14616347 emerging-trends-in-insurance-sector

Emerging Trends in life insurance
sector

ACKNOWLEDGEMENT

The success of this final report is the outcome of Guidance
and valuable suggestions provided by all the concerned
without whom the report could not fide on the right back.
I would like to express my sincere gratitude to Coordinator
and Guide MRs Mahek Mansuri for giving me an opportunity
to do this project work.
I express my sense of deep gratitude to. Faculty’s supervisor of
S.K Somaiya COLLEGE, for inclusions and timely suggestions
in the preparation of this final report. Finally, I will be failing
in my duty, if I do not thank my parents, brother & friends
and well wishers for their enthusiastic support and who have
directly or indirectly helped in some way or the other in
making this final report a success.

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PREFACE

Whether the insurer is old or new, private or public,
expanding the market will present multitude of challenges and
opportunities. But the key issues, possible trends,
opportunities and challenges that insurance sector will have
still remains under the realms of the possibilities and
speculation. What is the likely impact of opening up India’s
insurance sector?

The large scale of operations, public sector bureaucracies and
cumbersome procedures hampers nationalized insurers.
Therefore, potential private entrants expect to score in the
areas of customer service, speed and flexibility. They point out
that their entry will mean better products and choice for the
consumer. The critics counter that the benefit will be slim,
because new players will concentrate on affluent, urban
customers as foreign banks did until recently. This seems to
be a logical strategy. Start-up costs-such as those of setting
up a conventional distribution network-are large and high-end
niches offer better returns. However, the middle-market
segment too has great potential. Since insurance is a volumes
game. Therefore, private insurers would be best served by a
middle-market approach, targeting customer segments that
are currently untapped

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Contents
Sr. No. Subjects Covered Pages
Project Proposed
Objective of the project
Methodology
Sampling
Limitations
1. Introduction
1.1 Introduction to insurance
1.2 Definition of insurance
1.3 Pre liberalization of insurance
1.4 Post liberalization of insurance
2. Trends in Insurance Sector
2.1 Indian Insurance in 21 Century
2.2 Emerging Trend in Indian Insurance Sector
2.3 Growth of Insurance Sector
2.4 Present Scenario of Insurance Sector in India
2.5 Technology Trend in Insurance Sector
2.6 Globalization of Life Insurance Market
3. Impact of Budget on Insurance Sector
3.1 Impact of Budget 2004
4. Private V/S Public Insurance Sector
4.1 Comparison between private and Public
Insurance sector In India

Company Analysis of LIC& ICICI Prudential
5.
5.1 Mission Statement of LIC
5.2 Vision of LIC & ICICI Prudential
5.3 Goal of LIC & ICICI Prudential
5.4 Organizational Structure of LIC and ICICI
Prudential

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5.5 Market Share of LIC & ICICI Prudential

37 – 39
Product Offered by LIC & ICICI Prudential
6.
6.1 Product Offered by LIC & ICICI Prudential 40 - 42
6.2 New Products by LIC & ICICI Prudential 43 - 46
47 - 52
Innovation Strategy & IT in LIC & ICICI
7.
Prudential

7.1 Innovation Strategy in LIC & ICICI Prudential 53 - 62
7.2 IT in LIC & ICICI Prudential 63 - 69
70 - 71
Emerging Trend in LIC & ICICI prudential
8.
8.1 Emerging Trends in LIC & ICICI Prudential 72 - 91
9 92
Impact of Financial Crisis on LIC
9.1 Impact of Financial Crisis on LIC

Conclusion

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Scope of the
Study

Methodology

Used
Design of
the Study
Objective
Of the
Study

Limitation

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Objective
The project was conducted after taking into consideration the
changing face of the life insurance sector. The objective for
conducting this project was
• To understand the life insurance sector in India.
• To learn about LIC & ICICI prudential.
• To know the scope of life insurance in India.
To realize the masses how carrier can be developed generating huge
income from insurance

Scope
The project gives brief description of the following -
• What is insurance?
• Effect of liberalization
• Trends in insurance sector
• Impact of budget on insurance sector
• Product offered by LIC & ICICI Prudential
• Impact of financial crisis on LIC
Limitation
• Life Insurance is a vast subject. It is not possible to provide
information regarding all the different types of policies which
provides different benefits. The project would have been
much better if the comprehensive study of all the different
types of policy provided by different companies is
undertaken.

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sector RESEARCH METHODOLOGY

Information Research

Primary data Secondary data
collection collection

Personal
interview
Literature
Internet
study

Mr ashsish shukla
Insurance agent Books on insurance
(LIC ) agency

Mr parvinder
singh Various
Insurance agent insurance
(ICICI Prudential) magazines

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EXECUTIVE SUMMARY

The huge and ever rising population levels in out country
provide an attractive opportunity for the global insurance majors
to seek their fortunes here. That is the reason why we find so
many private players today competing with LIC the only life
insurer prior to liberalization of out economy, for insuring Indian
lives. In spite of the loud noises made by the various companies’
vying for a slice of the large Indian Insurance pie, the irony is
that even today not more than 20% of the population of out
country is aware about the very basic concepts regarding Life
Insurance. This is the precisely the reason why we see a
mandatory tag today with every advertisement that advertises
for a insurance product, that goes “INSURANCE IS THE
SUBJECT MATTER OF SOLICITATION”. The INSURANCE
REGULATORY DEVELOPMENT AUTHORITY OF INDIA (IRDA) is
aware of the fact that many Indian consumers can be taken for
a ride by fly by night operators who could seek to sell insurance
as a pure investment instrument and make good with their hard
earned money, promising them huge returns.
This project throws light on the emerging trend of the insurance
industry in India.

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Chapter 1
Introduction to
Insurance

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INSURANCE INDUSTRY: CLASSIFICATION

INSURANCE

LIFE GENERAL
INSURANCE INSURANCE

Fire Marine Mediclaim Motor
insurance insurance vehicle

Insurance = Collective bearing of Risk
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Insurance is nothing but a system of spreading the risk of one
onto the shoulders of many. While it becomes somewhat impossible
for a man to bear by himself 100% loss to his own property or interest
arising out of an unforeseen contingency, insurance is a method or
process which distributes the burden of the loss on a number of
persons within the group formed for this particular purpose.

Basic Human trait is to be averse to the idea of risk taking.
Insurance, whether life or non-life, provides people with a reasonable
degree of security and assurance that they will be protected in the
event of a calamity or failure of any sort.

Insurance may be described as a social device to reduce or eliminate
risk of loss to life and property. Under the plan of insurance, a large
number of people associate themselves by sharing risks attached to
individuals. The risks, which can be insured against, include fire, the
perils of sea, death and accidents and burglary. Any risk contingent
upon these, may be insured against at a premium commensurate
with the risk involved. Thus collective bearing of risk is insurance.

Insurance Indemnifies Assets & Income

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Every Asset has a value and generates Income to its Owner.
There is a normally expected Life-time for the Asset during which
time it is expected to perform. If the Asset gets lost earlier, being
destroyed or made Non-functional through an Accident or other
unfortunate event the Owner is Prejudiced. Insurance helps to
reduce CONSEQUENCES of such Adverse Circumstances which are
called Risks

Insurance is the science of spreading of the risk
It is the system of spreading the losses of an Individual over a group
of Individuals

Insurance is a Method of sharing of financial losses
of a few from a common fund formed out of Contribution of the
many who are equally exposed to the same loss
What is uncertainty for an Individual becomes a certainty for a Group.
This is the basis of All Insurance Operations. Thus insurance convert
uncertainties to certainty

DEFINITIONS

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The definition of insurance can be made from two points:

Functional definition.
Contractual definition.

Functional definition
Insurance is a co-operative device to spread the loss caused by a
particular risk over a number of persons who are exposed to it and
who agree to insure themselves against the risk.

General Definition
Insurance has been defined to be that in which a sum of money as a
premium is paid in consideration of the insurer’s incurring the risk of
paying a large sum upon a given contingency.
In the words of John Magee, “Insurance is a plan by
themselves which large number of people associate and transfer to
the shoulders of all, risks that attach to individuals.”

Fundamental Definition

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In the words of D.S. Hansell, “Insurance accumulated contributions of
all parties participating in the scheme.”

Contractual Definition
In the words of justice Tindall, “Insurance is a contract in which a sum
of money is paid to the assured as consideration of insurer’s incurring
the risk of paying a large sum upon a given contingency.”

Working of Insurance

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Pre-Liberalization Scenario

Indian History: Time to turn the clock back-and open up insurance

Fifty years ago, India had a bustling, if somewhat chaotic, entirely
private insurance industry. The year after Independence, 209 life
Insurance companies were doing business worth Rs712.76 crore
(which grew to an amazing Rs 295,758 crore in 1995-96). Foreign
insurers had a large market share 40 per cent for general insurance
but there were also plenty of Indian companies, many promoted by
business houses like the Tatas and Dalmias. The first Indian-owned
life insurance company, the Bombay Mutual Life Assurance Society,
was set up in 1870 by six friends. It Insured Indian lives at the normal
rates instead of charging a premium of 15 to 20 percent as foreign
insurers did. Its general insurance counterpart, Indian Mercantile
Insurance Company Ltd., opened in Bombay in 1907.

A plethora of insufficiently regulated players was a sure recipe for
abuse, especially because there was no separation between
business houses and the insurance companies they promoted. The
Insurance Act, 1938, introduced state controls on insurance, including
mandatory investments in approved securities, but regulation
remained ineffective. In 1949, Purshottamdas Thakurdas, chairman
of the Oriental Assurance Company, admitted: "We cannot deny that,
today, there is a tendency on the part of insurance companies in
general to make illicit gains. Can we overlook the cutthroat
competition for acquiring business? And still worse is the dishonest
practice of adjusting of accounts." After a 1951 inquiry, the

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government was dismayed that companies had high expense and
premium rates, were speculating in shares, and giving loans
regardless of security. No wonder that between 1945 and 1955, 25
insurers went into liquidation and 25 transferred their business to
other companies.

This reckless record stoked the pro-nationalization fires. The 1956 life
insurance Nationalization was a top-secret intrigue; for fear that
unscrupulous insurers would siphon funds off if warned. The
government resolved to first take over the management of life
insurance companies by ordinance, then their ownership. The then
finance minister C.D. Deshmukh later wrote: 'Seth Ramakrishna
Dalmia’s extraction of Rs.225 crore (misappropriation by the Bharat
Insurance Company) was a heaven-sent opportunity. We were ready
to nationalize, with every detail worked out." On 19 January 1956, the
news was announced on the radio, though even the director- general
of AIR was not shown the speech. The next morning, at 9 am, while
executives were frantically seeking details over the trunk telephone,
says Deshmukh in his autobiography, our officers walked into the
respective insurance offices, showed their authority and then took
over the business. I believe this will be regarded as one of the best
kept secrets of the Government of India in all times to come." The
ordinance transferred control of 245 insurers to the government. LIC,
established eight months later, took over their ownership. General
Insurance had its turn in 1972, when 107 insurers were amalgamated
into four companies headquartered in the four metros, with GIC as a
holding company. Nationalization brought some benefits. Insurance

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spread from an urban-oriented, high-end business to a mass one.
Today, 48 per cent Of LIC's new business is rural. Net premium
income in general insurance grew from Rs222 crore in 1973 to
Rs 5,956 crore in 1995- 96. Yet, rigid controls hamper operational
flexibility and initiative so both customers service and work culture
today are dismal. The frontier spirit of the early insurers has been
lost. Insurance companies have also been timid in managing their
investment portfolios. Competition between the four GIC subsidiaries
remains illusory. If Nationalization ever had a purpose, it has been
served. It's now time to turn back the clock in some respects, and
open up the sector again. The government already intends to insist
on large minimum capital requirements, a strong regulator, and a
healthy distance between insurers and industry. To ensure that
history doesn't repeat itself

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Post Liberalization Scenario

While no aspect of the reform process in India has gone smoothly
since its inception in 1991, no individual initiative has stirred the
proverbial hornets' nest as much as the proposal to liberalize the
country's insurance industry. However, the political debate that
followed the submission of the report by the Malhotra Committee has
presumably come to an end with the ratification of the Insurance
Regulatory Authority (IRA) Bill both by the central Cabinet and the
standing committee on finance. This section traces the evolution of
the life insurance companies in the US from firms underwriting plain
vanilla insurance contracts to those selling sophisticated investment
contracts bundled with insurance products. In this context, it brings
into focus the importance of portfolio management in the insurance
business and the nature and impact of portfolio related regulations on
the asset quality of the insurance companies. It also provides a
rationale for the increased autornatisation of insurance companies,
and the increased emphasis on agent-independent marketing
strategies for their products. If politicized, regulations have potential
to adversely affect the pricing of risks, especially in the non-life
industry, and hence the viability of the insurance companies. Finally,
the backdrop of US experience provides some pointers for Indian
policymakers

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Chapter 2
Trends in Insurance
Sector

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INDIAN INSURANCE IN 21ST CENTURY:

2000: IRDA starts giving licenses to private insurers: ICICI prudential
and HDFC Standard Life insurance first private insurers to sell
a policy

2001: Royal Sundaram Alliance first non life insurer to sell a policy

2002: Banks allowed selling insurance plans. As TPAs enter the
scene, insurers start setting non-life claims in the cashless
mode

2007: First Online Insurance portal, https:/// set up by an Indian
Insurance Broker, Bonsai Insurance Broking Pvt Ltd.

The Government of India liberalized the insurance sector in March
2000 with the passage of the Insurance Regulatory and Development
Authority (IRDA) Bill, lifting all entry restrictions for private players
and allowing foreign players to enter the market with some limits on
direct foreign ownership.

Minimum capital requirement for direct life and Non-life Insurance
company is INR1000 million and that for reinsurance company is INR
2000 million. In the 2004-05 budgets, the Government proposed for
increasing the foreign equity stake to 49%, this is yet to be effected.
Under the current guidelines, there is a 26 percent equity cap for
foreign partners in direct insurance and reinsurance Company.

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Emerging Trend in Indian Insurance Sector

Market by 2015, particularly in countries like India and China. The IRDA is
the major body, which is providing better opportunities for the private
player in India. GIC & LIC's monopoly market approach is no more
prevalent in India. The new market scenario for insurance is growing; no
doubt it is a flying bird.

Change is the eternal law of nature. Everything is changing according
to the need of the time. Economic growth and social development in
present scenario is due to sudden change in industrial policy and
economic planning. Globalization has been the basic mantra after
1991, so every one thinks of being global. Liberalization, privatization
and globalization is the basic concept of success in all aspect of
development. Competition is tough now due to globalization.
Business has positioned the entire economy, and industrialists think
about making things global. There are no stringent rules or
regulations for making any business house or industry. Government
gives more emphasis on export and entrepreneurship. This is a
changing world. Everyone has to compete for better success.
Marketing is the major concept for developing any type of business.
After globalization, marketing has taken a new dimension and it is the
most challenging task now. The new horizon of marketing in the field
of finance and insurance in present scenario is a good sign of
development.

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Globalization - "The Dynamic Force"

Many people consider globalization nothing new - societies have
been interconnected for years. The world has never experienced
globalization at this level of intensity before, or the speed at which it
is transforming and integrating societies.

Herman E. Daly, an analyst of Global Policy Forum, characterizes
globalization as, "Global integration of many former national
economies into global economy, mainly by free trade and free
mobility, but also by easy or uncontrolled economic purposes." He
further clarifies that globalization is not internationalization -
globalization brings about a single, integrated, global economy, while
internationalization is a federation of nations cooperating as
sovereign units to advance the national interest of all members.
Though globalization has become a broad heading for a multitude of
global interactions, ranging from the expansion of cultural influences
across borders to the enlargement of economic and business
relations throughout the world, it has different dynamic force for
different person. For the economist, globalization is essentially the
emergence of a global market. For a historian, it is an epoch
dominated by global capitalism. Sociologists see globalization as the
celebration of diversity and the convergence of social preferences in
matters of life style and social values. To the political scientist, it
represents the gradual erosion of state sovereignty. But discipline
specific studies explain only a part of the phenomenon.

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From a multi-disciplinary angle, globalization may be treated as a
phenomenon, a philosophy and a process, which affects human
beings as profoundly as any previous event. Several factors have
been responsible for this phenomenon. This study confines its
attention to four growth-enhancing facets of globalization that have
been among its key drivers, namely trade, finance, communication
and transport.

MNCs - "The New Path Maker"

After globalization, so many MNCs are the major path maker for
economic growth. The world-class MNCs constantly pursued their
strategy of gaining access to every promising market world over,
which had sound growth potentialities, in order to expand their
network and control over the respective local economies. The
consequence was that some of the markets, particularly in
developing countries like China and India, adopted some sort of self-
protectionist mechanisms by imposing certain deliberate politico-legal
restrictions in order to restrict the entry of capital goods of these
MNCs into their markets.

Insurance being an integral part of financial service could not claim
immunity to the impact of the globalization process and opened up to
private and global players world over, including India. So many MNCs
are now entering into the insurance sector which is now a booming
sector.

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New Horizons of Insurance Market after Globalization

After 1970, insurance sector has become more prosperous. For a
long time, the two most important insurance players were LIC & GIC.
Now so many MNCs have entered into the same sector like Bajaj
Allianz, Aviva, Birla Sunlife, ICICI Prudential, etc. Insurance is now
acting on two dimensions, i.e., the element of investment and the
element of protection. The Economic Value Addition (EVA) has taken
the major concern of the same business.

Marketing after globalization has become: -

• More customer oriented
• Mostly better service oriented
• More competitive

Better satisfaction, more value addition and strategic development
can help any insurance sector to sustain in the present era.

New Market Scenario & Insurance

Insurance market in present scenario though is a booming sector, but
the market has changed from simpler to complex, less challenging to
more challenging. Going domestic to international is a very difficult
task. Understanding market synergy and cognisation of perception of
customer in the insurance field is very difficult. The Regulatory Board
like 'IRDA' is playing a very crucial role for the benefit of the
insurance holder. The premium and interest rate can't be violated for

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better profit and development. The market is becoming tougher
gradually.

Globalization of Insurance Market

Historically, insurance has been an integral part of financial services
system and recognized as a corner-stone of a country's financial
health and symbol of progress. Insurance provides for the financial
security of citizens and their families. It offers valuable investment
advice and serves as an effective step towards both individual and
national financial stability.

After the terrorist attack on the World Trade Center in September
2001, the momentum of growth of world economy suffered some
temporary setback. According to 3rd Annual Globalization Index
Report of World Watch Institute, the growth rate fell sharply from 4%
in 2000 to 1.3% in 2001. But the world had become stabilized after
that and the economic growth was back with entry of so many MNCs
and insurances.

Triggered by the sound fundamentals in global economy and
internationalization of world markets, several countries turned
towards free market regimes in banking and insurance, putting an
end to several decade-old state-owned controlled markets. The
insurance market in China & India is brighter. The leading
reinsurance company like Swiss Re & Munich Re has projected 20-
25% growth in life and health insurance market by 2015, particularly
in countries like India & China

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Growth of Insurance

GROWTH OF LIFE INSURANCE SOME FACTS (MAY
2008):

HOW THEY STACK UP
Premium income of life insurers in Rs crore

April - June Growth Total
2007 2008 % Share (%)
LIC 8580.84 7524.56 -12 52.55
ICICI Prudential 1056.45 1,590.27 51 11.11
Bajaj Allianz 731.85 829.24 13 5.79
SBI Life 426.39 1,148.67 169 8.02
HDFC Standard 355.93 490.40 38 3.42
Max New York 289.74 501.16 73 3.50
Reliance Life 204.10 557.33 173 3.89
Birla Sun Life 174.63 501.53 187 3.50
Total Private 3930.95 6,795.64 73 47.45
Total Market 12511.80 14,320.20 14 100.00

Global Industry Statistics
Emerging Markets
(Total Premium, figures in $billion)
Taiwan 17.3
China 13.4
India 7.2
Hong Kong 6.1
Israel 5.8
Singapore 5.0

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Present Scenario of the Insurance Sector in India

As per the findings of a survey carried out in 2003-04, the Indian
insurance market ranked 5th in the Asian continent after Japan,
South Korea, China & Taiwan, and 19th

In India, the process of liberalization and opening of insurance sector
to private and foreign players started taking shape as part of the
series of financial and economic reforms brought in by the
Government in the late 1990s, in accordance with the
recommendations made by R. N. Malhotra Committee constituted by
the Government in April 1993. By amending the relevant provisions of
the Insurance Act, 1938, and passing the IRDA Act, 1999, by an Act
of Parliament, Insurance Regulatory and Development Authority
(IRDA) was established in the year 2000, which marked the opening
act of the insurance sector to private participation and foreign
investment.

GDP & Insurance

Though potentially insurance is more than Rs. 500 Billion business in
India, and together with banking, it adds slightly more than 7.5% to

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the GDP, of the country, the gross premium collection has been
hardly 2% of the GDP, not withstanding its growth between 15-20%
annually, during the decade preceding the opening up of insurance
market for private and foreign players in the year 2000. As the
insurance premium database of various developed and developing
countries for the year 1999 indicates, the per capita premium of India
was just around $ 8 as against the same having been very high in the
developed countries. In other words, and in terms of percentage of
GDP, it was 14% for Japan, 12% for Korea and 9% for UK as against
the same staggering below 2% for India for the fiscal year 2000-2001.

In the new economic reality in globalization, insurance companies in
21st century face a dynamic global business environment. Radical
changes are taking place owing to the internationalization of
activities. The appearance of new risks, new types of cover to match
with new risk situation, unconventional and innovative ideas on
customer service, low growth rates in developed markets, changing
customer needs and the uncertain economic conditions in the
developing world are exerting pressure on insurer’s resources while
testing their ability to survive. The existing insurers are facing
difficulties from non-traditional competitors that are entering the retail
market with new approaches and through new channels. The basic
premise of globalization is opening up of new service markets to
provide the developing countries with new opportunities for the
expansion of trade and economic growth.

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The rapidly changing economic scene, the political attitude, social
values and structures, cultural patterns, developments in IT have
transformed lifestyles in urban and rural areas. Developments in
other parts of the world, which are witnessing sweeping changes in
terms of convergence of financial and insurance markets through
banc assurance, replacement of reinsurance contracts by financial
instruments, sale of insurance through mergers and acquisitions will
also have their impact on Indian Insurance Industry.During the long
monopoly regime, the government attempted minor changes in the
procedures without going into the root cause. The deregulation
requires comprehensive changes in the character and basic policies
of the industry.

Till the year 2000, the insurance industry was a government
monopoly and is now experiencing cut-throat competition because a
number of players have entered into the Indian market in the form of
Joint ventures with Indian private sector partners.
Consequently, Indian Insurance Industry has closely integrated
with world economy thereby making crucial for insurance companies
to operate outside national boundaries.
India Insurance sector after globalization has brighter future. The
economic status of people is changing. So many new government
policies and economic reforms are impetus for insurance sector. The
firmament of economic growth is vast and never ending but the
insurance as a bird have to fly. No doubt insurance market after
globalization is "A flying bird"!

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TECHNOLOGY TREND IN INSURANCE
MARKET ARE AS FOLLOWS

Computerization:

Initially, in the late 1950’s the insurance companies used Unit
Record Machines (Electro Magnetic Machines) to process data
punched into cards. Computers were introduces in the mid 1960’s
and by the 1980’s the Unit Phased Machines were phased out and
the entire process was computerized. This brought about greater
efficiency and quick service delivery

Internet:

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Today, the internet has completely changed the service delivery
process. Internet is today used to even sell insurance policies.
Internet is, in fact, proving to be one of the widely used distribution
networks for selling insurance policies. Also internet is used for
sending premium notices to policy holders through e-mails
Companies like LIC (www.licindia.com), ICICI
(www.iciciprudential.com) all have websites from which people can
get the information about their products, prices, various schemes,
and lots of other information. People can also purchase the product
through this website.

Electronic Clearance Service (ECS):

Almost all the big organizations today provide the ECS facility
to its customers. A policy holder having an account in any bank which
is a member of the local clearing house can opt for ECS debit to pay
premiums. The advantage here is that once the option is exercised,
the policy holder need not visit a branch for paying the premium or
collecting the receipts. On the day indicated by the policy holder, the
premium amount will be directly debited to the bank account of the
policyholder and the receipt will be issued by the designated branch
office.

Call Centres and SMS services:

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Almost all the insurance companies have their own call centres
which cater to the phone based queries of the policyholders. This
service is 24x7 and they have the Interactive Voice Response (IVR)
systems at all the branches

Globalization of Life Insurance Market
SOME GENERAL INFORMATION ABOUT LIFE
INSURANCE IN INDIA

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Significant channel for
household savings into capital
formation

GDP penetration 2nd largest
of 4.1% financial service
in India after
Life Insurance banking
Statutory
requirements to Total number of
provide  reach   lives insured and
to rural areas on books as on
Total Assets Under Management March 31, 2008
of Life Insurance Cos. as on
March 31, 2008 Rs. 8,50,000

The Life Insurance market in India is an underdeveloped market that
was only tapped by the state owned LIC till the entry of private
insurers. The penetration of life insurance products was 19 percent of
the total 400 million of the insurable population. The state owned LIC
sold insurance as a tax instrument, not as a product giving protection.
Most customers were under- insured with no flexibility or
transparency in the products. With the entry of the private insurers
the rules of the game have changed.
The 12 private insurers in the life insurance market have
already grabbed nearly 9 percent of the market in terms of premium
income. The new business premium of the 12 private players has

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tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, state
owned LIC's new premium business has fallen.

Innovative products, smart marketing and aggressive
distribution. That's the triple whammy combination that has enabled
fledgling private insurance companies to sign up Indian customers
faster than anyone ever expected. Indians, who have always seen life
insurance as a tax saving device, are now suddenly turning to the
private sector and snapping up the new innovative products on offer.

The growing popularity of the private insurers shows in other
ways. They are coining money in new niches that they have
introduced. The state owned companies still dominate segments like
endowments and money back policies. But in the annuity or pension
products business, the private insurers have already wrested over 33
percent of the market. And in the popular unit-linked insurance
schemes they have a virtual monopoly, with over 90 percent of the
customers.

The private insurers also seem to be scoring big in other ways-
they are persuading people to take out bigger policies. For instance,
the average size of a life insurance policy before privatisation was
around Rs 50,000. That has risen to about Rs 80,000. But the private
insurers are ahead in this game and the average size of their policies
is around Rs 1.1 lakh to Rs 1.2 lakh- way bigger than the industry
average.

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Buoyed by their quicker than expected success, nearly all private
insurers are fast- forwarding the second phase of their expansion
plans. No doubt the aggressive stance of private insurers is already
paying rich dividends. But a rejuvenated LIC is also trying to fight
back to woo new customers

Market Share of Private Sector life Insurance
Companies

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Chapter 3
Impact of Budget
on Insurance Sector

IMPACT OF BUDGET 2004

The finance minister’s reform to strengthen risk management in

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banking The Finance Bill has some brilliant promises to offer and yet
there are adverse to the financial service sector.

The decision to permit 49 per cent foreign direct investment (FDI) in
insurance is welcome. The industry will agree that there is an acute
need for it to grow and to write more business. If one were to analyze
the growth of some new private sector insurance players the
underlying strength seems to be their ability to get more capital and
meet the solvency requirement perform, write more business and
grow faster. Let’s not forget that these insurance companies will be
able to tap the capital market in two to three years.

The best performer in the sector have also expanded their capital to
about Rs. 700 to 800 crore. A look at the non performers suggests
that they do not have adequate capital to grow. Hence the increase in
the FDI limit would help. More importantly, this will give greater
control to the foreign partners in areas of management control and
governance. They will now be more willing to bring in their expertise
in product development, technology, and implement best practices.

The striking future of the Finance Bill is that the government has
accepted defined contribution as the way forward for pension
reforms, particularly for new government employees.

One could have expected some clarity on the subject of multiple
regulators for pension. Though there be some benefits having a
separate pension regulator, one supposes that there would be a
strong case for just one regulator both the pension and insurance
sectors. The government must examine the confusion that may arise
on account of having multiple regulators.

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Banking and insurance companies are significant players in the
securities market today. Midsize public sector banks may have made
a turnover of about Rs. 40,000 crore on securities trade and larger
banks would have made two to three times the number. The
transaction tax of a 0.15 per cent would certainly eat away a good
part of banks’ profits.

Likewise, all services rendered by banks (except the fund based
assistances) would attract service tax. Banks would be able to
conveniently pass on some of these costs to the customers. So, each
time an individual goes and gets a demand draft or pay order, they
will end up paying much more than the existing rates. However, if
competition becomes acute, banks would have to bear it, which is
bad news for the banking companies.

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Chapter 4

Private V/S Public
Insurance Sector

PRIVATE V/S PUBLIC INSURANCE SECTOR

Private players in the life insurance business are growing at a
scorching pace. Within three years of their inception, they have
seized about 14 per cent of the market.

Compare this to new generation private-sector banks, which took
nine years for 20 per cent share in the Indian banking industry. And

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after seven years in the industry, in 2000, private mutual funds
accounted for just 9 per cent of a market that had been dominated by
the Unit Trust of India.

There's another dimension to the insurance numbers game. While
the private insurance companies have attained 13 to 14 per cent
share of the overall insurance market, their share in the key metros
(Mumbai and Delhi) is as high as 30 to 40 per cent.

"We have to struggle to complete a deal in the metros now,
because policyholders are comparing products and asking for
better deals," says S B Mathur, chairman of the Life Insurance
Corporation of India.

Private insurance companies are essentially joint ventures with global
insurance companies holding a maximum of 26 per cent stake. The
foreign partners are investing heavily in the Indian market and,
thereby, driving sales, because they see India emerging as one of the
biggest markets in the Asian region.

"India will become the biggest market for us in the next three to
four years," predicts Dan Bardin, Prudential Corporation Asia
managing director south Asia and greater China.

Private players have certainly done their bit to increase the
penetration levels of insurance, mainly by creating alternative
distribution channels--such as associations with banks, brokers and
corporate agents.

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"Our bancassurance channel--with tie-ups with four banks--
contributes almost 70 per cent of our total sales," says Aviva CEO
Stuart Purdy.

OM Kotak Mahindra Life, which is ranked eighth among private
players, is also leaning towards alternative distribution channels that
will contribute to 45 per cent of total sales, in line with the contribution
from its tied agency force.

In sharp contrast, most of the LIC's policies continue to be sold
through its tied-agency network. The state life corporation
acknowledges that it is unable to maintain its lead in some metros:
penetration by the private-sector insurers has come of age and they
are giving the LIC a run for its money.

The multi-channel approach adopted by private insurance companies
has proved to be a boon in terms of costing and their ability to
capture business. Earlier, most private insurance companies focused
their energies on the top 20 cities. Today they are moving to smaller
cities.

"The potential in smaller cities is increasing and companies are
moving to smaller cities and towns because these are increasingly
becoming more prosperous with a rise in agricultural income. With
the increase in buying power, this has fuelled growth opportunities for
us," says Max New York Life CEO Anuroop Tony Singh.

AMP Sanmar, another private player, has tied up with various chit
funds and transport finance companies in the country, where it is

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selling life policies on the back of fixed deposits and bonds. A senior
company official cites the example of Vijaywada where a significant
portion of the income is derived from farming activities.

"The rural populace is managing their money well and no longer
keeping it under their beds. They have mobile phones and have
opened bank accounts. They are not very different from their urban
counterparts when it comes to purchasing life insurance covers," he
points out.

And that's making the private sector optimistic about its future in the
Indian insurance market. "We [private insurers] are becoming an
alternative to LIC. If a customer has already bought an LIC plan, his
second policy is likely to be bought by the private insurance sector on
account of various reasons--more specifically flexibility and
transparency," says OM Kotak Mahindra Life CEO Shivaji Dam.

Perhaps this partly explains why the LIC has increased its advertising
spend multifold since the insurance sector was privatized. Its ad
spend more than doubled to Rs 81 crore (Rs 810 million) in fiscal
2003, against Rs 37 crore (Rs 370 million) in 1999-2000, prior to the
industry being privatized.

Of course, the private insurance sector has also been steadily
increasing its ad spend, from Rs 29 crore (Rs 290 million) in fiscal
2001 when the industry opened up, to Rs 92 crore (Rs 920 million)
the following year. In fiscal 2003, private insurers spent Rs 143 crore
(Rs 1.43 billion) on advertising.

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But it's not the increased spend on advertising alone that has helped
private players in grabbing market share. One of the key differential
factors responsible for their growing market is the 150,000-odd life
insurance advisors of the private insurance companies.

"The private insurance agents sell better than their counterparts at
the LIC. Life insurance advisors of private sector insurance
companies adopt the need-based selling approach, unlike the LIC's
agency force that pushes the number of policies," says Dam.

This also gets reflected in the average sum assured by private
insurance companies being higher than that of the LIC. Policies sold
by the private players tend to be of a higher value.

For instance, Birla Sun Life's average premium stands at Rs 24,500,
while that of OM Kotak Mahindra Life is equally high at Rs 20,400.
Against this is the LIC's average premium of Rs 3,200.

Of course, there's also a difference in the target client of the private
and the state-run insurance companies. While the private players are
targeting the upper middle-class and high net-worth individuals, the
LIC aims for the masses through its 2,048 branches spread
across semi-rural and rural towns.

Meanwhile, private insurance companies are capitalizing on global
relationships. "Business deals are often a call away since we
capitalize on AIG's global relationship with multinational companies
such as GE and Kodak," says Tata AIG Life Ian Watts.

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OM Kotak has gone a step further and tied up with Swiss Life
International so that it can capitalize on the latter's relationship with
300 multinational subsidiaries and affiliates.

But it's not as if LIC has lost out on group insurance. The insurance
major's group business reached new heights in fiscal 2004, recording
a 119 per cent growth in new premium income and 50 per cent
increase in the number of lives covered.

Still, new business income for private companies has grown at 146
per cent in fiscal 2004, compared to the 18 per cent average industry
growth in new premium income for the same period.

"The key in product sales lies in offering unbundled and transparent
products that give customer value," points out Dam.

The biggest draw in insurance in fiscal 2004 was unit-linked plans.
Ninety-five per cent of the policies sold by Birla Sun Life and over 80
per cent of the 436,000 policies sold by ICICI Prudential were unit-
linked plans.

And even though the LIC was late (January 2004) in pushing its unit-
linked product "Bima Plus", it managed to mop up a premium income
of Rs 373 crore (Rs billion) with the sale of just under 1.7-lakh unit-
linked policies, the highest sales figure in the industry.

The advantage with unit-linked plans is that they offer policyholders
transparency in terms of costs, annual returns and bonus
calculations. With many companies guaranteeing the capital

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investment (some like Birla Sun Life even guarantee 3 per cent
assured returns on its unit-linked plans), the interest in unit-linked
plans only increased.

And the switch from traditional products to unit-linked plans gained
momentum as the Sensex climbed higher: the returns on such
policies are linked to the equity market.

"The stock market has helped to a certain extent and has contributed
to our growth and performance," agrees Birla Sun Life CEO Nani
Javeri.

Aviva has shown a compounded aggregate growth rate of 36 per
cent since the inception of its fund. Returns on OM Kotak's
balanced and growth funds stand at 31.79 to 43.25 per cent
respectively.

Dam claims that OM Kotak has sold several policies of Rs 25-50 lakh
(Rs 2.5-5 million) since the "savvy investor thinks it best to invest in
unit-linked products." He adds: "Growth is coming faster in insurance
companies with unit-linked plans."

Chapter 5
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Company Profile of
LIC & ICICI
Prudential

COMPANY PROFILE

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Life Insurance Corporation of India was created on 1st September,
1956, with the objective of spreading life insurance much more widely
and in particular to the rural areas with a view to reach all insurable
persons in the country, providing them adequate financial cover at a
reasonable cost. LIC had 5 zonal offices, 33 divisional offices and
212 branch offices, apart from its corporate office in the year 1956.
Since life insurance contracts are long term contracts and during the
currency of the policy it requires a variety of services need was felt in
the later years to expand the operations and place a branch office at
each district headquarter. Re- organization of LIC took place and
large numbers of new branch offices were opened. As a result of re-
organisation servicing functions were transferred to the branches,

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and branches were made accounting units. It worked wonders with
the performance of the corporation. It may be seen that from about
200.00 crores of New Business in 1957 the corporation crossed
1000.00 crores only in the year 1969-70, and it took another 10 years
for LIC to cross 2000.00 crore mark of new business. But with re-
organisation happening in the early eighties, by 1985-86 LIC had
already crossed 7000.00 crore Sum Assured on new policies.

Today LIC functions with 2048 fully computerized branch offices, 100
divisional offices, 7 zonal offices and the Corporate office. LIC’s Wide
Area Network covers 100 divisional offices and connects all the
branches through a Metro Area Network. LIC has tied up with some
Banks and Service providers to offer on-line premium collection
facility in selected cities. LIC’s ECS and ATM premium payment
facility is an addition to customer convenience. Apart from on-line
Kiosks and IVRS, Info Centres have been commissioned at Mumbai,
Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi,
Pune and many other cities. With a vision of providing easy access to
its policyholders, LIC has launched its SATELLITE SAMPARK offices.
The satellite offices are smaller, leaner and closer to the customer.
The digitalized records of the satellite offices will facilitate anywhere
servicing and many other conveniences in the future.

LIC continues to be the dominant life insurer even in the liberalized
scenario of Indian insurance and is moving fast on a new growth
trajectory surpassing its own past records. LIC has issued over one
crore policies during the current year. It has crossed the milestone of

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issuing 1,01,32,955 new policies by 15th Oct, 2005, posting a healthy
growth rate of 16.67% over the corresponding period of the previous
year.

From then to now, LIC has crossed many milestones and has set
unprecedented performance records in various aspects of life
insurance business. The same motives which inspired our forefathers
to bring insurance into existence in this country inspire us at LIC to
take this message of protection to light the lamps of security in as
many homes as possible and to help the people in providing security
to their families

Life Insurance Corporation of India is a wholly owned
undertaking of the Government of India.
Life Insurance Corporation of India was established by an Act of
Parliament on 1st September, 1956. Its Central Office is located in
Mumbai. It also has seven zonal offices each located in
Mumbai(Western Zone), New Delhi (Northern Zone), Kanpur (North-
Central Zone), Bhopal (Central Zone), Chennai (Southern Zone),
Hyderabad(South-Central Zone), and Kolkotta (Eastern Zone).
It has a network of over 2000(2048) branches and more than nine
lakh agents.
Over 47 years, LIC has become a household name for providing
security for a lifetime and is synonymous to life insurance in India.
LIC ranks No.1 in the list of top 500 companies on the basis of Net
Worth(Rs. 15, 47, 951 million) as well as Net Profit(2,66,277 million)-
Dun & Bradstreet (India 500)

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Mission
"Explore and enhance the quality of life of people through financial
security by providing products and services of aspired attributes with
competitive returns, and by rendering resources for economic
development."

Vision
"A trans-nationally competitive financial conglomerate of significance
to societies and Pride of India."

Goals

• Promote within the Corporation greater awareness of the
changing environment and the need to align the corporate
policy to the emerging situation.
• Help fashioning, within the constraints, its policies,
programmes, practices and products to meet the
expectations of the Public. Help the public to appreciate the
performance and the limitations of LIC.

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Company profile of ICICI PRUDENTIAL

The company assigned to me is ICICI Prudential Life Insurance
Company. It is in to selling life insurance products. ICICI Prudential
Life Insurance Company is a joint venture between ICICI Bank, a
Premier Financial Powerhouse and Prudential PLC, a leading
international financial services group headquartered in the United
Kingdom. ICICI Prudential was amongst the first private sector
insurance companies to begin operations in December 2000 after
receiving approval from Insurance Regulatory Development Authority
(IRDA). At present it is growing at a tremendous pace. Now we can
say there is no close competitor to ICICI Prudential.
ICICI Prudential’s equity base stands at Rs. 9.25 billion with
ICICI Bank and Prudential PLC holding 74% and 26% stake
respectively. In the financial year ended March 31, 2005, the
company garnered Rs. 1,584 crores of new business premium for a
total sum assured of Rs. 13,780 crores and wrote nearly 6,15,000
policies. The company has a network of about 56,000 advisors as
well as 7-bank assurance and 150 corporate agent tie-ups.
For the past five years, ICICI Prudential has retained its
position as No. 1 private life insurance in the country, with a wide
range of flexible products that meet the needs of Indian customer at
every step in life.

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The company mainly depends on advisors. The advisors are
considered as the brand ambassadors of the company or the working
partner who doesn’t have to invest to get returns but just work with
the company to make money. Advisors main job is to sell policy and
in return the advisors get huge return like high commission, rewards,
recognition etc. He is, for all purposes, an authorized salesman for
insurance.
Advisors can become the Unit Manager of the company if they
pass the pinnacle program. ICICI Prudential has recruited and trained
about 56,000 insurance advisors to interface with and advise
customers. Further, it leverages its state-of-the-art IT infrastructure to
provide superior quality of service to customers.
Manager will get a fixed salary and the commission on the
policies sold by his advisor and the commission of the policies which
he has already sold. Tiger team manager is one who gets to sell the
policy and get commission, train the advisors about the product and
he is also a paid up employee of the company.

ICICI GROUP

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VISION
To be the dominant Life, Health and Pensions player built on trust by
world-class people and service

hope to achieve by:

• Understanding the needs of customers and offering them
superior products and service
• Leveraging technology to service customers quickly, efficiently
and conveniently
• Developing and implementing superior risk management and
investment strategies to offer sustainable and stable returns to
our policyholders
• Providing an enabling environment to foster growth and
learning for our employees
• And above all, building transparency in all our dealings

VALUES
Very member of the ICICI Prudential team is committed to 5 core
values: Integrity, Customer First, Boundaryless, Ownership, and
Passion. These values shine forth in all we do, and have become the
keystones of our success

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Organization Structure of ICICI
CHIEF MANAGING DIRECTOR (CMD)

CHIEF AREA OFFICER CHIEF AREA OFFICER

(PENINSULAR) (HIMALAYAN)

Sales Head

ZONAL MANA GER ZONAL MANA GER ZONAL MANA GER ZONAL MANA GER ZONAL MANA GER

ZONAL MANA GER ZONAL MANA GER

AREA SALES MANA GER

Unit Manager / Area Manager/ Senior Agency Manager

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Market Share

Total Market Share

22%
LIC
ICICI Prudentail
8%
Others
70%

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Chapter 6
Product Offered By
LIC & ICICI
Prudential

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Product offered by LIC
Insurance Plan
As individuals it is inherent to differ. Each individual’s insurance
needs and requirements are different from that of the others. LIC
insurance plans are policies that talk to you individually and give you
the most suitable option that can fit customer requirements.

Children plan

• Komal Jeevan - Plan No. 159
• Children Deferred - Plan no.41
• Jeevan Kishore - Plan no.102
• Jeevan Chhaya - Plan no.103
• Marriage Endowment/Educational Annuity - Plan No. 90
• Jeevan Anurag - Plan no.168

Endowment Policy

• Endowment with Profits - Plan no.14 Limited Payment Endowment
with Profits - Plan no.48
• Jeevan Mitra - Plan no.88
• New JanaRaksha Policy - Plan no.91
• Jeevan Anand Plan no. 149
• Jeevan Mitra Triple Cover - Plan no.133

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Group Insurance Policy

Group Insurance Scheme is life insurance protection to groups of
people. This scheme is ideal for employers, associations, societies
etc. and allows you to enjoy group benefits at really low costs.

• Janashree Bima Yojana
• Group Insurance Scheme in lieu of EDLI
• Group (Term) Insurance Scheme
• Group Savings Linked Insurance Scheme

Group Superannuation Scheme
Group Mortgage Redemption Assurance Scheme

Joint Life Policy

• Jeevan Saathi - Plan no.89

Money Back Policy

• Money Back with Profit - Plan no.75
• New Money Back - Plan no.93
• Jeevan Surabhi 15 yrs - Plan no.106
Jeevan Bharati Plan No 160
Jeevan Samriddhi Plan No 154, 155, 156 157
Bima Bachat- Plan no.175

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Pension Plans or Annuities

Pension Plans are Individual Plans that gaze into your future and
foresee financial stability during your old age. These policies are
most suited for senior citizens and those planning a secure future, so
that you never give up on the best things in life.

• New Jeevan Dhara - Plan no.148
• New Jeevan Suraksha Plan no. 147
• Jeevan Akshay II Plan no. 163
• Jeevan Nidhi Plan no. 169
• Jeevan Akshay V Plan no. 183

Special Plans

LIC’s Special Plans are not plans but opportunities that knock on
your door once in a lifetime. These plans are a perfect blend of
insurance, investment and a lifetime of happiness!

• Term Assurance - Plan no.43
• Mortgage Redemption - Plan no.52
• Jeevan Aadhar - Plan no.114
• Market Plus - Plan No 181
• Jeevan Vishwas Plan No. 136
• Jeevan Saral Plan No. 165
Jeevan Pramukh Plan No. 167
• Bima Nivesh 2005 Plan No 171
• Money Plus-Plan No 180

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Term Policy

• Convertible Term Assurance - Plan no.58
• New Bima Kiran
• Term Assurance
• Anmol Jeevan I Plan No- 164
• Amulya Jeevan-Plan No-177

Unit Plans

Unit plans are investment plans for those who realise the worth of
hard-earned money. These plans help you see your savings yield rich
benefits and help you save tax even if you don't have consistent
income.

• Market plus
• Profit plus
• Fortune plus
• Money plus
• Child fortune plus

LIC has Introduce a New Product

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JEEVAN AASTHA PLAN

Life Insurance Corporation of India (LIC) has launched its close-
ended single premium product, Jeevan Aastha, which offers
guaranteed benefits to customers.
“The plan has a maximum shelf life of 45 days and offers five and ten
year maturities to customers,
The scheme has fixed the minimum age at entry as 13 years which
would enable parents to make provisions for higher education of their
children,” Vijayan said.
Similarly, the maximum age at entry has been fixed as 60 years. The
plan offers guaranteed addition of Rs100 for every thousand of
maturity sum assured for 10 years term and Rs90 per annum for
policies with five year term.
“The policy holder can also avail the benefits of tax exemption and
has the options of surrendering the policy or to raise loan under the
policy,” the Chairman said

Features
LIC’s Jeevan Aastha is a single premium assurance plan which offers
guaranteed benefits on death and maturity. The Plan is close ended
and would be available for a maximum period of 45 days from the
date of its launch i.e. 08.12.2008

Eligibility conditions and other restrictions

a) Minimum Entry Age : 13 years (completed)

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b) Maximum Entry Age : 60 years (nearest birthday)
c) Minimum Basic Sum Assured: Rs.1,50,000
d) Maximum Basic Sum Assured: No Limit
The basic sum assured shall be available in multiples of Rs. 30,000.
e) Policy Term : 5 or 10 years
f) Premium payment mode : Single premium only

Premium rates
Specimen Single Premium rates per Rs.1000 Basic Sum Assured for
some of the ages are as under:
Age at Policy Term Policy Term
entry 5 years 10 years
20 174.50 165.00
30 174.70 165.40
40 176.10 167.95
50 180.85 175.90

Products Offered By ICICI Prudential

ICICI Prudential has a wide array of insurance plans that have been
designed with the philosophy that different individuals are bound to
have differing insurance needs.

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The ideal insurance plan is one that addresses the exact insurance
needs of the individual that will depend on the age and life stage of
the individual apart from a host of other factors.

Life Insurance Plans

Under Life insurance plans, ICICI Prudential offers plans under the
following

• Education Insurance Plans
• Wealth Creation Plans
• Premium Guarantee plans
• Protection Plans

Pension & Retirement Solutions:

The primary objective of a pension plan is to help you provide for
your financial needs in your post retirement years. You will find a
Pension Planning Calculator on the site, meant to make your pension
plan review as simple as possible. The calculator is the first step in
your Pension Plan scheme, there are othe steps towards getting the
Indian pension policy you need.

• LifeStage Pension
• LifeTime Super Pension
• LifeLink Super Pension
• ForeverLife

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Health Product Suite

Under Health Product Suite, ICICI Prudential offers plans under the
following major need categories:

Hospitalisation Plans

• MediAssure
• Hospital Care

Critical Illnessl Pans

• Crisis Cover

Cancer Products

• Cancer Care

Diabetes Products

• Diabetes Care Active
• Diabetes Assure

Retirement Solutions

ICICI PRUDENTIAL Provide a wide range of retirement plans and
they are as follows

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• LifeStage Pension
• LifeTime Super Pension
• LifeLink Super Pension
• ForeverLife
• Immediate Annuity

Group Plans

ICICI Prudential offers a suite of group insurance plans that are as
follows:

• Group super annuation
• Group gratuity period
• Annuity solution plan
• Group term insurance plan
• Group term insurance in lieu of EDL

Group Plans

• ICICI Pru suraksha
• ICICI pru suraksha kavach

ICICI Introduced a New Product

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Wealth Advantage (a single-premium unit-linked insurance
policy (Ulip):

This plan provides insurance cover to investors till the age of 70
years. ICICI Prudential's new plan is a single-premium policy bundled
with additional benefits such as option to withdraw money
systematically after six years of taking the policy, thereby increasing
the liquidity of investment. Minimum investment amount in this policy
is Rs 25,000.

ICICI Prudential Life Wealth Advantage plan allows consumers
to stay invested in the plan for as long as they live, even beyond the
age of 70 years, thereby ensuring long-term coverage. It also offers
the flexibility to increase or decrease the sum assured in accordance
with the individual's protection needs.

Key benefits of Wealth Advantage:

• Single premium plan with a whole life investment advantage.
• Life cover upto the age of 70 years.
• Two options of Sum Assured (125% or 500% of premium) to
provide complete protection
• Option to withdraw money systematically through Automatic
Withdrawal Plan, from the 6th policy year onwards
• Higher allocation of premium to ensure wealth maximization

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LIC New Jeevan Suraksha VS ICICI Prudential
Forever life

LIC’s New Jeevan Suraksha I offers cool comfort to serve the young,
the middle aged and the old which has also the security and safety
backing of Government of India. It is an ideal solution for people as it
not only offers retirement benefits but also takes care of our
protection needs (with term rider option). To combat the increase in
longevity, this plan provides regular guaranteed
income at old age and helps in planning to meet requirements for
current and future needs. This plan provides a lot of flexibility in terms
of various pension options for you to choose from. Additionally you
can also opt for an insurance cover during the deferment period by
taking the Term Rider add on. At the end of the deferment period
when the premium ceases, this policy can, at your option, pay you a
lumpsum amountand a suitable pension for your ifetime.

The similar product marketed by ICICI Prudential Life Insurance
Company is Forever Life, a comprehensive retirement solution that is
developed keeping in mind your capabilities and needs with respect
to your retirement planning. The salient features of this plan are as
Under:

A deferment pension plan to build up your retirement benefits.

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(i) It provides regular income for life, after a stipulated date.

(ii) The amount you receive depends on the premium you pay till the
Stipulated date and the option you choose.

(iii) It also offers life cover during the deferment period.

(iv) Postponement of retirement age.

(v) Health cover till age 65 through add-on benefits, not only while
Paying premium, but also while receiving pension

The table below shows the summarised comparison of LIC’s
New Jeevan Suraksha-I vs. ICICI’s Forever Life.

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Features Jeevan Suraksha-I Forever Life

Age at entry 18 – 70 years last birthday 18- 60 years

Deferment period 2 - 35 years Min. term = 5 years
Max. term = 30 years
Vesting age 50 -79 years last birthday 50- 70 years

Minimum single Rs. 10,000 Min. SA = Rs. 50,000/-
premium

Mode of premium Single ,yearly, half yearly, quarterly, monthly , SSS ----
payment

Minimum amount of RS 2500 ----
annual premium

Mode of annuity Yearly, half-yearly, quarterly & monthly Yearly, half-yearly, quarterly &
payment monthly

Tax benefits Tax benefits u/s 80CCC(I) for Same as in case of Jeevan
investment up to Rs. 10,000/- Suraksha –I.
(deducted from taxable income).
Choice of retirement Flexibility option not available. The annuitant has the
date flexibility to postpone the
vesting from originally chosen
vesting date up to a maximum
of 70 years of age.
Open Market Option Flexibility option not available. This option gives annuitant
the flexibility to buy a pension
from any other Company of his
choice.

Chapter 7

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Innovation Strategy
and IT in LIC
&
ICICI Prudential

INNOVATION STARTEGY IN LIC

LIC has realised the importance of personal involvement and has
included it in the training program itself. Once the Agent is recruited
he needs to undergo a compulsory training program designed by LIC.
The Training Program also explains them the importance of the

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smallest of the customer .i.e. customer who is just seeking general
information. The Agents and Employees are trained to Apologise
to its customers even if they are not at fault.
“SO IT DOSENT TAKE MUCH OF TIME FOR THE HANDS OF THE
LIC LOGO TO COME CLOSER FOR APOLOGY”

, LIC has established elaborate Grievance Redressal Machinery at
different level as per the customer requirement. There are Complaint
cells which are specially set up to listen up to each and every
customer’s problems. LIC gas also set up Policyholder Councils
and Zonal Advisory Boards to understand the problems of their
customer situated in any part of the city.
Offers a Fair Fix to Problem:
Customers want wrong to be set right and expects service contact
employee to be skilled, empowered and interested in setting things
right.
This is the main reason why LIC conducts training programs for
the newly recruited Agents as well as the other Employees. In any
kind of breakdown situations LIC try to offer a rational explanation
and demonstrate sensitivity and concern to the customer rather than
defending themselves.

• Offers Some Compensation for the Inconvenience:

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Compensation here wouldn’t mean of just monetary compensation or
some extreme measures like firing the Branch Manager Etc; but it is
just to make-up for the loss of customer satisfaction. It could be like
“it’s on us”; “free service” etc. The service provider should plan
certain compensation policies in advance for various types of
situations and deliver it as and when the situation is faced.

• Keep the Promises:

It basically means that the Company should keep the promises made
to the Customer before or at the time of service provision i.e. the
Company should fulfill its commitments.
LIC makes sure that none of the Agents provide any kind of wrong
information or false promises to its customers which mislead them.
LIC ask their Agents to give reasonable commitments so that they
could be fulfilled by the Company or the Agent on behalf of the
Company.

• Follow Up:

This is the most important step in Service Recovery as it ensures that
whether the implemented Service Recovery was Satisfactory or not.
It would include Internal and External Follow-up. Internal Follow-up
would be to ensure that the solutions they put in motion are actually

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executed and the External part would be to get feedback from the
customer whether he is satisfy

• Complaint Handling

In a vast Organization like LIC, catering to the various needs and
aspirations of millions of policyholders, grievances of customers do
arise occasionally. In order to redress these grievances LIC has
established elaborate Grievance Redressal Machinery

INNOVATION STRATEGY IN ICICI

An innovation refers to any good, service, or idea. That is perceived
by someone as new. The idea may have long history, but it is an
innovation to the person who sees it as new. Innovation takes time to
spread through the special system. The consumer adoption process
focuses on the mental process through which an individual passes

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from first hearing about an innovation to final adoption. Adopters of
new products have moved through the following five stages.

1. Awarness: The consumer becomes aware of the innovation
but lacks information about it.
2. Intrest: The consumer is stimulated to see the information
about the innovation.
3. Evaluation: The Consumer considers whether to try the
innovation or not.
4. Trial: The consumer tries the innovation to improve his
estimate of its value.
5. Adoption: The consumer decides to make full and regular
use of the innovation

IT in LIC

In today’s world, IT is a must for any industry to keep pace with the
customer’s changing expectations. This is especially relevant in the
service industry. The insurance sector has to ensure that the
technology it chooses does not lag behind where customer
expectations are concerned.

LIC has more than 16 crore policy holders. So it has to induct the
best IT products available and use them to cater to the needs of the

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customers and deliver anywhere any time service on demand and to
add value to its new products. The trust and the goodwill of the
customer gained in the last 50 years have to be consolidated by
making all activities more customer-focused.

For instance, LIC has a corporate Web site to provide information on
products, services, policy status, grievances and premium calculator.
Other facilities include touch-screen information kiosks at central
locations to provide 24 x 7 inquiry services to customers.

IT in ICICI Prudential

The Information technology function at ICICI Prudential is committed
to enable a business through the use of technology. It is segmented
into 4 groups to enable highest level of delivery of customer. Life Asia
Solution Group that provide flexibility in designing better product
offering to end user, the solution group- Web that provide real time
information to customer and is responsible for customer relationship
management, IT Architecture & corporate solution group is in charge
of developing and marinating a blue print for the IT architecture for
the enterprise as whole. This team work as an in house R&D solution
group, exploring new technological initiatives and also caters to
information needs of corporate function in the organization. IT

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infrastructure group is responsible for providing hardware, software,
network service to the whole organization. This group run at Digital
nervous system of the enterprise at the highest level of efficiency and
provide robust, scalable and highly available platform for
development business application

Chapter 8

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Emerging Trend
in LIC & ICICI
Prudential

EMERGING TREND IN Life Insurance
Corporation

With the emergence of competition, LIC has implemented strategic
moves for business growth, as well as ensured quality improvement
in service standards. As on today, they have been providing service
to around 12 crore policy holders and their track has been well
acknowledged as reflected through continual upgradation of service

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standards culminating into a world class performance in the area of
claim settlement operations.
It is well acknowledged that LIC has been able to provide appropriate
IT support in furtherance of prompt service to their valued policy
holders. The complex task of conversion of computerization of all the
branches with their conversion as Front Line offices has been
completed in aphase manner. In addition to this, the launching of the
IVRS facility, MAN and Wide Area Network operations has helped the
co-operation improve its servicing.
LIC’s strength lies in:

a. Wide network of branches covering rural areas.

b. A large and well- spread agency organization.

c. An acknowledged record of performance.

d. Adequate yield with high risk cover being offered keeping the

policy holders satisfied in the existing in the economic scenario.
e. Well accepted brand equity throughout the country.

In addition to this, LIC has an established and well administered
Grievance Redressal Mechanism and with Ombudsman intervention,
the customers appear to be well attended. However, this mechanism
has to be restructured keeping in view the additional legal provisions
laid down by the regulator as expounded in the IRDA act.
• Futuristic Approach

Till today, LIC enjoyed a monopoly. It is now that reality exists in the
are of marketing (i.e. sales and after sales service operations). It will

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now have to follow a multi-faceted strategy towards customer
retention and also expanding to a new clientele. With the new face of
the market, relationship management seems to be the new mantra.
At the nucleus of this approach is the concept of Customer
Relationship management. The need is to have a comprehensive
review of the business keeping in view customer expectations
• Customer Orientation

LIC, to be in the reckoning, has to have an efficient feed-back
system, so as to understand what the customer desires in terms of
product design, service procedures, relationship convinience,
accessibility, responses in terms of personalized service, attendance,
core and complimentary on an individual basis. The new players in
the market like ICICI, HDFC etc. will definitely be very aggressive in
the open market. LIC has to go ahead with their former customers,
existing customer, in a very gentle and courteous manner, reassuring
them of their better services with persona, attention.

ADVERTISING TRNED IN LIC
• News Papers and Magazines
LIC give ads in the news papers and magazines round the year to
continue its brand image and also when new products are
introduced. Normally its ads are published in Times of India.

• Television

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Companies like LIC, advertise on television to make people aware
of their products and services

• Gifts
LIC provides diaries, pens, booklets, etc to its customers

• Hoardings
LIC put its hoardings where there is a mass flow of people,
especially outside the railway station or at the backside of the bus.

• Advertisement At Kumbh Mela
LIC has also advertised about its products and the corporation
even in the kumbh mela

• Advertisement On Radio satellite channel
Advertisement about LIC are frequently been telecast on radio
and satellite channel.

EMERGING TREND IN ICICI PRUDENTIAL

In a significant move, ICICI Prudential Life Insurance — a joint
venture between the ICICI group and Prudential Plc of the UK — has
expanded its marketing platform for promoting life insurance products
to 1,500 banks branches from 642 branches through its existing
bancassurance tie-up with seven banks.

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With this, ICICI Prudential has increased the number of bank
branches (under banc assurance tie-ups) by about 130 per cent. In
fiscal 2002-2003, the number of bank branches networked by the
company grew by 270 per cent to 642 branches. Of these, 338
branches were from four new banc assurance relationships which it
had forged with Allahabad Bank, South Indian Bank (SIB), Federal
Bank and Lord Krishna Bank. The remaining expansion is from
earlier relationships, notably ICICI Bank and Bank of India (BoI),
ICICI Prudential chief-marketing Saugata Gupta told FE.

On the company’s new plans, Mr Gupta said: “The greatest
expansion has come from BoI and Allahabad Bank. In addition, ICICI
Bank, SIB and Federal Bank have also increased the number of
branches.”

Further, Mr Gupta informed that after having released
advertising campaign through print, outdoor and radio, the company
has also recently released a new advertising campaign through the
electronic media on ‘Smart Kid’ Insurance Policy. This policy is
positioned as — Child’s plan that leaves nothing to chance.

According to Mr Gupta: “Last fiscal, Rs 102 crore of premium
came through alternate distribution channels which comprises of
bancassurance channel. This channel is serviced by 430 financial
service consultants. There are 80 active corporate agents, and
22,000 life insurance advisors, at present.”

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ICICI Prudential has garnered Rs 364 crore as the new
business premium income in fiscal 2002-03. In fact, in the first quarter
of this fiscal, the company has issued around 51,000 policies, Rs 70
crore in new business premium income which accounts for a growth
of 132 per cent over last year’s first quarter. It has also crossed Rs
10,000 crore sum assured mark.

As for emerging trends, Mr Gupta explained that private
participation in insurance as a tax saving tool for comprehensive
financial solution, and, product pushing for need-based solutions
required for personal financial review is fast emerging.

The Company recently tied up with the Forbes Six Sigma rated
Dabbawalla organization in Mumbai for a direct marketing exercise.
In a Unique effort to create awareness about a tax saving product,
the company attached a creative of a bitten apple to Mumbai’s
ubiquitous lunchboxes. It worked wonderfully with Mumbai’s office-
goers and one that translated into substantial business for the
company

ADVERTISING TREND IN ICICI

• Radio:

ICICI Prudential advertises on 92.5 red Fm
• Television

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ICICI Prudential has been advertising in outdoor, TV and
press. The company launched a corporate television
campaign – Saat Phere – which took the emotions and
thoughts of initial Sindoor corporate film a few steps further.
• Tie- UP with DABBAWALA

ICICI Prudential tie-up with the Dabbawalla Organization in
Mumbai for a direct marketing exercise, to talk to the
customer through a non-cluttered route, and thereby have a
higher impact.
• Seminars

ICICI Prudential regularly holds consumer awareness meets
on ‘the need for retirement planning’ in different cities such
as Pune, Aurangabad, Coimbatore, Nagpur, Bangalore and
Mangalore.

Chapter 7

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Impact of
financial Crisis on
LIC

Impact of the financial crisis on Life Insurance
Corporation

LIC is a public sector insurer and a domestic investor. As such, LIC
are not directly affected by the global financial crisis. However, the
volatility in Indian financial market due to the uncertainty in global
markets may affect returns get on their investments. But LIC has an
indisputable record of prudently planning its investments and getting
the maximum returns on the policyholders’ money. Will LIC continue
to that in any type of scenario the ratio . Why has the new business
growth slowed? What will be the impact of the lower growth on LIC’s

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performance will it affect the ratio?
Total premium growth of LIC has always been quite stable, even
when there are periodical ups and downs in new premium income.
Last year, LIC ended the year with around 10% growth in First
Premium income despite several odds. However, the growth in total
premium income was quite healthy, indicating better conservation
ratio.
LIC overall expense ratio is the least in the industry. Last year, was
only 11.94%, and it was just 5.56%, excluding the commission. The
surplus generated was a record high of Rs 16,598.65 crore, which
enabled to give higher terminal bonus to their “with profit”
policyholders and to increase dividend to the government.
Having said that, LIC agree that there has been a decline in the new
premium in the current financial year. One of the reasons was that
after withdrawal of their successful old plans, they did not
immediately introduce any new ULIP. Since then, they have launched
new products and the response has been very positive and
encouraging.

Also, LIC had some issues with the union of development officers,
which have been more or less sorted out through series of
consultations and discussions. In September, the figures have started
picking up.

Private insurers are growing their market share by growing
distribution. LIC is close to saturation level in terms of distribution.
How will you retain the market share?

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