Hard Major

7/28/2019 Hard Major

1/52

CHAPTER-1

INTRODUCTION TO LIFE

INSURANCE

1


2/52

WHAT IS LIFE INSURANCE

People have various wrong conceptions about life insurance. They feel that

life insurance is needed during the latter years of ones life. Life insurance is

actually an agreement between the insured and the insurer in which the policy

holder accepts to pay regular premium to the insurer. In return, the insurer

guarantees monetary protection to the insured in case of any accident or

mishaps. If the insured dies in accident, financial help is provided to his

family members. Thus, life insurance is necessary as it provides protection to

not only you but also to your family in case of any unwanted disaster.

TYPES OF LIFE INSURANCE

There are various types of policies and schemes prepared to suit the need of

different individual. You can avail the one that satisfy your budget and need.

Life insurance can be broadly divided into 3 types:

Term life insurance

Whole life insurance

Universal life insurance

WHAT IS TERM LIFE INSURANCE?

In this type of life insurance, financial coverage is provided for a certain

period of time according to the terms of the policy. When the term period gets

over, the policy holder can either end the policy or continue it by paying

annual premiums. Term life insurance does not provide permanent coverage

but is good for those who want temporary protection on a limited budget. If

2


3/52

you are thinking of availing a short term life insurance policy to pay off loans,

term life insurance policy is the right option for you. It can be renewed

according to the policy holders wish and need.

WHAT IS WHOLE LIFE INSURANCE?

In this type of life insurance, the insured is provided with permanent financial

protection. It is a long term insurance plan where the policy holder needs to pay

premiums annually. There are various types of whole life insurance that

individuals can avail in accordance to their needs such as Non-participating,

Participating, Indeterminate premium, Economic, Limited Pay, SinglePremium and Interest sensitive. But all life insurance companies may not offer

all the types of whole insurance policies stated above.

WHAT IS UNIVERSAL LIFE INSURANCE?

This is a permanent life insurance plan which has flexible terms. It allows

some of the benefits such as death benefits, saving benefits to be reviewed and

changed according to the policy holders need. In this policy, the insured

enjoys not only benefits of term life insurance but also cash value (premiums

that are above the cost insurance are credited as cash value). You can choose

from the 3 types of universal life insurances, i.e. Single premium, fixed

premium and flexible premium, in accordance to your requirement.

Single premium universal life insurance: In single premium universal lifeinsurance, the policy holder pays a big premium amount at the beginning of

the policy. The policy remains active as long as the cost of insurance (COI) is

covered by the initially paid amount.

3
http://www.insuranceplanavenue.com/http://www.insuranceplanavenue.com/


4/52

Fixed premium universal life insurance: In fixed premium universal life

insurance, the policy holder makes monthly or yearly payments of fixed

amount for a certain period of time.

Flexible premium universal life insurance: In this option of universal life

insurance, the policy holder can pay monthly premiums of his choice as long

as the minimum payment amount is covered.

Life insurance is therefore an essential step towards safeguarding the future of

your family. People should understand how these life insurance policies work

and avail the one that seems suitable to their needs. Take the help of a goodinsurance agent who will help you with details of the policies available

IRDA

The Insurance Regulatory and Development Authority (IRDA) is a

national agency of the Government of India, based in Hyderabad. It was

formed by an act of Indian Parliament known as IRDA Act 1999, which wasamended in 2002 to incorporate some emerging requirements. Mission of

IRDA as stated in the act is "to protect the interests of the policyholders, to

regulate, promote and ensure orderly growth of the insurance industry and for

matters connected therewith or incidental thereto."

DUTIES, POWERS AND FUNCTIONS OF IRDA

4
http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Hyderabad_(India)http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Hyderabad_(India)


5/52

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of

IRDA

1. Subject to the provisions of this Act and any other law for the time

being in force, the Authority shall have the duty to regulate, promote

and ensure orderly growth of the insurance business and re-insurance

business.

2. Without prejudice to the generality of the provisions contained in sub-

section (1), the powers and functions of the Authority shall include,

1. issue to the applicant a certificate of registration, renew,

modify, withdraw, suspend or cancel such registration;

2. protection of the interests of the policy holders in matters

concerning assigning of policy, nomination by policy holders,

insurable interest, settlement of insurance claim, surrender

value of policy and other terms and conditions of contracts of

insurance;

3. specifying requisite qualifications, code of conduct andpractical training for intermediary or insurance intermediaries

and agents;

4. specifying the code of conduct for surveyors and loss assessors;

5. promoting efficiency in the conduct of insurance business;

6. promoting and regulating professional organizations connected

with the insurance and re-insurance business;

7. levying fees and other charges for carrying out the purposes of

this Act;

8. calling for information from, undertaking inspection of,

conducting enquiries and investigations including audit of the

5


6/52

insurers, intermediaries, insurance intermediaries and other

organizations connected with the insurance business;

9. control and regulation of the rates, advantages, terms and

conditions that may be offered by insurers in respect of general

insurance business not so controlled and regulated by the Tariff

Advisory Committee under section 64U of the Insurance Act,

1938 (4 of 1938);

10.specifying the form and manner in which books of account

shall be maintained and statement of accounts shall be rendered

by insurers and other insurance intermediaries;

11.regulating investment of funds by insurance companies;

12.regulating maintenance of margin of solvency;

13.adjudication of disputes between insurers and intermediaries or

insurance intermediaries;

14.supervising the functioning of the Tariff Advisory Committee;

15.specifying the percentage of premium income of the insurer to

finance schemes for promoting and regulating professional

organizations referred to in clause (f);

16.specifying the percentage of life insurance business and general

insurance business to be undertaken by the insurer in the rural

or social sector; and

17.exercising such other powers as may be prescribed from time to

time.

THE INSURANCE INDUSTRY IN INDIA

6


7/52

AN OVERVIEW

With the largest number of life insurance policies in force in the world,

Insurance happens to be a mega opportunity in India. Its a business growing

at the rate of 15-20 per cent annually and presently is of the order of Rs

1560.41 billion (for the financial year 2006 2007). Together with banking

services, it adds about 7% to the countrys Gross Domestic Product (GDP).

The gross premium collection is nearly 2% of GDP and funds available with

LIC for investments are 8% of the GDP.

Even so nearly 65% of the Indian population is without life insurance cover

while health insurance and non-life insurance continues to be below

international standards. A large part of our population is also subject to weak

social security and pension systems with hardly any old age income security.

This in itself is an indicator that growth potential for the insurance sector in

India is immense.

A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and

strengthens the risk taking ability of individuals. It is estimated that over the

next ten years India would require investments of the order of one trillion US

dollars. The Insurance sector, to some extent, can enable investments in

infrastructure development to sustain the economic growth of the country.

HISTORICAL PERSPECTIVE

7


8/52

The history of life insurance in India dates back to 1818 when it was

conceived as a means to provide for English Widows. Interestingly in those

days a higher premium was charged for Indian lives than the non - Indian

lives, as Indian lives were considered more risky to cover. The Bombay

Mutual Life Insurance Society started its business in 1870. It was the first

company to charge the same premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to Triton

Insurance Company Limited, the first general insurance company established

in the year 1850 in Calcutta by the British. Till the end of the nineteenth

century insurance business was almost entirely in the hands of overseas

companies.

Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912.

Several frauds during the 1920's and 1930's sullied insurance business in

India. By 1938 there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of

1938 that provided strict State Control over the insurance business. The

insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was

witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life

insurers and provident societies under one nationalized monopoly corporation

and Life Insurance Corporation (LIC) was born. Nationalization was justified

on the grounds that it would create the much needed funds for rapid

8


9/52

industrialization. This was in conformity with the Government's chosen path

of State led planning and development.

The non-life insurance business continued to thrive with the private sector till

1972. Their operations were restricted to organized trade and industry in large

cities. The general insurance industry was nationalized in 1972. With this,

nearly 107 insurers were amalgamated and grouped into four companies-

National Insurance Company, New India Assurance Company, Oriental

Insurance Company and United India Insurance Company. These were

subsidiaries of the General Insurance Company (GIC).

9


10/52

LIFE INSURANCE CORPORATION OF INDIA

The Life Insurance Corporation of India has been a nation builder since its

formation n 1956. True to the objective of nationalization, the LIC has

mobilized the funds invested by the people in the life insurance for the benefit

of the community at large.

LIC has deployed the funds to the best advantage of the policy holders as well

as the community as the whole, true to the spirit of nationalization. National

priorities and obligation of reasonable returns to the policyholders are the

main criteria of their investments.

The recent Economic Times Brand Equity Survey rated LIC as the No. 1

Service Brand of the Country. The slogan of LIC is "Zindagi ke saath

bhi,Zindagi ke baad bhi"in hindi. In english it means "with life also, after life

also.

HISTORY OF LIC

The Oriental Life Insurance Company, the first corporate entity in India

offering life insurance coverage, was established in Calcutta in 1818 by Bipin

Bernard Dasgupta and others. Europeans in India were its primary target

market, and it charged Indians heftier premiums. The Bombay Mutual Life

Assurance Society, formed in 1870, was the first native insurance provider.

Other insurance companies established in the pre-independence era included

Bharat Insurance Company (1896)

United India (1906)

National Indian (1906)

10
http://www.liclifeinsuranceindia.com/http://www.liclifeinsuranceindia.com/tag/life-insurance/http://en.wikipedia.org/wiki/Calcuttahttp://www.liclifeinsuranceindia.com/http://www.liclifeinsuranceindia.com/tag/life-insurance/http://en.wikipedia.org/wiki/Calcutta


11/52

National Insurance (1906)

Co-operative Assurance (1906)

Hindustan Co-operatives (1907)

Indian Mercantile

General Assurance

Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It

witnessed, India's First War of Independence, adverse effects of the World

War I and World War II on the economy of India, and in between them the

period of world wide economic crises triggered by the Great depression. The

first half of the 20th century also saw a heightened struggle for India's

independence. The aggregate effect of these events led to a high rate of

bankruptcies and liquidation of life insurance companies in India. This had

adversely affected the faith of the general public in the utility of obtaining life

cover.

The Life Insurance Act and the Provident Fund Act were passed in 1912,

providing the first regulatory mechanisms in the Life Insurance industry. The

Indian Insurance Companies Act of 1928 authorized the government to obtain

statistical information from companies operating in both life and non-life

insurance areas. The subsequent Insurance Act of 1938 brought stricter state

control over an industry that had seen several financially unsound ventures

fail. A bill was also introduced in the Legislative Assembly in 1944 to

nationalize the insurance industry.

HDFC STANDARDLIFE

11
http://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Great_depressionhttp://en.wikipedia.org/wiki/India's_independence_movementhttp://en.wikipedia.org/wiki/India's_independence_movementhttp://en.wikipedia.org/wiki/Bankruptcyhttp://en.wikipedia.org/wiki/Liquidationhttp://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_Ihttp://en.wikipedia.org/wiki/World_War_IIhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Great_depressionhttp://en.wikipedia.org/wiki/India's_independence_movementhttp://en.wikipedia.org/wiki/India's_independence_movementhttp://en.wikipedia.org/wiki/Bankruptcyhttp://en.wikipedia.org/wiki/Liquidation


12/52

HDFC Standard Life, one of India's leading private life insurance companies,

offers a range of individual and group insurance solutions. It is a joint venture

between Housing Development Finance Corporation Limited (HDFC), India's

leading housing finance institution and Standard Life plc, the leading provider

of financial services in the United Kingdom.

HDFC Ltd. holds 72.43% and Standard Life (Mauritius Holding) Ltd. holds

26.00% of equity in the joint venture, while the rest is held by others.

HDFC Standard Life's product portfolio comprises solutions, which meet

various customer needs such as Protection, Pension, Savings, Investment andHealth. Customers have the added advantage of customizing the plans, by

adding optional benefits called riders, at a nominal price. The company

currently has 32 retail and 4 group products in its portfolio, along with five

optional rider benefits catering to the savings, investment, protection and

retirement needs of customers.

HDFC Standard Life continues to have one of the widest reaches among new

insurance companies with 568 branches servicing customer needs in over 700

cities and towns. The company has a strong presence in its existing markets

with a base of 2,00,000 Financial Consultants

HISTORY

HDFC Limited, India's premier housing finance institution has assisted morethan 3.4 million families own a home, since its inception in 1977 across 2400

cities and towns through its network of over 271 offices. It has international

offices in Dubai, London and Singapore with service associates in Saudi

Arabia, Qatar, Kuwait and Oman to assist NRI's and PIO's to own a home

12


13/52

back in India. As of December 2009, the total asset size has crossed more than

Rs. 104,560 crores including the mortgage loan assets of more than Rs.90,400

crores. The corporation has a deposit base of over Rs. 23,000 crores, earning

the trust of nearly one million depositors. Customer Service and satisfaction

has been the mainstay of the organization. HDFC has set benchmarks for the

Indian housing finance industry. Recognition for the service to the sector has

come from several national and international entities including the World

Bank that has lauded HDFC as a model housing finance company for the

developing countries. HDFC has undertaken a lot of consultancies abroad

assisting different countries including Egypt, Maldives, and Bangladesh in the

setting up of housing finance companies.

STANDARD LIFE

Standard Life is one of the UK's leading long term savings and investments

companies headquartered in Edinburgh and operating internationally.

Established in 1825, Standard Life provides life assurance, pensions and

investment management propositions to over 6 million customers worldwide.

The Standard Life Group has around 10,000 employees across the UK,

Canada, Ireland, Germany, Austria, India, USA, Hong Kong and mainland

China. At the end of December 2010 the Group had total assets under

administration of 170.1bn. Standard Life's diverse business includes one of

the largest life and pensions businesses in the UK with more than 4 million

customers and Standard Life Investments, currently manages assets of over

138.7bn globally. On 10 July 2006, after 80 years as a mutual company,

Standard Life Assurance Company demutualised and Standard Life plc was

listed on the London Stock Exchange. Standard Life now has approximately

1.5 million individual shareholders in over 50 countries around the world

13


14/52

14


15/52

CHAPTER- 2

REVIEW OF

LITERATURE

REVIEW OF LITERATURE

15


16/52

Bansal (2005) in an article discussed the recommendations for changes in

the structure of the industry and policy framework. The suggestions to

improve the functioning of LIC and to examine the role of intermediaries.

Since 1991 Indian economy has been going through European financial

reforms. Consequent to the important landmark reforms in the financial

sector, the insurance sector in India is going to witness sea change.

Liberalization entails on modernizing industrial system by removing

unproductive controls, encouraging private and foreign investment and

integrating Indian economy with the global economy.

Xharbrahimi (2006)in his research paper discussed the effect of technology

on Life Insurance Distribution, whether life insurers and insured are

aggressively seeking to make use of internet or not. Technology in the

insurance industry has evolved from providingEnhanced operation processing to facilitating corporate strategy. More

recently technology is becoming an important part of Corporate Life

Insurance Competitive Strategy and is increasingly employed in achieving

a competition edge. This article examines some of the opportunities that

technology solutions off er to life insurance Thus, it may be safely

assumed that the most significant innovations in product distribution by

far will be the direct result of the extent to which technology is embraced

Insurers with well conceived technology solutions will get competitive

advantage. In a few years time, it might be possible that those who try

to resist the flow of internet

technologies will be no more successful.

Gupta(1997) in his research work on has worked on how LIC is

working with its policies, can it provide quality and variety of products to

its customers and lastly, is there any scope for private participation in coming

few years

It was concluded that presently, the only captain of ship insurance is

Life Insurance Corporation of India but soon the doors may be opened for

private sector. No doubt, LIC is working well with its policies but still itwill have to be ready for entry of private sector.

Chaudhary (2000) in her research paper, made an attempt on the roles

which private companies can play the objectives of the paper were to find

out whether private insurance companies can serve as one stop shop covering

16


17/52

all insurance needs, to know whether private companies can offer value added

like beyond premium collection and claim settlement or not. It was

concluded that for the first time in the history of Indian Insurance, the

concept of intermediary is being upgraded on a full scale. The reach of

intermediaries will become

deeper and their impact on the conduct of insurance business will be wider

than before. The insurance companies can become one stop shop for providing

all insurance products and services to the customers.

Mishra (1986) in his Ph.D. thesis has worked on objective to study the

effect of working of LIC, how this effects the financial level, and study the

impact of LICs working on the internal organisation. It was concluded

that being the only company providing best services to the customers by

satisfying their needs, is running successfully by earning through revenues andthrough providing remarkable services to the customers.

Market Research Report, (2000) in this report contains a detailed

examination of the key trends and issues surrounding distribution of life

insurance and pension products in Europe, France, Germany, Italy, Spain

and UK. The report not only looked at channels but also at reasons behind

growth of each channel. Distribution of life and pension in Europe (2002) is

intended to appeal bancassurers, agents, direct sales force and all life and

pension product advisors. In addition, it will appeal to dependent financial

advisors and wealth managers.

Aggarwal (2002) in his paper worked on the change in the existing

distribution channels and to study whether they are technology oriented or not.

To study whether there is a potential for new companies or not, it was

concluded that new players are exploring fresh techniques of distribution. The

companies are giving opportunity to DSAs to market their polices while

many are following bancassurance channel for distribution. The otherchannel which is already established is agency. Bancassurance is able to

penetrate the market more successfully because banking and insurance

industry share a common target of providing financial services to the

customers. Thanks to the technology advancement, which is resulting in more

awareness and sophistication. On the other hand, web is exclusively used for

getting information and offline mode is followed while taking the policy.

17


18/52

Hollway and Basu (2002) in their research report worked on the

background of new entrants, on their business strategies, on various

developments that are likely to influence the market. After the opening of

insurance sector in India, many insurance companies have entered the market

with new business and distribution strategies. These companies are

offering different saving plans, term benefits, riders and we can say a wider

range of products are being offered. Foreign equity capital is expected to

increase from 26% to 49% in 2001 to coming 4 to 5 years.

Analyst Report (2004) gives an overview of distribution technology trends

in European Insurance. As the pendulum swings back towards business

growth, distribution channel investments are returning to the strategic forefrontfor Europes insurers. This is the latest research finding to determine the main

areas of investment focus for 2004. This is based upon 100 unique interviews

with European Life and non-life insurers covering seven major western

European markets.

Aggarwal (2005) has explained his research experience about location and

channels used to supply services to target customers. Place and environment in

which service is delivered also plays an important role. Traditionally insurance

service providers have been going to the customer through their direct selling

agents. In India and in world, the selling model is basically dependent upon

Agency Sales Force. Even in U.S, most of the insurance policies are sold

through direct contact, as it is a complicated product and it needs personal

guidance, suggestions and options.

Baskar and Lakshmikutty (2005) in their discussion emphasis on

distribution as a key element of insurance industry or not, to study the

changing scenario demanding the role transformation of intermediaries andlastly the focus on multiple distribution channels. The current state of

insurance distribution in India is flux. On one hand, insurers are awaiting

regulations to be approved for brokerage and bancassurance to be truly

launched. On the other hand, there are corporate model of intermediaries in

place of traditional model. There is no right or wrong in all this, the success of

distribution depends upon understanding the social and cultural needs of target

18


19/52

population.

19


20/52

CHAPTER-3

RESEARCH

METHODOLOGY

RESEARCH METHODOLOGY

Research simply means the search for the facts--- answers to questions and

solutions to problems, it is a persuasive investigation. It is an organized

enquiry in the other words. Research means search for knowledge and

research methodology is a way to systematically solve these problems.

RESEARCH DESIGN

20


21/52

A research design is the arrangement of conditions for collection and analysis

of data in a manner that aims to combine relevance to the research purpose

with economy in procedure.

TYPE OF RESEARCH

The project is conducted by means of an exploratory and somewhat descriptive

research in which clients or policyholders have been surveyed to check their

awareness regarding the Life Insurance Sector.

METHOD OF DATA COLLECTION

Generally there are 2 methods of data collection

PRIMARY DATA

For collecting primary data I used as questionnaire.

Under this questionnaire, having established the special attributes for which the

customer took up the policy a close end questionnaire is designed for

collecting the information to gain a deeper insight into the problem; the

investigation is restored to sampling i.e. the information is collected from a

sample group of the respondents out of the universe. Here the questionnaire is

distributed to the consumer of life Insurance Policyholders personally with the

request to fill on the spot.

SECONDARY DATA

I. These types of data are available in published media, Internet and other

type of media.

II. For this project I have taken help from the Annual Report for the last

five years for both the companies i.e Lic & HDFC Standard Life

Insurance.

Secondary sources used are:

21


22/52

Text books

Internet sites on Insurance

SAM PLE DESIGN

Universe of the study

All people having insurance policy.

Sampling Unit

Policy holders in the city of Bathinda.

Sample Size

Sample size = 100 policyholders of HDFC & LIC in the city of Bathinda.ASSUM PTION

The target respondents are assumed to be reasonably educated and

having reasonable knowledge of the Insurance environment around

them.

All policy holder are having insurance policy of HDFC & LIC

DATA ANALYSIS

Use of various statistical techniques to empirically prove the results and to

validate the findings.

Sampling Method

Convenient judgment sampling has been used to save time and to meet my

Objectives. Sample consists of Shopkeepers, Traders, Factory owners, Doctors,

Engineers Lawyers, Chartered Accountants, and I .T Professionals. Service

class people from different organizations are taken into consideration.

RESEARCH TECHNIQUES USED

22


23/52

Different ratios are to be calculated for the financial evaluation of

LIC & HDFC Standard life insurance.

OBJECTIVES OF THE STUDY

To study the Financial statement for the last five years

of HDFC standard & LIC.

To study the satisfaction level of the customers of boththe companies.

To give suggestions to both the sectors.

23


24/52

24


25/52

LIMITATIONS OF THE STUDY

1. Human weaknesses such as respondents personal biasness,

inattentiveness cant b ignored.

2. Sample size being small may not completely represent the whole universe.

3. Many respondents dont know what sort of policy they have taken.

4. It was difficult to know who is insured or not. People generally

considered me as insurance agent and avoid any discussion.

5. Many times, the consumer had not enough time to respondent,

being busy in his routine.

25


26/52

CHAPTER -4

DATA ANALYSIS &

INTERPRETATION

(A) Performance evaluation of LIC & HDFC Standard life

insurance

26


27/52

CURRENT RATIO OF LIC

TABLE 4.1

2006 2007 2008 2009 2010

5.68 13.25 23.27 0.35 1.76

CURRENT RATIO OF LIC

5.68

13.25

23.27

0.351.76

0

5

10

15

20

25

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATION

From the above graph we can say that in 2006 the C.R. is 5.68 i.e. short term

solvency of a co. is sound & then in 2007 the C.R. is increased upto 13.25 co. has

adequate C.A. to repay its C.L. but too much higher C.R. is also not safe. In 2008

the ratio is 23.27 this shows the adequate C.R. which indicates weak investment

policy. In 2009 the C.R. is 0.35 which is very low according to the rule of thumb

i.e. 2:1 & in 2010 the C.R. is 1.76 which shows satisfaction level to some extent.

RETURN ON TOTAL ASSET OF LIC

27

CURRENT ASSET

CURRENT LIBALITY


28/52

TABLE 4.22006 2007 2008 2009 2010

314.46 256.72 259.21 280.48 284.19

RETURN ON TOTAL ASSET

314.46

256.72 259.21280.48 284.19

0

50

100

150

200

250

300

350

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATIONIn 2006 the return on total asset is 314.46% which shows very high return of total

asset and is not good for the company. As we interpret above there is a weak

investment policy, whether we have sufficient profits but how we are utilizing is

not correct. There might be certain plan for raising fund in long term but co.

concentrate on current year profitability. This indicates lack of sustainable

development (long term from 10 to 12 years). F.A. make sound position but co. has

to take care about long term solvency also to promote external equities.

RETURN ON CAPITAL EMPLOYED OF LIC

28

profit after int. & tax x 100

T.A.


29/52

TABLE 4.3

2006 2007 2008 2009 2010

655.77 256.71 259.21 28.48 284.2

RETURN ON CAPITAL EMPLOYED OF LIC

655.77

256. 71 259. 21

28.48

284.2

0

100

200

300

400

500

600

700

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATION

The return on capital employed is the prime ratio which measures the efficiency of

the business it also help in evaluating performance of a co. The minimum level of

return should be 40 to 50% and in LIC the return on capital employed is much

higher than expected. Company has to raise the reserve amount, the investment

policy should be change and proper utilization of profits should be done by the co.so that they can earn more from their investment.

DEBT EQUITY RATIO OF LIC

29

profit before int. & tax x 100

T.A.


30/52

TABLE 4.4

2006 2007 2008 2009 2010

0.7 0.47 0.48 0.48 0.47

DEBT EQUITY RATIO OF LIC

0.7

0.47 0.48 0.48 0.47

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATION

From the above graph we can say that, in 2006 the ratio of debt equity is 0.70

which indicates satisfactory as far as cos long term solvency concerned. In 2007

the ratio is 0.47. The ideal ratio is 1:1 but the margin of safety is 0.30, so it doesnt

show the satisfactory level but it is above than margin of safety. In 2008 & 2009

the ratio is 0.48 & in 2010 the ratio is 0.47 the co. has to finance through Owned

capital rather than borrowed funds. It has been reducing every year. Co. have to

increase the owners equity to make healthier debts.

CURRENT RATIO OF HDFC STANDARD

30

Outsiders fund

Shareholders fund


31/52

TABLE 4.5

2006 2007 2008 2009 20101.45 1.37 1.39 1.09 0.63

CURRENT RATIO OF HDFC STANDARD

1.451.37 1.39

1.09

0.63

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATION

From the above graph we conclude that in 2006 the C.R. is 1.45 it means that the

co. short term solvency is quite satisfactory & in 2007 the C.R. is 1.37 this

indicates that the co. has less C.A. over C.L. because a rule of thumb for C.R. is

2:1 & it is less, In 2008 the C.R. of a co. is 1.39 & in 2009 the ratio is 1.09 & in

2010 the C.R. is 0.63. This shows that the cos liquidity position is not good & the

firm cant pay its C.L.

RETURN ON TOTAL ASSET OF HDFC STANDARD

31

CURRENT ASSET

CURRENT LIBALITY


32/52

TABLE 4.62006 2007 2008 2009 2010

-70.8 -72.9 -69.4 -107.4 -164.9

RETURN ON TOTAL ASSET OF HDFC

STANDARD

-70.8 -72.9 -69.4

-107.4

-164.9

-200

-150

-100

-50

0

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATION

From the above graph we can say that in 2006 the return on total assets is

-70.8% and is increasing in the above years the shows that the co. is not in a

position to retain so many fixed assets but for current asset it might the extensive

approach to short term loans because fixed assets are mirror to have current assets

so, at least co. should try to extend the level of C.A., executing owners equity to its

contrast there can possibility to change their product policy also.

RETURN ON CAPITAL EMPLOYED OF HDFC

32

profit after int. & tax x 100

T.A.


33/52

TABLE 4.7

2006 2007 2008 2009 2010

-10.1 -7.9 -9.13 -13.31 -6.73

RETURN ON CAPITAL EMPLOYED OF HDFC

-10.1

-7.9

-9.13

-13.31

-6.73

-14

-12

-10

-8

-6

-4

-2

0

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATION

From the above graph we conclude that in 2006 the return on capital employed is

-10.1% which shows the dissatisfaction level of return. The return on capital

employed of is the prime ratio which measures the efficiency of the business. It

also helps in evaluating the performance of a co. In 2007 it is -7.90% in 2008 the

return is -9.13%. in 2009 the return is -13.31% & in 2010 the return is 6.73% it

left just half from 2009. This shows that efficiency of capital employed has been

33

profit before int. & tax x 100

T.A.


34/52

decreasing co. is suffering losses due to weak policy. In this, short term & long

term are both weak. Company has to improve its short term solvency for 1 to 2

years for drasting change in sales through proper promotion like advertising etc.

After that external equities will be concentrated.

DEBT EQUITY RATIO OF HDFC

34


35/52

TABLE 4.8

2006 2007 2008 2009 20103.92 7.23 9.31 10.54 33.56

DEBT EQUITY RATIO OF HDFC

3.92

7.239.31

10.54

33.56

0

5

10

15

20

25

30

35

40

1 2 3 4 5

2006 2007 2008 2009 2010

Series1

INTERPRETATIONIn this graph company is suffering from losses through out year. A part of reserve

and surplus it is not able to increase profit sufficiently which effect adversely on

net worth. It is very high ratio and unfavourable from the point of you of the firm

also because the firm may not be able to get credit without paying very high rate of

interest.

For this Co. has to raise short term solvency, having better product policies.

As far as investment concerned it can only be raise after sufficient debt. It means

owners equity should be increased.

(B)DATA ANALYSIS & INTERPRETATION

35

Outsiders fund

Shareholders fund


36/52

PROFILE OF THE RESPONDENTS

Professional/Service 35

Business 50Others 15

0

10

20

30

40

50

60

1

service

business

others

INTERPRETATION

From the above graph we conclude that out of 100 respondents

35 respondents are of service class & 50 respondents are

businessman & 15 respondents are from other profile.

INCOME GROUP OF RESPONDENTS

1,50,000- 52

36


37/52

2,50,000

2,50000-3,50,000 40

ABOVE 3,50,000 8

0

10

20

30

40

50

60

1

150000-250000

250000-350000

ABOVE 350000

INTERPRETATION

This graph shows that 52 respondents are having income between 1500000 to

2500000, 40 respondents have income between 250000 to 350000 & 8 respondents

having income above 350000.

Q.1. DO YOU HAVE ANY INSURANCE POLICY ?

INSURANCE % Z TEST value RESULT

YES 100 10 H.S

37


38/52

NO 0 0 -

The above table shows that 100 respondents have insurance policy & the value is

10 & the statistical result from the z test is highly significant in this question.

2. IF YES, WHICH COMPANY INSURANCE POLICY DO YOU HAVE?COMPANY % TEST VALUE RESULT

LIC 65 3.0 H.S

HDFC 35 2.58 SIGNIFICANT

In this table, it is clear that out of 100 respondents 65 have insurance of LIC & 35

have policy of HDFC standard & in this z test is applied the value of LIC is 3 &

the result for this is highly significant & test value of HDFC is 2.58 which is

significant. This shows that most of the people having life insurance policy as

compared to hdfc standard.

3.WHICH INSURANCE PLAN DO YOU HAVE?

Different plan LIC % HDFC % Value Test result

Pension plan 15 10 2.96 Significant

Child plan 20 25 2.96 Significant

Money back 50 48 1.13 Not

significant

Other 15 17 1.13 Not

significant

This table shows that15% respondents of lic like pension plan whereas 10% of

respondents of hdfc like pension plan,the statistical difference of these two is

significant which shows that more of respondents like lic pension plan as

compared to hdfc standard. The statistical difference of child plan is also same but

the most respondents like child plan of hdfc standard & the result is significant. In

this table 50 % respondents like lic money back policy & 48 % like hdfc money

back policy & the statistical difference between these two is not significant which

shows the equal liking of lic & hdfc standard.

38


39/52

4.FOR HOW MANY YEARS DO YOU HAVE INSURANCE POLICY?

YEARS %

5 YEARS 175-10 YEARS 30

10-15 YEARS 40

ABOVE 15 YEARS 13

CHI-SQUARE TEST VALUE 6.77

RESULT HIGHLY SIGNIFICANT

This table shows that 17 respondents have insurance policy from recent 5 yrs, 30

respondents have insurance from 5-10 yrs, 40 people have their policy from 10-15

yrs & 13 respondents have their policy for more than 15 yrs. In this chi-square

statistical tool is used & the value appears is 6.77 which show highly significant

position.

5. HOW WOULD YOU EVALUATE THE PLANS OF A COMPANY?

Evaluation LIC % HDFC % Test value Result

Very good 60 50 2 SIG.

Good 15 15 0 N. S

Moderate 17 15 0.46 N.S

Bad 5 15 2 SIG.

Very bad 3 5 0.46 N.S

In this table 60% respondents says that the plan of a LIC is very good & 50% says

that HDFC plans are very good & the statistical difference between these two is

significant, this shows that most people says that the plan of lic is very good as

compare to hdfc standard. This table also shows that 15% says good to LIC plans

& 15% says that HDFC plans are good the result are same so that table value in

39


40/52

this is zero which shows not significant position. there are 17% respondents who

says that the plan of LIC is moderate & 15% 0f respondents says that hdfc plan is

moderate this shows that statistical difference between these two is not so

significant. Now coming to the bad plans 5% says that LIC plan is bad & 15% says

that HDFC plans are bad in this statistical different is not significant & that shows

that HDFCS plan are not so good as compare to LIC plan. Same shows in very

bad evaluation in this also more respondents doesnt like HDFC standard plan.

6. RANKING ACCORDING TO THE DEALING OF A COMPANY?

Ranks LIC % HDFC % Test value Result

Very good 50 60 2 SIG.Good 15 15 0 N.S

Moderate 15 17 0.46 N.S

Bad 15 5 2 SIG.

Very bad 5 3 0.46 N.S

This table shows that the 50% respondents says the dealing of LIC is very good &

60% said that HDFC dealing is very good in this statistical different is significant

& the table value is 2. 15% respondents says that the dealing of LIC is moderate &

17% says hdfc dealing is moderate & the statistical difference is not significant. In

this table we analysis that dealing of LIC is not so good as compared to HDFC &

statistical difference is not significant.

7. RANK ACCORDING TO THE PREMIUM PAID BY YOU ?

40


41/52

Ranks LIC % HDFC % Test value Result

Very high 65 40 5 H.S

High 15 10 1 N.S

Moderate 10 40 6 H.S

Low 5 6 0.20 N.SVery low 5 4 0.20 N.S

The above table shows that 65% respondents of LIC rank very high premium paid

by them & 40% says that HDFC premium are very high the z test value is 5 this

shows statistical difference is highly significant. In high ranking 15% said that the

premium paid by them of LIC is high & 10% says HDFC premium is high this

shows that statistical difference between LIC & HDFC is not significant. Sameasin low and very low situation the statistical difference between LIC & HDFC is

not significant.

8. MARK ACCORDING TO THE PROCESS OF PREMIUM

COLLECTED FROM YOU?

PROCESS LIC % HDFC % Test value Result

Very difficult 0 0 - -

Difficult 10 5 1 N.S

Neutral 20 15 1 N.S

Easier 30 30 - -

Very easy 40 50 2 SIG.

the above table shows that the process of premium collection of lic & hdfc is zero

which shows that neither the lic process is difficult nor of the hdfc standard. 10%

respondents says that the process of premium collection is difficult & 5% said that

the hdfc process is difficult and the statistical tool analyised between these two is

not significant. 20% says that the process of lic is neutral & 15% says the hdfc

process is neutral & statistical difference is not significant. 40% respondents said

that the process of premium collection of LIC is very easy & 50 % respondent said

41


42/52

that the process of HDFC is very easy & the result of statistical difference is

significant & we analysis that the process of premium collection of HDFC is very

easy as we compare to LIC.

9. RANKING ACCORDING TO THE RETURNS FROM POLICY?

Ranks LIC % HDFC % Test value ResultVery high 25 15 2 SIG.

High 20 10 2 SIG.

Moderate 30 20 2 SIG.

Low 15 25 2 SIG.

Very low 10 30 4 H.S

This table shows that 25% respondents says that the return from LIC is very high

& 15% says that the return of hdfc is very high the test value appears is 2 & the

statistical difference between these to company is significant. we analysis that the

return of lic is high according to the consumer satisfaction level. 20% says the

return are high of lic &10 % respondents says that hdfc return are high the result is

significant. The result of stastical difference of moderate & low is also same i.e.

significant. In very low ranking 10% respondent says that LIC return is very low

& 30% says that the return of HDFC is very low the statistical difference between

these two is highly significant this shows that the LIC is giving high return as

compared to HDFC Standard life insurance.

42


43/52

CHAPTER -5

SUGGESTIONS

43


44/52

SUGGESTIONS

SUGGESTIONS TO LIC

1. From the last five year LIC is not changing the reserve & surplus amount if

they dot change reserve & surplus amount then they cant pay future

expenses so to pay future libalities LIC should raise the amount of reserve& surplus.

2. Investment policy of LIC should be change so that profit can be utilize in a

better way.

3. External Equity should be raised for atleast 10 to 12 years .

4. The utilization of profit is to be done in a proper manner.

SUGGESTIONS TO HDFC STANDARDLIFE INSURANCE

1. The company is suffering from losses to overcome the losses has to raise

short time solvency i.e current ratio has to be increased.

2. The company have to improve there product policy so that sale should be

more.

3. As far as investment concern it can only be raise after sufficient debt it

means owners equity should be increased.

4. The company has to promote there product through direct marketing like

advertisement and executives.

44


45/52

5. The Company investment current investment criteria is very bad they are not

investing there investment in a proper way at all , the company has plan for

better investment criteria.

6. new policies should be designed on the basis of capital structure & capital

budgeting.

CHAPTER-6

CONCLUSION

45


46/52

Here we have compare two company i.e. life insurance corporation & hdfc

standard context to their life insurance and we find that LIC is better compared

to hdfc standard life insurance by comparing the current positioning concern. On

the other hand HDFC due to worst investment policy has been lacking in raising

fund for long period but life insurance corporation, inspite of satisfactory current

ratio it has been performing in mature sense. The HDFC is suffering from losses

due to the weak investment policy. Hdfc needs to plan again the investment

criteria. And both the company need capital budgeting in true sense perhaps

because of pay back period, return on investment, gearing has to be re-evaluated so

that average investment can manage upto their respective availability of funds. On

the whole there is need of transparency in investment policy so that, owners

equity can little healthier.

LIC is performing very well as comparing to HDFC standard

life insurance. Additional spending has not simply increased the awareness level

of insurance but also brought about certain amount of selling and market

discipline. More and more people understand the right amount of insurance

cover to take care of their responsibilities .People know when they are

underinsured and go for the right choice of insurance cover for themselves. People

have started demanding the easy access of right and true information. So hdfc has

to measure the deviation occur and variance are to be done to overcome the loss &

stand again in the market.

46


47/52

BIBLIOGRAPHY

Books

J.J Hamton, financial decision making: prentice- hall of

India, New Delhi, 4th edition.

Khan and jain, financial management, Tata Mc Graw-hill

publishing co. ltd. New Delhi, 4 th edition.

Stephan A Ross, Jeffery jaffe corporate finance, Tata Mc

Graw hill publishing co. ltd, New Delhi, 7 th edition.

Richard A. Brealey & stewart C. Meyers, principal of

corporate finance, Tata Mc Graw-hill publishing co. ltd.

New Delhi, 6 th edition.

Web Site

www.hdfclife.com

www.licindia.com

www,irdaindia.org

47
http://www.hdfclife.com/http://www.licindia.com/http://www.hdfclife.com/http://www.licindia.com/


48/52

ANNEXTURE

48


49/52

QUESTIONNAIRE

As this questionnaire is being filled by you to help me in my project report i.e.

Performance Evaluation of insurance sector, a comparative study of LIC &

HDFC standard life insurance so please cooperate.

PERSONAL PROFILLE

Name______________________

Age _______________________

Occupation

a) Professional/Service [] b) Business [] c) Other []

Annual Income

a) 150000 - 250000 b) 250000 350000 c) above 350000

Address ___________________________________________________________

__________________________________________________________________

Contact No. ____________________

1. DO YOU HAVE ANY INSURANCE POLICY ?

YES [ ]

NO [ ]

2. If yes, WHICH COMPANY INSURANCE POLICY DO YOU HAVE ?

49


50/52

LIC [ ]

HDFC STANDARD [ ]

3. WHICH INSURANCE PLAN DO YOU HAVE ?

PENSION PLAN [ ]

CHILD PLAN [ ]

MONEY BACK POLICY [ ]

OTHER [ ]

4. FOR HOW MANY YEARS DO YOU HAVE INSURANCE POLICY ?

5 YEARS [ ]

5 YRS 10 YRS [ ]

10 YRS 15 YRS [ ]

ABOVE 15 YEARS [ ]

5. HOW WOULD YOU EVALUATE THE PLANS OF A COMPANY ?

VERY GOOD [ ]

GOOD [ ]

MODERATE [ ]

BAD [ ]

VERY BAD [ ]

6. RANKING ACCORDING TO THE DEALING OF A COMPANY ?

VERY GOOD [ ]

50


51/52

GOOD [ ]

MODERATE [ ]

BAD [ ]

VERY BAD [ ]

7. RANK ACCORDING TO THE PREMIUM PAID BY YOU ?

VERY HIGH [ ]

HIGH [ ]

MODERATE [ ]

LOW [ ]

VERY LOW [ ]

8. MARK ACCORDING TO THE PROCESS OF PREMIUM

COLLECTED FROM YOU ?

VERY DIFFICULT [ ]

DIFFICULT [ ]

NEUTRAL [ ]

EASIER [ ]

VERY EASY [ ]

9. RANKING ACCORDING TO THE RETURNS FROM POLICY ?

VERY HIGH [ ]

HIGH [ ]

MODERATE [ ]

51


52/52

LOW [ ]

VERY LOW [ ]

Documents

Hard Major