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8/6/2019 Analysis of Indian Insurance Industry
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Objectives and Research Methodology
Objective of research
To understand the likes, preferences of investors and their currentinvestment pattern.
To know the different media that influences the purchase decision of
investor while investing in insurance policies.
To know the factors that influences the investor while taking the decision
to invest .
To know the investors preference especially for insurance as an
investment option.
To know awareness and agreeableness of investor to invest in private
insurance companies.
Research methodology
Data collection:
Secondary data: collected from electronic documents from internetsites
viz., google.com, etc.,irdaindia.org.
Primary data: collected by survey method based on personal
interview and self-administration of structured questionnaires.
Sample design:
Sampling frame : Gandhinagar & Ahmedabad.
Sample unit: Individuals
Sampling method: simple random sampling convenience
Sample size : 150
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Introduction To Insurance:
Life insurance made its debut in India well over 100 years ago. Insurance is no
longer considered to be a mere tax saving tool. Increasing urbanization andnuclearisation of families has led to a state where insurance has become a
necessity. And this is not just true for Life Insurance but also for maintenance
of vehicles is the reason that people are increasingly opting for insurance on
their own.
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 premiumcommensurate with the risk involved. Thus collective bearing of risk is
insurance.
Following are few of the definitions of insurance:
Insurance is a plan by which large number of people associate themselves
and transfer to the shoulders of all, risks that attach to individual.
Insurance may be defined as a social device providing financialcompensation for the effects of misfortune, the payment being made from
the accumulated contributions of all parties participating in the scheme.
Insurance is a contract in which a sum of money is paid to the assured as
consideration of insurers incurring the risk of paying a large sum upon a
given contingency.
Parties Involved In Insurance
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The transaction of the insurance needs three types of parties. They are as
follows:
Insured
The person who buys the policy of the insurance and agrees to follow all theterms and conditions levied by the insurance company and also agrees to pay
the necessary premium is called the insured. In short, it is a customer of the
insurance product.
Insurer
The supplier of the insurance coverage or the seller of the insurance policy is
called as insurer. In short, they are the different insurance companies formed
under the IRDA act.
Intermediaries - Brokers/Agents
The person between the insured and insurer is called as the intermediaries. They
are called either as brokers or as agents. The intermediaries play a very vital
role in the business of the insurance because they bring business for the
insurance companies and they perform all the formalities on behalf of the
insured also
Today, it is widely accepted as one of the most attractive financial instruments
in an individuals portfolio, that provides an assurance of security with
attractive returns.
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Types Of Policies :
Savings Plans
Endowment Assurance Plan
It is a participating [with profit] plan that offers the following features: Provides financial support to the family by way of a lump sum payment
in case of a unfortunate death of the life assured within the term of the
policy.
Provides a lump sum payment to the life assured on the survival up to the
maturity. This lump sum is basic sum assured and bonuses.
Money Back Plan
It is a participating [with profit] policy that offers following features:
Payment of lump sum each of which is a proportion of the basic sum
assured, at 5 years intervals during the term of the policy.
On survival up to the maturity, a payment equal to basic sum assured plus
any bonus additions less the cash lump sum paid earlier is provided.
In case of the unfortunate death of the life assured within the term of the
policy, the basic sum assured plus any bonus additions is provided. This
is over and above the earlier payouts.
Childrens Plan
Childrens Plan is designed to provide a lump sum to the child at maturity. It
also provides financial security to the child in the future, even in case of the
insured parents unfortunate death during the policy term. Childrens Plan
receives simple reversionary bonuses, which are usually added annually. This is
flexible plan with three options for you to choose from, depending on your
requirements.
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Investment Plan
Single premium whole of Life insurance Plan
It is a participating [with Profit] insurance plan that offers the following
features.
Investors money will be invested in with profit fund. This fund aims
to provide secure and stable long-term growth.
Even after choosing policy, investor can decide on the policy term.
For 4 weeks after any one of the 10 th, 15th, 20th and subsequent 5 years
anniversaries, life assured can choose to receivethe sum assured plus
any attaching bonuses, in full. Once the money has been received,
your policy will cease.
In case of unfortunate death, nominee gets the sum assured secured by
premium, plus any attaching bonuses.
It does not require any medical test.
Protection Plan
Term Assurance (TA) Plan
TA plan is a plan under which a sum insured is payable in case of death of the
life assured during the term of the contract. One can choose the lump sum that
would replace the income lost to ones family in the unfortunate event of ones
death. Since this non-participating (without profit) plan is a pure risk coverplan, no benefits are payable on survival to the end of the term of the policy.
Loan Cover Term Assurance (LCTA) Plan
This plan provides a lump sum on the unfortunate death of the life assured
during the term of the life assured during the term of the plan. The lump sum
will be a decreasing percentage of the initial sum assured. As the outstanding
loan decreases as per the loan schedule, the cover under the policy decreases as
per the policy schedule. Since this is a non-participating pure risk cover plan, nobenefits are payable on survival to the end of the policy.
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Retirement Plan
Personal Pension Plan
This plan is a participating (with profits) plan, which is basically a savings
contract, designed to provide an income for the life after retirement. It provides
a national lump sum on retirement, comprising of sum assured plus any
attaching bonus. Subject to the prevailing regulations, p[art of this lump sumcan be taken in form of cash and the rest converted to an annuity at the rate then
offered by HDFC Standard Life Insurance or with any other insurance company
will accept such business.
Rider Benefits
The rider benefits can only be taken out in conjunction with an Endowment
Assurance, Money Back, Personal Pension Plan or Protection Series Product
and not on a stand-alone basis. These riders provide extra protection and aredescribed in more detail below.
Waiver Of Premium Benefit (WOP)
If the life assured is disabled and is unable to pursue any occupation for a
period of more than twenty six consecutive weeks then, under this rider all
premiums falling due after the first twenty six weeks of such continuous
disability are waived, but before the earliest of
The recovery of the life assured
The expiry date
The termination of the policy
The death of the life on whose disability the waiver claim is based
Critical illness Benefit (CI)
This benefit provides for the payment of an amount equal to the basic sum
assured on diagnosis of serious disease. The life assured must be alive 30 days
after notification of the serious disease. The 6 serious diseases are mentioned by
the co.
Cancer
Coronary artery bypass
Heart Attack
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Kidney/Renal failure
Major organ transplant (as recipient)
Stroke
Accidental Death Benefit (ADB)
This benefit provides for the payment of an additional amount equal to the basic
sum assured on the death as a result of an accident. Death must occur within 90
days of the accident.
Double Sum Assured (DSA)
This benefit provides for the payment of an amount equal to the basic sum
assured as result of death by any cause.
Accelerated Sum Assured Benefit (ASA)
This benefit can be taken in conjunction with a protection series product. It
provides an amount, equal to the death benefit on diagnosis of a critical illness.
The illness covered under this rider is same as the Critical illness rider.
Additional Term Benefit Rider (ATB)
The benefit can be taken with conjunction with PPP. It provides for the
payment of an amount agreed on policy inception, as a result of death,
subject to minimum of Rs. 20,000.
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History Of Insurance Sector In India
Life insurance in its existing form came to India from the United Kingdom with
the establishment of a British firm. Oriental LIC in Calcutta in 1818 followed
by Bombay Life Assurance Company in 1823.
The Indian Life Assurance Company act 1912 was the first statutory measure toregulate life insurance business. Later in 1928, the Indian Insurance co. act was
enacted to enable the Government to collect statistical information about both
life and non-life insurance business transacted in India by Indian foreign insurer
including provident insurance societies. In 1938 with a view to protecting the
interest of insuring public earlier legislation was consolidated and amended by
the insurance act, 1938 with comprehensive provision detailed and effective
control over the activities of insurers.
The act was amended in 1950 resulting in far reaching changes in the insurancesector. These included a statutory requirement of equity capital for companies
carrying on life insurance business, ceiling on share holdings in such
companies, stricter control on investment and such other information to the
controller. The controller could also call for appointment of administrators and
put a ceiling on expenses of management companies.
By 1956, 154 Indian insurers and 16 foreign insurers were carrying on Life
insurance business in India. Life India Corporation business was concentrated
in urban areas and confined to the higher strata of the society. On January 19,
1956, the management of life insurance business of 245 Indian and foreigninsurers then operating in India was taken over by the central Government. Life
Insurance Corporation was formed in September 1956 by an act of parliament,
viz. LIC ACT 1956 with a capital contribution of Rs. 50mn.and since then it has
enjoyed a monopoly over the life insurance business in India. Due to concerns
of
Relatively low spread of insurance in the country.
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The efficient and quality functioning of the Public Sector insurance
companies.
The untapped potential for mobilizing long-term contractual savings
funds for infrastructure.
The finance manager Mr. C.D.Deshmukh while piloting the bill for
nationalization outlined the objective of the LIC thus:
To conduct the business with utmost economy with the spirit of trust ship; to
charge premium amount higher than warranted by strict actual consideration; to
invest the fund for obtaining maximum yield for the policy-holder consistent
with safety of capital; to render prompt and efficient service to policy-holders
thereby making Insurance widely popular.
The (Congress) government set up an insurance Reforms committee in April
1993. The Committee submitted its report in January 1994, recommended a
phased program of liberalization, and called for private sector entry and
restructuring of the LIC. The United Front government moved an insurance bill
but it did not pass. The BJP government moved an insurance bill again in 1998,
which had also to be referred back to a select committee of parliament. But now
the parliament has given a nod to the Insurance Regulatory and Development
Authority (IRDA) bill with some changes in the original structure.
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Private Players:
After 1998 the following private players came in to existence.
S.SSr.No. Registration
Number
Date of
Reg.
Name of the Company
1 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.
2 104 15.11.2000 Max New York Life Insurance Co. Ltd.
3 105 24.11.2000 ICICI Prudential Life Insurance Company Ltd.
4 107 10.01.2001 Om Kotak Mahindra Life Insurance Co. Ltd.
5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.
6 110 12.02.2001 Tata AIG Life Insurance Company Ltd.
7 111 30.03.2001 SBI Life Insurance Company Limited .
8 114 02.08.2001 ING Vysya Life Insurance Company Private Limited
9 116 03.08.2001 Allianz Bajaj Life Insurance Company Ltd.
10 117 06.08.2001 Metlife India Insurance Company Pvt. Ltd.
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Analysis
Data classification
Total sample
size150
Classification
criteriaCategories
No. of
respondentsPercentage
Profession
wiseBusiness 71 47.33 %
Service 79 52.67 %
Age wise Below 25 18 12 %
25-40 74 49.33 %
40 and
above58 38.67 %
Income wise 0 to 10 k 65 43.33 %
10k to 20 k 63 42 %
20k and
above22 14.67 %
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0
10
20
30
40
50
60
70
Age wise analysis of Investment avenues
BELOW 25 13 4 6 3 8 9 2 2 0
25 TO 40 70 16 45 7 34 40 6 24 6
ABOVE 40 51 29 36 5 26 32 2 30 20
insu
ranc
real
estat
post
offic
mut
ualf
shar
es
fixed
dep
deb
entu
prov
iden
bon
ds
Question. 1.
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0
10
20
30
40
50
60
70
Income wise analysis of Investment avenues
0 to 10k 51 25 33 3 24 34 5 19 7
10k to 20K 61 20 40 9 32 33 3 25 11
20k and above 22 4 14 3 12 14 2 12 8
insur
ance
real
estate
post
officesavi
mutu
alfunds
shar
es
fixed
deposits
debe
ntures
provi
dentfund
bond
s
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0
10
20
30
40
50
60
70
Profession wise analysis of Investment avenues
Business 65 28 32 3 31 30 5 8 18
Service 69 21 55 12 37 51 5 48 8
insur
ance
realestat
e
postoffic
esavi
mutualfun
ds
shar
es
fixeddepo
sits
debenture
s
provident
fund
bond
s
Question. 2.
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0
0.5
1
1.5
2
2.5
3
3.5
4
Overall analysis of Investment Preferences
overall 3.57 2.61 3.39 1.82 2.32 3.4 1.55 2.73 1.84
insura
nce
real
estate
postof
ficesa
mutua
lfundsshares
fixed
depos
deben
tures
provid
entbonds
0
0.5
1
1.5
2
2.5
3
3.5
4
Age wise analysis of Investmen Preferences
BELOW 25 3.44 2.94 3.56 2.11 2.39 4 2.17 2.56 2.33
25 TO 40 3.51 2.54 3.3 1.76 2.35 3.26 1.47 2.53 1.55
ABOVE 40 3.69 2.59 3.45 1.81 2.26 3.4 1.47 3.03 2.05
insur
ance
real
estat
e
post
offic
esav
mut
ualf
unds
shar
es
fixe
d
dep
deb
entu
res
prov
iden
t
bon
ds
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0
0.5
1
1.5
2
2.5
3
3.5
4
Income wise analysis of Investmen Preferences
0 to 10k 3.43 2.77 3.28 1.62 1.97 3.26 1.51 2.48 1.65
10k to 20K 3.67 2.62 3.41 1.87 2.54 3.52 1.6 2.81 1.76
20k and above 3.73 2.09 3.64 2.27 2.73 3.45 1.55 3.23 2.64
insur
ance
real
estat
post
offic
mutu
alfun
shar
es
fixed
depo
debe
ntur
provi
dent
bond
s
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0
0.5
1
1.5
2
2.5
3
3.5
4
Profession wise analysis of Investmen Preferences
business 3.62 2.66 3.13 1.86 2.27 3.06 1.68 1.9 1.92
service 3.53 2.56 3.62 1.78 2.37 3.71 1.44 3.47 1.77
insur
ance
real
estat
posto
ffices
mutu
alfun
share
s
fixed
depo
debe
nture
provi
dent
bond
s
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Question. 3.
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Analysis of respondents holding insurance
not holding
9%
holding
91%
not holding
holding
0
10
20
30
40
50
60
70
Age wise analysis of respondents holding insurance policy
BELOW 25 14 4
25 TO 40 68 6
ABOVE 40 54 4
holding not holding
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0
10
20
30
40
50
60
70
Income wise analysis of respondents holding insurance policy
0 to 10k 53 12
10k to 20K 62 1
20k and above 21 1
holding not holding
0
10
20
30
40
50
60
70
80
Profession wise analysis of respondents holding
insurance policy
business 65 6
service 71 8
holding not holding
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Market Share of Insurance Companies
lic79%
bsl
5%
icic
i
6%
bajajallianz
2%
HDFC
2%National
1%
TataAig
1%
Oriental
2%
Maxnewyork
2%
lic
bsl
icici
bajaj allianz
HDFC
National
Tata Aig
Oriental
Maxnewyork
Insurance
Co.
Market Share
LIC 79
Bsl 5
ICICI 6
HDFC 2
National 1
Max
Newyork
2
Tata AIG 1
1.1 Orienta
l
2
Bajaj Allianz 2
Question. 4.
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0
20
40
60
80
100
120
Reason for holding an insurance policy
overall 116 22 35 16
Protectio
nPension Savings
Investme
nt
Question. 5.
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0
10
20
30
40
50
6070
80
90
Overall Analysis of various media influencing purchasing
of Insurance policy
overall 21 86 35 20 25 15 28
mediaagents
relative
s
televisi
on
word of
mouthsociety
professi
on
0
10
20
30
40
50
Age wise analysis of various media influencing
purchasing of Insurance policy
BELOW 25 1 3 4 3 6 0 625 TO 40 9 48 18 5 11 9 8
ABOVE 40 11 35 13 12 8 6 14
media
agent
s
relativ
es
televis
ion
word
of
societ
y
profes
sion
Question. 6.
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0
10
20
30
40
Income wise analysis of various media influencing
purchasing of Insurance policy
0 to 10k 4 36 12 5 14 8 10
10k to 20K 10 38 15 6 9 3 13
20k and above 7 12 8 9 2 4 5
media
agent
s
relativ
es
televis
ion
word
of
societ
y
profes
sion
0
10
20
30
40
50
Profession wise analysis of various media influencing
purchasing of Insurance policy
business 10 41 14 6 7 5 14
service 11 45 21 14 18 10 14
mediaagents
relativ
es
televisi
on
word
ofsociety
profess
ion
Question.7.
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Satisfaction with current insurance policy
Satisfied
83%
Not Satisfied
17%
Satisfied
Not Satisfied
Reasons
- Should have more comprehensive cover
- Not satisfied with the services provided
- Low returns
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0
10
20
30
40
50
60
Age wise satisfaction with current insurance policy
Below 25 52 13
25 to 40 52 11
40 and above 20 2
satisfied not satisfied
0
10
20
30
40
50
60
Income wise satisfaction with current insurance policy
0 to 10k 52 13
10k to 20K 52 11
20k and above 20 2
satisfied not satisfied
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0
10
20
30
40
50
60
70
Profession wise satisfaction with current insurance policy
business 62 9
service 62 17
satisfied not satisfied
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Preference for insurance policy
offered by private co.
Prefer
43%
Not prefer
57%
PreferNot prefer
Question. 8.
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0
5
10
15
20
25
30
35
40
Age wise Preference for insurance by private co.
BELOW 25 9 4
25 TO 40 39 30
ABOVE 40 17 30
prefer pvt. not prefer
0
5
10
15
20
25
30
35
Income wise Preference for insurance by private co.
0 to 10k 25 29
10k to 20K 31 25
20k and above 9 10
prefer pvt. not prefer
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28
29
30
31
32
33
34
Profession wise Preference for insurance by private co.
business 33 34
service 32 30
prefer pvt. not prefer
Limitations of the study
Less number of respondents surveyed
Respondents were hesitant to give certain information.
In certain cases data is taken on the basis of observation and judgment.
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CONVERSION PROCESS OF A LIFE INSURANCE
POLICY
Fill up the proposal form
Check the form at local branch
Is
everything
ok ?No
Proposal form sent to HO
Yes
Approaching Prospectus
Check the form at local branchIs form
properly
filled up?
No
Proposal form back to FC
Proposal form back to local branch Yes
Is there any
further
/medical
Requirement?
Policy immediately accepted
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Is rate up
required?
Yes
No
Further required
documents/medical tests
report sent to HO
Corrective actions at localbranchreport sent to HO
Is the
prospectus
suitable?
Decline the policy
Is
postponement required?
Accept the policy
Yes
Postpone the policy
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