Reportaviva Life Insurance India Pvt. Ltd

8/2/2019 Reportaviva Life Insurance India Pvt. Ltd

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AVIVA LIFE INSURANCE INDIA

An Internship Report

PERIN.F.SHOLAPURWALA

SSN: 888940849

In Partial fulfillment of the Masters Program in Business

Administration, Ohio University, Athens, USA

OHIO University, Christ College Academy for Management Education

Christ College Campus

Hosur Road, Bangalore 29

April 2007


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EXECUTIVE SUMMARYAviva Life insurance is the oldest life insurance company in the world. It is the largest

insurer in the UK and is the 28th largest company in the world. In India, the company is

marketing life insurance products and unit linked investment plans. From my research at

Aviva, I found that the company has a lot of competition from other private insurers like

ICICI, HDFC, Birla Sun Life and Tata Aig. It also faces competition from LIC. To

compete effectively Aviva could launch cheaper and more reasonable products with

small premiums and short policy terms (the number of years premium is to be paid).

The ideal premium would be between Rs. 5000 Rs. 25000 and an ideal policy term

would be 10 20 years.

Aviva must advertise regularly and create brand value for its products and services.

Most of its competitors like HDFC, ICICI, Reliance and LIC use television advertisements

to promote their products. The Indian consumer has a false perception about insurance

they feel that it would not benefit them if they do not live through the policy term.

Nowadays however, most policies are unit linked plans where a customer is benefited

even if their death does not occur during the policy term. This message should be

conveyed to potential customers so that they readily invest in insurance.

Family responsibilities and high returns are the two main reasons people invest in

insurance. Optimum returns of 16 20 % must be provided to consumers to keep them

interested in purchasing insurance.

On the whole Aviva life insurance is a good place to work at. Every new recruit is

provided with extensive training on unit linked funds, financial instruments and the

products of Aviva. This training enables an advisor/ sales manager to market the

policies better. Aviva was ranked 13 in the Best Places to Work survey. The company

should try to create awareness about itself in India. In the global market it is already

very popular. With an improvement in the sales techniques used, a fair bit of advertising

and modifications to the existing product portfolio, Aviva would be all set to capture the

insurance market in India as it has around the globe.


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TABLE OF CONTENTS

Introduction to Insurance.1

Research Design5

Company Profile..10

Financial Analysis.34

Competitive analysis..36

Marketing problems40

Analysis and Interpretation42

Future line of research.58

Conclusion..59

References..60

Appendix..61


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ACKNOWLEDGMENTI would like to thank my project guide Ms. Rajeswari Ramsubramanian, Sales Manager

Aviva Life Insurance for guiding me through my internship and research project. Herencouragement, time and effort are greatly appreciated.

I would like to thank Professor Dr. Amalendu and Mr. Girish for supporting me during

this project and providing us an opportunity to learn outside the class room. It was a

truly wonderful learning experience.

I would like to dedicate this project to my parents and brother. Without their help and

constant support this project would not have been possible.

Lastly I would like to thank all the respondents who offered their opinions and

suggestions through the survey that was conducted by me in Bangalore.


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CHAPTER I

INDIAN INSURANCEINDUSTRY

AN OVERVIEW


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THE INSURANCE INDUSTRY IN INDIAAN 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 450 billion (for the financial year

2004 2005). 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 80% 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. (Source: www.indiacore.com)

HISTORICAL PERSPECTIVEThe 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


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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 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


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India Assurance Company, Oriental Insurance Company and United India Insurance

Company. These were subsidiaries of the General Insurance Company (GIC).

KEY MILESTONES1912: The Indian Life Assurance Companies Act enacted as the first statute to regulatethe life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government tocollect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended by the Insurance Act with theobjective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were taken overby the central government and nationalized. LIC was formed by an Act of Parliament-

LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India.

INDUSTRY REFORMSReforms in the Insurance sector were initiated with the passage of the IRDA Bill in

Parliament in December 1999. The IRDA since its incorporation as a statutory body in

April 2000 has fastidiously stuck to its schedule of framing regulations and registering

the private sector insurance companies. Since being set up as an independent statutory

body the IRDA has put in a framework of globally compatible regulations.

The other decision taken simultaneously to provide the supporting systems to the

insurance sector and in particular the life insurance companies was the launch of the

IRDA online service for issue and renewal of licenses to agents. The approval of


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institutions for imparting training to agents has also ensured that the insurance

companies would have a trained workforce of insurance agents in place to sell their

products.

PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 36%, with premium income

from new businesses at Rs. 253.43 billion during the fiscal year 2004-2005. Though the

total volume of LIC's business increased in the last fiscal year (2004-2005) compared to

the previous one, its market share came down from 87.04 to 78.07%.

The 14 private insurers increased their market share from about 13% to about 22% in a

year's time. The figures for the first two months of the fiscal year 2005-06 also speak of

the growing share of the private insurers. The share of LIC for this period has further

come down to 75 percent, while the private players have grabbed over 24 percent.

With the opening up of the insurance industry in India many foreign players have

entered the market. The restriction on these companies is that they are not allowed to

have more than a 26% stake in a companys ownership.

Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7

billion have poured into the Indian market and 14 private life insurance companies have

been granted licenses.

Innovative products, smart marketing, and aggressive distribution have enabled

fledgling private insurance companies to sign up Indian customers faster than anyone

expected. Indians, who had 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. Some of these products include investment plans with insurance and good returns

(unit linked plans), multi purpose insurance plans, pension plans, child plans and

money back plans. (www.wikipedia.com)


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CHAPTER II

RESEARCH DESIGN


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RESEARCH DESIGNINTRODUCTION

A Research Design is the framework or plan for a study which is used as a guide in

collecting and analyzing the data collected. It is the blue print that is followed in

completing the study. The basic objective of research cannot be attained without a

proper research design. It specifies the methods and procedures for acquiring the

information needed to conduct the research effectively. It is the overall operational

pattern of the project that stipulates what information needs to be collected, from which

sources and by what methods.

TITLE OF THE STUDY

A Study on Market Segmentat ion of the Insurance Industry in India forAviva Life Insurance India Pvt. Ltd., Bangalore

STATEMENT OF THE PROBLEMThis study was undertaken to identify which type of insurance plans Aviva should

market to particular market segments in India. A survey was undertaken to understand

the preferences of Indian consumers with respect to insurance. While marketing policies

the sole duty of an advisor/ agent is to provide insurance plans as per customer

requirements.

In effect plans (insurance products) should be flexible to suit individual requirements.

This research tries to analyze some key factors which influence the purchase of


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insurance like the term of the policy, the type of company, the amount of annual

premium payable (capacity and willingness to spend), risk taking ability and the

influence of advertising. Solutions and recommendations are made based on qualitative

and quantitative analysis of the data.

OBJECTIVES OF THE STUDY

To find the market share of various life insurers in India

To suggest additions to the current product portfolio

To recognize the popular insurance plans

To showcase the influence of advertising

To suggest ideal policy term and premium for insurance

To showcase the consumers willingness to spend on life insurance

To showcase the factors that motivate purchase of insurance policies

To understand the type of company preferred for investment

To understand the awareness level of consumers about unit linked insurance

plans

RESEARCH METHODOLOGY

TYPE OF DATA COLLECTEDThere are two types of data used. They are primary and secondary data. Primary data is

defined as data that is collected from original sources for a specific purpose. Secondary

data is data collected from indirect sources. (Source: Marketing Research, Sumathi and

Saranavel)

PRIMARY SOURCESThese include the survey or questionnaire method, telephonic interview as well as the

personal interview methods of data collection.


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SECONDARY SOURCESThese include books, the internet, company brochures, product brochures, the company

website, competitors websites etc, newspaper articles etc.

SAMPLINGSampling refers to the method of selecting a sample from a given universe with a view

to draw conclusions about that universe. A sample is a representative of the universe

selected for study.

Convenience sampling is used in exploratory research where the researcher isinterested in getting an inexpensive approximation of the truth. As the name implies,

the sample is selected because they are convenient. This non probability method is

often used during preliminary research efforts to get a gross estimate of the results,

without incurring the cost or time required to select a random sample. (Source:

www.statpac.com)

SAMPLE SIZEThe sample size for the survey conducted was 130 respondents.

SAMPLING TECHNIQUEConvenience sampling technique was used in the survey conducted.

PLAN OF ANALYSIS

Tables were used for the analysis of the collected data. The data is also neatly

presented with the help of statistical tools such as graphs and pie charts. Percentages

and averages have also been used to represent data clearly and effectively.
http://www.statpac.com/http://www.statpac.com/


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STUDY AREAThe samples referred to were residing in Bangalore City. The areas covered were

Koramangla, Frazer town, Maruthinagar, C.V. Raman Nagar, MG Road and Whitefield.

LIMITATIONS OF THE STUDY The study was limited only to the city of Bangalore

The study was conducted only for a short period of one month

The study is based on the assumption that information provided by the

respondents is true

OVERVIEW OF CHAPTER SCHEMECHAPTER 1:Introduction to insurance - An overview of the industry in India, history, keymilestones, reforms in the industry, present scenario in India.

CHAPTER 2:Research Design - Introduction, title of the study, statement of the problem,objectives of the study, research methodology, sampling, plan of analysis, study

area and limitations of the study.

CHAPTER 3:Company Profi le Introduction to Aviva, products and services, vision and corevalues, human resource, organizational structure, introduction to unit linked funds,

national & international presence of the organization.


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CHAPTER 4:Financial Analysis Analysis of the income statement and balance sheet, stockanalysis to determine the profitability of the firm. The advantages of investing in

Aviva compared to other financial instruments.

CHAPTER 5:Competit ive analysis Information about the plans offered by LIC and otherprivate insurers in India. Comparisons between the plans to find the most popular

and beneficial plans which Aviva can incorporate into their product portfolio.

CHAPTER 6:Marketing problems - The techniques used to market insurance and theiradvantages and disadvantages along with suggestions for improvement.

CHAPTER 7:Analysis and Interpretat ion A survey on Segmentation of the InsuranceIndustry in India.

CHAPTER 8:Problems requiring more research Future line of work

CHAPTER 9:Conclusion

ReferencesAppendices


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CHAPTER IIICOMPANY PROFILE


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COMPANY PROFILE

AVIVA LIFE INSURANCE

INTRODUCTIONAviva plc was previously known as CGNU plc. The name change was effected on 1st July

2002. Prior to the re branding, CGNU was using 50 trading names across the world.

The decision for the re branding was taken with the objective of creating a strong and

powerful international services brand.

HISTORY OF THE AVIVA GROUP 1696 The worlds oldest insurance company Hand in Hand formed in London

1797 Norwich Union founded in London

1861 Commercial Union founded in London

1885 General Accident founded in Perth, Scotland

1998 CGNU formed with the merger of Commercial Union and General

Accident

2000 CGNU formed with the merger of CGU and Norwich Union

2002 CGNU re - branded as Aviva plc on 1st July, 2002

KEY POINTS - AVIVA


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5th largest insurance group in the world (Source: Fortune 500)

Largest insurer in the United Kingdom

28th largest company in the world

Premium income from new business 32 billion USD

Total premium income 36 billion pounds

Shareholders funds of 14.9 billion

Over 35 million satisfied customers worldwide

Listed on the London, Paris and Dublin stock exchanges

Top five positions in Holland, Ireland, Singapore, Spain, Turkey and Poland

Long term savings and asset management account for 71% of premiums

KEY POINTS - AVIVA LIFE INSURANCE INDIA Got licensed on 14th May 2002 and started operations on 6th June 2006

Pioneered the concept of indexation

Pioneered the concept of unitization

Tie - ups with ABM Amro, American Express, Canara Bank & Lakshmi Vilas Bank

26 million customers and over 67734 crores in deposits

Paid up capital of Rs.559 crores

Growth of 118% since the last year from new business

VISIONAviva - Where exceeding expectations through innovative solutions is ourway of l ife


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CORE VALUES Passion for winning

Integrity

Innovation

Customer centricity

Empowered Team

PRODUCTS & SERVICESThe right investment strategies won't just help plan for a more comfortable tomorrow --they will help you get Kal Par Control. At Aviva, life insurance plans are created

keeping in mind the changing needs of you and your family. Our life insurance plans are

designed to provide you with flexible options that meet both protection and savings

needs. We offer our customers a full range of transparent, flexible and value for money

products. Aviva products are modern and contemporary unitized products that offer

unique customer benefits like flexibility to choose cover levels, indexation and partial

withdrawals. (Source: www.avivaindia.com)

PLANS MAINLY FOR PROTECTION (LIFE COVER)

1) LIFE LONGLife Long is designed to suit individual requirements, no matter which life stage you are

at, and changes as your needs change during your entire life. For the same premium,

you can opt for a higher life cover (protection) and lower savings or lower life cover and

higher savings. The choice of protection-savings mix is yours, and the decision can bebased on your priorities and age. You can also cover your spouse under the same policy

without any additional expense through a joint life policy (first death basis).

The entry age is 18 60 years. If any rider is opted the maximum entry age is 55 years

(last birthday). This is a whole life plan with premium payment age up to 85 years. The


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minimum annual premium is Rs. 6000. The minimum sum assured is 0.5* (70 entry

age) * Annual premium and the maximum sum assured is Annual premium * Cover

level, where the cover level ranges from 10 to 100, depending upon age at entry.

Sample Cover Level

Age 20 years 30 years 40 years 50 yearsCover Level 97 82 54 30

One can invest their monies in a With Profits Fund and 3 Unit Linked funds; Protector,

Growth and Balanced Funds. An individual can opt for riders like accidental death and

disbursement rider, critical illness and permanent total disability rider and hospital cashbenefit. There will be 5% extra allocation of units on the 15th policy year.

How is the money invested?Life Long offers a With Profits Fund and 3 Unit Linked Funds which give you the

flexibility of choosing how your money should be invested in terms of the risk and the

security of the return on the investment. You can invest 100% of your premiums either

in the With Profits Fund or in any of the Unit Linked Funds. The minimum allocation in

each selected unit linked fund must be 10%.

With Profits Fund Unit Linked FundsProtector Fund Growth Fund Balanced FundFund ObjectiveSteady returns on your

investments by

smoothening market

volatility throughcrediting bonuses to

your fund on a daily

basis

Progressive

returns on your

investment by

investing higherelement of assets

in debt securities

with minimum

exposure to

equities

High Capital growth

by investing higher

element of assets in

the equity market

Capital growth

by availing

opportunities in

debt and equitymarkets and

providing you a

good balance

between risk and

return


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Fund Composition (Range)Debt securities:

70 100%

Equities: 0 20%

Money market & cash:

0 10%

Debt securities:

60 100%

Equities: 0 20%

Money market &

cash: 0 20%

Debt securities:

0 50%

Equities: 30 85%

Money market &

cash: 0 20%

Debt securities:

50 90%

Equities: 0 45%

Money market &

cash: 0 10%

Changing Al location ProportionsYou have the option to change the allocation proportion of your premiums to different

funds at anytime, up to 2 times a year, for all future premiums. The minimum allocation

in each selected fund must be 10%. A policy holder can switch accumulated funds from

one investment fund to another (either partly or fully). In case of a part switch, the

minimum amount switched should be Rs. 10,000 and the minimum balance in the fund

after the switch should be Rs. 5,000. The first 2 switches in a policy year are free of

charge.

Allocation of Units Units purchased with the first years premium and the first incremental regular

premium due to indexation and / or additional regular premium will be used to

allocate initial units. Units purchased from the second years premium onwards

and after the first incremental regular premium due to indexation and / or

additional regular premium will be used to allocate accumulation units

The unit price shall be calculated on a daily basis in accordance with Insurance

Regulatory and Development Authority (IRDA) guidelines from time to time. The

Unit Price will be calculated as follows: Unit price for Unit Linked Funds isequal to the market value of assets held by the fund plus the valueof current assets and accrued income minus the value of current


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l iabi l i t ies, fund management charges and provisions, i f any, dividedby the total number of units outstanding

Unit price for With Profits Fund is calculated by applying the equivalent daily rate

to the current unit price on a daily compounding basis. The equivalent dai lyunit growth rate = (1 + annual regular bonus rate) ^ (1/365)*(1-fund management charge per annum /365) - 1. Aviva guaranteesthat the unit price in this fund wil l never fal l

Units shall be allocated on the day the proposal is completed and results into a

policy by adjustment of application money towards premium. The premium shall

be adjusted on the due date even if it has been received in advance

In respect of premiums received within a time specified by IRDA through a local

cheque or a demand draft, payable at par, at the place where the premium is

received, the closing NAV of the day on which premium is received shall be

applicable. Currently, this time is 4:15 p.m.

In respect of premiums received after the time specified by IRDA through a local

cheque or a demand draft, payable at par, at the place where the premium is

received, the closing NAV of the next business day shall be applicable In respect of premiums received through outstation cheque / demand draft, at

the place where the premium is received or through direct debit / ECS, the

closing NAV of the day on which the cheque / demand draft / money is realized,

shall be applicable

Extra Al location of UnitsOn the 15th policy anniversary, Life Long gives you a 5% Extra Allocation on existing

units. These units are given if all the due premiums have been paid. The additions will

apply to the units attributable to regular premiums existing at the end of the specified


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policy anniversary. This benefit will not be applicable to units pertaining to the top-up

premiums or additional regular premiums.

Can I make lump-sum investments?You have the flexibility of making lump-sum investments through top-up premiums to

increase the investment value of your policy without increasing the sum assured

provided all due premiums till date are paid. The minimum top-up premium is Rs. 1,500.

The total of top-up premiums cannot exceed 25% of the total regular premiums paid till

date at any point in time. Units purchased from top-up premiums will be used to

allocate accumulation units to various investment funds in the same proportion asselected by you for your regular premiums

Can I increase the sum assured?You can increase your sum assured anytime before age 67 or the 27th policy year,

whichever is earlier, provided that all due premiums have been paid. This is subject to

the maximum increase allowed at that age. The sum assured under the riders (except

HCB) will also increase up to the maximum limit allowed under each rider. Evidence of

health may be required before such an increase in sum assured is made.

Can I increase my regular premium?You can increase your regular premiums through any of the 2 methods mentioned

below:

IndexationYou have the option to increase your regular premiums by an indexation rate at any

policy anniversary to protect the real value of your investment against inflation. The rate

of indexation will be in line with the increase in the Whole Sale Price Index (or in the

event that this Index ceases to be published such other index as the Company may


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select for this purpose). The base sum assured and sum assured of any attached rider

(except HCB) would also be increased by the corresponding indexation increase.

The maximum sum assured limits under the riders for the purchased policy would not

apply in this case. You can opt for indexation at the inception of the plan only. Once

opted for, this will become a default option unless altered by you. The indexation

benefit is available till age 67 or the 27th policy year, whichever is earlier.

Additional Regular Premiums (ARP)On every policy anniversary you have the option to increase the regular premium

amount through ARP at any time up to age 67 or the 27th policy year, whichever is

earlier. The minimum ARP is Rs. 1,000.

ARP will increase the sum assured automatically. The sum assured of any attached rider

(except HCB) would also increase provided the increased sum assured is within the

maximum limits allowed for the riders. Evidence of health may be required before such

an increase in sum assured is made.

When can I withdraw my money?You have the flexibility of making partial withdrawals from accumulation units in respect

of regular premiums as well as top up premiums provided all due premiums till date are

paid. Any partial withdrawal will first be made from the top up premium account (if any

and if eligible for withdrawal) followed by the regular premium account, if required.

Partial withdrawals from top-up premium account can be made after 3 years

from the allocation date of that top-up premium

Partial withdrawals from units pertaining to regular premiums can be made after

completion of 3 policy years


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Only 4 partial withdrawals are allowed in a policy year.

The minimum partial withdrawal is Rs. 5,000 and the fund value should not be

less than two times the annual premium

Till age 58 years, the total partial withdrawal with respect to regular premiums in

a policy year should not exceed 25% of the fund value pertaining to regular

premiums at the beginning of the policy year.

Post age 58 years this restriction does not apply. There is no restriction on the

maximum amount of partial withdrawal with respect to top-up premiums.

What are the riders that I can opt for?Apart from the death cover under the base plan, Life Long offers extra protection

through optional riders:

Accidental Death and Dismemberment Rider (AD&D): Coverage from risk of

death or dismemberment due to an accident

Critical Illness and Permanent Total Disability Rider (CI&PTD): Coverage against

contracting a critical illness or becoming totally and permanently disabled due to

a disease or an accident

Hospital Cash Benefit Rider (HCB): The Company will make fixed cash payments

for each day of hospitalization. These riders can be attached to the base plan at

inception only and the rider covers expire at 60 years of age.

What happens if I die?In the unfortunate event of your death or if your spouse dies before you (if jointly

assured) the following payments would be made:


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Higher of sum assured or fund value (value of initial and accumulation units in

respect of regular premiums) is payable

An additional sum assured would also be payable if AD&D rider has been opted

for and death is due to accident

The sum assured as well as the rider sum assured will be reduced by all partial

withdrawals made from regular premium account within the last 2 years prior to

death. If death occurs after age 60, the sum assured will be reduced by all

partial withdrawals made after age 58 till death

The value of units attributable to the top-up premiums, if any, would also be

payable

If you have invested in the With Profits fund, a final bonus, if any, will also be

payable

What are the charges on my pol icy?

Policy Administration Charge (PAC): Rs. 67 per month, which will increaseby 5% p.a. on the 1st of January each year. PAC will be deducted monthly by

cancellation of units from the accumulation unit account. If premiums are

discontinued, this charge would reduce to 60% of the charge applicable for the

premium paying policies

Init ial Management Charge (IMC): 10% p.a. of initial units during the first30 years. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a.on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth


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Fund. FMC will be applied on the fund while calculating NAV on a daily basis.

The maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA

Mortal ity Charge: The Mortality Charge will apply on the Sum at Risk (SAR =Sum Assured less the Fund Value pertaining to regular premiums). It will be

deducted by monthly cancellation of units from the accumulation unit account.

The Mortality Charge shall remain guaranteed throughout the policy term. Rider Premium Charges: Rider charges will be made by monthly cancellation

of units from the policy accumulation unit account. The AD&D rider charge will

apply on Sum Assured; the CI&PTD rider charge will apply on the Sum at Risk,

while the HCB rider charge is a fixed amount.

Rider charges may change based on the Companys claims experience and

approval by the IRDA. The Company shall charge the applicable service tax over

and above the mortality charge and rider premium charge mentioned above

Surrender Charge on Initial Units: [1-(1/1.10^N)] * value of initial units, atthe unit price, on the date of surrender on Accumulation Units pertaining to

regular premiums: [1-{1/(1 + x)}^N] * value of accumulation units, at their unit

price, on the date of surrender.

What are the tax benefits I get?Tax benefits will be as per Section 80C & Section 10(10D) of the Income Tax Act, 1961.

Insurance is tax free up to Rs. 100000 per annum and the returns on investment on

maturity of the policy are also tax free.

2) LIFE SHIELD


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Life Shield is an ideal life insurance plan that helps you protect your family's future.

While there can be no compensation for the loss of life, Life Shield ensures that your

family's financial needs are met should something unfortunate happen to you. Its aim is

to pay out a guaranteed cash amount in the unfortunate event of your death during the

term of the policy.

Key Features of Life Shield Life Shield is a low cost life insurance plan which guarantees to pay a lump sum

amount in case of your death during the term of the policy.

Life Shield can be purchased for any life between 18 to 55 years of age.

However, the maximum age of the life insured at expiry of the policy is 65 years.

The minimum and maximum policy terms are 5 years and 40 years, respectively.

The minimum annual premium is Rs.2000 and the minimum sum insured is

Rs.500000.

The sum insured of the policy can be increased (only up to 40 years of age)

once by 50% (subject to maximum increase of Rs.1,000,000) during the term of

the policy, without submitting any evidence of good health, if:

- You decide to increase the sum insured within three months of your

marriage.

- You decide to increase the sum insured within three months of the birth

of your child.

This option to increase the sum insured is available if the policy has been

accepted on standard rates. It can be exercised only when outstanding term of

the policy is at least 5 years and the policy is in force for full sum insured.

What are the benefits of this plan?


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The plan pays out a sum insured in the unfortunate event of your death before

the maturity date.

We offer preferred rates to customers opting for higher sum insured and to

Pension Plus policyholders of Aviva.

- You will receive a discount of Rs. 0.50 per thousand of sum insured on

standard premium rates if you are opting for a sum insured of Rs.

1,000,000 and above.

- If you are a Pension Plus policyholder, you will get an additional discount

of 7.5% on the premium rate stated in the Premium Rate Table of Life

Shield, provided your Life Shield policy has been accepted on standard

rates.

Il lustrationThis illustration is of a 30 year old, who pays premiums annually for a sum insured of

Rs. 1,000,000.

Policy Term(Years)BaseAnnualPremium(Rs.)

Base AnnualPremium forPension PlusPolicyholder(with 7.5%discount)(Rs.)

Discount*@50paise/'000(Rs.)

BaseAnnualPremium(Rs.)

AnnualPremium forPensionPlusPolicyholder(Rs.)10 3160 2923 500 3160 242315 3390 3136 500 3390 263620 3620 3349 500 3620 2849

PLANS MAINLY FOR SAVINGS & INVESTMENT

1) EASY LIFE PLUSEasy Life Plus is a simple unit linked endowment plan with the benefit of life protection.

By choosing an appropriate premium level and term, you can match the maturity date

of the plan to a specific savings need such as your childs education, wedding or any

other financial need. Easy Life Plus also offers an extra protection against accident

without requiring you to undergo any medical examinations.


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The entry age for the policy is 18 50 years. The policy term is 10, 15, 20 or 25 years.

Maximum age at maturity is 60 years. The minimum annual premium is Rs. 6000 and

maximum is Rs. 50000. Sum assured is calculated as higher of 10 times the annual

premium and 0.5 * policy term * annual premium subject to a minimum of Rs. 60,000

and a maximum of Rs. 50,000. The investment fund options available are protector,

growth and balanced funds.

On maturity, you can either take out the maturity proceeds (fund value in respect of

regular premiums) and terminate the policy or opt for a settlement option wherein all or

part of maturity proceeds would be paid out to you as structured payouts in accordance

with the settlement option then offered by the Company. The settlement option is

available only on Unit Linked funds and only if all due premiums have been paid.

Sample Il lustration: This illustration is for a 30 year old male who pays premiumsannually for a period of 20 years:

AnnualPremium Su mAssured With Profits Fund Unit Linked (BalancedFund)P ro ject ed Matur it y Value (Rs .) a ssuming g rossreturns6% 10% 6% 10%

7500 75000 186041 263391 195678 308956

15000 150000 398277 563041 421045 662236

25000 250000 680616 961711 718325 1128244

50000 500000 1386459 1958382 1461524 2293258

What happens if I die?In case of a non accidental death in the first policy year 50% of the sum assured or

fund value which ever is higher is paid. From the 2nd policy year, higher of sum assured


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or fund value is payable. In case of accidental death an additional sum assured is

payable.

What are the charges on my pol icy? Policy Administration Charge (PAC): Rs. 43 per month, which will increase

by 5% p.a. on the 1st of January each year. PAC will be deducted monthly by

cancellation of units from the accumulation unit account. If premiums are

discontinued, this charge will reduce to 60% of the charge applicable for the

premium paying policies

Init ial Management Charge (IMC): 5% p.a. of initial units during the policyterm. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1% p.a.on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on Growth

Fund. FMC will be applied on the fund while calculating NAV on a daily basis.

The maximum FMC on any fund is 2% p.a. subject to prior approval by the IRDA

Mortal ity Charge: The Mortality Charge will apply on the Sum at Risk (SAR =Sum Assured less the Fund Value). It will be deducted by monthly cancellation of

units from the accumulation unit account. The Mortality Charge shall remain

guaranteed throughout the policy term. The charge for the ADPTD benefit will

apply on Sum Assured and will remain flat throughout the term of the policy.

Premium Allocation Charge:

Annual PremiumAllocation rate

Yearly and half yearly

premium frequency

Quarterly and Monthly

premium frequency


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< Rs. 7500 93% 92%Rs. 7500 Rs. 9999 94% 93%Rs. 10,000 and above 95% 94%

2) YOUNG ACHIEVER

Young Achiever is a regular premium life insurance product designed to meet the

financial needs of your children - be it higher education, marriage, starting a career or a

business, or any other need. The plan can be purchased on the life of any one of

the parents with the child as the nominee. Through this policy, you save regularlyto meet your childrens needs, and at the same time their financial needs are taken care

ofshould something unfortunate happen to you.

The entry age for this policy is 21 55 years. The term of the policy is 8 to 21 years

(maximum age at maturity 65 years). If your childs age is between 0 13 years, the

policy term will be 21 minus the age of your child at entry. For example if the age of

your child is 10 years at the time of purchasing the policy, the policy term will be 11

years (21 10). The minimum annual premium payable is Rs. 6000. The minimum sum

assured is Rs. 36000 and maximum sum assured is Rs. 10,000,000. For each policy

term there is a low and high sum assured to choose from ranging from 6 to 21 times

the annual premium.

Can I withdraw my money during the pol icy term?You have the flexibility of making partial withdrawals from accumulation units in respect

of regular premiums as well as top up premiums provided all due premiums till date are

paid. Any partial withdrawal will first be made from the top up premium account (if any

and if eligible for withdrawal) followed by the regular premium account, if required.


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Partial withdrawals from top-up premium account can be made after 3 years

from the allocation date of that top-up premium

Partial withdrawals from units pertaining to regular premiums can be made in

the last 4 policy years. There is no restriction on the maximum amount of partial

withdrawal with respect to top-up premiums

The minimum partial withdrawal is Rs. 5,000 and the fund value should not be

less than two times of annual premium

Only 4 partial withdrawals are allowed in a policy year

No partial withdrawal can be made from the initial units

What are the charges on my pol icy? Pol icy Administrat ion Charge (PAC): Rs. 57 per month, which will

increase by 5% p.a. on the 1st of January each year. PAC will be deducted

monthly by cancellation of units from the accumulation unit account. If

premiums are discontinued, this charge would reduce to 60% of the charge

applicable for the premium paying policies

Init ial Management Charge (IMC): 10% p.a. of initial units during thepolicy term. IMC will be deducted monthly from initial units

Fund Management Charge (FMC): 1% p.a. on With Profits Fund, 1%p.a. on Protector Fund, 1.25% p.a. on Balanced Fund and 1.50% p.a. on


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Growth Fund. FMC will be applied on the fund while calculating NAV on a

daily basis. The maximum FMC on any fund is 2% p.a. subject to prior

approval by the IRDA

Mortal ity Charge: The Mortality Charge will apply on the Sum Assured. Itwill be deducted by monthly cancellation of units from the accumulation unit

account. The Mortality Charge shall remain guaranteed throughout the policy

term.

Sample Mortal ity Charges

Age (Male) 25 years 35 years 45 years 55 yearsAnnual Mortality charges

per 1000 sum assured

1.19700 1.50675 3.43770 9.47310

3) LIFE SAVERLife saver is a flexible endowment savings plan. Its entry age is 18 65 years. This

policy can be taken jointly with your spouse. The sum assured is calculated as

annual premium * cover level; where cover level ranges from 5 68 depending

upon the age at entry and the policy term. Since it is an endowment plan the sum

assured is fixed right from the acceptance of the policy. The minimum policy term is

5 years and maximum age at maturity is 70 years. The policy term may be selected

according to the goals of the prospect.

The minimum premium payable is Rs. 6000 and there is no maximum limit. This is a

contribution based plan. It means that the customer can decide how much money

he wants to set aside in his investment. The premium payment term is the same as

the policy term and it encourages disciplined savings. Top up premiums are allowed


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with a minimum top up of Rs. 1500 and a maximum of up to 25% of the total

regular premium paid. The allocation rate for the top up premium is 96%.

A policy holder can avail a premium holiday 6 months after the 5 th policy year for 4

times during the policy term. During this time the policy does not lapse. A grace

period of 30 extra days are given to the policy holder to pay premium beyond the

premium paying due date. On the death of the policy holder the higher of the sum

assured or fund value is paid. The sum assured protects the policy holder and their

corpus whereas invest able premiums grow the savings component.

The customer has the option to return the policy within 15 days and no surrender

penalty would be levied on the same. You can experience the service and if you are

not satisfied you have a chance to cancel the policy. This is called the free look

period. Tax free partial withdrawal is allowed after the three policy years. No

surrender value is payable in the first three policy years. If the policy has lapsed it

can be reinstated within two years from the date of the first unpaid premium. The

settlement option is available at maturity.

4) LIFE BONDA wide age band can opt for this policy. The eligibility is 1 65 years. There are no

riders available with this policy. The minimum sum assured is Rs. 31,250 and there is no

maximum limit. The minimum premium payable is Rs. 25000 and there is no maximum

limit. The customer decides how much money he wants to set aside in this investment.

Only single premium is allowed. No additional regular premiums are allowed. The

minimum top up premium is Rs. 6250 and the maximum top up premium is 25% of the

total regular premiums paid. The allocation rate for top ups is illustrated as below:

Premium amount (Rs.) Allocation Rate (%)< Rs. 35000 97%

Rs. 35000 Rs. 99999 99%


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Rs. 100000 Rs. 149999 101%Rs. 150000 and above 102%

Policy Charges

Policy administration charge: 1.5% p.a. of the single premium for the firstyear and 1% p.a. thereafter. This is also true for the top up premiums.

Fund management charges: 1% on with profit and protector, 1.25% on thebalanced fund and 1.5% on the growth fund.

Mortal ity Charges: Apply on the sum at risk which is the sum assured less thefund value

5) SAVE GUARDThis policy is a limited premium paying term whole life plan. The eligibility age for this

plan is 18 50 years. The minimum premium payable is Rs. 12000 and the maximum is

Rs. 360000. Annual premiums have to be multiples of 6000.

The sum assured is calculated as 0.5*PT*AP and the maximum is Rs. 18,00,000 for 10,

15 years term and 12,00,000 for 20, 25 and 30 years term. The premium paying term is

10, 15, 20, 25 and 30 years. The minimum policy term is 10 years and maximum is 30

years. The maximum age at maturity is 70 years. The three funds available for

investment are secure fund, balanced fund and growth fund.

Policy proceeds are tax free under the section 10 (10D) of the Income Tax Act, 1961

(provided the total premium paid in any policy year does not exceed 20% of the capital

sum assured). A tax deduction is also applicable under section 80C of the Income Tax

Act, 1961.

6) TREASURE PLUSTreasure plus is a savings cum protection plan. The entry age is 18 to 50 years. The

maximum age at maturity is 65 years. This policy has various premium payment terms


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of 10, 15 and 20 years. The minimum annual premium is Rs 12000/- and the minimum

sum assured is 10 times annual premium subject to a maximum of 6 lakhs. The

investment option available is 100% investment in secure fund. The composition of the

fund is 0-20% equity 50-100% debt and 0-20% money market.

The maturity benefit is higher of the fund value or minimum maturity value where

minimum maturity value is equal to annual premium into policy term. The administration

charges is Rs 38/- per month. The initial management charge of 7% per annum will be

charged on initial units during the premium paying term. Mortality charges are based on

gender, age and term of the policy.

7) FREEDOM LIFE PLANFreedom life plan is a limited payment term investment cum protection plan. The

eligibility age is 18 60 years. This policy can cover you and your spouse for the same

premium amount. The maximum age at maturity is 70 years. The policy term is 10 30

years. The minimum premium payable is Rs. 25000 p.a. for 10, 15, 20, 25 or 30 years

and a minimum of Rs. 200000 p.a. for 3 or 5 years.

The minimum sum assured is 0.5*PT*AP and the maximum sum assured is 1.25*PT*AP.

There is an option of increasing the sum assured before the age of 40 years by 50%,within 3 months of marriage or within 3 months of the birth of the child. This feature

helps the policy holder to alter the policy to suit his life stage and need. There are

guaranteed loyalty additions of 5% on the 10th policy year and 3% on every subsequent

5th policy anniversary till the date of maturity. The HCB, CIPTD and ADD riders are

available.

Composition of fundsSecurity Secure Balanced Growth

Equity 0% 20% 0% - 45% 20% - 60%

Debt 50% - 100% 50% - 90% 0% - 50%

Money market 0% - 30% 0% - 30% 0% - 30%


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8) PENSION PLUSIt is a regular savings personal pension plan. The eligibility age is 18 65 years. The

term of the policy is equal to the premium paying term (maximum up to the age of 70

years). You have the option to choose term based on retirement age. The minimumpremium is Rs. 6000 per annum for regular premium and Rs. 100,000 for single

premium.

The term of the policy is subject to a maximum of 70 years. The minimum vesting is 40

years and maximum vesting age is 70 years. You have the provision to start your

pension from as early as 40 years of age. The allocation rate is 98% for below Rs.500,

000 and 99% for above Rs. 500,000.

The maturity benefit is 100% of the corpus used to purchase regular pension from the

annuity options available and commutation of 33.33% and the balance for purchasing

pension from Aviva or the open market.

HUMAN RESOURCEWith a strong sales force of over 16,000 Financial Planning Advisers (FPAs), Aviva has

initiated an innovative and differentiated sales approach to the business. Through the

Financial Health Check (FHC) Avivas sales force has been able to establish its

credibility in the market. The FHC is a free service administered by the FPAs for a need-

based analysis of the customers long-term savings and insurance needs. Depending on

the life stage and earnings of the customer, the Financial Health Check assesses and

recommends the right insurance product for them.

ORGANIZATION STRUCTURE


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At Aviva in Bangalore, the internal structure of the organization was as given above.

The branch was headed by the zonal manager. He controlled the south zone. The

branch manager was the next person in authority. All strategic decisions about the

firms future were taken by these two individuals. There job profile was to monitor the

performance of the organization and see that all the operations were going smoothly.

The HR department was responsible for recruiting new financial planning advisors. The

department was headed by a HR Manager. The main sales force comprised of the sales

managers and the advisors. The sales managers had to manage teams of 15 20

advisors. They would help in filling out applications, providing relevant databases to

prospect customers, accompany advisors on their sales calls and make sure everyone in

the team is motivated.

The financial planning advisors are the main link between the customer and the

company. They are the individuals who try to market the insurance policies to

prospects. They are provided training for the same. Every advisor must pass the

insurance examination as specified by the IRDA. Only a licensed advisor is allowed to

Zonal Manager

Branch Manager

Sales ManagerHR

DepartmentSales Manager

Financial Planning Advisors

(team)

Operations

Department

Tele callers

(Recruiting) GeneralStaff


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procure business for the firm. Apart from this training is provided on unit linked funds

and the savings/ protection products Aviva offer.

INTROUCTION TO UNIT LINKED FUNDSUnit linked plans are based on the component of the premium or the contribution of the

customer towards the plan. This contribution can be in different modes like yearly, half

yearly, quarterly and monthly. Unit linked plans have multiple benefits like life

protection, rider protection, savings, transparency, investment choices, liquidity and

planning for taxes. These plans work like mutual funds.

The premium is collected from the policy holder. He is allotted a certain number of units

based of his contribution. The Net Asset Value is the value of each unit of the fund. It isfound by subtracting the charges and current liabilities from the current assets and

investments and dividing this number by the total number of outstanding units.

Let us take an example. There are 100 investors and each invests Rs. 10 in a fund. The

total value of the fund is Rs. 1000 and each person is allotted 1 unit of Rs 10. Now the

money (Rs. 1000) is invested in the debt or equity market. Suppose the fund value

increased by 20%. As a result the Rs. 1000 invested became Rs. 1200. Hence the value

of every investor is now Rs. 12 and not Rs. 10.

PICTORIAL REPRESENTATION


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NATIONAL & INTERNATIONAL PRESENCEAviva has over 59000 employees serving 40 million customers worldwide. It is present

in the United Kingdom, Asia, Australia, Canada, China, France, Germany, Cyprus,Greece, Hong Kong, Hungary, India, Ireland, Italy, Luxembourg, Netherlands, Poland,

Romania, Russia, Singapore, Spain, Sri Lanka, Turkey and USA. Aviva has 113 branches

in India supporting its distribution network. Aviva products are available is 497 towns

and cities across India thanks to the Bancassurance partner locations.

PREMIUM CONTRIBUTION

(LESS) CHARGES

(LESS) MORTALITY CHARGES

INVESTIBLE PREMIUM

INVESTED AFTER

UNITIZATION

LIFE PROTECTION

FUND VALUE


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CHAPTER IV

FINANCIALANALYSIS

FINANCIAL ANALYSIS


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Aviva Life Insurance is listed on the Bombay stock exchange. The chart below gives the

companies performance from 31 Dec 2005 31 Dec 2006.

Net Sales 18.06 46.96 36.55 15.06Other Income 0.02 0.04 - 10.5Total Income 18.08 47 36.55 25.56Expenditure -17.79 -46.79 -36.05 -14.9Operating Profit 0.3 0.21 0.5 10.67Interest - -0.01 - -Gross Profit 0.29 0.2 0.5 10.67Depreciation -0.06 0.15 -0.06 -Profit before Tax 0.24 0.34 0.44 10.67Tax -0.04 -0.1 -0.01 -Profit after Tax 0.2 0.24 0.43 10.67Net Profit 0.2 0.24 0.43 10.67Equity Capital 14.99 14.99 14.99 14.99Reserves - - - 14.71EPS 0.13 0.16 0.29 7.12

The chart below gives the performance from 31 Dec 2004 31 Dec 2005:

Net Sales 15.06 - - - -Other Income 10.5 0.21 2.45 - 0.02Total Income 25.56 0.21 2.45 - 0.02Expenditure -14.9 -0.13 -0.06 -0.35 -Operating Profit 10.67 0.08 2.39 -0.35 0.02Gross Profit 10.67 0.08 2.39 -0.35 0.02Depreciation - - - -0.07 -Profit before Tax 10.67 0.08 2.39 -0.42 0.02Profit after Tax 10.67 0.08 2.39 -0.42 0.02Net Profit 10.67 0.08 2.39 -0.42 0.02Equity Capital 14.99 14.99 14.99 14.99 14.99Reserves 14.71 - - - -EPS 7.12 0.05 1.59 - -

The companys total income is Rs. 18.06 million. Last year it was Rs. 25.56 million. This

means that net income or net premium collected has decreased since the last year. The

expenses have increased by 2.8 million but the net income has not. Hence the

companies performance has fallen in the year 2006. Operating profits were only 0.3

million down from 10.67 million last year. Earnings per share also fell from Rs. 7.12 to

Rs. 0.13.


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The company faces stiff competition from other private player like Bajaj Allianz, ICICI

Prudential, HDFC Standard Life Insurance, Tata Aig and SBI. Now it will face additional

competition from Bharti Axa and Reliance Life Insurance (both companies are into the

telecom sector as well). ICICI, HDFC and SBI are large banks which also provide the

service of insurance. Tata and Bajaj are mainly companies in the auto section and have

diversified into this field.

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTSParameters RBI Bonds Fixed Deposits Mutual Funds Unit linked

Safety High High Medium HighLiquidity None High High HighReturns Low Low High High

Life Cover 1 time amount 1 time amount 1 time amount 10 timesTax benefits Tax free Taxed Taxed Tax free

We find that life insurance unit linked plans is a good area to invest money in as it

provides liquidity, safety, high returns, life cover and tax benefits in a single plan. Aviva

offers the option of indexation to beat inflation. Risk is reduced to a large extent as the

company invests in a diversified portfolio of stocks.


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CHAPTER VCOMPETITIVE

ANALYSIS

COMPETITIVE ANALYSISLIFE INSURANCE CORPORATION OF INDIA (LIC)


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LIC has an excellent money back policy which provides for periodic payments of partial

survival benefits as long as the policy holder is alive. 20% of the sum assured is payable

after 5, 10, 15 and 20 years and the balance 40% is payable at the 20th year along with

accrued bonus. (www.lic.com)

For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and 20

years and the balance 40% plus the accrued bonus becomes payable at the 25th year.

An important feature of these types of policies is that in the event of the death of the

policy holder at any time within the policy term the death claim comprises of full sum

assured without deducting any of the survival benefit amounts which have already been

paid. The bonus is also calculated on the full sum assured.

Aviva does not have a money back policy. It could offer a money back plan and capture

some portion of this market. While marketing insurance products I found that many

customers wanted to purchase these plans.

LIC offers 66 different plans; plans are formulated for specific occasions whole life

plans, term assurance plans, money back plan for women, child plans, plans for the

handicapped individuals, endowment assurance plans, plans for high worth individuals,

pension plans, unit linked plans, special plans, social security schemes diversified

portfolio of products. Aviva could diversify its product portfolio. It could add more plans

for high worth individuals and women.

The minimum premium payable for an LIC policy is Rs. 5000 p.a. It increases at Rs.

1000 per year. At Aviva minimum premium for easy life plus is Rs. 6000 which increases

in multiples of 6000 per year. Hence Aviva should reduce the minimum premium

amount payable to compete with LIC. The guaranteed sum assured in case of the death

of the policyholder is larger in LIC than in Aviva.

Switching from one fund to another is cheaper for LIC it is only Rs. 100 to switch from

one fund to another whereas at Aviva it is Rs. 500. More number of switches is allowed

free per year in the case of LIC.


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There are however some drawbacks to investing in LIC. The allocation charges are

higher. Therefore the money invested in the fund is lower than what Aviva will invest.

This is true across all policies. Aviva covers its costs over the policy term whereas LIC

charges a high amount for the first five years and then charges a very nominal amount

from the 6th year onwards. The investment benefit is not as high as Aviva.

ICICI PRUDENTIALICICI Prudential is a stiff competitor for Aviva. The company is a merger between ICICI

Bank which is the biggest private bank in India and Prudential Plc which is a global life

insurance company.

The company has an investment plan which is market related Invest Shield Life. In

this plan even if the market falls, the premium will be returned to investors. It is a

guaranteed plan which ensures the company carefully invests your money. The stock

market performance of ICICI Prudential is much better than Aviva. The returns on the

growth fund were 46.28% compared to the 39.59% offered by Aviva. Customers are

attracted by higher returns and this is a plus point for Prudential.

The company is very well advertised. The advertisements are showcased in movies,

television, newspapers, magazines, bill boards, radio etc. The company has an excellent

brand ambassador Mr. Amitabh Bacchan. His promotion of the company builds trust

and faith in the minds of our people.

However the charges are very high in the plans offered by ICICI Prudential. It is 35%

during the first year, 15% in the next year and 3% from the third year onwards. Also a

higher minimum premium of Rs. 8000 is charged. Hence the policies are not accessible

to the lower strata of the society. (Source: www.iciciprulife.com)

BIRLA SUN LIFE


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Birla Sun Life Insurance Company Limited is a joint venture between The Aditya Birla

Group, one of the largest business houses in India and Sun Life Financial Inc., a leading

international financial services organization. The local knowledge of the Aditya Birla

Group combined with the expertise of Sun Life Financial Inc., offers a formidable

protection for your future. (Source: www.birlasunlife.com)

The Aditya Birla Group has a turnover close to Rs. 33000 crores with a market

capitalization of Rs. 53400 crores (as on 31st March 2006). It has over 72000

employees across all its units worldwide. It is led by its Chairman - Mr. Kumar

Mangalam Birla. Some of the key organizations within the group are Hindalco and

Grasim.

Sun Life Financial Inc. and its partners today have operations in key markets worldwide,

including Canada, the United States, the United Kingdom, Hong Kong, the Philippines,

Japan, Indonesia, India, China and Bermuda. It had assets under management of over

US$343 billion, as on 31st March 2006. The company is a leading player in the life

insurance market in Canada.

Being a customer centric company, BSLI has invested heavily in technology to build

world class processing capabilities. BSLI has covered more than a million lives since

inception and its customer base is spread across more than 1000 towns and cities in

India. All this has assisted the company in cementing its place amongst the leaders in

the industry in terms of new business premium income. The company has a capital base

of 520 crores as on 31st July, 2006.

Its Flexi Life Line Plan offers life long insurance cover till the policy holder is 100 years

of age. There are guaranteed returns of 3% p.a. net of policy charges after every 5

years from the eleventh policy year onwards. However the charges are very high. The

initial charges for the first year are 65%. Hence the fund value is greatly reduced.

BAJAJ ALLIANZ


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Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience in

over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55 years

in the Indian market. Together they are committed to offering you financial solutions

that provide all the security you need for your family and yourself. Bajaj Allianz is the

number one private life insurer for the year 2005 2006. It is leading by 78 crores. It

has experienced a whopping growth of 216% in the last financial year.

The company has sold 13, 00,000 policies and is backed by 550 offices across India. It

offers travel insurance, motor insurance, home insurance, health and corporate

insurance. The mortality charges are lower than Aviva. The entry age could be zero

years which allow even new born babies to be insured. (Source: www.bajajallianz.com)

TATA AIGTata Aig is a joint venture between the Tata group and American International Group

Inc. In one of the plans the company offers hospital cash benefit wherein it will pay Rs.

2500 per day in case of hospitalization and Rs.12.5 lakhs in case the person suffers

from any critical illness. Annual premium is much less (about Rs. 6712) to avail such a

good benefit. Charges are relatively low compared to Aviva for some policies.

The company offers high coverage plans at low cost. There is a plan even for a policy

term of 1 year. Your family can continue to enjoy their current lifestyle even in the case

of something happening to you. These plans are very flexible and Aviva could adopt this

idea of insuring individuals for short periods of time. For example; there is a family of

four. The only earning member is the father.

He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is able to

repay the loan with his current salary in 15 years. The problem arises if something were

to happen to him within these fifteen years. Not only will the family face the emotional

and financial loss of their father but they will also have to repay the home loan or risk

being homeless. (Source: www.tataaig.com)


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CHAPTER VI

MARKETING

PROBLEMS


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MARKETING PROBLEMSThe old and out dated technique of tele marketing is used to prospect customers. More

modern techniques must be adopted. The company must sponsor shows and give

presentations in corporate houses. The financial health check must be performed for

every prospect to assess his/her true financial position and needs. Some of the advisors

skip this vital step and the prospect ends up with a plan they do not appreciate and

soon surrender or discontinue.

Some of the main problems in marketing the policies are:

Large amount of competition (15 players in the market)

Other brands are well advertised and have higher recall value

LIC is considered a safer option

Face competition from banks and mutual funds

High premium policies are difficult to market

Incorrect perception about insurance

Interested prospects might have a lack of time and postpone investments

Customers get defensive if you cold call

Short term plans are available only at large premium

Customers do not have risk appetite to invest in shares

Some prospects have already invested and are not interested in further

investments

Consumers dont want to undertake medical examinations

Large amount of documentation

Customers do not like their money locked up for many years

Lack of awareness about the unit linked funds in the market


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No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT

Advertise about the company and its products it motivates individuals to

purchase insurance

Create a positive perception about insurance

Speak about the good features a plan offers like high returns, life cover, tax

benefits, indexation, accident cover while prospecting customers

Try to sell the product/plan which the consumer requires and not the plan where

the advisors benefit is higher

Improve the efficiency in operations

Bring out policies with small premiums payable for short periods of time Rs.

5000 Rs. 10000 per annum for 10 years

Attract the youth of India with higher returns on investment as returns are the

motivating factor which influence purchase of insurance

Promote insurance in colleges and corporate houses

Promote Aviva as an Indian Company to build trust

Aviva is actually Aviva Dabur Dabur has a good brand name and this brand

name could be used to give a push to its products

Aviva could have a brand ambassador or a mascot to promote its services

Should have partial withdrawals from the first year onwards

Tap the rural market where there is large potential

Diversify product portfolio

Make products more straight forward reduce complexities


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CHAPTER VIIANALYSIS

&INTERPRETATION


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ANALYSIS & INTERPRETATION A S U R V E Y O N T H E L I F E I N S U R A N C E I N D U S T R Y I N I N D I A

AGE GROUP OF SURVEYED RESPONDENTSTABLE 1:Age group No. of Respondents

18 - 25 years 62

26 - 35 years 33

36 - 49 years 22

50 - 60 years 12

More than 60 years 2

CHART 1:

47%

25%

17%

9%

2%

18 - 25 years

26 - 35 years

36 - 49 years

50 - 60 years

More than 60 years

Analysis:From the chart above we find that 47% of the respondents fall in the age group of 18

25 years, 25% fall in the age group of 26 35 years and 17% fall in the age group of

36 49 years.


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Therefore most of the respondents are relatively young (below 26 years of age). These

individuals could be induced to purchase insurance plans on the basis of its tax saving

nature and as an investment opportunity with high returns.

Individuals at this age are trying to buy a house or a car. Insurance could help them

with this and this fact has to be conveyed to the consumer. As of now many consumers

have a false perception that insurance is only meant for people above the age of 50.

Contrary to popular belief the younger you are the more insurance you need as your

loss will mean a great financial loss to your family, spouse and children (in case the

individual is married) who are financially dependent on you.

GENDER CLASSIFICATION OF SURVEYED RESPONDENTSTABLE 2:

Particulars No. of Respondents

Male 113

Female 17

CHART 2:

Gender of the respondents

17

113

0

20

40

60

80

100

120

Male Female

No.ofrespond

Male

Female

CUSTOMER PROFILE OF S URVEYED RESPONDENTS


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TABLE 3:Customer profile No. of respondents

Student 30

Housewife 3

Working Professional 55

Business 24

Self Employed 12

Government service employee 7

CHART 3:

23%

2%

43%

18%

9%

5%

Student

Housewife

Working Professional

Business

Self Employed

Government service

employee

Analysis:From the chart above it can clearly be seen that 43% of the respondents are working

professionals, 23% are students and 18% are into business. Therefore the target

market would be working individuals in the age group of 18 25 years having surplus

income, interested in good returns on their investment and saving income tax.

MARKET SHARE OF LIFE INSURANCE COMPANIES


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TABLE 4:LIFE INSURER NUMBER OF POLICIES

HDFC STANDARD LIFE 5

BIRLA SUN LIFE 4AVIVA LIFE INSURANCE 8

BAJAJ ALLIANZ 9

LIC 64

TATA AIG 8

ICICI PRUDENTIAL 14

ING VYSYA 7

BHARTI AXA 3

OTHERS 2

CHART 4:

4%3%

6%

7%

53%

6%

11%

6%2% 2%

HDFC STANDARD LIFE

BIRLA SUN LIFE

AVIVA LIFE INSURANCE

BAJAJ ALLIANZ

LIC

TATA AIG

ICICI PRUDENTIAL

ING VYSYA

BHARTI AXA

OTHERS

Analysis:


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In India, the largest life insurance company is Life Insurance Corporation of India. It has

been in existence in India since 1956 and is completely owned by the Government of

India. Today the organization has grown to 2048 offices serving 18 crore policies and

has a corpus of over 340000 crore INR.

The largest private insurance company in India is ICICI Prudential. It is a joint venture

between ICICI Bank and Prudential plc, a leading international financial services group

headquartered in the UK. In just 4 years time (till March 31, 2004) the company has

successfully sold 430000 policies with a premium income in excess of 980 crores.

The second largest private life insurance company is Bajaj Allianz. It has more than 550

offices and over 60000 insurance consultants. It had a premium income of 221 crores as

on March 31, 2004. This year it has gone past ICICI Prudential to become the number

one private life insurance company in India with a premium of 3134 crores.

ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

TABLE 5:

Premium paid (p.a.) No. of respondents

Rs. 5000 - Rs. 10000 45

Rs. 10001 - Rs. 15000 29

Rs. 15001 - Rs. 24900 19

Rs. 25000 - Rs. 50000 12

Rs. 50001 - Rs. 60000 5

Rs.60001 - Rs. 80000 2

Rs. 80001 - Rs. 100000 3

CHART 5:ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE


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39%

25%

17%

10%

4% 2% 3%

Rs. 5000 - Rs. 10000

Rs. 10001 - Rs. 15000

Rs. 15001 - Rs. 24900

Rs. 25000 - Rs. 50000

Rs. 50001 - Rs. 60000

Rs.60001 - Rs. 80000

Rs. 80001 - Rs. 100000

Analysis:From the chart above we find that, 39% of the respondents surveyed pay an annual

premium less than Rs. 10001 towards life insurance. 25% of the respondents pay an

annual premium less than Rs. 15001 and 17% pay an annual premium less than Rs.

25000. Hence we can safely say that Aviva Life insurance would be able to capture the

market better if it introduced products/plans where the minimum premium starts at Rs.

5000 p.a.

Only 19% of the respondents pay more than Rs. 25000 as premium and most products

sold by Aviva have Rs.25000 as the minimum annual premium amount. They should

introduce more products like Easy Life Plus and Safe Guard where the minimum

premium is Rs.6000 p.a. and Rs. 12000 p.a. respectively. This would definitely increase

their market share as more individuals would be able to afford the policies/plans

offered.

POPULAR LIFE INSURANCE PLANS


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TABLE 6:

Type of Plan No. of Respondents

Term Insurance Plans 53

Endowment Plans 62

Pension Plans 8

Child Plans 4

Tax Saving Plans 10

CHART 6:

POPULAR LIFE INSURANCE PLANS

39%

45%

6%

3%7%

Term Insurance Plans

Endowment Plans

Pension Plans

Child Plans

Tax Saving Plans

Analysis:From the chart given above we can clearly see that 45% of the respondents hold

endowment plans and 39% of the respondents hold term insurance plans. Endowment

plans are very popular and serve two purposes life cover and savings.


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If the policy holder dies during the policy term the nominee gets the death benefit that

is, sum assured and accumulated bonus. On survival the policy holder receives the

survival benefit with a bonus.

A term plan is a pure risk cover plan wherein the insured pays a lower premium for a

higher sum assured. Term insurance is the cheapest form of insurance and helps the

policy holder insure himself for a relatively low premium. For the returns sensitive

investor term plans do not find favor as they do not offer a return in case the individual

does not die during the policy term.

AWARENESS OF UNIT LINKED INSURANCE PLANSTABLE 7:

Awareness of Unit Linked Plans No. of Respondents

Yes 74

No 56

CHART 7:AWARENESS OF UNIT LINKED INSURANCE PLANS

57%

43%Yes

No


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Analysis:From the chart given above we find that 57% of the respondents are aware of unit

linked life insurance plans and 43% are not aware of such plans. These plans should be

promoted through advertising. The company can advertise through television, radio,

newspapers, bill boards and pamphlets. This would increase awareness and arouse

curiosity in the minds of the consumer which would enable the company to market its

products more effectively.

Unit linked plans are those where the benefits are expressed in terms of number of

units and unit price. They can be viewed as a combination of insurance and mutual

funds. The number of units a customer would get would depend on the unit price when

they pay the premium.

When the policy matures the individual gets his fund value. The value of his fund is

calculated by multiplying the net asset value and number of units held by them on that

day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

TABLE 8:

Willingness to spend on premium No. of respondents Percentage

Less than Rs. 6000 20 15%

Rs. 6001 - Rs. 10000 35 27%

Rs. 10001 - Rs. 25000 54 41%

Rs. 25001 - Rs. 50000 20 15%

Rs. 50001 - Rs. 100000 2 2%

CHART 8:


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CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

0

10

20

30

40

50

60

Less than Rs.

6000

Rs. 6001 - Rs.

10000

Rs. 10001 - Rs.

25000

Rs. 25001 - Rs.

50000

Rs. 50001 - Rs.

100000

Analysis:From the graph above, we can clearly see that 41% of the respondents would be willing

to spend between Rs. 10001 Rs. 25000 for life insurance. 27 % would be willing to

spend between Rs. 6001 Rs. 10000 per annum. Only 15% would be willing to spend

more than Rs. 25000 per annum as life insurance premium.

We could say that the maximum premium payable by most consumers is less than Rs.

25000 p.a. This is further reduced as most customers have already invested with LIC,

ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.

Aviva is faced with a large amount of competition. There are 15 insurance companies inIndia inclusive of LIC. Hence to capture a larger part of the market the company could

introduce more reasonable plans with lesser premium payable per annum.

CHART SHOWING IDEAL POLICY TERM


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TABLE 9:Ideal policy term No. of respondents

3 - 5 years 25

6 - 9 years 2010 - 15 years 46

16 - 20 years 18

21 - 25 years 12

26 - 30 years 2

More than 30 years 1

Whole life Policy 6

CHART 9:CHART SHOWING IDEAL POLICY TERM

19%

15%

35%

14%

9%

2%

1%5%

3 - 5 years

6 - 9 years

10 - 15 years

16 - 20 years

21 - 25 years

26 - 30 years

More than 30 years

Whole life Policy

Analysis:


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From the chart given above it can be seen that 35% of the respondents prefer a policy

term of 10 15 years, 19% prefer a term of 3 5 years and 15% prefer a term of 6 9

years. This means that Aviva could introduce more plans wherein the premium paying

term is less than 15 years.

The outlook of insurance as a product should be changed from something which you

pay for your whole life (whole life policy) and do not receive any benefit (the nominee

only receives the benefit in case of your death) to an extremely useful investment

opportunity with the prospects of good returns on savings, tax saving opportunities as

well as providing for every milestone in your life like marriage, education, children and

retirement.

FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCETABLE 10:

Parameter No. of Respondents

Advertisements 17

High returns 42

Advice from friends 23

Family responsibilities 45

Others 8

CHART 10:

13%

31%

17%

33%

6%

Advertisements

High returns

Advice from friends

Family responsibilities

Others

Analysis:


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From the chart above it can be seen that 33% of the respondents purchase life

insurance to secure their families, 33% take life insurance to get high returns, 17%

purchase insurance on the advice of their friends and 13% purchase insurance because

of the influence of advertisements.

The main purpose of insurance is to cover the financial or economic loss that occurs to

the family in case of the uncertain death of the policy holder. But nowadays this trend is

changing. Along with protection (life cover), a savings element is being added to

insurance.

With the introduction of the new unit linked plans in the market, policy holders get the

option to choose where their money will be invested. They can invest their money in the

equity market, debt market, money market or a combination of these. The debt and

money markets usually have low risk attached whereas the equity market is a high risk

investment option.

PREFERRED COMPANY TYPE OF THE RESPONDENTS

TABLE 11:Type of Company No. of Respondents Percentage

Government Owned Company 67 47%

Public Limited Company 33 23%

Private Company 26 18%

Foreign Company 17 12%

CHART 11:


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PREFERRED COMPANY TYPE OF THE RESPONDENTS

0

10

20

30

40

50

60

70

80

Government OwnedCompany Public LimitedCompany Private Company Foreign Company

Analysis:From the graph above we find that 47% of the respondents preferred to purchase

insurance from a government owned company, 23% of the respondents preferred to

purchase insurance from a public limited company and only 12% of the respondents

preferred a foreign based company. Aviva could be promoted as an essentially Indian

company with a foreign tie up. Its tie up with Dabur India, a trusted name in an Indian

household and a pharmaceutical giant, could be used to give a push to its products/

services.

Heavy advertising through television, newspapers, magazines and radio is required.

Very few people know that Aviva is one of the oldest insurance companies in th

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