A PROJECT REPORT ON Customer Awareness about Insurance Industry and Comparative Analysis of Different Products of Different Insurance Companies A report submitted towards the partial fulfillment of the two years full-time Post Graduate Diploma in Business Management TABLE OF CONTENTS PARTICULARS PAGE NOS. CHAPTER-1 • Acknowledgement …………………………………. 7 • Executive Summary……………………………… 8-9 PART-A CHAPTER-2 COMPANY PROFILE…………………………………………………. 10 About HDFC Back Ground…………………………………………………….. 10 • HDFC Group Companies………………………………………… 11 • Business Objective………………………………………………… 12 • Organizational Goals………………………………………… 12 • Corporate Strengths…………………………………………… 12 About Standard Life • History…………………………………………………………… 13-16 About HDFC SLIC • Our Mission……………………………………………………… 17 • Our Values………………………………………………………… 18 • Vision Statement…………………………………………………….. 18 • Board Members………………………………………………………. 8-21 • Various Plans………………………………………………………….. 22 • Work Culture………………………………………………………….. 23 • SWOT Analysis…………………………………………………………. 24-25 CHAPTER-3 • Introduction of Insurance……………………………………………….. 26 • History of Insurance……………………………………………………… 26-28 • Why to Buy Insurance Product?…………………………………………………………. 29-31 • Scope of Insurance……………………………………………………………. 32 • Type of Insurance………………………………………………… 33-34 • Benefits of Insurance……………………………………………… 34 • Life Insurance Milestone…………………………………………… 35 Major Players………………………………………………………… 36 CHAPTER -4 • About IRDA…………………………………………………………….. 37-39 • Essentials for License………………………………………………… 40-42 • Duties & Obligations of Agent………………………………………. 42-43 • Code of Conduct of the Agent……………………………………….. 43-44 CHAPTER-5 • Channel Development……………………………………………… 45 • Who is an Advisor?………………………………………………………………… 45-46 • The Importance of Advisor………………………………………….. 46-47 • For this Purpose the Agent has to,……………………………………. 48 Commission Structure………………………………………………. 49 • Selling Channel………………………………………………………. 49-50 • Documents Required………………………………………………… 53 • Quality Score………………………………………………………. 54 • Benefits Provided to FC……………………………………. 54-55 • Nature of work, Working hours and Work expectation……… 55 • Distribution Channel…………………………………………. 56 Chapter-6 • Marketing Strategy………………………………………. 56-58 • Market Segment…………………………………………… 59 • Marketing Mix Policies………………………………… 60-61 PART-B
RESEARCH METHODOLOGY • Objective…………………………………………………………… 62 • Scope………………………………………………………………… 62 • Research Design…………………………………………………….. 62 • Sampling Design…………………………………………………… 62 DATA SOURCES • Research Instrument……………………………………… 63 • Mode of Survey…………………………………………….. 63 • Sample Size………………………………………………… 63 • Place of Study………………………………………………. 63 ? Limitations of the Study……………………………………. 64 ? Questions and Graphs with explanations………………………… 65-77 Results and Findings…………………………………………….. 78-80 ? Suggestion……………………………………………………… 80-81 ? Conclusion……………………………………………………… 82-83 ? Recommendation……………………………………………… 83-85 ? Bibliography……………………………………………………. 85 ? Questionnaire ……………………………………………………. 86-93 A C K N O W L E D G E M E N T With profound respect and gratitude, I take the opportunity to convey my thanks to the Management of HDFC Standard Life, SAKET for giving me opportunity to have my training here. I do extend my heartiest thanks to Mr.
BHAWESH KUMAR (CHANNEL DEVELOPMENT MANAGER) for providing me the opportunity to be the part of this esteemed organization. I am extremely grateful to all the financial staff of HDFC Standard Life, SAKET for their cooperation and guidance. I have learned a lot working with them. Sudeep Kumar, Area Manager, HDFC Standard Life, SAKET branch for clarifying the problems which I encountered during the preparation of this project. I am especially indebted to Prof. D. R. Tehran, who helped me in this project by providing such stress free & friendly environment to work; I am able o complete this project. EXECUTIVE SUMMARY The entire Project was a learning experience and has given me idea about the Insurance product and Insurance market. The experience was also very rewarding and exposed me to the real world of Insurance. It was assigned a project related to HDFC STANDARD LIFE on the topic of “Customer Awareness about Insurance Industry and Comparative Analysis of Different Products of Different Insurance Companies” The opening up of the insurance sector has changed the whole look of the industry .
While the LIC in order to face the competition is coming with new strategies. New players like HDFCSLIC are leading the sector due to their strategic management and tailored made projects. The primary reasons for buying an insurance policy, whether life or non-life is to protect us from vagaries of life . We do not invest in insurance for returns; rather we invest in it for regrettable necessities. Though a large proportion of policies available in the country provide for returns, but nobody is looking for returns to the inflation rate.
So what does insurance offer, perhaps peace of mind, but even that takes time, due to poor claim performance The demand for insurance is likely to increase with rising per-capita incomes, rising literacy rates and increase of the service sector, as has been seen from the example of several other developing countries. In fact, opening up of the insurance sector is an integral part of the liberalization process being pursued by many developing countries Pricing of insurance products, as empirically available in India, shows that pricing is not in consonance with market realities.
Life Insurance premium is generally perceived, as being too high while general insurance (especially motor insurance) is priced too low. Some insurance products, which are not available in India, should, be introduced in market. From our research we could find out that people are not aware about the policies and features of insurance. Therefore HDFCSLIC are recommended to shed light on policies and explain the benefits, thus increasing the awareness. The penetration of insurance in India is around 22%. This indicates that a vast majority of rural population is not covered.
The market player needs to explore this untapped potential through their marketing and sales network Part–A CHAPTER -2 COMPANY PROFILE [pic] HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED Background HDFC was incorporated in 1977 with the primary objective of meeting a social need – that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million. HDFC Group Companies 1. HDFC Limited 2. HDFC Bank 3. HDFC Asset Management Co. Limited 4. HDFC Securities Limited 5. HDFC Standard Life Insurance Company . Intel net Global 7. CIBIL – Credit Information Bureau Investigation Ltd 8. HDFC Chubb General Insurance Business Objectives The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets Organizational Goals HDFC’s main goals are to- ? Develop close relationships with individual households Maintain its position as the premier housing finance institution in the country, ? Transform ideas into viable and creative solutions, ? Provide consistently high returns to shareholders, and ? To grow through diversification by leveraging off the existing client base. Corporate strengths ? Strong brand ? Customer base of over two billion ? Stable and experienced management ? High service standards ? High quality loan portfolio ? Provision for contingencies ? Constant up gradation of contingencies ? One of the best capital adequacy ratio STANDARD LIFE [pic] History
The Standard Life Assurance Company (“Standard Life”) was established in 1825 and the first Standard Life Assurance Company Act was passed by Parliament in 1832. Standard Life was reincorporated as a mutual assurance company in 1925. The Standard Life group originally operated only through branches or agencies of the mutual company in the United Kingdom and certain other countries. Standard Life Asia Limited/Joint ventures The group’s Hong Kong subsidiary, Standard Life Asia Limited (“SL Asia”), was incorporated in 1999 as a joint venture and became a wholly-owned subsidiary of Standard Life in 2002.
The group’s operations in Hong Kong were established to give the group a presence in the Far East from which it could expand into China. The group’s joint ventures in India with Housing Development Finance Corporation Limited (“HDFC”) were incorporated in 2000 (in relation to the life assurance and pensions joint venture) and 2003 (in relation to the investment management joint venture). The group’s joint venture in China with Tianjin Economic Development Area General Company (“TEDA”) became operational in 2003. Standard Life International Limited –
The group also incorporated Standard Life International Limited (“SLIL”) in 2005 for the purposes of providing the group with an offshore vehicle, based in Ireland, through which it could sell tax-efficient investment products into the United Kingdom. Sales of these products commenced in 2006. HDFC Standard Life -The Partnership HDFC Standard Life Insurance is a joint venture between India’s largest housing finance provider, HDFC and Europe’s largest Mutual Life Assurance company – The Standard Life Assurance Company (U. K). The Standard Life Assurance Co. s one of the very few insurance companies in the world to have received ‘AAA’ rating from two of the leading international credit rating agencies, Moody’s and Standard & Poor’s. Standard Life was recently voted ‘Company of the Decade’ in U. K. by the Independent Brokers called IFAs. HDFC is a well-known & trusted name in India. Since its inception in 1977 they have maintained their position as the premier Housing Finance Institution in the country. They value integrity, commitment, teamwork and excellence in customer service.
HDFC and Standard Life first came together for a possible joint venture, to enter the Life Insurance market, in January 1995. It was clear from the outset that both companies shared similar values and beliefs and a strong relationship quickly formed. In October 1995 the companies signed a 3 year joint venture agreement. Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the relationship. The next three years were filled with uncertainty, due to changes in government and ongoing delays in getting the IRDA (Insurance Regulatory and Development authority) Act passed in parliament.
Despite this both companies remained firmly committed to the venture. In October 1998, the joint venture agreement was renewed and additional resource made available. Around this time Standard Life purchased 2% of Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also started to use the services of the HDFC Treasury department to advise them upon their investments in India. Towards the end of 1999, the opening of the market looked very promising and both companies agreed the time was right to move the operation to the next level.
Therefore, in January 2000 an expert team from the UK joined a hand picked team from HDFC to form the core project team, based in Mumbai. Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFC Bank. In a further development Standard Life agreed to participate in the Asset Management Company promoted by HDFC to enter the mutual fund market. The Mutual Fund was launched on 20thJuly2000 Incorporation of HDFC Standard Life Insurance Company Limited: The company was incorporated on 14th August 2000 under the name of HDFC Standard Life Insurance Company Limited.
Our ambition from as far back as October 1995 was to be the first private company to re-enter the life insurance market in India. On the 23rdOctober 2000, this ambition was realized when HDFC Standard Life was the only life company to be granted a certificate of registration. HDFC as on March 31st 2007 holds 81. 9 per cent of equity in the joint venture Given Standard Life’s existing investment in the HDFC Group, this is the maximum investment allowed under current regulations. HDFC and Standard Life have a long and close relationship built upon shared values and trust.
The ambition of HDFC Standard Life is to mirror the success of the parent companies and be the yardstick by which all other insurance company’s in India are measured. About HDFC Standard life [pic] Our Mission: To be the top new life insurance company in the market. This did 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 Our Values: Our mission is to be the best new life insurance company in India and these are the values that will guide us in this. • SECURITY: Providing long term financial security to our policy holders will be our constant endeavor. We will be doing this by offering life insurance and pension products. • TRUST: We appreciate the trust placed by our policy holders in us. Hence, we will aim to manage their investments very carefully and live up to this trust. • INNOVATION: Recognizing the different needs of our customers, we will be offering a range of innovative products to meet these needs.
Vision statement The most successful and admired life insurance company, which means that we are most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry. In short, is the most obvious choice for all. Brief profile of the Board of Directors Mr. Deepak S Parekh is the Chairman of the Company. He is also the Executive Chairman of Housing Development Finance Corporation Limited (HDFC Limited). He joined HDFC Limited in a senior management position in 1978. He was inducted as a whole-time director of HDFC Limited in 1985 and was appointed as its Executive Chairman in 1993.
He is the Chief Executive Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered Accountants (England & Wales). Mr. Keki M Mistry joined the Board of Directors of the Company in December, 2000. He is currently the Managing Director of HDFC Limited. He joined HDFC Limited in 1981 and became an Executive Director in 1993. He was appointed as its Managing Director in November, 2000. Mr. Mistry is a Fellow of the Institute of Chartered Accountants of India and a member of the Michigan Association of Certified Public Accountants. Mr.
Alexander M Crombie joined the Board of Directors of the Company in April, 2002. He has been with the Standard Life Group for 34 years holding various senior management positions. He was appointed as the Group Chief Executive of the Standard Life Group in March 2004. Mr. Crombie is a fellow of the Faculty of Actuaries in Scotland Ms. Marcia D Campbell is currently the Group Operations Director in the Standard Life group and is responsible for Group Operations, Asia Pacific Development, Strategy & Planning, Corporate Responsibility and Shared Services Centre. Ms. Campbell joined the Board of Directors in November 2005.
Mr. Keith N Skeoch is currently the Chief Executive in Standard Life Investments Limited and is responsible for overseeing Investment Process & Chief Executive Officer Function. Prior to this, Mr. Skeoch was working with M/s. James Capel & Co. holding the positions of UK Economist, Chief Economist, Executive Director, Director of Controls and Strategy HSBS Securities and Managing Director International Equities. He was also responsible for Economic and Investment Strategy research produced on a worldwide basis. Mr. Skeoch joined the Board of Directors in November 2005. Mr.
Gautam R Divan is a practising Chartered Accountant and is a Fellow of the Institute of Chartered Accountants of India. Mr. Divan was the Former Chairman and Managing Committee Member of Midsnell Group International, an International Association of Independent Accounting Firms and has authored several papers of professional interest. Mr. Divan has wide experience in auditing accounts of large public limited companies and nationalised banks, financial and taxation planning of individuals and limited companies and also has substantial experience in structuring overseas investments to and from India Mr.
Ranjan Pant is a global Management Consultant advising CEO/Boards on Strategy and Change Management. Mr. Pant, until 2002 was a Partner & Vice-President at Bain & Company, Inc. , Boston, where he led the worldwide Utility Practice. He was also Director, Corporate Business Development at General Electric headquarters in Fairfield, USA. Mr. Pant has an MBA from The Wharton School and BE (Honours) from Birla Institute of Technology and Sciences Mr. Deepak M Satwalekar is the Managing Director and CEO of the Company since November, 2000. Prior to this, he was the Managing Director of HDFC Limited since 1993.
Mr. Satwalekar obtained a Bachelors Degree in Technology from the Indian Institute of Technology, Bombay and a Masters Degree in Business Administration from The American University, Washington DC. Ms. Renu S. Karnad is the Executive director of HDFC Limited, is a graduate in law and holds a Master’s degree in economics from Delhi University. She has been employed with HDFC Limited since 1978 and was appointed as the Executive Director in 2000. She is responsible for overseeing all aspects of lending operations of HDFC Limited. THE VARIOUS PLANS ARE PLAN |BENEFITS | |Savings Plans | | |Endowment Assurance Plan |Life Insurance with Savings | |Unit Linked Endowment Plan |Life Insurance & Savings with choice of investment funds | |Children’s Plan |Security for your child | |Unit Linked Young Star Plan |Financial security for your child with choice of investment funds | |Money Back Plan |Life Insurance with Savings | |Investment Plans | | |Single Premium Whole Of Life Plan |Investment with Life Insurance | |Protection Plans | | |Term Assurance Plan |Life Insurance at an affordable price | |Loan Cover Term Assurance Plan |Life Insurance customized for home loans | |Retirement Plans | | |Personal Pension Plan |Savings for retirement | |Unit Linked Pension Plan |Retirement Savings with a choice of investment funds | WORK CULTURE HDFC Standard Life Insurance is known for its stimulating environment with high levels of motivation, empowerment and recognition.
We encourage an open and informal culture that values integrity, commitment, teamwork and excellence in customer service. We adopt a policy of strong learning and development initiatives, which promotes day-to-day learning as well as decision-making. We believe our strength is our people, so we endeavor to surpass their expectations and give them the best possible work environment and benefits that match the best in the industry. In which cities are our branches located? HDFC Standard Life Insurance is presently operational in Bangalore, Bhopal, Chandigarh, Chennai, Delhi, Hyderabad, Indore, Jaipur, Kolkata, Kanpur, Luck now, Ludhiana, Mumbai, Pune, Rajkot, Surat, Thane and Vadodara, panjim, Nasik and many more places. PAST PERFORMANCE & FUTURE PROSPECTS
Analysis of performance of HDFC Standard life in financial year 2004-2005 The Company has achieved a total sum of Rs 1,266 cr. on its individual insurance, individual pensions 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 declared a lower interim bonus of 7 % on single premium policies and 3. 75% on regular premium policies. S. W. O. T ANALYSIS OF HDFC STANDARD LIFE STRENGTHS • Premiums are increasing and so are commissions. • The variety of products is increasing. Transparency in working is followed. • Fund charges are less i. e. 0. 8% • Stronger financial base. • Employee centric organization . WEAKNESSES • Strong competitors like LIC, ICICI Prudential, and Birla Sun Life etc. • Premium is priced high as compared top the market leader. • Infrastructure cost is high. • Less expenditure on promotion. • Products not customized for lower segment. OPPORTUNITIES • The ability to cross sell financial services barely being tapped. • Technology is improving to the point that paperless transactions are available. • The client’s increasing need for an “insurance consultant” can open new ways to service the client and generate income. THREATS Government regulations on issues like health care, mold and terrorism can quickly change the direction of insurance. • The increasing expenses and lower profit margins. • Intense competition from LIC. CHAPTER-3 INTRODUCTION WHAT IS INSURANCE? Insurance is a contract between two parties whereby one party called the insurer, undertakes to compensate the other party known as insured in the event of loss in consideration of premium. Insurance is a protection against a financial loss arising on the happening of an unexpected event. Insurance company collects premium to provide for this protection. A loss is paid out of this premium collected from the insuring public.
The insurance company act as a trustee to the amount collected through premium. History of insurance Early methods of transferring or distributing risk were practiced by Babylonian traders as long ago as the 2nd millennium BCE. The Babylonians developed a system which was recorded in the famous Code of Hammurabi, c. 1750 BC and practiced by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an additional sum in exchange for the lender’s guarantee to cancel the loan should the shipment be stolen. A thousand years later, the inhabitants of Rhodes invented the concept of the ‘general average’.
Merchants whose goods were being shipped together would pay proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm or sinkage. The Greeks and Romans introduced the origins of health and life insurance c. 600 AD when they organized guilds called “benevolent societies” which acted to care for the families and funeral expenses of members upon death. Guilds in the Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Insurance became far more sophisticated in post-Renaissance Europe, and specialized varieties developed. Towards the end of the seventeenth century, the growing importance of London as a centre for trade led to rising demand for marine insurance. In the late 1680s, Mr.
Edward Lloyd opened a coffee house which became a popular haunt of ship owners, merchants and ships’ captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyds of London remains the leading market for marine and other specialist types of insurance, but it works rather differently to the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this disaster Nicholas Barbon opened an office to insure buildings. In 1680 he established England’s first fire insurance company, “The Fire Office”, to insure brick and frame homes.
The first insurance company in the United States provided fire insurance and was formed in Charles Town (modern-day Charleston), South Carolina, in 1732. Benjamin Franklin helped to popularize and make standard the practice of insurance, particularly against fire. In 1752, he founded the Philadelphia Contributor ship for the Insurance of Houses from Loss by Fire. Franklin’s company was the first to make contributions toward fire prevention. Not only did his company warn against certain fire hazards, it refused to insure certain buildings where the risk of fire was too great, such as all wooden houses. In the United States, regulation of the insurance industry is highly Balkanized, with primary responsibility assumed by individual State insurance departments.
Whereas insurance markets have become centralized nationally and internationally, State insurance commissioners operate individually, though at times in concert through a national insurance commissioner’s organization. In the State of New York, which has unique laws in keeping with its stature as a global business center, attorney general Eliot Spitzer has been in a unique position to grapple with major national insurance brokerages. Spitzer found that Marsh & McLennan steered business to insurance carriers based on the amount of contingent commissions that could be extracted from carriers, rather than basing decisions on whether carriers had the best deals for clients. LIFE INSURANCE
Life Insurance is a contract providing for payment of a sum of money to the person assured or, to the person entitled to receive the same, on the happening of a certain event. A family is dependent for its food, clothing and shelter on the income brought by the family’s breadwinner. The family is secure so long as this breadwinner is alive and is capable of earning. A sudden death (or disability) may leave the family in a financially difficult situation. Uncertainty of death is inherent in human life and this uncertainty makes it necessary to have some protection against the financial loss arising from untimely death. Life insurance offers this protection.
Life insurance is all about making sure your family has adequate financial resources to make those plans and dreams come true. It provides financial protection to help your family or business to manage after your death. Why to buy insurance products? If you ask any individual how they would do their tax planning their first reply will be insurance policy. Such is the nature of life insurance. It is brought by almost everyone right from the bigwigs of the business world to small retail investors. Majority buy it for one core reason to save tax. There are other reasons to buy a life insurance policy? There are some guiding principles for individuals who are contemplating taking the insurance. 1. Passing away early
One is never sure about life . We often come across people claiming that nothing is going to happen to them that they are too young to pass away. But no one knows what the future holds for them? We only have to read newspaper headlines about the recent tsunami, the earthquake that took place not so long ago and such other natural calamities to understand how the future can unpredictable. Individuals need to insure themselves to secure the future of those who are dependent on them especially so if they happen to be the sole breadwinners. You wouldn’t want them to go through hardships or rely on others etc. This is one of the prime reasons to buy a insurance policy. 2.
Living too long Advances in the field of medicine have grown by leaps and bounds over the past decades due to which life expectancies have gone up. This is another problem for individuals. It is observed that individuals who tend to live way beyond their earning years like say, till the age of 80 or 90, usually face a problem coming to terms with increasing costs of living. And that is not taking into account the manifold increase in medical expense of course. This takes place due to imprudent financial planning by individuals during their earning years. Insurance, if brought at the right time for the right amount, acts as a savor in such times.
Individuals could opt for a pension plan offered by insurance companies, which suits their profile in terms of income. Proposed retirement age and proposed expenses post retirement. Such plans provide an annuity, which means that individuals keep getting a fixed sum every month/year after they have retired. 3. Painful existence May be an individual has planned well during his earning years to secure himself financially. He has also designed his financial portfolio in such a way that he is drawing a comfortable monthly income to support his family expenditure. But what if an individual were to have a health problem afflicting him or his spouse?
What if the remedy to his ailment were to cost him a sum beyond his financial capability? Here again life insurance can act as the saving grace in two ways. One, by way of medical rider like critical illness benefit rider. These riders are taken along with the life insurance plan and help cover the medical expenses and secondly by allowing the individual to surrender the insurance policy. Surrendering the policy will help in the generation of a lump sum amount that can be used for covering the high cost of medical expenses. 4. Tax benefits Under the new regime, individuals can invest up to Rs 100,000 in insurance premium to avail of a deduction from taxable income.
The tax sops provided on insurance help increase the individual’s disposable income and make him consider taking a life insurance plan which he may otherwise not have done 5. Investments It is usually done through investment plans like unit linked investment plan where individuals make a one off payments. Scope of insurance Insurance products can be used in various forms according to the needs which vary from person to person. The scope of insurance is immense • Pure –term insurance • Savings — endowment , money back policy • Investment –single premium policies • Income/pension –annuities • Market/unit linked –equities Whole life policies – Cover the insured for life. The insured does not receive money while he is alive; the nominee receives the sum assured plus bonus upon death of the insured..
Endowment policies – Cover the insured for a specific period. The insured receives money on survival of the term and is not covered thereafter. Money back policies – The nominee receives money immediately on death of the insured. On survival the insured receives money at regular intervals during the term. These policies cost more than endowment with profit policies. Annuities / Children’s policies – The nominee receives a guaranteed amount of money at a pre-determined time and not immediately on death of the insured. On survival the insured receives money at the same pre-determined time. These policies are best suited for planning children’s future education and marriage costs
Pension schemes – are policies that provide benefits to the insured only upon retirement. If the insured dies during the term of the policy, his nominee would receive the benefits either as a lump sum or as a pension every month. IRDA mission to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Type of insurance What Is Term Life Insurance? Term is the simplest form of life insurance, it is the least expense and least complicated form of life insurance. Coverage is for a fixed amount of time, usually 1 to 30 years, and the beneficiary receives a fixed sum if the insured dies during the term.
At the end of the term the policy expires and coverage ceased; however, term life insurance can be renewed. Term life is the good choice for individuals who are looking for temporary coverage. What is whole life insurance? Provides both a death benefit and a dividend. A fixed premium is charged over the length of the contract. Over time the policy increases in tax deferred value. Most policies provide a dividend to the policy holders which help with retirement What is universal life insurance? It is the most flexible plan. The policy holder is able to adjust the benefit/premium mix to best serve their current financial needs, within the limits set by the policy. The payout is the accumulated value of the policy at time of death.
One added benefit of a Universal policy is the ability to skip payments if the need arises. What is variable life insurance? Allows the policy holder to tie the accumulated value of their policy to the financial markets. While these policies enable a higher return, they also increase risk as down markets occur. You can borrow against a variable policy. Benefits of insurance Safeguards oneself and one’s family for future requirements Peace of mind in case of financial loss • Encourage savings • Tax rebate • Protection from the claim made by creditors • Security against personal loans, housing loans , or other type of loans Life insurance milestones: 1818 –oriental insurance company set up in Calcutta ? 1912 –the Indian life assurance companies act enacted –first statute ? 1928 –the Indian insurance companies act enacted to enable the government to collect statistical information about both life and non- life insurance companies ? 1938 –passing of the insurance act ? 1956 –nationalization of life insurance companies and formation of LIC ? 1956-99 – monopoly of LIC for nearly 44 years ? 1999 –privatization initiated Privatization -objectives ? Broad increased coverage of the population ? Specific Customer has a wider choice and range of products Improved service standards to customer • Economic Mobilization of savings Major players LIFE INSURANCE BUSNIESS |NON-LIFE INSURNACE BUSNIESS | |Life Insurance Corporation |General insurance Corporation | |ICICI Prudential Life Insurance |National Insurance Company | |HDFC Standard Life Insurance |The New India Assurance Company | |Max New York Life Insurance |The Oriental Insurance Company | |Birla Sun Life Insurance |United India Insurance Company | |OM Kotak Mahindra Life Insurance |Reliance General Insurance | |Reliance Life Insurance |TATA-AIG Insurance | |Allianz Bajaj Life Insurance |Royal Sundaram Alliance General Ins. | |Dabur CGU Life Insurance |Bajaj Allianz General Insurance | |ING Vyasa Life Insurance |ICICI Lombard Insurance | |SBI Life Insurance | | CHAPTER -4
THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY Duties, Powers and Functions Section 14 of IRDA act, 1999 lays down the duties, powers and functions of IRDA. • Subject to the provisions of this act and any other law for the time being in force, the authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business. • Without prejudice to the generality of the provisions contained in sub-section(1),the powers and functions of the authority shall include, 1. Issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration; 2.
Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; 3. Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; 4. Specifying the code of conduct for surveyors and loss assessors; 5. Promoting efficiency in the conduct of insurance business; 6. Promoting and regulating professional organizations connected with the insurance and re-insurance business; 7. Levying fees and other charges for carrying out the purposes of this act; 8.
Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with insurance business; 9. Control and regulations of the rates, advantages, terms and conditions that may be offered by insurer in respect of general insurance business not so controlled and regulated by the tariff advisory committee under section 64U of the insurance act,1938(4 of 1938) 10. Specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries; 11. Regulating investment of funds by insurance companies; 12. Regulating maintenance of margin of solvency; 13.
Adjudication of disputes between insurers and intermediaries or insurance intermediaries; 14. Supervising the functioning of the tariff advisory committee; 15. Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations referred to in clause(f); 16. Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and 17. Exercising such other powers as may be prescribed; Essentials for the license The IRDA has prescribed both qualifications and disqualification for a person to be given a license. QUALIFICATIONS The person must :- • Be at least 18 years of age; Have passed at least 12th standard or more (if he is appointed in a place with population 5000 or more),10th standard otherwise; • Have undergone training for at least 100 hours in life or general insurance business as the case may be from an institution, approved and notified by the authority; • Should have also passed the pre-recruitment examination conducted by the Insurance Institute of India or any other examination body recognized by the authority. • In case of an applicant for the composite insurance agent, he/she should have completed at least 150 hours practical training in life & general insurance business, which may be spread over six to eight weeks. DISQUALIFICATIONS The factors that would debar a person from obtaining a license are that he/she Has been found to be of unsound mind by a court of competent jurisdiction • Has been found guilty of criminal breach of trust, misappropriation, cheating, forgery or abetment or attempt to commit any such offence. The license once issued can be cancelled whenever the person acquires a disqualification. In the case of companies & firms who want to become agents, the test of qualification & disqualification would be applied to all the directors or partners. There are two separate forms, one for individuals & another for those other than individuals, in which the applications are to be made. The two forms are numbered by IRDA-Agent VB & are annexed to the regulation.
The applications in the respective forms have to be made to the designated person appointed buy the insurer sponsoring the application. The application for the license should be accomplished by proofs. • Of fee having been remitted to the authority. • Of age • Of having completed the training & passed the prescribed examination. The fee to be sent to the authority directly is Rs. 250 for new license & for renewals applied for within the prescribed period, viz, at least 30 days before the date of expiry. If the application is made after the date of expiry it would be normally refused. But, if the authority is satisfied that hardship would be caused otherwise, the license may be renewed.
Prior to renewal of the license of the license the agent should have completed at least 25 hours practical training in life or general insurance business or at least 50 hours practical training in life & general insurance business in the case of a composite insurance agent. The Duties & Obligations of the Agent As per the IRDA guidelines every advisor must be trained & licensed to sell life insurance. The responsibilities & obligations of the advisors have been clearly defined. • Every insurance agent should himself & the insurance company that he represents along with the license particulars. • The advisors should take into the actual needs of the clients before recommending a plan. All requisite information in respect of the products recommended should be provided with a ‘Sales Illustration’ & the premium to be paid. • The agent is obligated to disclose the scales of commission likely to be earned by him through sale of the recommended product, should the client wish to know it. • The nature of information required in the application form should be adequately explained along with the requirement for supporting documents. • Once the proposal is submitted, the advisor shall inform the status of decision by insurer promptly. • In case of a claim, the advisor is required to render necessary assistance in complying with the requirements for settlement of claims by the insurer. He/she should not interfere with any proposal introduced by any other any insurance advisor/agent or force the client to terminate an existing policy taken from him/her & take a new proposal within 3 years. • An advisor cannot induce the client to omit any material information or submit any wrong information in the proposal form. • Further no rebating or offering any inducements in lieu of taking a policy is allowed. Code of Conduct for the Agent The licensing of Insurance Agent Regulations, 2000 lays down a code of conduct for the agents which state that the agent shall • Disclose the license to the prospect on demand. • Explain all available options to the prospect. • Disclose the scales of commission, if asked for by the prospect. • Impress upon the prospect need to disclose all information Inform the insurer about any adverse habits & materials facts of the person to be insured. • Convey to the proper about the acceptance or rejection of the proposal. • Render necessary assistance to policy holders or claimants or beneficiaries in complying with the requirements, asked for by the insurer. Advise policy holders to affect nomination. • Make every attempts to ensure remittance of premiums by the policy holders within the stipulated time by giving notice orally or in written. • Not induce the prospect to submit any wrong information. • Not interfere with the proposal introduced by other insurance agents. • Not demand or receive share of proceeds under an insurance contract. Not cause the termination of an existing policy with a view to effect a new proposal. Chapter -5 Channel development ADVISOR ROLE IN INSURANCE INDUSTRY Advisors help the customers to understand the company’s plan and advise them on the correct solution that will meet their need. It is very important for the advisors to deliver the right advice depending on the need of the prospects. However the channel development is expensive and it is a time consuming process but it is the most successful channel to sell insurance policies. An advisor is the public face of an insurance company. Most of clients of Insurance Company never get to see any one besides the advisor. WHO IS AN ADVISOR
An advisor is a person who takes up agency from the insurance company to sell their policy on a commission basis. He acts as an intermediary between the insurance company and the policy holder. But before doing so, he has to undergo training and get a certificate of proficiency from the insurance company. They also help the policy holders at the time of settlement of the claim. The job of agents is quite challenging as selling a product like insurance policy is not easy. For being successful, agents should be outgoing and social. They should have a knack of convincing people Some of the expectations from advisor by the insurer are: 1. Contact prospects for life insurance, study their insurance needs and persuade them to buy. 2.
Complete all formalities for the proposal of new insurance including filling up proposal forms, collecting premium, arranging medical examination, collecting proofs (of age or income), reports or information required by the underwriter. 3. COMPLETING a policy is not the end of the job of an agent but just the beginning of a new relationship. Having sold a new insurance policy the advisor has to insure that the policy continues in books of the insurance company and its purposed benefits are in no way comprised. THE IMPORTANCE OF ADVISORS HDFC SLI Ltd. aspires to provide state of the art of customer service & opportunities & avenues for enterprising people to grow & prosper.
The company wish to grow exponentially that is backed by the latest technology, hence offering its customers: • Complete & diversified product portfolio. • Faster & more accurate service. • Multi-channel distribution systems. • Highly trained professional sales people offering quality pre & post sales service. It is in the above mentioned areas of personal specialization where the importance of an advisor clearly stands out the advisor not only contribute in bringing in new business for the company, but also plays an important part in offering world class pre & post sales service to the clients to the clients with the support of the organization.
But the company in its principles clearly states out that an advisor to means “much more than a salesman or a saleswoman, we at HDFC SLIC recognize our advisors as the ambassadors of our organization in the market place & we consider the advisor force would be our biggest differentiating factor in the coming years”. The advisor is an important asset not only for the organization from the business point of view but also to the society on the whole as he/she is someone who provide valuable service to the community be helping people attain financial security & build funds for their future needs thereby assisting them in getting their financial freedom.
If looked from the other side of the business where the company is operating the competitive Indian market & more so in the business of life insurance where the customers looks for self-belief & faith then the advisor certainly holds the vital link in the overall business proposition. They represent the company’s face & words on which the customers can trust because the customer knows that face. The advisor helps to create a web for the business to grow & driving the customer to come to the company with complete trust & faith. For this purpose the agent has to: a) Keep in touch with the policy holder to make sure that renewal premiums are paid in time b) Ensure that nominations are made or changed, if necessary, as and when it is required. c) Assist in collecting the claim amounts as and when they become due by helping the claimants to complete all documents and evidences. 4.
Apart from these routine procedures, at times an insured may need a loan against his policy. The details of various situations for which a loan can be given and its term have to be explained to the policy holder. These go a long way in strengthening the bond between policyholder and the agent. Advisor is called with different name in different companies – In HDFC:Financial Consultant In AVIVA:Financial Planning advisor In ICICI:Insurance Advisor In KOTAK MAHINDRA:Financial Advisor Similarly an advisor called with different names in other companies. In any company selling start with financial consultants or advisors COMMISION STRUCTURE The commission structure varied for advisor depending on the policies they would sell.
They would get a commission of 40% in all traditional policy and 5% from next year onwards. They would get a commission of 7. 5 to 20% on ULIP depending upon the plan they sell and a commission of 2% from next year onwards. SELLING CHANNEL Managing Director General Manager Zonal manager Regional manager Sales manager Assistant sales manager Sales/branch development manager Financial advisors/Consultants Selling start from A sale starts from the side of Financial Consultant then Sales development manager then Assistant manager then Sales development manager then Regional manager then zonal manger then general manager and finally managing director.
Financial consultant works under guidance of sales development manager, how is to be work and sale is managed by sales development manager and commission provided to financial consultant on their premium up to different levels. Sales development manager works under the guidance of assistant sales manager, similarly all these channel work under the guidance of upper channel The purpose of recruiting the financial advisor was to develop a distribution channel for selling the life insurance products. A distribution channel is the route by which the product (or offer) prepared by the producer reaches the ultimate consumer (or buyer). Distribution channel bridges the distance between the producer (point of manufacture) and the consumer (point of sale).
In the case of life insurance, the agent or the financial advisor is the primary component of the distribution channel. He is the equivalent of the retailer. The supervisor of financial advisors/agent is an important part, because it is he who, by creating and training financial advisor/agents, makes the channel effective. New recruited financial advisors/agents widen the channel. My supervisor gave me the responsibility of identifying and selecting the eligible candidate and finally convincing him to apply for a license to become a financial advisor. The insurance Act, 1938 lays down that, financial advisors/agents must posses a licence under section 42 of that Act. The licence is to be issued by the IRDA.
The licence may be to act as an agent for a life insurance, for a general insurer or as a “composite insurance agent” working for a life insurer or a general insurer. No agent is allowed to work for more than one life insurer or more than one general insurer. The qualifications necessary before a licence can be given are that the person (individual or corporate insurance executive) must ? Be at least 18 years old. ? Have passed at least the 12th standard or equivalent examination, if he is to be appointed in a place with a population of 5000 or more, or 10th std otherwise. ? Have undergone practical training for at least 100 hrs in life/general insurance business, as the case may be, from an institution, approved and notified by the IRDA.
Have passed the pre-recruitment examination conducted by the Insurance Institute of India or any other examination body recognized by the IRDA. A person with the following disqualifications is debarred from holding a license. ? He has been found to be of unsound mind a court of competent jurisdiction. ? He has been found guilty of criminal breach of trust, misappropriation, cheating, forgery or abetment or attempt to commit any such offence. The license once issued, can be cancelled whenever the person acquires a disqualification. Insurers who select financial advisors/agents for appointment make arrangement for training for appearing in the prescribed examinations, and obtaining the license from the IRDA. TRAINING MODE:
There are two types of training modes a) Class room training b) On line internet training After completing the, an examination is conducted by IRDA. It must be cleared by the person with 50% marks. After passing the exam a person is entitled for financial consultant. In his license a code is given to him and after getting the license a person can start his work with the company In HDFC Standard Life Insurance Company Ltd. An additional training provided to financial consultant who is held for five days, called product training and sales training (known as DISHA) PRODUCT TRAINING: This is the additional training provided by life insurance company.
In this training a financial consultant is gone through the product or plans provided by the company to the people. SALES TRAINING: In this type of training a Financial Consultant can learn how sales is to be made and what are the features to make improve sales. DOCUMENTS REQUIRED • Acceptable age proof • Acceptable address proof • Acceptable education proof • Cancelled cheque • DD in favour of HDFCSLIC • Online Exammination-825 Rs • Manual Examination-925 • Eight passport size photographs • Acceptable Identity proof • Pan Card OUALITY SCORE FOR FINANCIAL CONSULTANT • Age: Minimum 25 to 60 years • Married • Income ;RS. 3Lacs p. a. • Graduate or Higher Has spend ;3 years in the city of current residence BENEFITS PROVIDED TO A FINANCIAL CONSULTANT • Space or place provided in the branch office • To use unlimited calls from any branch in India. • Computer can be used by FC • Zero balance account is opened with the name of FC in HDFC bank • Commission provided to him/her on every premium of each policy(given by him) up to certain percentage level • Unlimited income but tax free • Club membership Nature of work, working hours and work expectation To accomplish the assigned task I had to meet up with people to tell them the details about the work profile, commission structure and registration fees.
Basically, the assigned work was a field based job. I had to visit several places in and around Delhi to meet up with concerned people. I had to report to the supervisor at 10:00 in the morning, and there was no fixed time for leaving the office. All the management trainees were expected to recruit advisors who were not students so that they can dedicate time for explaining the various policies to prospects and to bring in business for the insurance company. Punctuality, discipline, dedication and hard work were expected by the organization from all the management trainees. Distribution Channel • Individual Agents. • Corporate Agents. • Broker. CHAPTER-6
MARKETING STRATEGIES HDFC STANDARD LIFE INSURANCE COMPANY LIMITED • Ad line: – ‘Making Life Easier for you. ’ – With this particular punch line HDFC Std. Life has been able to make a great impact in the minds of the potential customer are being communicated that a lot of worries of their lives are being taken care of by the company so that they can now enjoy their life in a much more better manner in a comparatively less stressful manner. • Workstation Marketing: – Customers coming to the office of HDFC SLICL were given a detail about the various products at the office itself, by almost any official they meet, so that the product can be sold to the customer at that time only if the customer gets interested. Corporate Marketing: – Company officials often go to various corporate houses to make presentations regarding various products they are offering. They are even ready to sell the policies then and there, in case customer wants. This is specially taken care of because, if given any time, customer might go to the competitor. • Stall In Trade Fair: – This strategy is basically undertaken to expose general public to various life insurance products available of HDFC SLICL. Also this strategy helps generating leads. This is short-term strategy as is limited to duration of such trade fairs and all. • Road Shows: – This strategy is aimed at reaching more and more customers by moving to various places. Awareness Camps: – This is one of the strategies which has the greatest effect on the mindset of the prospective customers and is considered to be the most effective. Most of the Indian population is still unaware of life insurance as such and the various benefits which life insurance carries for them. Thus, making people aware of these things will definitely help company increasing its sales. • Segment Targeting through Consultants: – This is a unique strategy in itself and is a new concept in itself. We know that every insurance company has consultants or agents. Now HDFC SLICL has targeted their customers into various segments like transporters, doctors, housewives, teachers, etc. nd has made one person out of them as their consultant. Thus, this helps them cater to the whole segment since person of same level can easily influence others. This strategy has infact done well till now. • Riders: – Almost every private player has such strategy. Under this, the HDFC SLICL has added few more benefits or covers with the original life policy like accident, illness etc. With a slight increase in the original premium an individual can avail multiple benefits/insurance covers, thus, avoiding the hassle of buying separate policies for separate purposes. • Hoardings: – Though HDFC SLICL reacted late to such kind of advertising efforts, but still such hoarding brings visibility.
Among the various marketing strategies followed by HDFC SLICL, most of them are Proactive in nature whereas few are Reactive strategies, which it was forced to follow because of the actions of the competitors. Like, creating visibility through ‘hoarding’ is a late reaction by HDFC SLICL which actually came since the competitors like HDFC LIFE was putting more stress on hoarding, and that too from very beginning and this actually did wonders for HDFC LIFE. Now strategies like ‘corporate marketing’, ‘segment consultants’ are proactive strategies of marketing followed by HDFC SLICL. MARKET SEGMENTS The life insurance and pension business has two distinct customers segments – individuals and corporate. In case of the retail business for individuals, the 4 sub-segments are – protection, investment, savings and pension.
Apart from the existing leader LIC, new companies such as HDFC Standard Life, TATA AIG, HDFC Standard Life Insurance and more will seek to be present across all the segments of the market. Among the retail products for individuals, pure risk protection products have been introduced by some of the new life insurance companies in the market. As these products have no savings component to it, the premiums are very low compared to other products. Investment products provide long term investment growth and insurance cover. This segment is growing rapidly. Savings products like Endowments and Money-Backs provide a combination of protection and investment benefits.
The last segment of pension includes products that are aimed at offering customers an income during their retirement years. In case of the group business, there are three sub-segments – protection, statutory savings and pension. Group insurance products are taken to provide low cost life insurance cover to a group of people. Group insurance can be taken to provide low cost life insurance cover as part of employee benefit packages to motivate employees or to cover the housing or vehicle loan given by employer to employee. It can also be used as a substitute for the statutory EDLI subject to approval by the Regional Provident Fund Commissioner.
The statutory savings segment essentially comprises of the gratuity products for companies. The pension segment will include products like group superannuation, which will enable a company to benefit from the actuarial, investment and operational expertise of a specialist company to manage its superannuation funds. MARKETING MIX POLICIES Different companies can choose to position themselves differently and hence the marketing mix would be different. However, there are certain common characteristics that one can cull out from the possible strategies that companies can adopt. Product: The development of flexible products to suit individual requirements is what will differentiate the winners from the also-rans.
The key to success is in providing insurance solutions, not standardized insurance products. The concept of riders/optional benefits has already been a huge innovation brought about by the new players, which has led to customization of products for individual needs. However, companies may differentiate themselves on the basis of product segments that they choose to focus on and excel in. Distribution: Different companies may however choose different channels and different geographies to focus on. The channel options are – tied agency force, corporate agents and brokers and this is an area where
