priyansu hdfc

8/8/2019 Priyansu HDFC

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HDFC STANDARD LIFE INSURANCE COMPANY LIMITED

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CHAPTER 1

-----------------------------------------------------------------------------------------------------------------Institute of Business Management and Research


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INTRODUCTION:

The new millennium saw the dawn of many developments and changes in

insurance industry. In the backdrop of this challenging market scenario it

was thought to be befitting to undertake a project study on customerawareness and satisfaction towards the financial products, with special

reference to pension plans.

Among the competitive and complex market scenario in India, it is difficult

to analyze the changing attitudes, likes, dislikes and satisfactory levels of

customers. The field is such that only the enduring and most outstanding

will survive without being choked. The attempt here is made to assess the

awareness and preference of people in a pension schemes.

On the outset itself the problem was identified and defined with the help of

convince sampling. The researcher carried out this survey keeping in mind

the need and importance of the proposed study. This has enabled the

researcher to easily determine the scope and objectives of this study. A

descriptive approach was considered ideal for the study as it entailed the

ever-changing opinion of the customers.

Survey has been successfully carried on among 85 respondents. They

were considered adequate to represent the entire characteristic of the

population in vogue. Primary data was collected using structured

questionnaire as an effective instrument. The collected data was tabulated

for the purpose of consolidation and logicality and the same was analyzed

and interpreted in a judicious way to facilitate systematic progression of

the subject matter of the study.

The findings were taken up for drawing logical conclusions. Based on the

findings suitable suggestions and recommendations were brought out for

the tangible benefits of both the company and the dealer. The entire



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project is presented in the form of a comprehensive study report using a

chapter scheme developed logically and sequentially in a systematic and

orderly manner from the beginning to the end.

The respondents were presented with a well-structured questioner as a

part of the survey method, which was easy to fill up. The main source of

data were the questioner and other relevant business magazines books

and broachers of the companies providing pension plans.

Human life is an income-generating asset. This asset can be lost through

the unexpected death or mad non functional through sickness or

disability caused by an accident, disability to earn because of age. It is

certain that some day one will have to stop working and as a result no

income to sustain.

Insurance companies on the one hand help the individual in securing their

life & on the other hand sustain their position in the competitive market.

Insurance reduces the impact of old age & those who depend on the

income generated by the individual. It must however be noted, only

economic or financial losses can be compensated and the emotional

support that the breadwinner provides can neither be evaluated nor

compensated.

The insurance companies help in reducing risk from an individual to

a group. Insurance premium collected by insurance companies are

invested in various developmental projects. Insurance provides relief to

the insured from any mishap reduces the burden of the government in

providing relief to all citizens and places large sums of money at the

disposal of the government for development of the economy.



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A Study on investors preferences towards pension plans

(With reference to HDFC Standard Life Insurance Bangalore)

In todays scenario all a person is worried about is security. A security of

life, security of loved ones, security of income. Security for life can never

be provided but the effect of life lost on those who were dependent on the

lost life can only be reduced. And security of loved ones is provided by the

society in which we live, although nobody can be protected round the

clock all the year.

The only thing that can be assured to some extent with some certainty is asecure future with a fixed some of income being paid no matter the person

is working or retired or wealthy or cannot afford to make a living.

In todays date where attrition is highly increasing, performance is being

highly stressed on, job security is almost nil, where competition is very

high, it becomes increasingly difficult to assure ourselves and those

dependent on us a fixed sum of money currently and also when we have

attained an age when earning becomes difficult or even impossible. Also

not neglecting the fact of dilution of combined families into necular families

which means parents cannot expect their children in their old age, which is

becoming increasingly common in todays world again increasing

insecurity.

"Old age is the most unexpected of all things that happen to man."--

Leon Trotsky

An economy, apart from everything else, is a highly fluid transmission

mechanism. Its beauty lies in how the smallest of changes have the most

complex trickle-down effects. A paradigmatic example of how seemingly



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minor policy changes can jumpstart the economy can be illustrated by

examining the effects of a reform in the pension system.

This changes in society and economy is demanding strongly for

improvement and effectiveness of pension plans in order to give that

security to people in that age where they will have to feel all the time

spent working is worthwhile to give themselves a treat of relaxation.

What is pension?

Pension is a means to provide a person with a secure income

for life. A lottery may provide a pension but the common use

of the term is to describe the payments a person receives

upon retirement.

Pensions have traditionally been payments made in the form

of a guaranteed annuity to a retired or disabled employee, or

to a deceased employee's spouse, children, or other

beneficiary. A pension created by an employer for the benefit

of an employee is commonly referred to as an occupational or

employer pension scheme. Labour unions, the government, or

other organizations may also sponsor pension provision.

Why pension plan?



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Because the earnings of employees were at one stage so meager that

they hardly covered current expenditure, in early days it was often the

case that, when people were no longer able to work, there were no

alternative sources of income. This state of affairs had two results:

The government instituted a scheme in terms of which persons received

a small pension on attaining a certain age. These so-called "old-age

pensions" were - and still are - small, and barely fulfill basic needs.Ex-employees placed their employers under a moral obligation to

provide financial aid.

As a result of the second factor, employers sometimes supplied sums

from their own current funds to provide for a retired employee. However,

as more employees reached an advanced age, greater demands were

made on employers' support. These claims often caused embarrassment

to an employer either because he did not have adequate funds at his

disposal at the time or because his money was otherwise committed, e.g.

in his business.

The thought then arose that regular sums should be set aside during anemployee's working life to make provision for the time when he would no

longer be capable of supporting himself. At the same time the need arose

for assistance at the death of an employee or when, for medical reasons,

he became unfit for work. This, in turn, led to new "moral claims" on the

employer for financial aid.

Some employers, especially powerful ones, consequently took upon

themselves all these functions, such as the saving of money for old age,

providing capital at death, and making an income available on

disablement. Other employers who were unable to carry the risk of

disability and death, or did not have the necessary skills to administer

such a scheme, turned to assurance companies.



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To an ever-increasing degree assures began making facilities availablewhereby provision could be made on a regular basis for the needs of

workers on retirement, death or disablement. In fact, this business

developed to such an extent that employers formed a separate

organization called a fund - which is a legal entity in its own right - to pay

out benefits to qualifying employees on retirement, death or disablement,

with both employers and employees making regular monetary

contributions to the fund.

As skilled labour became scarcer in modern times, employees chose to

work for those employers who offered retirement benefits. So, in order to

attract employees, increasing numbers of employers began to institute

pension and provident funds.

Meanwhile the burden on government of providing old-age pensions

became heavier, inter alia because people's life expectancy was

increasing owing to progress in medical science. The authorities therefore

welcomed the establishment of funds by employers to relieve the burden

on the state, and even began actively to encourage pension provision by

allowing attractive tax benefits on contributions to funds by employers and

employees. The Pension Funds Act was promulgated in 1956 to ensure

the orderly regulation of all matters pertaining to funds. This Act

underlined, for the first time, the difference between the business of

assurers and that of pension funds. Previously any accumulation of funds

for retirement was seen as part of the business of assurers. Therefore the

early history of pension funds coincides with that of the assurance

companies.



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INDUSTRY PROFILE

Indian is about 300 million people who can afford to buy life,health and

the pension plan products. Out of this only 20% have insurance - and

that too covers only 25% of their needs and financial capacity. The

remaining 80% have no insurance cover. The life insurance market of

India, therefore has, tremendous growth potential.

An estimated existing insurance market in India, in terms of premium

income, reveals that out of an insurable population of 300 million, 50

million have the capacity to pay a premium of Rs 10,000 per year; 100

million have the capacity to pay Rs 7000 per year and 150 million can pay

Rs 3500 per year, On this basis the total annual insurance premium would

be Rs 1570 billion.

Over the past three years around 30 companies have expressed interest

in entering the sector and many foreign and Indian companies have

arranged alliances. Weather the insurance is old are new private or public,

expanding the market will present challenges. In number of foreign

insurance company have setup representative offices in India and have

also tied up with various asset management companies. They have either



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signed MOUs with Indian companies or are crying to do the same. Some

have carried our extensive research on the Indian insurance sector.

Others have setup liaison offices. The following tie ups are being

reported.

Indian Partner International Partner

Alpic Finance Allianz Holding, Germany

Tata American Int. Group. US.

Ck Birla Group Zurich Insurance, Switzerland

ICICI Prudential, UK

Sundaram Finance Winterthur Insurance, Switzerland

Hindustan Times Commercial Union, UK

Ranbaxy Cigna, US

HDFC Standard Life, UK

Bombay Dyeing General Accident, UK

DCM Shriram Royal Sun Alliance, UK

Dabur Group Liberty Mutual Fund, USKotak Mahindra Chubb, US

Godrej J. Rothschild, UK

Sanmar Group Gio, Australia

Cholamandalm Guardian Royal Exchange, UK

SK Modi Group Legal & General, Australia

20th Century Finance Canada life

MA Chidambaram

Vysya Bank ING



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Its the size and the potential of the Market that Attracting insurance, Life

Insurance is an area for long-term players & it is the best route to build

relationship.

The likely impact of the opening up Indias insurance sector is that private

players may swamp the market. International insurers often derive a

significant part of their business form multinational operations.

Multinational insurers are indeed keenly interested as, perhaps, their

home markets are saturated while emerging countries have low insurance

penetrations and high growth rates. A small share of large and growing

market can be profitable and attractive.

However, the experiences of some other countries are different as foreign

insurers took only a small share of an individual market. In Taiwan, for

example, foreign companies took only a 3% share even seven year after

opening up. In Korea their share was 1percent after 20 years. In China,

which is a large and complex market like India, private insurers have not

made much headway. The Korean Insurance market, for example, was

onto the 30th largest market in the world by premium volume in 1971. It

moved up to 6th largest in 1996. In any case, in India multinational insurers

will be restricted to a minority shareholding in new companies. The new

entrants will be Indian private sector companies. Therefore, potential

private entrants expect to score in the areas of customer service, speed

and flexibility and better product choice. They may concentrate on affluent

urban customer, as a foreign did until recently. This might a logical

strategy, as the start up costs, like distribution network, are high in the

initial stages and niche offer better returns.

How ever, we believe that the middle market offers the greatest potential.

Although this may still be an urban market it goes beyond the affluent

segment.



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Insurance, even more than banking, is a volume game a very exclusive

approach and unlikely to provide meaningful numbers because private

insurance would be best served by a middle market approach, targeting

customer sergeants that are currently untapped.

We anticipate that many new players will indeed take the approach

extending the benefits of a free market place to a wide base of customer.

Faced with the competition, we believe that the nationalized insurers will

improve their game, as they are already trying to do in any case, the

customer will be the initiate beneficial.

PENSION PLANS THROUGH HISTORY

Lord Clive Military Fund (1809- 1838)

Bengal Military Fund ( 1862)

Bengal Military Orphan Society (1861 )

Madras Military Pension Fund (1866 1895 )

Madras Medical Fund ( 1862 )

Bengal, Madras and Bombay Civil Funds ( 1882 1885)

Indian Military Service Family Pension Fund ( 1873 1893)

Indian Military Widows' and Orphans' Fund( 1915 1943 )

Insurance Industry In India

India is the largest democracy in the world having a population more than

one billion. It is 5th largest in the world in terms of purchasing power party

(PPP). India GDP growth rate is over 6 percent per year on average for

the last decade and saving rate is around 26 percent of GDP.



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Through Indias economics development, it becomes the most lucrative

insurance markets in the world. Before the year 1999 there were

monopoly of state run life Insurance Corporation of India (LIC) in life

insurance sector and General Insurance Corporation of India (GIC) with its

four subsidiaries in general sector. In the wake of reform process and

passing Insurance Regulations Development Act (IRDA) through Indian

parliament in 1999, India Insurance was opened for private Companies

History

Insurance industries in India have a long history. Life insurance in existing

form came in India for U.K in 1818 with Oriental Life Insurance Company.

The Indian life Assurance Companies Act, 1912 was the first measure to

regulate life Insurance business. Later in 1928 the Indian Insurance

companies act was enacted, which was amended in 1938.Finally this act

was amended by Government of India in 1950.

Life Insurance Corporation of India was formed in September 1956 by

passing LIC Act, 1956 in Indian Parliament.

The first general insurance company, Triton Insurance Company Ltd., was

established in Calcutta in 1850. In 1957 the General Insurance Council a

wing of Insurance Association of India formed a code of conduct. In 1961

an insurance act was passed to form General Insurance Company Ltd.

This was amended in 1968. The General Insurance Business Act

nationalized general Insurance Business with effect from 1.1.73. From

1973, the general Insurance Company (GIC) as holding company divided

in four subsidiaries as: National Insurance Company Ltd., The New India

Assurance Company Ltd., The oriental Insurance Company Ltd. and The

United Assurance Company Ltd.

Pre-Liberalised Period



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Before nationalization, there were 153 Indian and 16 non-Indian

companies that offered insurance products. In January 1956, the All India

Congress committee decided to nationalize insurance. The decision was

precipitated by Ramakrishna Dalais embezzlement of Rs 2.56 Corers

from the Bharat Insurance Company. Life insurance was nationalized

through an ordinance on 19 January 1956 and the Life Insurance

Corporations (LIC) was established on 1 September 1956. General

insurance was taken over through an ordinance on 13 May 1971 (act of

parliament in September 1971) General insurance corporation (GIC) was

incorporated in November 1972 as a holding company with four

companies functioned as a cartel.

LIC accounts for also most 10 percent of financial savings of households.

It has a huge Life Fund premiums plus interest minus management

expenses and claims). It has more than 2000 branch offices and 100

divisional offices. It directly employs around 1, 25,000 people and

indirectly, there are around 5, 25,000 agents. But the lack of competition

has created complacency in the insurance industry which is reflected

among other things, insufficient responsiveness to customers needs, high

costs, instability of marketing network, excessive lapsing of life policies,

overstaffing, growth of restrictive staff practice and serious lags in

technology.

On the nationalization of life insurance in 1956, the premium ratings of

oriental government security life assurance Company were adopted by life

with reduction of 5 % of the tabular premium or Rs 1 per thousand sun

assured, whichever was less? This reduction was made in anticipation of



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economics of scale that would emerge on the merger of different

insurance into a single entity.

Life made several downward revisions in this premium rating in order to

benefit the sub standard lives and also substantially reduced the number

of vocations that were classified as hazardous. The additional premium

being charged for grating accident benefit was reduced from 2 to re 1 per

thousand sum assured. The charging of extra premium in respect of

policies on female lives was also discontinued.

Post Liberalisation

In terms of new business private players have around 9% of the total

market share in comparison to LIC, which holds around 91% of the market

share. Life insurance premium as a %age of Gross domestic savings is

expected to increase from 6-18% over a 10-year period.

The analysis of the new business figures furnished by the private life

insurers reveals that the overall business captured by the 12 player rose

to Rs. 981.24 crore during 2002-2003 from Rs 296.61 Crores in the

previous fiscal, a growth of 231%.

It was ICICI prudential that topped the private sector new business market

with a share of 38%, while Birla Sun Life followed it with a market share of

15%, HDFC Standard garnered a share of 14%, Max New York 8%, SBI

life 7%, Tata AIF 6%, Allianz Bajaj 5%, OM Kotak3%, ING Vysya 2%, and

Met Life and Aviva 1% each. AMP Sanmar registered no market share.

In terms of total market, the share of ICICI Prudential stood at nearly

3.41%, followed by Birla Sun Life And HDFC Standard 1.52% and 1.22%

of the premium underwritten.



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Analysing the performance of LIC, the individual business, inclusive of

Bima Nivesh and Single premium, suffered a decline at Rs 9361.11 crore.

Similarly the individual pension plans of LIC recorded a decline of 87% at

RS. 327.75 crores, however, the number of individual assurance policies

showed and increase of 9.54% over the previous fiscal at 239.31 lakh

policies.

In terms of number of policies, while ICICI prudential issued around

2.45lakhs policies, while HDFC Standard and Allianz Bajaj followed with

1.25 lakh and 1.16 lakhs policies respectively.

In terms of number of policies underwritten in rural sector, ICICI Prudential

led the chart with 29,376 policies SBI life, which recorded a premium of

RS 39.45 lakhs covering 37,478 lives, dominated the social sector the

IRDA report says.

Marketing Of Financial Products

The marketing concept in the banking and insurance services emerged

with the publication of an article entitled; Banks and Savings Institutions

in the Television Age. The article focused that in the recent past, the

banking and saving institutions have assigned due weightage to their

austere dignity rather that the friendliness. The marketing experts

advocated that marketing transcends advertising, and friendliness. Later, it

was realized that marketing is not more than smiling, friendliness. This

necessitated customer convenience and injected new life and strength of

the marketing concept in the banking and insurance and even in other

financial institutions. Marketing was accepted as an organizational

imperative. It was felt that conceptualization of marketing in the insurance

business would identify the most profitable markets now and in future;



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Marketing concept in the insurance business focuses on the formulation of

marketing mix or a contract over the whole group of marketing activities

that make up an integrated marketing strategy.

The following facts regarding the concept of insurance marketing can be

observed:

It is a managerial process.

It is a conceptualization of marketing principles.

It is a process of formulating the marketing mix

It is a device to make possible customer orientation.

It is an attempt to help project maximization

It is another name for marketing professionally.

It is to make possible product attractiveness.

It is to energise the process of quality up gradation.

Users of Insurance Services

INSTITUTIONS

The formulation of creative marketing decision is not possible unless we

are aware of the different categories of users using the services of

insurance organizations. Different categories of users are guided by


Users of Insurance services

INDIVIDUALS

FAMILY


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different considerations. The general users assign due weightage to their

own interests where as the industrial users assign an over riding priority to

the interests of there organization.

An individual or an institution, a person or a group of persons availing the

services are termed to be the actual users of the insurance organization.

On the other hand both the categories of prospects having the potential,

bearing the willingness but not using the services right now are termed to

be the potential users. We also call them prospects.

In the insurance business, we find prime focus on the policy holders and

therefore an individual or an institution taking the policies is known as the

actual policy hold on whereas the persons or organization willing to do so

but waiting for the creative persuasive efforts of the agents are known as

the potential policy holders.

.

Types of pension scheme:

A pension scheme that provides a guaranteed benefit is commonly called

a defined benefit pension scheme. A defined benefit scheme typically

employs a formula based on the employee's pay, years of employment

and age at retirement to calculate the guaranteed payment. The United

States Social Security system is an example of a defined benefit pension

arrangement.

Defined benefit schemes used to dominate pension provision in both the

private and public sector. However, a guaranteed, or "defined" benefit is

no longer the universal pension payment model. Instead, the benefit may

be based solely on the value of the accumulated assets in a pension fund

at the time payment is to begin.

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A pension scheme of this kind is commonly called a defined contribution

plan. In a defined contribution pension scheme, the employer, the

employee or both make contributions into an individual investment fund.

This fund is invested in underlying investments, such company shares,

and will move in line with the return on these investments. At retirement,

and occasionally in other circumstances, the individual draws income from

the fund. This is often done by purchasing an annuity, which provides a

secure income for life, from an insurance company.

In a defined contribution plan, investment risk and investment rewards are

assumed by each individual/employee/retiree and not by the

sponsor/employer. In the United States, the most common example of adefined contribution employer pension scheme is the 401(k) profit sharing

plan.

Financing

There are various ways in which a pension scheme may be financed. In a

funded scheme, contributions are paid into a fund during an individuals

working life. The fund will be invested in assets, such as stocks, bonds

and property, and grow in line with the return on these assets.

In an unfunded scheme no assets are set aside and the benefits are paid

for by the employer or other scheme sponsor as and when they are paid.

Pension arrangements provided by the state in most countries in the world

are unfunded, with benefits paid directly from current workers

contributions and taxes. This method of financing is known as Pay-as-

you-go. It has been suggested that this model bears disturbing

resemblances to Ponzi schemes

In a funded defined benefit arrangement, if the employee's contributions

and accumulated earnings are not sufficient to pay the guaranteed, or

"defined" benefit, the sponsor must cover the shortfall with additional



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contributions. Sponsors employ actuaries to calculate the contributions

that need to be made to ensure that the pension fund will meet future

payment obligations. This means that in a defined benefit pension,

investment risk and investment rewards are typically assumed by the

sponsor/employer and not by the individual.

Political and economic issues

In many countries, the average age of the population is increasing. This

can put pressure on pension schemes. For example, where benefits are

funded on a pay-as-you-go basis, the benefits paid to those receiving a

pension come directly from the contributions of those of working age. If the

proportion of pensioners to working age people rises, the contributionsneeded from working people will also rise proportionately.

In order to reduce the burden on such schemes, many governments give

private funded pensions a tax advantaged status in order to encourage

more people to contribute to such arrangements. Governments often

exclude pension contributions from an employee's taxable income, while

allowing employers to receive tax deductions for contributions to pension

funds. Investment earnings in pension funds are almost universally

excluded from income tax while accumulating prior to payment. Payments

to retirees and their beneficiaries also sometimes receive favorable tax

treatment. In return for a pension scheme's tax advantaged status,

governments typically enact restrictions to discourage access to a pension

fund's assets before retirement.

The personal pension scheme has also emerged in recent decades. In a

personal pension scheme, an individual saves, usually on a tax

advantaged basis, for income at retirement. In the United States, an

example of a personal pension scheme is the individual retirement

arrangement" (IRA). (IRA alternately stands for "individual retirement

account" or "individual retirement annuity.") Personal pension schemes

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are typically defined contribution because there is no sponsor to

guarantee future benefit amounts, so the individual has to assume the risk

of future investment returns being less than expected.

Operators In INDIA

By the year 1956, 154 Indian insurance, 16 non-Indian companies

insurance and 75 provident societies were carrying on Life Insurance

business in India. On 1st September 1956 all the Insurance Companies

were nationalized. On September 1956, LIC Act was passed by Indian

Parliament and the state run Life Insurance Corporation of India (LIC) has

held the monopoly in counties life insurance sector.

In the year 1999, the Insurance Regulatory Development Act (IRDA) was

passed in Indian Parliament. By this act a door was open fro private

companies with foreign equity Life Insurance. By this act a Indian

promoter can invest either wholly in an insurance venture or team up with

a foreign insurer with a cap of 26 percent of equity for a foreign partner.

No.Registrati

onNumber

Date ofregistration

Name of the company

1. 101 23.10.2000 HDFC Standard Life Insurance Company

2. 104 15.11.2000 Max New York Life Insurance Co.Ltd

3. 105 24.11.2000ICICI Prudential Life Insurance CompanyLtd.

4. 107 10.01.2001 Om Kotak Mahindra Life Insurance Co.Ltd

5. 109 31.09.2001 Birla Sun Life Insurance Company Ltd

6. 110 12.02.2001 TATA Aig Life insurance Company Ltd.

7. 111 30.03.2001 SBI Life Insurance Company Ltd



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8. 114 02.08.2001 ING Vysya Life Insurance Company Ltd.

9. 116 03.08.2001Allianz Bajaj Life Insurance CompanyPvt.Ltd.

10. 117 06.08.2001 Metlife IndiaInsurance Company Pvt.Ltd.

Insurance industry grew by over 65% to in September 2009 as against

Rs3,291 crore premium income in july.

Total premium income- april sep 2003

Total industry: Rs 5,436 crore

LIC:Rs 4,841 crore

ICICI prudential life : Rs 185 crore

Birla sunlife : Rs 82 croreHDFC standard life : Rs 66 crore

Tata AIG : Rs 63 crore

Market share

LIC :89%

ICICI prudential life : 3.41%

Birla sun life: 1.52%

HDFC standard life : 1.22%

Tata AIG: 16%.



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RESEARCH DESIGN:

Background of the study:

The sub has been chosen considering the need to know the effect of job

scarcity, job insecurity, attrition, job dissatisfaction, on an individual. As a

result how does he retaliate and secure his future.

In the present generation one cannot depend on anybody to be sheltered

as families are fast changing, people are on their own. As a result of which

there is a high growth in investments made in pension plans offered by

many companies.

There has been a lot of dilemma as to where to invest and how to secure

the future. Hence the subject has been taken up to understand the

preferences of investors towards a pension plan and to measure the

growth of pension schemes. To help the company offering the pension

plans customize the schemes according to the customers preferences



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4. To study the expectations of investors in a pension plan.

5. To study the re-investment options preferred by the investors in

pension plan.

6. To make an exploratory research & to arrive at conclusions.

7. Based upon the findings to offer strategies for insurance industry.

SCOPE OF THE STUDY

The study enlightens the insurance company to spread its products &

Services to Various segments improve on existing products and it also

gives rise to introductions of new products.

METHODOLOGY

a) Research design: Descriptive method of research is used to carryon the research.

b) SAMPLING - Convenience sampling has been adopted for the

study. The sample size taken up for the study was 85

respondents. Thee respondents includes professionals,

housewives, students, employed, retired and businessmen.

c) DATA COLLECTION -

The data has been collected using primary and secondary sources.

Primary Source: -

Questionnaires with structured questions.

Personal Interviews to elicit information beyond the

questionnaire

Personal interview with insurance representative or agents.

Secondary Source: - the source of secondary data includes



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Company records

Mass media

Websites

Newspaper

Books

Tools for data collection

Questionnaire

PLAN OF ANALYSIS

The data so collected has been classified and tabulated for better

understanding. The collected data were analyzed using basic statistical

tools and techniques such as averages, dispersion, co- relation, %ages

and the like and where ever possible to make the presentation of data

effective tables, charts, diagrams have been resorted to.

CONCEPTUAL DEFINITIONS

a) Insurance - Insurance is an economic institution based on the

principle of mutuality, the need for which arises owing to

chance occurrences of nature which can be easily estimated

thus when one talks of insurance the following aspects are

important

Principle of mutuality

Economic activities.

Probability of occurrence of event.

Estimating and pricing the financial loss.



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Thus insurance is designed to compensate a policyholder for loss

suffered, by the payment of money, repair, replacement or reinstatement.

In every case of the policyholder is entitled to be put back to the same

financial position as he or she was immediately before the event insured

against occurred.

b) Insurer: - The Company that covers an individual under an

insurance policy called the insurer.

c) Insured: - An individual who is covered under the policy is

called the insured or policy holder.

d) Premium: - The amount that is paid by the policy holder

toward the sum assured to the insurer either monthly, quarterly,

half yearly or annually is called premium.

e) Maturity: - The period for which the insurance policy has

been taken is known as the maturity period.

f) Eventuality: - Death of a policyholder is known aseventuality.

g) Claims: - Claims refer to the demand for the commitment

made by the insurer at the time of entering in to the contract.

The insurer has to be satisfied that all condition set for the

settlement of the claim have been fulfilled.

h) Sum assured: - The sum for which the policyholder

insures himself with insurer is called the sum assured.



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i) Annuities: - A specified capital sum is paid by a person in

return for a promise from the insurer to make a series of

payments as long as the person lives.

j) Assurance: - Events that must occur at some time, such as

death, are provided for by assurance.

k) Critical Illness: - An added coverage of paying out a lump

sum on diagnosis of specified critical illness or dread disease

l) Group insurance: - Group insurance is a scheme that provides

insurance benefits to a number of people under a single policy.

m) Regular Endowment: - Regular premium savings policy

provides minimum life cover on death during the term offers

invest & risk protection.

n) Surrender: - Surrender is a voluntary termination of a

contract by a policyholder.

LIMITATION OF THE STUDY

The study encountered the following pit falls:

1. There are possibilities of errors owing the respondents prejudices

and bias while supplying the data.



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2. The scope of the study is limited to Bangalore area only (i.e) only

Bangalore area is covered.



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PATNERSHIP:

HDFC Standard Life Insurance Co Ltd. is a joint venture between HDFC,

India's largest housing finance institution and Standard Life Assurance

Company, Europe's largest mutual life company. HDFC has 'AAA' rating

by CRISIL and ICRA for seven consecutive years. Standard Life has 'AAA'

rating by Moody's and Standard and Poor's for many years. These reflect

the efficiency by which HDFC and Standard Life manage their asset bases

of Rs. 21,450 Cr and US $ 121 Billion respectively.

Both the companies are renowned for offering a very high level of serviceto all their customers. HDFC's 120 offices have serviced customers in over

2400 cities/towns. Standard Life has been in the life insurance business

for the past 176 years. Thus, this is a joint venture between two

companies, which combine an understanding of the Indian market and

expertise in the life insurance business.

HDFC and Standard Life first came together for a possible joint venture, to

enter the Life Insurance market, in January 1995. In October 1995 the

companies signed a 3-year joint venture agreement.

Around this time Standard Life purchased a 5% stake in HDFC, further

strengthening the relationship.

In October 1998, the joint venture agreement was renewed and additional

resource made available. Around this time Standard Life purchased 2% ofInfrastructure Development Finance Company Ltd. (IDFC). Standard Life

also started to use the services of the HDFC Treasury department to

advise them upon their investments in India.



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Towards the end of 1999, the opening of the market looked very promising

and both companies agreed the time was right to move the operation to

the next level. Therefore, in January 2000 an expert team from the UK

joined a hand picked team from HDFC to form the core project team,

based in Mumbai.

Around this time Standard Life purchased a further 5% stake in HDFC and

a 5% stake in HDFC Bank.

In a further development Standard Life agreed to participate in the Asset

Management Company promoted by HDFC to enter the mutual fund

market. The Mutual Fund was launched on 20th July 2000.

INCORPORATION

The company was incorporated on 14th August 2000 under the name of

HDFC Standard Life Insurance Company Limited.

Our ambition from as far back as October 1995 was to be the first private

company to re-enter the life insurance market in India. On the 23rd of

October 2000, this ambition was realized when HDFC Standard Life was

the only life company to be granted a certificate of registration.

HDFC are the main shareholders in HDFC Standard Life, with 81.4%,

while Standard Life owns 18.6%. Given Standard Life's existing

investment in the HDFC Group, this is the maximum investment allowed

under current regulations.

HDFC and Standard Life have a long and close relationship built upon

shared values and trust. The ambition of HDFC Standard Life is to mirror



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the success of the parent companies and be the yardstick by which all

other insurance company's in India are measured.

MISSION

We aim to be the top new life insurance company in the market.

This does not just mean being the largest or the most productive company

in the market, rather it is a combination of several things like-

Customer service of the highest order

Value for money for customers

Professionalism in carrying out business

Innovative products to cater to different needs of different

customers

Use of technology to improve service standards

Increasing market share.

VALUES

Security:

Providing long-term financial security to our policyholders will be

our constant endeavour. We will do this by offering life insurance

and pension products.

Trust:

We appreciate the trust placed by our policyholders in us. Hence,

we will aim to manage their investments very carefully and live up

to this trust.

Innovation:



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Recognizing the different needs of our customers, we will be

offering a range of innovative products to meet these needs.

Our mission is to be the best new life insurance company in India and

these are the values that will guide us in this.

HDFC does not need any formal introduction, so strong is its brand

already. After having a significant presence in the housing finance,

banking and MF industries, this JV marks its foray into the life insurance

sector.

Private sector players would only be too aware that this is the proverbial

first step of the thousand-mile journey that lies up ahead. Contending for a

piece of market share with a Goliath that LIC is, will not be an easy task

unless they offer qualitative and innovative products at an affordable price.

That they would be pulling out all the stops to attract customers is not in

doubt. Hence, this is as good a time as any to pay attention and see what

is on display.

THE STRATEGY

Too many options simply confuse the users whereas too few will surely

turn them away. HDFC Standard Life has thankfully introduced products

with basic premiums serving specific needs of all. Most products have

some additional optional value adding benefits at marginal additional

premiums. The proponent is free to choose any of the basic products

along with none or some of the options as per his needs.

Before examining the base products, let us see the options.

Accidental Death Benefit (ADB)



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ADB provides an additional amount equal to the basic sum assured

(SA) in case of the death of the policyholder due to an accident,

within 90 days of the accident.

2. Critical Illness (CI) Benefit

CI provides an additional amount equal to the SA on diagnosis of

the any one of the 6 specified critical illnesses --- cancer, coronary

artery bypass graft surgery, heart attack, kidney/renal failure, major

organ transplant (as recipient) and stroke. The sum assured is

payable if the policy holder survives for 30 days after the date of the

claim.

3. Double Sum Assured (DSA) Benefit

DSA provides an additional amount equivalent to the basic SA in case of

the death of the policyholder.

4. Waiver of Premium (WOP) BenefitWOP basically waives the premium in case the policyholder becomes

totally disabled. However, the waiver is applicable only during the period

of the disability.

5. Accelerated Sum assured (ASA)

Upon diagnosis of any of the specified six critical illnesses, ASA provides

an amount equal to the amount payable on death.

These options must be selected at the outset while choosing the product.

Now we will have a look at the different products.

Single Premium Bond



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This is basically a hybrid of insurance and investment. The life

cover is quite low and therefore it functions almost like a deep

discount bond. For a single upfront premium (read investment), the

policy pays a lump sum (read maturity value) and its tenure of 10,

15, 20 years or more at 5-year intervals. A compound reversionary

bonus is declared every year, which would be added to the policy

upon its anniversary. The future bonuses though are not

guaranteed and are dependent upon the company's experience

and the conditions prevalent in the economy.

The minimum age for buying the policy is 18 years, the maximum

being 70. The minimum SA is fixed at Rs. 25,000, the maximum

being Rs. 5, 00,000.

Normally, a policy acquires a paid up value (and the related

surrender value) after premiums for 3 years are paid but in this

case the holding period is specified to be just 6 months. This

provides for excellent liquidity options.

Term Assurance PlanThe SA is payable in the case of the death of the policyholder during the

term but on survival, there are no maturity benefits. Consequently, the

premium rates are absolutely the lowest. This is insurance in its purest

form --- highest cover at lowest cost. There was a crying need for easy

availability of this product. HDFC Standard Life deserves kudos to have

catered to this need.

Amongst the optional benefits listed above, ADB, CI and ASA are

available for this plan.

Money Back Plan



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This plan pays periodic cash lump sums during the tenure of the

policy. The lump sums, essentially a proportion of the basic SA, are

paid at 5-year intervals. On survival, the basic SA plus bonus less

the cash lump sums paid earlier are provided. However, in the case

of the demise of the policyholder, the basic SA plus any bonus is

provided to the family. This would be over and above any earlier

payouts.

Endowment Assurance Plan

As is normal with all endowments, on the death of the life assured

during the term, the beneficiary will get the SA. On survival, the

policyholder gets the SA.

From amongst the optional benefits, CI, DSA, ADB and the WOP

benefit are available along with this plan. The indicative premiums

for an SA of Rs. 1 lakh for a male life assured for a period of 20

years are detailed in the table.

Loan Cover Term Assurance

This is a unique product meant as a safety net in case one has

taken a loan to buy a house. It is designed to help the family repay

the outstanding loan in the case of the death of the breadwinner.

For starters, it provides a lump sum on the death of the life assured

during the term of the plan. The difference in this case is that the

lump sum is a decreasing %age of the initial SA. As the loan

decreases, as per its payment schedule, the cover under the policy

decreases as per its own schedule.



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There is a choice of paying the premium in yearly, half-yearly or

quarterly modes or even a single one time premium is payable.

Amongst the optional benefits, ASA is available along with this

plan.

Group Term Insurance (GTI)

HDFC Standard Life also offers GTI, meant essentially for

employees of an organisation. GTI is extremely convenient for an

employer, as he can take insurance for all or certain categories of

employees. All members of a group, subject to some basic

conditions are eligible.

GTI is used basically to provide life insurance as part of the employee

benefits. It can also cover any housing or vehicle loan given by the

employer to the employee.

HDFC Standard Life Insurance Co. Ltd. has completed a landmark

achievement in its Group Insurance business. Speaking to the press onthe occasion, Mr. Paresh Parasnis, General Manager Distribution said

"We have just crossed a major milestone in our Group Insurance

business. The total life insurance cover in our group insurance business is

now over Rs 1000 Cr sum assured. Employers are finding our product a

very useful and affordable HR benefits."

The company has group insurance products for companies and for NGO's.

The Group Term Insurance can be taken by companies to provide low

cost life insurance to their employees. It is a one-year renewable term

insurance plan providing a cost-effective life cover for all or certain

categories of employees. The plan covers death due to any cause,



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accidental or natural, and hence, is a very comprehensive group

insurance plan.

This plan can be customized to meet the needs of the group in terms. The

sum assured could be constant or could vary according to grade or salary.

The plan can be further customized through various combinations of

riders. It can be taken by an employee as a valued employee benefit or as

a cover for any housing loan or vehicle loan given by the employer to the

employee. It can also be taken as a substitute for the statutory Employee

Deposit Linked Insurance (EDLI) subject to approval by the Regional

Provident Fund Commissioner.

In addition to this plan, the company also has a group insurance plan for

NGO's. This plan, called Development Insurance Plan, provides low cost

life insurance cover to members of self-help groups that are affiliated to

NGO's.

Tax Benefits

Our Life Insurance plans namely Endowment Assurance, Money Back

Plan, Single Premium Whole of LIfe Insurance, Term Assurance Plan and

Loan Cover Term Assurance are entitled to rebate underSection 88 of the

Income Tax Act, 1961. Additionally, our Health Insurance* riders are

eligible for tax exemption underSection 80D.

Our pension product, Personal Pension Plan is eligible for exemption

underSection 80CCC.

Furthermore, the proceeds from our life insurance plans are exempt from

income tax under Section 10 (10D).

http://www.hdfcinsurance.com/InsuranceProducts/section88.htmhttp://www.hdfcinsurance.com/InsuranceProducts/section80D.htmhttp://www.hdfcinsurance.com/InsuranceProducts/section80CCC.htmhttp://www.hdfcinsurance.com/InsuranceProducts/section88.htmhttp://www.hdfcinsurance.com/InsuranceProducts/section80D.htmhttp://www.hdfcinsurance.com/InsuranceProducts/section80CCC.htm


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The Directors of HDFC Standard Life declared the company's first bonus

for participating policyholders.

Reversionary Bonus

The Directors declared a reversionary bonus at the annual rate of 4.25%

of the sum assured for all Endowment Assurance policies issued in the

calendar year 2000, that were still paying premiums on 31st December,

2000, and still in force on 30th September, 2001.

Interim Bonus

The directors declared an interim bonus at the annual rate of 4.25% of the

sum assured for all Endowment Assurance and Money Back policies that

are still paying premiums and become claims before the next bonus

declaration.

The Directors also declared an interim bonus at the annual rate of 8.0% of

the sum assured plus bonuses for all Single Premium Whole of Life

policies that become claims before the next bonus declaration.

The combined effect of the reversionary bonus just declared and the

Founders' Bonus for sample terms is as follows.

Reversionary plus Founders' Bonus rates as %age of sum assured

PolicyTerm of policy (years)

10 15 20 25 30

Endowment Assurance 5.50% 6.50% 7.25% 8.75% 9.25%



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Money Back 4.75% 5.75% 6.50% 8.00% 8.50%

Annual and quarterly performance

For the period ending 31st March 2002 the company has achieved a total

sum assured of Rs. 1,266 Cr on its individual insurance, individual pension

and group insurance business nationally and has covered 44,311 lives.

The total sum assured in the first quarter of the current financial year is

Rs. 800 Cr. HDFC Standard Life is also the first new life insurance

company to declare a bonus on its with profits policies. The company has

recently declared bonus on the Endowment Assurance Plan, Money Back

Plan, Single Premium Whole of Life Plan and Personal Pension Plans.

Geographical presence

HDFC Standard Life has the widest distribution network among all new life

insurance companies with presence in 32 locations across the country.

The company has also ventured into rural areas in two ways - with NGO's

and directly.

Future prospects

On 8th May 2003, HDFC Standard Life Insurance Company Limited, the

first private sector life insurance company to start operations, declared its

annual results for the financial year ending March 31st, 2003. The



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company generated premium from new business of Rs. 132 crore in 2002-

03, as compared to Rs. 36 crore in the previous financial period,

registering a year-on-year growth of over 260%.

Another significant achievement for HDFC Standard Life was that the

cumulative insurance coverage, i.e. the sum assured for the policyholders,

crossed the Rs. 5000 crore mark during the year. During this period,

HDFC Standard Life extended life insurance coverage to over 1,50,000

lives.

The Directors of HDFC Standard Life at their Board meeting on 29th April,

2003, also declared the companys third bonus for participating

policyholders.

HDFC Standard Lifes current product portfolio caters to all the needs of

the individual protection, investment, savings and pension.

A new addition to HDFC Standard Lifes product portfolio was the HDFC

Childrens Plan in February 2003. This customised solution has found

wide acceptance amongst policyholders towards ensuring a bright future

for their children, whether it is education, marriage or establishing a

professional career. Besides the Childrens Plan, the HDFC Personal

Pension Plan also continued to gain in popularity during the year.

Amongst private insurers, HDFC Standard Life currently has a 25 percent

market share in the pension segment.

With offices in 49 locations, HDFC Standard Life has nearly doubled its

physical presence across the country in the last twelve months. Ajmer in

Rajasthan was the latest in the companys list of cities that it operates

from.



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Also contributing to the growth in business were more than 10,500

financial consultants trained to understand the needs of the consumer,

provide the right advice and maintain high service standards.

With the modified corporate agency regulations allowing banks to sell

insurance products, HDFC Standard life entered into tie-ups with HDFC

Bank, Union Bank of India and Indian Bank. HDFC Standard Lifes group

business also grew significantly in 2002-03 covering over 22,000 lives for

a sum assured of over Rs. 2000 crores.

As on 30 / june / 2009 While the LIC continues to hold a market share of

92 percent, among the private life insurance players ICICI Prudential Life

has attained the number one position with a market share of 37.1% as per

IRDA data followed by Birla Sun Life at the second position with a market

share of 15.2% and HDFC Standard Life the third with 13.5% market

share.

As on 26 November 2009 Life insurance industry grew by over 65% in

September as against Rs 3,291 crore premium income in July.

TOTAL PREMIUM INCOME:



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Total Premium Income - April - September 2009Total Industry: Rs 5,436 croreLIC: Rs 4,841 croreICICI Prudential Life: Rs 185 croreBirla Sun Life: Rs 82 crore

HDFC Standard Life: Rs 66 croreTata AIG: Rs 63 crore

MARKET SHARE OF DIFFERENT COMPANIES:


Total Premium Income - April - September 2009

89% 3% 2% 1% 4%

4841

199636682185

1%0

1000

2000

3000

4000

5000

6000

LIC ICICI Brila SunLife

HDFCStandard

Life

Tata AIG Others

Companies

RsinCrores


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Market ShareLIC: 89%ICICI Prudential Life: 3.41%

Birla Sun Life: 1.52%HDFC Standard Life: 1.22%Tata AIG: 1.16%

Market Share of diferent companies

89%3.41%

1.52%

1.22%

1.16%

4%

Compani

Percentage

Others

Tata AIG

HDFC Standard

Life

Brila Sun Life

ICICI

LIC



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Functional chart:

SWOT ANALYSIS

Strengths of HDFC Standard Life Insurance

The company has excellent underwriting skills, which reduces the

mortality rate because of this Claim Ratio is the lowest in the

industry, which leads to large funds in the different pools and in turn



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fetches more returns to policy holders. HDFC Standard Life

insurance also has excellent portfolio management skills.

This was the first company to come up with the Pension Plan with

out life cover now also introduced by LIC.

In terms of services got best insurers award from OUT LOOK

MONEY.

Weaknesses of HDFC Standard Life Insurance

Awareness every Indian knows about LIC but not every one knows

about HDFC Standard Life Insurance.

We know that every company has a break even point ie the

business starts running with profits. In case of insurance companies

the term is seven years and HDFC is 4 to 5 years old. It has a long

way to go.

Opportunities:

In India the insurable population is huge. To put it in figures in India

people who can take insurance is more than 30 crores, among

them only around 7 crores are insured. The remaining id yet to be

insured, and the people who are coming into the brakets, who can

take insurance are increasing.



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Because of many companies coming into insurance business the

advertisement on insurance has increased, which will improve the

knowledge of the individuals on insurance that is an opportunity for

the company.

Threats:

HDFC Standard life insurance has only one threat that is competition

from other life insurance companies.



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Table1:

The table depicts the age group of the respondents:

SL.NO AGE GROUP RESPONDENT

1 Less than 25 years 10

2 25-29 years 76

3 30-39 years 13

4 Above 40 years 01

Total 100

Figure 1:

The chart shows the age group of insured persons.

Age group of insured persons

10%

76%

13%1%

Less than 25 years 10

25-29 years 76

30-39 years 13

Above 40 years 1

Interpretation



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It is clear from the above chart 76% are under the age group of 25-29

years, 14% are he age group of 30-36, 10% are under the age guop of

less than 35 years and 0% above 40 years.

Table 2:

Table depicts the occupations of the respondents

Sl.no Working sector No Of

Respondents

1 Government 10

2 Business 06

3 Private employee 22

4 Info tech 60

5 Education 02

Total 100



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Figure 2

Occuption

10%6%

22%60%

2%

GovernmentBusiness

Private employee

Info tech

Education

Interpretation: It is clear from the above chart that 60% are the info tech,

22% are under the private employee sector, 10% are under government

sector, 6% under businessman and 2% under education



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Table 3:

Table depicts the annual income of the respondent

Sl.no Annual Income No Of

Respondents

1 > Rs.1.5 lacs 27

2 Rs.1.5 - 3 lacs 403 Rs.3 lacs - 5 lacs 204 < Rs.5 lacs 13

Total 100

Figure 3

Annual income

Rs.1.5

3 lacs

40%

Rs.3

lacs - 5

lacs

20%

>

Rs.1.5

lacs

27%

< Rs.5

lacs

13%

> Rs.1.5 lacs Rs.1.5 - 3 lacs Rs.3 lacs - 5 lacs < Rs.5 lacs



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Interpretation: The above table shows that 40% of the respondents are

belongs to Rs.1.5 to3 lakhs annual income group, 27% are under the

group of less than Rs 1.5 lakh, 20% under the age group of Rs 3 to 5

lakh, and 13% the group of above to s 5 lakhs

Table 4:

Table depicts the life insurance policy holder of the respondent

Sl.n

o

Insurance companies Respondents

1 HDFC STANDARD LIFE 15

2 LIC 763 ICICI PRUDENTIAL 4

4 BAJAJ LIFE INSURANCE 3

5 OTHERS 2

TOTAL 100



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Figure 4:

Insurance companies

LIC

76%

OTHERS

2%

ICICI

PRUDENTIAL4%

BAJAJ ALLIANZ

13% HDFC

STANDARD

LIFE

15%

HDFC STANDARD LIFE

LIC

ICICI PRUDENTIAL

BAJAJ ALLIANZ

OTHERS

Interpretation

It is clear from the above chart 76% of them are having LIC, 15% of them

are having HDFC SLIC , 13% in the LIC, 4% of them are having ICICI

prudential and 2% of the customers are towards Others companies.



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Table 5

Table depicts the factors that influenced the respondents to take life

insurance policy

Sl.no Factors Respondents

1 Tax savings 74

2 Good return 76

3 Liquidity 144 Security 46

Total 210

Figure 5 The chart shows the factor made to take the life insurance

policy

Factors made to take Life insurance policy

Tax savings

35%

Good return

36%

Liquidity

7%

Security

22%

Tax savings

Good return

Liquidity

Security



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InterpretationIt is clear from the above chart that 36% have taken the

policy for future earnings, 35% of them for tax savings, 22% for the

security and 7% for liquidity.

Table 6:

Table depicts how they came to know about present life insurance

policy provider


1 Direct marketing 162 News paper Advertisement 253 Television Advertisement 69

4 e-Marketing 55 Financial consultant 85

Total 200



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Figure 6

chart showing the insurance policy provider

News paper

Advertisement

13%

Directmarketing

8%

Financial

consultant

42%

e-Marketing

3%

Television

Advertisement

34%

Direct marketing

News paper

Advertisement

Television Advertisement

e-Marketing

Financial consultant

Interpretation:

It is clear from the above chart that 34% came to know by television

Advertisement, 42% from financial consultant, 13% from newspaper, 8%

from direct marketing , and 3% from e-marketing



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Table 7

Table depicts the satisfaction level by Life Insurance Company

Sl.no Satisfaction level Respondents1 Satisified 702 Disatificatied 30

Total 100

Figure 7

Satisifaction level

Respondents,

Satisified, 70%

Respondents,

Disatificatied ,

30%

Satisified

Disatificatied

Interpretation

The above table shows that 70% of the respondents are satisfied and 30%

of the respondents are dissatisfied

Table 8



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Table depicts the factor through which they came to know about

HDFC standard life insurance.


1 Direct marketing 052 News paper Advertisement 16

3 Television Advertisement 74

4 e-Marketing 05

5 Financial consultant 35

Total 135

Figure 8



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how did they come to know about HDFC standard li

priyansu hdfc

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