additions to the current product portfolio To recognize the popular insurance plans To showcase the influence of advertising To suggest ideal policy term and premium for insurance To showcase the consumers willingness to spend on life insurance To showcase the factors that motivate purchase of insurance policies To understand the type of company preferred for investment To understand the awareness level of consumers about unit linked insurance plans

RESEARCH METHODOLOGY

TYPE OF DATA COLLECTED There are two types of data used. They are primary and secondary data. Primary data is defined as data that is collected from original sources for a specific purpose. Secondary data is data collected from indirect sources. (Source: Marketing Research, Sumathi and Saranavel) PRIMARY SOURCES These include the survey or questionnaire method, telephonic interview as well as the personal interview methods of data collection. SECONDARY SOURCES These include books, the internet, company brochures, product brochures, the company website, competitors websites etc, newspaper articles etc.

SAMPLING
Sampling refers to the method of selecting a sample from a given universe with a view to draw conclusions about that universe. A sample is a representative of the universe selected for study. Convenience sampling is used in exploratory research where the

researcher is interested in getting an inexpensive approximation of the truth. As the name implies, the sample is selected because they are convenient. This non probability method is often used during preliminary research efforts to get a gross estimate of the results, without incurring the cost or time required to select a random sample. (Source: www.statpac.com) SAMPLE SIZE The sample size for the survey conducted was 130 respondents.

SAMPLING TECHNIQUE Convenience sampling technique was used in the survey conducted.

PLAN OF ANALYSIS
Tables were used for the analysis of the collected data. The data is also neatly presented with the help of statistical tools such as graphs and pie charts. Percentages and averages have also been used to represent data clearly and effectively.

STUDY AREA
The samples referred to were residing in Bangalore City. The areas covered were Koramangla, Frazer town, Maruthinagar, C.V. Raman Nagar, MG Road and Whitefield.

LIMITATIONS OF THE STUDY

The study was limited only to the city of Bangalore The study was conducted only for a short period of one month The study is based on the assumption that information provided by the respondents is true

OVERVIEW OF CHAPTER SCHEME

CHAPTER 1: Introduction to insurance - An overview of the industry in India, history, key milestones, reforms in the industry, present scenario in India.

CHAPTER 2: Research Design - Introduction, title of the study, statement of the problem, objectives of the study, research methodology, sampling, plan of analysis, study area and limitations of the study.

CHAPTER 3: Company Profile Introduction to Aviva, products and services, vision and core values, human resource, organizational structure, introduction to unit linked funds, national & international presence of the organization.

CHAPTER 4: Financial Analysis Analysis of the income statement and balance sheet, stock analysis to determine the profitability of the firm. The advantages of investing in Aviva compared to other financial instruments.

CHAPTER 5: Competitive analysis Information about the plans offered by LIC and other private insurers in India. Comparisons between the plans to find the most popular and beneficial plans which Aviva can incorporate into their product portfolio.

CHAPTER 6: Marketing problems - The techniques used to market insurance and their advantages and disadvantages along with suggestions for improvement. CHAPTER 7: Analysis and Interpretation A survey on Segmentation of the Insurance Industry in India. CHAPTER 8: Problems requiring more research Future line of work CHAPTER 9: Conclusion References Appendices

CHAPTER III COMPANY PROFILE

COMPANY PROFILE
AVIVA LIFE INSURANCE INTRODUCTION
Aviva plc was previously known as CGNU plc. The name change was effected on 1st July 2002. Prior to the re branding, CGNU was using 50 trading names across the world. The decision for the re branding was taken with the objective of creating a strong and powerful international services brand.

HISTORY OF THE AVIVA GROUP

1696 The worlds oldest insurance company Hand in Hand formed in London 1797 Norwich Union founded in London 1861 Commercial Union founded in London 1885 General Accident founded in Perth, Scotland 1998 CGNU formed with the merger of Commercial Union and General Accident 2000 CGNU formed with the merger of CGU and Norwich Union 2002 CGNU re - branded as Aviva plc on 1st July, 2002

KEY POINTS - AVIVA

5th largest insurance group in the world (Source: Fortune 500) Largest insurer in the United Kingdom 28th largest company in the world Premium income from new business 32 billion USD

Total premium income 36 billion pounds Shareholders funds of 14.9 billion Over 35 million satisfied customers worldwide Listed on the London, Paris and Dublin stock exchanges Top five positions in Holland, Ireland, Singapore, Spain, Turkey and Poland

Long term savings and asset management account for 71% of premiums

KEY POINTS - AVIVA LIFE INSURANCE INDIA

Got licensed on 14th May 2002 and started operations on 6th June 2006 Pioneered the concept of indexation Pioneered the concept of unitization Tie - ups with ABM Amro, American Express, Canara Bank & Lakshmi Vilas Bank 26 million customers and over 67734 crores in deposits Paid up capital of Rs.559 crores Growth of 118% since the last year from new business

VISION
Aviva - Where exceeding expectations through innovative solutions is our way of life

CORE VALUES
Passion for winning

Integrity Innovation Customer centricity Empowered Team

PRODUCTS & SERVICES

The right investment strategies won't just help plan for a more comfortable tomorrow -- they will help you get Kal Par Control. At Aviva, life insurance plans are created keeping in mind the changing needs of you and your family. Our life insurance plans are designed to provide you with flexible options that meet both protection and savings needs. We offer our customers a full range of transparent, flexible and value for money products. Aviva products are modern and contemporary unitized products that offer unique customer benefits like flexibility to choose cover levels, indexation and partial withdrawals. (Source: www.avivaindia.com)

PLANS MAINLY FOR PROTECTION (LIFE COVER)

1) LIFE LONG Life Long is designed to suit individual requirements, no matter which life stage you are at, and changes as your needs change during your entire life. For the same premium, you can opt for a higher life cover (protection) and lower savings or lower life cover and higher savings. The choice of protectionsavings mix is yours, and the decision can be based on your priorities and age. You can also cover your spouse under the same policy without any additional expense through a joint life policy (first death basis). The entry age is 18 60 years. If any rider is opted the maximum entry age is 55 years (last birthday). This is a whole life plan with premium payment age up to 85 years. The minimum annual premium is Rs. 6000. The minimum sum assured is 0.5* (70 entry age) * Annual premium and the maximum

sum assured is Annual premium * Cover level, where the cover level ranges from 10 to 100, depending upon age at entry. Sample Cover Level

Age Cover Level

20 years 97

30 years 82

40 years 54

50 years 30

One can invest their monies in a With Profits Fund and 3 Unit Linked funds; Protector, Growth and Balanced Funds. An individual can opt for riders like accidental death and disbursement rider, critical illness and permanent total disability rider and hospital cash benefit. There will be 5% extra allocation of units on the 15th policy year. How is the money invested? Life Long offers a With Profits Fund and 3 Unit Linked Funds which give you the flexibility of choosing how your money should be invested in terms of the risk and the security of the return on the investment. You can invest 100% of your premiums either in the With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in each selected unit linked fund must be 10%.

With Profits Fund

Protector

Unit Linked Funds

Growth Fund Balanced Fund

Steady returns on your investments by smoothening market volatility through crediting bonuses to your

Fund Fund Objective Progressive High Capital returns on your investment by investing higher element of assets in growth by investing higher element of assets in the equity market

Capital growth by availing opportunities in debt and equity markets and providing you a

fund on a daily basis

debt securities with minimum exposure to equities Fund Composition (Range) Debt securities: Debt securities: 60 100% Equities: 20% 0 20% 0 0 50% Equities: 30

good balance between risk and return

Debt securities: 70 100% Equities: 0 20% Money market & cash: 0 10%

Debt securities: 50 90% Equities: 0 45% Money market &

Money 85% cash: 0 20%

market & cash: Money market & cash: 0 10%

Changing Allocation Proportions You have the option to change the allocation proportion of your premiums to different funds at anytime, up to 2 times a year, for all future premiums. The minimum allocation in each selected fund must be 10%. A policy holder can switch accumulated funds from one investment fund to another (either partly or fully). In case of a part switch, the minimum amount switched should be Rs. 10,000 and the minimum balance in the fund after the switch should be Rs. 5,000. The first 2 switches in a policy year are free of charge. Allocation of Units

Units purchased with the first years premium and the first incremental regular premium due to indexation and / or additional regular premium will be used to allocate initial units. Units purchased from the second years premium onwards and after the first incremental regular premium due to indexation and / or additional regular premium will be used to allocate accumulation units

The unit price shall be calculated on a daily basis in accordance with Insurance Regulatory and Development Authority (IRDA) guidelines from time to time. The Unit Price will be calculated as follows: Unit

price for Unit Linked Funds is equal to the market value of assets held by the fund plus the value of current assets and accrued income minus the value of current liabilities, fund management charges and provisions, if any, divided by the total number of units outstanding

Unit price for With Profits Fund is calculated by applying the equivalent daily rate to the current unit price on a daily compounding basis. The equivalent daily unit growth rate = (1 + annual regular bonus rate) ^ (1/365)*(1-fund management charge per annum /365) 1. Aviva guarantees that the unit price in this fund will never fall

Units shall be allocated on the day the proposal is completed and results into a policy by adjustment of application money towards premium. The premium shall be adjusted on the due date even if it has been received in advance

In respect of premiums received within a time specified by IRDA through a local cheque or a demand draft, payable at par, at the place where the premium is received, the closing NAV of the day on which premium is received shall be applicable. Currently, this time is 4:15 p.m.

In respect of premiums received after the time specified by IRDA through a local cheque or a demand draft, payable at par, at the place where the premium is received, the closing NAV of the next business day shall be applicable

In respect of premiums received through outstation cheque / demand draft, at the place where the premium is received or through direct debit / ECS, the closing NAV of the day on which the cheque / demand draft / money is realized, shall be applicable

Extra Allocation of Units On the 15th policy anniversary, Life Long gives you a 5% Extra Allocation on existing units. These units are given if all the due premiums have been paid. The additions will apply to the units attributable to regular premiums existing at the end of the specified policy anniversary. This benefit will not be applicable to units pertaining to the top-up premiums or additional regular premiums.

Can I make lump-sum investments? You have the flexibility of making lump-sum investments through top-up premiums to increase the investment value of your policy without increasing the sum assured provided all due premiums till date are paid. The minimum top-up premium is Rs. 1,500. The total of top-up premiums cannot exceed 25% of the total regular premiums paid till date at any point in time. Units purchased from top-up premiums will be used to allocate accumulation units to various investment funds in the same proportion as selected by you for your regular premiums Can I increase the sum assured? You can increase your sum assured anytime before age 67 or the 27th policy year, whichever is earlier, provided that all due premiums have been paid. This is subject to the maximum increase allowed at that age. The sum assured under the riders (except HCB) will also increase up to the maximum limit allowed under each rider. Evidence of health may be required before such an increase in sum assured is made.

Can I increase my regular premium? You can increase your regular premiums through any of the 2 methods mentioned below: Indexation You have the option to increase your regular premiums by an indexation rate at any policy anniversary to protect the real value of your investment against inflation. The rate of indexation will be in line with the increase in the Whole Sale Price Index (or in the event that this Index ceases to be published such other index as the Company may select for this purpose). The base sum assured and sum assured of any attached rider (except HCB) would also be increased by the corresponding indexation increase.

The maximum sum assured limits under the riders for the purchased policy would not apply in this case. You can opt for indexation at the inception of the plan only. Once opted for, this will become a default option unless altered by you. The indexation benefit is available till age 67 or the 27th policy year, whichever is earlier.

Additional Regular Premiums (ARP) On every policy anniversary you have the option to increase the regular premium amount through ARP at any time up to age 67 or the 27th policy year, whichever is earlier. The minimum ARP is Rs. 1,000. ARP will increase the sum assured automatically. The sum assured of any attached rider (except HCB) would also increase provided the increased sum assured is within the maximum limits allowed for the riders. Evidence of health may be required before such an increase in sum assured is made.

When can I withdraw my money? You have the flexibility of making partial withdrawals from accumulation units in respect of regular premiums as well as top up premiums provided all due premiums till date are paid. Any partial withdrawal will first be made from the top up premium account (if any and if eligible for withdrawal) followed by the regular premium account, if required.

Partial withdrawals from top-up premium account can be made after 3 years from the allocation date of that top-up premium

Partial withdrawals from units pertaining to regular premiums can be made after completion of 3 policy years

Only 4 partial withdrawals are allowed in a policy year. The minimum partial withdrawal is Rs. 5,000 and the fund value should not be less than two times the annual premium

Till age 58 years, the total partial withdrawal with respect to regular premiums in a policy year should not exceed 25% of the fund value pertaining to regular premiums at the beginning of the policy year.

Post age 58 years this restriction does not apply. There is no restriction on the maximum amount of partial withdrawal with respect to top-up premiums.

What are the riders that I can opt for? Apart from the death cover under the base plan, Life Long offers extra protection through optional riders:

Accidental Death and Dismemberment Rider (AD&D): Coverage from risk of death or dismemberment due to an accident

Critical

Illness

and

Permanent

Total

Disability

Rider

(CI&PTD):

Coverage against contracting a critical illness or becoming totally and permanently disabled due to a disease or an accident

Hospital Cash Benefit Rider (HCB): The Company will make fixed cash payments for each day of hospitalization. These riders can be attached to the base plan at inception only and the rider covers expire at 60 years of age.

What happens if I die? In the unfortunate event of your death or if your spouse dies before you (if jointly assured) the following payments would be made:

Higher of sum assured or fund value (value of initial and accumulation units in respect of regular premiums) is payable

An additional sum assured would also be payable if AD&D rider has been opted for and death is due to accident

The sum assured as well as the rider sum assured will be reduced by all partial withdrawals made from regular premium account within the last 2 years prior to death. If death occurs after age 60, the sum assured will be reduced by all partial withdrawals made after age 58 till death

The value of units attributable to the top-up premiums, if any, would also be payable

If you have invested in the With Profits fund, a final bonus, if any, will also be payable

What are the charges on my policy?

Policy Administration Charge (PAC): Rs. 67 per month, which will increase by 5% p.a. on the 1st of January each year. PAC will be deducted monthly by cancellation of units from the accumulation unit account. If premiums are discontinued, this charge would reduce to 60% of the charge applicable for the premium paying policies

Initial Management Charge (IMC): 10% p.a. of initial units during the first 30 years. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on a daily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA

Mortality Charge: The Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the Fund Value pertaining to regular premiums). It will be deducted by monthly cancellation of units from the accumulation unit account. The Mortality Charge shall remain guaranteed throughout the policy term.

Rider Premium Charges: Rider charges will be made by monthly cancellation of units from the policy accumulation unit account. The AD&D rider charge will apply on Sum Assured; the CI&PTD rider charge will apply on the Sum at Risk, while the HCB rider charge is a fixed amount.

Rider charges may change based on the Companys claims experience and approval by the IRDA. The Company shall charge the applicable

service tax over and above the mortality charge and rider premium charge mentioned above

Surrender Charge on Initial Units: [1-(1/1.10^N)] * value of initial units, at the unit price, on the date of surrender on Accumulation Units pertaining to regular premiums: [1-{1/(1 + x)}^N] * value of accumulation units, at their unit price, on the date of surrender.

What are the tax benefits I get? Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961. Insurance is tax free up to Rs. 100000 per annum and the returns on investment on maturity of the policy are also tax free. 2) LIFE SHIELD Life Shield is an ideal life insurance plan that helps you protect your family's future. While there can be no compensation for the loss of life, Life Shield ensures that your family's financial needs are met should something unfortunate happen to you. Its aim is to pay out a guaranteed cash amount in the unfortunate event of your death during the term of the policy. Key Features of Life Shield

Life Shield is a low cost life insurance plan which guarantees to pay a lump sum amount in case of your death during the term of the policy.

Life Shield can be purchased for any life between 18 to 55 years of age. However, the maximum age of the life insured at expiry of the policy is 65 years.

The minimum and maximum policy terms are 5 years and 40 years, respectively.

The minimum annual premium is Rs.2000 and the minimum sum insured is Rs.500000.

The sum insured of the policy can be increased (only up to 40 years of age) once by 50% (subject to maximum increase of Rs.1,000,000) during the term of the policy, without submitting any evidence of good health, if: You decide to increase the sum insured within three months of your marriage. You decide to increase the sum insured within three months of the birth of your child.

This option to increase the sum insured is available if the policy has been accepted on standard rates. It can be exercised only when outstanding term of the policy is at least 5 years and the policy is in force for full sum insured.

What are the benefits of this plan?

The plan pays out a sum insured in the unfortunate event of your death before the maturity date. We offer preferred rates to customers opting for higher sum insured and to Pension Plus policyholders of Aviva.

You will receive a discount of Rs. 0.50 per thousand of sum insured on standard premium rates if you are opting for a sum insured of Rs. 1,000,000 and above.

If you are a Pension Plus policyholder, you will get an additional discount of 7.5% on the premium rate stated in the Premium Rate Table of Life Shield, provided your Life Shield policy has been accepted on standard rates.

Illustration This illustration is of a 30 year old, who pays premiums annually for a sum insured of Rs. 1,000,000.
Base Annual Premium for Pension Plus Policyholder (with 7.5% discount) (Rs.) 2923 3136 3349 Annual Premium for Pension Plus Policyhold er (Rs.) 2423 2636 2849

Policy Term (Years)

Base Annual Premium (Rs.) 3160 3390 3620

Discount* @50 paise/'000 (Rs.) 500 500 500

Base Annual Premium (Rs.) 3160 3390 3620

10 15 20

PLANS MAINLY FOR SAVINGS & INVESTMENT

1) EASY LIFE PLUS Easy Life Plus is a simple unit linked endowment plan with the benefit of life protection. By choosing an appropriate premium level and term, you can match the maturity date of the plan to a specific savings need such as your childs education, wedding or any other financial need. Easy Life Plus also offers an extra protection against accident without requiring you to undergo any medical examinations. The entry age for the policy is 18 50 years. The policy term is 10, 15, 20 or 25 years. Maximum age at maturity is 60 years. The minimum annual premium is Rs. 6000 and maximum is Rs. 50000. Sum assured is calculated as higher of 10 times the annual premium and 0.5 * policy term * annual premium subject to a minimum of Rs. 60,000 and a maximum of Rs. 50,000. The investment fund options available are protector, growth and balanced funds. On maturity, you can either take out the maturity proceeds (fund value in respect of regular premiums) and terminate the policy or opt for a settlement option wherein all or part of maturity proceeds would be paid out to you as structured payouts in accordance with the settlement option then offered by

the Company. The settlement option is available only on Unit Linked funds and only if all due premiums have been paid.

Sample Illustration: This illustration is for a 30 year old male who pays premiums annually for a period of 20 years:
Annual Premium Sum Assured With Profits Fund Unit Linked (Balanced Fund)

Projected Maturity Value (Rs.) assuming gross returns 6% 7500 15000 25000 50000 75000 150000 250000 500000 186041 398277 680616 1386459 10% 263391 563041 961711 1958382 6% 195678 421045 718325 1461524 10% 308956 662236 1128244 2293258

What happens if I die? In case of a non accidental death in the first policy year 50% of the sum assured or fund value which ever is higher is paid. From the 2nd policy year, higher of sum assured or fund value is payable. In case of accidental death an additional sum assured is payable.

What are the charges on my policy?

Policy Administration Charge (PAC): Rs. 43 per month, which will increase by 5% p.a. on the 1st of January each year. PAC will be deducted monthly by cancellation of units from the accumulation unit account. If premiums are discontinued, this charge will reduce to 60% of the charge applicable for the premium paying policies

Initial Management Charge (IMC): 5% p.a. of initial units during the policy term. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on a daily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA

Mortality Charge: The Mortality Charge will apply on the Sum at Risk (SAR = Sum Assured less the Fund Value). It will be deducted by monthly cancellation of units from the accumulation unit account. The Mortality Charge shall remain guaranteed throughout the policy term. The charge for the ADPTD benefit will apply on Sum Assured and will remain flat throughout the term of the policy.

Premium Allocation Charge:

Allocation rate

Annual Premium < Rs. 7500 Rs. 7500 Rs. 9999 Rs. 10,000 and above

Yearly and half yearly premium frequency 93% 94% 95%

Quarterly and Monthly premium frequency 92% 93% 94%

2) YOUNG ACHIEVER Young Achiever is a regular premium life insurance product designed to meet the financial needs of your children - be it higher education, marriage,

starting a career or a business, or any other need. The plan can be purchased on the life of any one of the parents with the child as the nominee. Through this policy, you save regularly to meet your childrens needs, and at the same time their financial needs are taken care of should something unfortunate
happen to you.

The entry age for this policy is 21 55 years. The term of the policy is 8 to 21 years (maximum age at maturity 65 years). If your childs age is between 0 13 years, the policy term will be 21 minus the age of your child at entry. For example if the age of your child is 10 years at the time of purchasing the policy, the policy term will be 11 years (21 10). The minimum annual premium payable is Rs. 6000. The minimum sum assured is Rs. 36000 and maximum sum assured is Rs. 10,000,000. For each policy term there is a low and high sum assured to choose from ranging from 6 to 21 times the annual premium. Can I withdraw my money during the policy term? You have the flexibility of making partial withdrawals from accumulation units in respect of regular premiums as well as top up premiums provided all due premiums till date are paid. Any partial withdrawal will first be made from the top up premium account (if any and if eligible for withdrawal) followed by the regular premium account, if required.

Partial withdrawals from top-up premium account can be made after 3 years from the allocation date of that top-up premium

Partial withdrawals from units pertaining to regular premiums can be made in the last 4 policy years. There is no restriction on the

maximum amount of partial withdrawal with respect to top-up premiums

The minimum partial withdrawal is Rs. 5,000 and the fund value should not be less than two times of annual premium

Only 4 partial withdrawals are allowed in a policy year No partial withdrawal can be made from the initial units

What are the charges on my policy?

Policy Administration Charge (PAC): Rs. 57 per month, which will increase by 5% p.a. on the 1st of January each year. PAC will be deducted monthly by cancellation of units from the accumulation unit account. If premiums are discontinued, this charge would reduce to 60% of the charge applicable for the premium paying policies

Initial Management Charge (IMC): 10% p.a. of initial units during the policy term. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth Fund. FMC will be applied on the fund while calculating NAV on a daily basis. The maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA

Mortality Charge: The Mortality Charge will apply on the Sum Assured. It will be deducted by monthly cancellation of units from

the accumulation unit account. The Mortality Charge shall remain guaranteed throughout the policy term. Sample Mortality Charges
Age (Male) Annual Mortality charges per 1000 sum assured 25 years 1.19700 35 years 1.50675 45 years 3.43770 55 years 9.47310

3) LIFE SAVER Life saver is a flexible endowment savings plan. Its entry age is 18 65 years. This policy can be taken jointly with your spouse. The sum assured is calculated as annual premium * cover level; where cover level ranges from 5 68 depending upon the age at entry and the policy term. Since it is an endowment plan the sum assured is fixed right from the acceptance of the policy. The minimum policy term is 5 years and maximum age at maturity is 70 years. The policy term may be selected according to the goals of the prospect. The minimum premium payable is Rs. 6000 and there is no maximum limit. This is a contribution based plan. It means that the customer can decide how much money he wants to set aside in his investment. The premium payment term is the same as the policy term and it encourages disciplined savings. Top up premiums are allowed with a minimum top up of Rs. 1500 and a maximum of up to 25% of the total regular premium paid. The allocation rate for the top up premium is 96%. A policy holder can avail a premium holiday 6 months after the 5th policy year for 4 times during the policy term. During this time the policy does

not lapse. A grace period of 30 extra days are given to the policy holder to pay premium beyond the premium paying due date. On the death of the policy holder the higher of the sum assured or fund value is paid. The sum assured protects the policy holder and their corpus whereas invest able premiums grow the savings component. The customer has the option to return the policy within 15 days and no surrender penalty would be levied on the same. You can experience the service and if you are not satisfied you have a chance to cancel the policy. This is called the free look period. Tax free partial withdrawal is allowed after the three policy years. No surrender value is payable in the first three policy years. If the policy has lapsed it can be reinstated within two years from the date of the first unpaid premium. The settlement option is available at maturity.

4) LIFE BOND A wide age band can opt for this policy. The eligibility is 1 65 years. There are no riders available with this policy. The minimum sum assured is Rs. 31,250 and there is no maximum limit. The minimum premium payable is Rs. 25000 and there is no maximum limit. The customer decides how much money he wants to set aside in this investment. Only single premium is allowed. No additional regular premiums are allowed. The minimum top up premium is Rs. 6250 and the maximum top up premium is 25% of the total regular premiums paid. The allocation rate for top ups is illustrated as below:
Premium amount (Rs.) < Rs. 35000 Rs. 35000 Rs. 99999 Rs. 100000 Rs. 149999 Rs. 150000 and above Allocation Rate (%) 97% 99% 101% 102%

Policy Charges Policy administration charge: 1.5% p.a. of the single premium for the first year and 1% p.a. thereafter. This is also true for the top up premiums.

Fund management charges: 1% on with profit and protector, 1.25% on the balanced fund and 1.5% on the growth fund.

Mortality Charges: Apply on the sum at risk which is the sum assured less the fund value

5) SAVE GUARD This policy is a limited premium paying term whole life plan. The eligibility age for this plan is 18 50 years. The minimum premium payable is Rs. 12000 and the maximum is Rs. 360000. Annual premiums have to be multiples of 6000. The sum assured is calculated as 0.5*PT*AP and the maximum is Rs. 18,00,000 for 10, 15 years term and 12,00,000 for 20, 25 and 30 years term. The premium paying term is 10, 15, 20, 25 and 30 years. The minimum policy term is 10 years and maximum is 30 years. The maximum age at maturity is 70 years. The three funds available for investment are secure fund, balanced fund and growth fund. Policy proceeds are tax free under the section 10 (10D) of the Income Tax Act, 1961 (provided the total premium paid in any policy year does not exceed 20% of the capital sum assured). A tax deduction is also applicable under section 80C of the Income Tax Act, 1961. 6) TREASURE PLUS Treasure plus is a savings cum protection plan. The entry age is 18 to 50 years. The maximum age at maturity is 65 years. This policy has various

premium payment terms of 10, 15 and 20 years. The minimum annual premium is Rs 12000/- and the minimum sum assured is 10 times annual premium subject to a maximum of 6 lakhs. The investment option available is 100% investment in secure fund. The composition of the fund is 0-20% equity 50-100% debt and 0-20% money market. The maturity benefit is higher of the fund value or minimum maturity value where minimum maturity value is equal to annual premium into policy term. The administration charges is Rs 38/- per month. The initial management charge of 7% per annum will be charged on initial units during the premium paying term. Mortality charges are based on gender, age and term of the policy. 7) FREEDOM LIFE PLAN Freedom life plan is a limited payment term investment cum protection plan. The eligibility age is 18 60 years. This policy can cover you and your spouse for the same premium amount. The maximum age at maturity is 70 years. The policy term is 10 30 years. The minimum premium payable is Rs. 25000 p.a. for 10, 15, 20, 25 or 30 years and a minimum of Rs. 200000 p.a. for 3 or 5 years. The minimum sum assured is 0.5*PT*AP and the maximum sum assured is 1.25*PT*AP. There is an option of increasing the sum assured before the age of 40 years by 50%, within 3 months of marriage or within 3 months of the birth of the child. This feature helps the policy holder to alter the policy to suit his life stage and need. There are guaranteed loyalty additions of 5% on the 10th policy year and 3% on every subsequent 5th policy anniversary till the date of maturity. The HCB, CIPTD and ADD riders are available. Composition of funds
Security Equity Debt Money market Secure 0% 20% 50% - 100% 0% - 30% Balanced 0% - 45% 50% - 90% 0% - 30% Growth 20% - 60% 0% - 50% 0% - 30%

8) PENSION PLUS It is a regular savings personal pension plan. The eligibility age is 18 65 years. The term of the policy is equal to the premium paying term (maximum up to the age of 70 years). You have the option to choose term based on retirement age. The minimum premium is Rs. 6000 per annum for regular premium and Rs. 100,000 for single premium. The term of the policy is subject to a maximum of 70 years. The minimum vesting is 40 years and maximum vesting age is 70 years. You have the provision to start your pension from as early as 40 years of age. The allocation rate is 98% for below Rs.500, 000 and 99% for above Rs. 500,000. The maturity benefit is 100% of the corpus used to purchase regular pension from the annuity options available and commutation of 33.33% and the balance for purchasing pension from Aviva or the open market.

HUMAN RESOURCE
With a strong sales force of over 16,000 Financial Planning Advisers (FPAs), Aviva has initiated an innovative and differentiated sales approach to the business. Through the Financial Health Check (FHC) Avivas sales force has been able to establish its credibility in the market. The FHC is a free service administered by the FPAs for a need-based analysis of the customers longterm savings and insurance needs. Depending on the life stage and earnings of the customer, the Financial Health Check assesses and recommends the right insurance product for them.

ORGANIZATION STRUCTURE

Zonal Manager

Branch Manager

Sales Manager

Sales Manager

HR Department

Operations Department

Financial Planning Advisors (team)

Tele callers (Recruiting)

General Staff

At Aviva in Bangalore, the internal structure of the organization was as given above. The branch was headed by the zonal manager. He controlled the south zone. The branch manager was the next person in authority. All strategic decisions about the firms future were taken by these two individuals. There job profile was to monitor the performance of the organization and see that all the operations were going smoothly. The HR department was responsible for recruiting new financial planning advisors. The department was headed by a HR Manager. The main sales force comprised of the sales managers and the advisors. The sales managers had to manage teams of 15 20 advisors. They would help in filling out applications, is motivated. The financial planning advisors are the main link between the customer and the company. They are the individuals who try to market the insurance policies to prospects. They are provided training for the same. Every advisor must pass the insurance examination as specified by the IRDA. Only a providing relevant databases to prospect customers, accompany advisors on their sales calls and make sure everyone in the team

licensed advisor is allowed to procure business for the firm. Apart from this training is provided on unit linked funds and the savings/ protection products Aviva offer.

INTROUCTION TO UNIT LINKED FUNDS

Unit linked plans are based on the component of the premium or the contribution of the customer towards the plan. This contribution can be in different modes like yearly, half yearly, quarterly and monthly. Unit linked plans have multiple benefits like life protection, rider protection, savings, transparency, investment choices, liquidity and planning for taxes. These plans work like mutual funds. The premium is collected from the policy holder. He is allotted a certain number of units based of his contribution. The Net Asset Value is the value of each unit of the fund. It is found by subtracting the charges and current liabilities from the current assets and investments and dividing this number by the total number of outstanding units. Let us take an example. There are 100 investors and each invests Rs. 10 in a fund. The total value of the fund is Rs. 1000 and each person is allotted 1 unit of Rs 10. Now the money (Rs. 1000) is invested in the debt or equity market. Suppose the fund value increased by 20%. As a result the Rs. 1000 invested became Rs. 1200. Hence the value of every investor is now Rs. 12 and not Rs. 10.

PICTORIAL REPRESENTATION

PREMIUM CONTRIBUTION

(LESS) CHARGES

(LESS) MORTALITY CHARGES

INVESTIBLE PREMIUM INVESTED AFTER UNITIZATION LIFE PROTECTION FUND VALUE

NATIONAL & INTERNATIONAL PRESENCE

Aviva has over 59000 employees serving 40 million customers worldwide. It is present in the United Kingdom, Asia, Australia, Canada, China, France, Germany, Cyprus, Greece, Hong Kong, Hungary, India, Ireland, Italy, Luxembourg, Netherlands, Poland, Romania, Russia, Singapore, Spain, Sri Lanka, Turkey and USA. Aviva has 113 branches in India supporting its distribution network. Aviva products are available is 497 towns and cities across India thanks to the Bancassurance partner locations.

CHAPTER IV FINANCIAL ANALYSIS

FINANCIAL ANALYSIS
Aviva Life Insurance is listed on the Bombay stock exchange. The chart below gives the companies performance from 31 Dec 2005 31 Dec 2006.

Net Sales Other Income Total Income Expenditure Operating Profit Interest Gross Profit Depreciation Profit before Tax Tax Profit after Tax Net Profit Equity Capital Reserves EPS

18.06 0.02 18.08 -17.79 0.3 0.29 -0.06 0.24 -0.04 0.2 0.2 14.99 0.13

46.96 0.04 47 -46.79 0.21 -0.01 0.2 0.15 0.34 -0.1 0.24 0.24 14.99 0.16

36.55 36.55 -36.05 0.5 0.5 -0.06 0.44 -0.01 0.43 0.43 14.99 0.29

15.06 10.5 25.56 -14.9 10.67 10.67 10.67 10.67 10.67 14.99 14.71 7.12

The chart below gives the performance from 31 Dec 2004 31 Dec 2005:
Net Sales Other Income Total Income Expenditure Operating Profit Gross Profit Depreciation Profit before Tax Profit after Tax Net Profit Equity Capital Reserves EPS 15.06 10.5 25.56 -14.9 10.67 10.67 10.67 10.67 10.67 14.99 14.71 7.12 0.21 0.21 -0.13 0.08 0.08 0.08 0.08 0.08 14.99 0.05 2.45 2.45 -0.06 2.39 2.39 2.39 2.39 2.39 14.99 1.59 -0.35 -0.35 -0.35 -0.07 -0.42 -0.42 -0.42 14.99 0.02 0.02 0.02 0.02 0.02 0.02 0.02 14.99 -

The companys total income is Rs. 18.06 million. Last year it was Rs. 25.56 million. This means that net income or net premium collected has decreased since the last year. The expenses have increased by 2.8 million but the net income has not. Hence the companies performance has fallen in the year 2006. Operating profits were only 0.3 million down from 10.67 million last year. Earnings per share also fell from Rs. 7.12 to Rs. 0.13. The company faces stiff competition from other private player like Bajaj Allianz, ICICI Prudential, HDFC Standard Life Insurance, Tata Aig and SBI. Now it will face additional competition from Bharti Axa and Reliance Life Insurance

(both companies are into the telecom sector as well). ICICI, HDFC and SBI are large banks which also provide the service of insurance. Tata and Bajaj are mainly companies in the auto section and have diversified into this field.

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS

Parameters Safety Liquidity Returns Life Cover Tax benefits RBI Bonds High None Low 1 time amount Tax free Fixed Deposits High High Low 1 time amount Taxed Mutual Funds Medium High High 1 time amount Taxed Unit linked High High High 10 times Tax free

We find that life insurance unit linked plans is a good area to invest money in as it provides liquidity, safety, high returns, life cover and tax benefits in a single plan. Aviva offers the option of indexation to beat inflation. Risk is reduced to a large extent as the company invests in a diversified portfolio of stocks.

CHAPTER V

COMPETITIVE ANALYSIS

COMPETITIVE ANALYSIS
LIFE INSURANCE CORPORATION OF INDIA (LIC) LIC has an excellent money back policy which provides for periodic payments of partial survival benefits as long as the policy holder is alive. 20% of the sum assured is payable after 5, 10, 15 and 20 years and the balance 40% is payable at the 20th year along with accrued bonus. (www.lic.com)

For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and 20 years and the balance 40% plus the accrued bonus becomes payable at the 25th year. An important feature of these types of policies is that in the event of the death of the policy holder at any time within the policy term the death claim comprises of full sum assured without deducting any of the survival benefit amounts which have already been paid. The bonus is also calculated on the full sum assured. Aviva does not have a money back policy. It could offer a money back plan and capture some portion of this market. While marketing insurance products I found that many customers wanted to purchase these plans. LIC offers 66 different plans; plans are formulated for specific occasions whole life plans, term assurance plans, money back plan for women, child plans, plans for the handicapped individuals, endowment assurance plans, plans for high worth individuals, pension plans, unit linked plans, special plans, social security schemes diversified portfolio of products. Aviva could diversify its product portfolio. It could add more plans for high worth individuals and women. The minimum premium payable for an LIC policy is Rs. 5000 p.a. It increases at Rs. 1000 per year. At Aviva minimum premium for easy life plus is Rs. 6000 which increases in multiples of 6000 per year. Hence Aviva should reduce the minimum premium amount payable to compete with LIC. The guaranteed sum assured in case of the death of the policyholder is larger in LIC than in Aviva. Switching from one fund to another is cheaper for LIC it is only Rs. 100 to switch from one fund to another whereas at Aviva it is Rs. 500. More number of switches is allowed free per year in the case of LIC. There are however some drawbacks to investing in LIC. The allocation charges are higher. Therefore the money invested in the fund is lower than what Aviva will invest. This is true across all policies. Aviva covers its costs over the policy term whereas LIC charges a high amount for the first five

years and then charges a very nominal amount from the 6th year onwards. The investment benefit is not as high as Aviva. ICICI PRUDENTIAL ICICI Prudential is a stiff competitor for Aviva. The company is a merger between ICICI Bank which is the biggest private bank in India and Prudential Plc which is a global life insurance company. The company has an investment plan which is market related Invest Shield Life. In this plan even if the market falls, the premium will be returned to investors. It is a guaranteed plan which ensures the company carefully invests your money. The stock market performance of ICICI Prudential is much better than Aviva. The returns on the growth fund were 46.28% compared to the 39.59% offered by Aviva. Customers are attracted by higher returns and this is a plus point for Prudential. The company is very well advertised. The advertisements are showcased in movies, television, newspapers, magazines, bill boards, radio etc. The company has an excellent brand ambassador Mr. Amitabh Bacchan. His promotion of the company builds trust and faith in the minds of our people. However the charges are very high in the plans offered by ICICI Prudential. It is 35% during the first year, 15% in the next year and 3% from the third year onwards. Also a higher minimum premium of Rs. 8000 is charged. Hence the policies are not accessible to the lower strata of the society. (Source: www.iciciprulife.com)

BIRLA SUN LIFE Birla Sun Life Insurance Company Limited is a joint venture between The Aditya Birla Group, one of the largest business houses in India and Sun Life Financial Inc., a leading international financial services organization. The local knowledge of the Aditya Birla Group combined with the expertise of Sun

Life Financial Inc., offers a formidable protection for your future. (Source: www.birlasunlife.com) The Aditya Birla Group has a turnover close to Rs. 33000 crores with a market capitalization of Rs. 53400 crores (as on 31st March 2006). It has over 72000 employees across all its units worldwide. It is led by its Chairman - Mr. Kumar Mangalam Birla. Some of the key organizations within the group are Hindalco and Grasim. Sun Life Financial Inc. and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda. It had assets under management of over US$343 billion, as on 31st March 2006. The company is a leading player in the life insurance market in Canada. Being a customer centric company, BSLI has invested heavily in technology to build world class processing capabilities. BSLI has covered more than a million lives since inception and its customer base is spread across more than 1000 towns and cities in India. All this has assisted the company in cementing its place amongst the leaders in the industry in terms of new business premium income. The company has a capital base of 520 crores as on 31st July, 2006. Its Flexi Life Line Plan offers life long insurance cover till the policy holder is 100 years of age. There are guaranteed returns of 3% p.a. net of policy charges after every 5 years from the eleventh policy year onwards. However the charges are very high. The initial charges for the first year are 65%. Hence the fund value is greatly reduced. BAJAJ ALLIANZ Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years in the Indian market. Together they are committed to offering you financial solutions that provide all the security you

need for your family and yourself. Bajaj Allianz is the number one private life insurer for the year 2005 2006. It is leading by 78 crores. It has experienced a whopping growth of 216% in the last financial year. The company has sold 13, 00,000 policies and is backed by 550 offices across India. It offers travel insurance, motor insurance, home insurance, health and corporate insurance. The mortality charges are lower than Aviva. The entry age could be zero years which allow even new born babies to be insured. (Source: www.bajajallianz.com) TATA AIG Tata Aig is a joint venture between the Tata group and American International Group Inc. In one of the plans the company offers hospital cash benefit wherein it will pay Rs. 2500 per day in case of hospitalization and Rs.12.5 lakhs in case the person suffers from any critical illness. Annual premium is much less (about Rs. 6712) to avail such a good benefit. Charges are relatively low compared to Aviva for some policies. The company offers high coverage plans at low cost. There is a plan even for a policy term of 1 year. Your family can continue to enjoy their current lifestyle even in the case of something happening to you. These plans are very flexible and Aviva could adopt this idea of insuring individuals for short periods of time. For example; there is a family of four. The only earning member is the father. He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is able to repay the loan with his current salary in 15 years. The problem arises if something were to happen to him within these fifteen years. Not only will the family face the emotional and financial loss of their father but they will also have to repay the home loan or risk being homeless. (Source: www.tataaig.com)

CHAPTER VI MARKETING PROBLEMS

MARKETING PROBLEMS
The old and out dated technique of tele marketing is used to prospect customers. More modern techniques must be adopted. The company must sponsor shows and give presentations in corporate houses. The financial health check must be performed for every prospect to assess his/her true financial position and needs. Some of the advisors skip this vital step and the prospect ends up with a plan they do not appreciate and soon surrender or discontinue. Some of the main problems in marketing the policies are: Large amount of competition (15 players in the market) Other brands are well advertised and have higher recall value LIC is considered a safer option Face competition from banks and mutual funds High premium policies are difficult to market Incorrect perception about insurance Interested prospects might have a lack of time and postpone investments Customers get defensive if you cold call Short term plans are available only at large premium Customers do not have risk appetite to invest in shares Some prospects have already invested and are not interested in further investments Consumers dont want to undertake medical examinations Large amount of documentation Customers do not like their money locked up for many years

 Lack of awareness about the unit linked funds in the market No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT Advertise about the company and its products it motivates individuals to purchase insurance Create a positive perception about insurance Speak about the good features a plan offers like high returns, life cover, tax benefits, indexation, accident cover while prospecting customers Try to sell the product/plan which the consumer requires and not the plan where the advisors benefit is higher Improve the efficiency in operations Bring out policies with small premiums payable for short periods of time Rs. 5000 Rs. 10000 per annum for 10 years Attract the youth of India with higher returns on investment as returns are the motivating factor which influence purchase of insurance Promote insurance in colleges and corporate houses Promote Aviva as an Indian Company to build trust Aviva is actually Aviva Dabur Dabur has a good brand name and this brand name could be used to give a push to its products Aviva could have a brand ambassador or a mascot to promote its services Should have partial withdrawals from the first year onwards

 Tap the rural market where there is large potential Diversify product portfolio Make products more straight forward reduce complexities

CHAPTER VII ANALYSIS & INTERPRETATION

ANALYSIS & INTERPRETATION

A SURVEY ON THE LIFE INSURANCE INDUSTRY IN INDIA AGE GROUP OF SURVEYED RESPONDENTS TABLE 1:
Age group 18 - 25 years 26 - 35 years 36 - 49 years 50 - 60 years More than 60 years No. of Respondents 62 33 22 12 2

CHART 1:

17% 9% 18 - 25 years 2% 25% 26 - 35 years 36 - 49 years 50 - 60 years More than 60 years 47%

Analysis:

From the chart above we find that 47% of the respondents fall in the age group of 18 25 years, 25% fall in the age group of 26 35 years and 17% fall in the age group of 36 49 years. Therefore most of the respondents are relatively young (below 26 years of age). These individuals could be induced to purchase insurance plans on the basis of its tax saving nature and as an investment opportunity with high returns. Individuals at this age are trying to buy a house or a car. Insurance could help them with this and this fact has to be conveyed to the consumer. As of now many consumers have a false perception that insurance is only meant for people above the age of 50. Contrary to popular belief the younger you are the more insurance you need as your loss will mean a great financial loss to your family, spouse and children (in case the individual is married) who are financially dependent on you. GENDER CLASSIFICATION OF SURVEYED RESPONDENTS TABLE 2: Particulars Male Female No. of Respondents
113 17

CHART 2:

G d o th res o d ts en er f e p n en
1 20

13 1

No. of respondents

1 00

80

60

M ale Fem ale

40

20

1 7

Male

Fem ale

CUSTOMER PROFILE OF SURVEYED RESPONDENTS TABLE 3: Customer profile

Student Housewife Working Professional Business Self Employed Government service employee

No. of respondents
30 3 55 24 12 7

CHART 3:

5% 9% 23%

Student Housewife Working Professional 2% Business Self Employed Government service employee

18%

43%

Analysis: From the chart above it can clearly be seen that 43% of the respondents are working professionals, 23% are students and 18% are into business. Therefore the target market would be working individuals in the age group of 18 25 years having surplus income, interested in good returns on their investment and saving income tax.

MARKET SHARE OF LIFE INSURANCE COMPANIES TABLE 4: LIFE INSURER

HDFC STANDARD LIFE BIRLA SUN LIFE AVIVA LIFE INSURANCE BAJAJ ALLIANZ LIC TATA AIG ICICI PRUDENTIAL ING VYSYA

NUMBER OF POLICIES
5 4 8 9 64 8 14 7

BHARTI AXA OTHERS

3 2

CHART 4:

6%

2% 2% 4%

3% 6% HDFC STANDARD LIFE

11% 7%

BIRLA SUN LIFE AVIVA LIFE INSURANCE BAJAJ ALLIANZ LIC TATA AIG ICICI PRUDENTIAL ING VYSYA BHARTI AXA OTHERS

6%

53%

Analysis: In India, the largest life insurance company is Life Insurance Corporation of India. It has been in existence in India since 1956 and is completely owned by the Government of India. Today the organization has grown to 2048 offices serving 18 crore policies and has a corpus of over 340000 crore INR. The largest private insurance company in India is ICICI Prudential. It is a joint venture between ICICI Bank and Prudential plc, a leading international financial services group headquartered in the UK. In just 4 years time (till

March 31, 2004) the company has successfully sold 430000 policies with a premium income in excess of 980 crores. The second largest private life insurance company is Bajaj Allianz. It has more than 550 offices and over 60000 insurance consultants. It had a premium income of 221 crores as on March 31, 2004. This year it has gone past ICICI Prudential to become the number one private life insurance company in India with a premium of 3134 crores.

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE TABLE 5: Premium paid (p.a.) Rs. 5000 - Rs. 10000 Rs. 10001 - Rs. 15000 Rs. 15001 - Rs. 24900 Rs. 25000 - Rs. 50000 Rs. 50001 - Rs. 60000 Rs.60001 - Rs. 80000 Rs. 80001 - Rs. 100000 No. of respondents 45 29 19 12 5 2 3

CHART 5: ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

Rs. 5000 - Rs. 10000

4% 10% 39% 2% 3%

Rs. 10001 - Rs. 15000 Rs. 15001 - Rs. 24900 Rs. 25000 - Rs. 50000

17%

Rs. 50001 - Rs. 60000

25%

Rs.60001 - Rs. 80000 Rs. 80001 - Rs. 100000

Analysis: From the chart above we find that, 39% of the respondents surveyed pay an annual premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs. 25000. Hence we can safely say that Aviva Life insurance would be able to capture the market better if it introduced products/plans where the minimum premium starts at Rs. 5000 p.a. Only 19% of the respondents pay more than Rs. 25000 as premium and most products sold by Aviva have Rs.25000 as the minimum annual premium amount. They should introduce more products like Easy Life Plus and Safe Guard where the minimum premium is Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase their market share as more individuals would be able to afford the policies/plans offered.

POPULAR LIFE INSURANCE PLANS TABLE 6:

Type of Plan Term Insurance Plans Endowment Plans Pension Plans Child Plans Tax Saving Plans

No. of Respondents 53 62 8 4 10

CHART 6: POPULAR LIFE INSURANCE PLANS

7% 3% 6% 39%
Term Insurance Plans Endow m ent Plans Pension Plans Child Plans Tax Saving Plans

45%

Analysis: From the chart given above we can clearly see that 45% of the respondents hold endowment plans and 39% of the respondents hold term insurance plans. Endowment plans are very popular and serve two purposes life cover and savings. If the policy holder dies during the policy term the nominee gets the death benefit that is, sum assured and accumulated bonus. On survival the policy holder receives the survival benefit with a bonus.

A term plan is a pure risk cover plan wherein the insured pays a lower premium for a higher sum assured. Term insurance is the cheapest form of insurance and helps the policy holder insure himself for a relatively low premium. For the returns sensitive investor term plans do not find favor as they do not offer a return in case the individual does not die during the policy term.

AWARENESS OF UNIT LINKED INSURANCE PLANS TABLE 7:

Awareness of Unit Linked Plans Yes No No. of Respondents 74 56

CHART 7: AWARENESS OF UNIT LINKED INSURANCE PLANS

43%

Y es

57%

N o

Analysis: From the chart given above we find that 57% of the respondents are aware of unit linked life insurance plans and 43% are not aware of such plans.

These plans should be promoted through advertising. The company can advertise through television, radio, newspapers, bill boards and pamphlets. This would increase awareness and arouse curiosity in the minds of the consumer which would enable the company to market its products more effectively. Unit linked plans are those where the benefits are expressed in terms of number of units and unit price. They can be viewed as a combination of insurance and mutual funds. The number of units a customer would get would depend on the unit price when they pay the premium. When the policy matures the individual gets his fund value. The value of his fund is calculated by multiplying the net asset value and number of units held by them on that day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM TABLE 8:

Willingness to spend on premium Less than Rs. 6000 Rs. 6001 - Rs. 10000 Rs. 10001 - Rs. 25000 Rs. 25001 - Rs. 50000 Rs. 50001 - Rs. 100000

No. of respondents 20 35 54 20 2

Percentage 15% 27% 41% 15% 2%

CHART 8: CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

60 50 40 30 20 10 0 Les s than Rs . 6000 Rs . 6001 - Rs . Rs . 10001 - Rs . Rs . 25001 - Rs . Rs. 50001 - Rs . 10000 25000 50000 100000

Analysis: From the graph above, we can clearly see that 41% of the respondents would be willing to spend between Rs. 10001 Rs. 25000 for life insurance. 27 % would be willing to spend between Rs. 6001 Rs. 10000 per annum. Only 15% would be willing to spend more than Rs. 25000 per annum as life insurance premium. We could say that the maximum premium payable by most consumers is less than Rs. 25000 p.a. This is further reduced as most customers have already invested with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc. Aviva is faced with a large amount of competition. There are 15 insurance companies in India inclusive of LIC. Hence to capture a larger part of the market the company could introduce more reasonable plans with lesser premium payable per annum.

CHART SHOWING IDEAL POLICY TERM TABLE 9:

Ideal policy term 3 - 5 years 6 - 9 years 10 - 15 years 16 - 20 years 21 - 25 years 26 - 30 years More than 30 years Whole life Policy

No. of respondents 25 20 46 18 12 2 1 6

CHART 9: CHART SHOWING IDEAL POLICY TERM

1% 2% 9%

5% 19%

3 - 5 years 6 - 9 years 14% 15% 10 - 15 years 16 - 20 years 21 - 25 years 26 - 30 years More than 30 years Whole life Policy

35%

Analysis: From the chart given above it can be seen that 35% of the respondents prefer a policy term of 10 15 years, 19% prefer a term of 3 5 years and

15% prefer a term of 6 9 years. This means that Aviva could introduce more plans wherein the premium paying term is less than 15 years. The outlook of insurance as a product should be changed from something which you pay for your whole life (whole life policy) and do not receive any benefit (the nominee only receives the benefit in case of your death) to an extremely useful investment opportunity with the prospects of good returns on savings, tax saving opportunities as well as providing for every milestone in your life like marriage, education, children and retirement. FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE TABLE 10:
Parameter Advertisements High returns Advice from friends Family responsibilities Others No. of Respondents 17 42 23 45 8

CHART 10:

6% 3 3%

13% Adv ertisem ents H returns igh 31% Adv from friends ice Fam responsibilities ily O thers

17%

Analysis: From the chart above it can be seen that 33% of the respondents purchase life insurance to secure their families, 33% take life insurance to get high

returns, 17% purchase insurance on the advice of their friends and 13% purchase insurance because of the influence of advertisements. The main purpose of insurance is to cover the financial or economic loss that occurs to the family in case of the uncertain death of the policy holder. But nowadays this trend is changing. Along with protection (life cover), a savings element is being added to insurance. With the introduction of the new unit linked plans in the market, policy holders get the option to choose where their money will be invested. They can invest their money in the equity market, debt market, money market or a combination of these. The debt and money markets usually have low risk attached whereas the equity market is a high risk investment option.

PREFERRED COMPANY TYPE OF THE RESPONDENTS TABLE 11:

Type of Company Government Owned Company Public Limited Company Private Company Foreign Company No. of Respondents 67 33 26 17 Percentage 47% 23% 18% 12%

CHART 11: PREFERRED COMPANY TYPE OF THE RESPONDENTS

80 70 60 50 40 30 20 10 0 Government Owned Company Public Limited Company Private Company Foreign Company

Analysis: From the graph above we find that 47% of the respondents preferred to purchase insurance from a government owned company, 23% of the respondents preferred to purchase insurance from a public limited company and only 12% of the respondents preferred a foreign based company. Aviva could be promoted as an essentially Indian company with a foreign tie up. Its tie up with Dabur India, a trusted name in an Indian household and a pharmaceutical giant, could be used to give a push to its products/ services. Heavy advertising through television, newspapers, magazines and radio is required. Very few people know that Aviva is one of the oldest insurance companies in the world. It was started in the year 1696. The company is over 300 years old. These facts would surely increase the customer base it currently possesses and thereby increase sales of Aviva products in the Indian insurance market.

MINIMUM EXPECTED RETURN ON INVESTMENT TABLE 12:

Expected Returns Less than 5% 5% - 10% 11% - 15% 16% - 20% 21% - 25% 26% - 30% 31% - 40% 41% - 50% More than 50%

No. of respondents 3 20 22 23 22 13 11 7 10

CHART 12:

8% 5%

2% 15% Less than 5%

8%

5% - 10% 11% - 15% 16% - 20% 21% - 25% 26% - 30% 31% - 40% 41% - 50% More than 50% 17% 18%

10%

17%

Analysis:

From the chart above it can clearly been seen that 18% of the respondents would like 16 20% returns, 17% would like returns between 21 25% and 17% would like returns of 11 15% on their investments. Therefore the average return on investment should be at least 16 20 %. Most consumers are willing to adapt to some amount of risk but still want some guaranteed returns. Therefore the bulk of investment should be made in the balanced fund with 50% debt and 50% equity. The returns on the Secure Fund are guaranteed as these involve investment is government securities and the debt market. But the returns on these instruments are low (8 10%). If the company invests in shares, returns are higher (39%) but correspondingly risk borne by the policy holder is also higher. Therefore a good combination of the two instruments is often a wise choice.

CHAPTER VIII FUTURE LINE OF RESEARCH

FUTURE LINE OF RESEARCH

The future topics for research in the organization could be setting up of an appropriate ad campaign. It is very vital to the companies success that the people of India know about Aviva, its products and their special features and how insurance in general can help them in their future. The advertisements

have to be emotionally appealing. They might also include a celebrity. The brand name of Dabur could be used to give a push to Aviva and its products. The general perception of insurance as inauspicious should be done away with and individuals and corporations accept insurance on power with other investment opportunities. The other area of research could be in the management of funds Aviva possesses and how it can maximize returns for its investors. A research project could be undertaken on how to ensure that the money gets invested in the right companies and earns a medium high return on investment. Another area of research could be an analysis of the sales and marketing techniques used by Aviva. A large number of changes could be introduced and this would help in saving operating costs and improving the efficiency of the firm.

CHAPTER IX CONCLUSION

CONCLUSION

Aviva life insurance is one of the worlds largest and oldest life insurance companies. It has businesses spread out across the globe. It came to India in the year 2002. It currently ranks number 7 amongst the insurers in India (Source: annual premium provided by the company) The company faces a large amount of competition. To sustain itself it must promote its products through advertising and improve its selling techniques. Consumers must be aware of the new plans available at Aviva. The medium of advertising used could be television since most of its competitors use this tool to promote their products. The company must be promoted as an Indian company since consumers seem to have more trust in investing in Indian firms. Hence its association with Dabur should be showcased since Dabur is a trusted name in India and it could be used to provide a push to the products Aviva has to offer. The unit linked concept must be specifically promoted. The general perception of life insurance has to change in India before progress is made in this field. People should not be afraid to invest money in insurance and must use it as an effective tool for tax planning and long term savings. Aviva could tap the rural markets with cheaper products and smaller policy terms. There are individuals who are willing to pay small amounts as premium but the plans do not accept premiums below a certain amount. It was usually found that a large number of males were insured compared to females. Individuals below the age of 30 (mostly male) were interested in investment plans. This was a general conclusion drawn during prospecting clients.

REFERENCES

Products and Services. Aviva. 20 Apr. 2007 <http://www.avivaindia.com>. Historical perspective. Wikipedia. 19 Apr. 2007<http://www.wikipedia.com>. Overview." Indiacore. 18 Apr. 2007 <http://www.indiacore.com>. Reforms." Wikipedia. 17 Apr. 2007 <http://www.wikipedia.com>. Unit Linked Plans." Life insurance Corporation of India. 17 Apr. 2007 <http://www.lic.com>. Stock price of Aviva." Money Control. 17 Apr. 2007 <http://www.money control.com>. Unit Linked Plans." Tata aig. 16 Apr. 2007 <http://www.tataaig.com>. Life Insurance." Bajaj allianz. 17Apr. 2007 <http://www.bajajallianz.com/ BagicCorp/index.jsp>. Life Insurance." ICICI Prudential. 18Apr. 2007 <http://www.icici.prulife.com>. Sumathi S., and Saranavel P. 2nd ed. New Delhi: Vikas Publishsing House, 2003. 85-172. Convenience Sampling. Statpac. 26 Apr. 2007 <http://www.statpac.com>.

APPENDIX

A SURVEY ON MARKET SEGMENTATION FOR INSURANCE INDUSTRY

Dear Sir/ Madam, I am a student of Bharti Vidyapeeth University. As part of the requirements for my Bachelors Degree in Business Administration I am required to do a research based project. Kindly spend a few minutes of your valuable time and fill in this questionnaire. All the information provided by you will be used only for academic purposes and will be strictly confidential. Do you own a life insurance policy/ investment plan in your name? o Yes o No If yes which company/ companys insurance policies do you hold? o HDFC Standard o Birla Sun Life o Aviva Life Insurance o Bajaj Allianz o LIC o Tata AIG o ICICI Prudential o ING Vysya o Bharti Axa o Others (specify name) What is the approximate premium paid by you annually (in Rupees)? o o o o o o o o Rs. 5000 Rs. 10000 Rs. 10001 Rs. 15000 Rs. 15001 Rs. 24900 Rs. 25000 Rs. 50000 Rs. 50001 Rs. 60000 Rs. 60001 Rs. 80000 Rs. 80001 Rs. 100000 More than Rs. 100000 ( specify premium)

What kind of insurance policy would suit you best in your current stage of life?

o o o o o

Life Insurance Life Insurance and Investment Plans Pension Plans Child Plans Tax saving plans

Are you aware of the new unit linked insurance plans in the market? o o Yes No

How much would you be willing to spend per annum if you were to go for an investment/ insurance plan? o o o o o o Less than Rs. 6000 Rs. 6001 Rs. 10000 Rs. 10001 Rs. 25000 Rs. 25001 Rs. 50000 Rs. 50000 Rs. 100000 More than Rs. 100000

Which according to you is an ideal policy term? (Number of years you would be willing to pay premium) o o o o o o o o 3 to 5 years 6 to 9 years 10 to 15 years 16 to 20 years 21 to 25 years 26 to 30 years More than 30 years Whole life policy

What motivates you to purchase insurance/ investment plans? o o o o o Advertisements High Returns Advice from friends Family responsibilities Others (specify)

In which kind of company would you prefer to make a purchase of insurance?

o o o o

Government owned company Public Limited Company Private Company Foreign based company

Typically what kind of returns would you look at from your investments? (Please note: Higher returns involve greater risk) o o o o o o o o o Less than 5% 5% - 10 % 11% - 15 % 16% - 20 % 21% - 25% 26% - 30% 31% - 40% 41% - 50% More than 50%

Personal Details: Name: Gender: o o Male Female

Age group: 18 25 years 26 35 years o 36 49 years o 50 60 years o Above 60 years o o Profile of respondent: o o o o o o Student Housewife Working Professional Business Self Employed Government Service employee