Download pdf - Analysis of Indian Insurance Industry

8/6/2019 Analysis of Indian Insurance Industry

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Objectives and Research Methodology

Objective of research

To understand the likes, preferences of investors and their currentinvestment pattern.

To know the different media that influences the purchase decision of

investor while investing in insurance policies.

To know the factors that influences the investor while taking the decision

to invest .

To know the investors preference especially for insurance as an

investment option.

To know awareness and agreeableness of investor to invest in private

insurance companies.

Research methodology

Data collection:

Secondary data: collected from electronic documents from internetsites

viz., google.com, etc.,irdaindia.org.

Primary data: collected by survey method based on personal

interview and self-administration of structured questionnaires.

Sample design:

Sampling frame : Gandhinagar & Ahmedabad.

Sample unit: Individuals

Sampling method: simple random sampling convenience

Sample size : 150


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Introduction To Insurance:

Life insurance made its debut in India well over 100 years ago. Insurance is no

longer considered to be a mere tax saving tool. Increasing urbanization andnuclearisation of families has led to a state where insurance has become a

necessity. And this is not just true for Life Insurance but also for maintenance

of vehicles is the reason that people are increasingly opting for insurance on

their own.

Insurance may be described as a social device to reduce or eliminate risk of loss

to life and property. Under the plan of insurance, a large number of people

associate themselves by sharing risks attached to individuals. The risks, which

can be insured against, include fire, the perils of sea, death and accidents and

burglary. Any risk contingent upon these may be insured against at a premiumcommensurate with the risk involved. Thus collective bearing of risk is

insurance.

Following are few of the definitions of insurance:

Insurance is a plan by which large number of people associate themselves

and transfer to the shoulders of all, risks that attach to individual.

Insurance may be defined as a social device providing financialcompensation for the effects of misfortune, the payment being made from

the accumulated contributions of all parties participating in the scheme.

Insurance is a contract in which a sum of money is paid to the assured as

consideration of insurers incurring the risk of paying a large sum upon a

given contingency.

Parties Involved In Insurance


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The transaction of the insurance needs three types of parties. They are as

follows:

Insured

The person who buys the policy of the insurance and agrees to follow all theterms and conditions levied by the insurance company and also agrees to pay

the necessary premium is called the insured. In short, it is a customer of the

insurance product.

Insurer

The supplier of the insurance coverage or the seller of the insurance policy is

called as insurer. In short, they are the different insurance companies formed

under the IRDA act.

Intermediaries - Brokers/Agents

The person between the insured and insurer is called as the intermediaries. They

are called either as brokers or as agents. The intermediaries play a very vital

role in the business of the insurance because they bring business for the

insurance companies and they perform all the formalities on behalf of the

insured also

Today, it is widely accepted as one of the most attractive financial instruments

in an individuals portfolio, that provides an assurance of security with

attractive returns.


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Types Of Policies :

Savings Plans

Endowment Assurance Plan

It is a participating [with profit] plan that offers the following features: Provides financial support to the family by way of a lump sum payment

in case of a unfortunate death of the life assured within the term of the

policy.

Provides a lump sum payment to the life assured on the survival up to the

maturity. This lump sum is basic sum assured and bonuses.

Money Back Plan

It is a participating [with profit] policy that offers following features:

Payment of lump sum each of which is a proportion of the basic sum

assured, at 5 years intervals during the term of the policy.

On survival up to the maturity, a payment equal to basic sum assured plus

any bonus additions less the cash lump sum paid earlier is provided.

In case of the unfortunate death of the life assured within the term of the

policy, the basic sum assured plus any bonus additions is provided. This

is over and above the earlier payouts.

Childrens Plan

Childrens Plan is designed to provide a lump sum to the child at maturity. It

also provides financial security to the child in the future, even in case of the

insured parents unfortunate death during the policy term. Childrens Plan

receives simple reversionary bonuses, which are usually added annually. This is

flexible plan with three options for you to choose from, depending on your

requirements.


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Investment Plan

Single premium whole of Life insurance Plan

It is a participating [with Profit] insurance plan that offers the following

features.

Investors money will be invested in with profit fund. This fund aims

to provide secure and stable long-term growth.

Even after choosing policy, investor can decide on the policy term.

For 4 weeks after any one of the 10 th, 15th, 20th and subsequent 5 years

anniversaries, life assured can choose to receivethe sum assured plus

any attaching bonuses, in full. Once the money has been received,

your policy will cease.

In case of unfortunate death, nominee gets the sum assured secured by

premium, plus any attaching bonuses.

It does not require any medical test.

Protection Plan

Term Assurance (TA) Plan

TA plan is a plan under which a sum insured is payable in case of death of the

life assured during the term of the contract. One can choose the lump sum that

would replace the income lost to ones family in the unfortunate event of ones

death. Since this non-participating (without profit) plan is a pure risk coverplan, no benefits are payable on survival to the end of the term of the policy.

Loan Cover Term Assurance (LCTA) Plan

This plan provides a lump sum on the unfortunate death of the life assured

during the term of the life assured during the term of the plan. The lump sum

will be a decreasing percentage of the initial sum assured. As the outstanding

loan decreases as per the loan schedule, the cover under the policy decreases as

per the policy schedule. Since this is a non-participating pure risk cover plan, nobenefits are payable on survival to the end of the policy.


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Retirement Plan

Personal Pension Plan

This plan is a participating (with profits) plan, which is basically a savings

contract, designed to provide an income for the life after retirement. It provides

a national lump sum on retirement, comprising of sum assured plus any

attaching bonus. Subject to the prevailing regulations, p[art of this lump sumcan be taken in form of cash and the rest converted to an annuity at the rate then

offered by HDFC Standard Life Insurance or with any other insurance company

will accept such business.

Rider Benefits

The rider benefits can only be taken out in conjunction with an Endowment

Assurance, Money Back, Personal Pension Plan or Protection Series Product

and not on a stand-alone basis. These riders provide extra protection and aredescribed in more detail below.

Waiver Of Premium Benefit (WOP)

If the life assured is disabled and is unable to pursue any occupation for a

period of more than twenty six consecutive weeks then, under this rider all

premiums falling due after the first twenty six weeks of such continuous

disability are waived, but before the earliest of

The recovery of the life assured

The expiry date

The termination of the policy

The death of the life on whose disability the waiver claim is based

Critical illness Benefit (CI)

This benefit provides for the payment of an amount equal to the basic sum

assured on diagnosis of serious disease. The life assured must be alive 30 days

after notification of the serious disease. The 6 serious diseases are mentioned by

the co.

Cancer

Coronary artery bypass

Heart Attack


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Kidney/Renal failure

Major organ transplant (as recipient)

Stroke

Accidental Death Benefit (ADB)

This benefit provides for the payment of an additional amount equal to the basic

sum assured on the death as a result of an accident. Death must occur within 90

days of the accident.

Double Sum Assured (DSA)

This benefit provides for the payment of an amount equal to the basic sum

assured as result of death by any cause.

Accelerated Sum Assured Benefit (ASA)

This benefit can be taken in conjunction with a protection series product. It

provides an amount, equal to the death benefit on diagnosis of a critical illness.

The illness covered under this rider is same as the Critical illness rider.

Additional Term Benefit Rider (ATB)

The benefit can be taken with conjunction with PPP. It provides for the

payment of an amount agreed on policy inception, as a result of death,

subject to minimum of Rs. 20,000.


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History Of Insurance Sector In India

Life insurance in its existing form came to India from the United Kingdom with

the establishment of a British firm. Oriental LIC in Calcutta in 1818 followed

by Bombay Life Assurance Company in 1823.

The Indian Life Assurance Company act 1912 was the first statutory measure toregulate life insurance business. Later in 1928, the Indian Insurance co. act was

enacted to enable the Government to collect statistical information about both

life and non-life insurance business transacted in India by Indian foreign insurer

including provident insurance societies. In 1938 with a view to protecting the

interest of insuring public earlier legislation was consolidated and amended by

the insurance act, 1938 with comprehensive provision detailed and effective

control over the activities of insurers.

The act was amended in 1950 resulting in far reaching changes in the insurancesector. These included a statutory requirement of equity capital for companies

carrying on life insurance business, ceiling on share holdings in such

companies, stricter control on investment and such other information to the

controller. The controller could also call for appointment of administrators and

put a ceiling on expenses of management companies.

By 1956, 154 Indian insurers and 16 foreign insurers were carrying on Life

insurance business in India. Life India Corporation business was concentrated

in urban areas and confined to the higher strata of the society. On January 19,

1956, the management of life insurance business of 245 Indian and foreigninsurers then operating in India was taken over by the central Government. Life

Insurance Corporation was formed in September 1956 by an act of parliament,

viz. LIC ACT 1956 with a capital contribution of Rs. 50mn.and since then it has

enjoyed a monopoly over the life insurance business in India. Due to concerns

of

Relatively low spread of insurance in the country.


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The efficient and quality functioning of the Public Sector insurance

companies.

The untapped potential for mobilizing long-term contractual savings

funds for infrastructure.

The finance manager Mr. C.D.Deshmukh while piloting the bill for

nationalization outlined the objective of the LIC thus:

To conduct the business with utmost economy with the spirit of trust ship; to

charge premium amount higher than warranted by strict actual consideration; to

invest the fund for obtaining maximum yield for the policy-holder consistent

with safety of capital; to render prompt and efficient service to policy-holders

thereby making Insurance widely popular.

The (Congress) government set up an insurance Reforms committee in April

1993. The Committee submitted its report in January 1994, recommended a

phased program of liberalization, and called for private sector entry and

restructuring of the LIC. The United Front government moved an insurance bill

but it did not pass. The BJP government moved an insurance bill again in 1998,

which had also to be referred back to a select committee of parliament. But now

the parliament has given a nod to the Insurance Regulatory and Development

Authority (IRDA) bill with some changes in the original structure.


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Private Players:

After 1998 the following private players came in to existence.

S.SSr.No. Registration

Number

Date of

Reg.

Name of the Company

1 101 23.10.2000 HDFC Standard Life Insurance Company Ltd.

2 104 15.11.2000 Max New York Life Insurance Co. Ltd.

3 105 24.11.2000 ICICI Prudential Life Insurance Company Ltd.

4 107 10.01.2001 Om Kotak Mahindra Life Insurance Co. Ltd.

5 109 31.01.2001 Birla Sun Life Insurance Company Ltd.

6 110 12.02.2001 Tata AIG Life Insurance Company Ltd.

7 111 30.03.2001 SBI Life Insurance Company Limited .

8 114 02.08.2001 ING Vysya Life Insurance Company Private Limited

9 116 03.08.2001 Allianz Bajaj Life Insurance Company Ltd.

10 117 06.08.2001 Metlife India Insurance Company Pvt. Ltd.


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Analysis

Data classification

Total sample

size150

Classification

criteriaCategories

No. of

respondentsPercentage

Profession

wiseBusiness 71 47.33 %

Service 79 52.67 %

Age wise Below 25 18 12 %

25-40 74 49.33 %

40 and

above58 38.67 %

Income wise 0 to 10 k 65 43.33 %

10k to 20 k 63 42 %

20k and

above22 14.67 %


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0

10

20

30

40

50

60

70

Age wise analysis of Investment avenues

BELOW 25 13 4 6 3 8 9 2 2 0

25 TO 40 70 16 45 7 34 40 6 24 6

ABOVE 40 51 29 36 5 26 32 2 30 20

insu

ranc

real

estat

post

offic

mut

ualf

shar

es

fixed

dep

deb

entu

prov

iden

bon

ds

Question. 1.


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0

10

20

30

40

50

60

70

Income wise analysis of Investment avenues

0 to 10k 51 25 33 3 24 34 5 19 7

10k to 20K 61 20 40 9 32 33 3 25 11

20k and above 22 4 14 3 12 14 2 12 8

insur

ance

real

estate

post

officesavi

mutu

alfunds

shar

es

fixed

deposits

debe

ntures

provi

dentfund

bond

s


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0

10

20

30

40

50

60

70

Profession wise analysis of Investment avenues

Business 65 28 32 3 31 30 5 8 18

Service 69 21 55 12 37 51 5 48 8

insur

ance

realestat

e

postoffic

esavi

mutualfun

ds

shar

es

fixeddepo

sits

debenture

s

provident

fund

bond

s

Question. 2.


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0

0.5

1

1.5

2

2.5

3

3.5

4

Overall analysis of Investment Preferences

overall 3.57 2.61 3.39 1.82 2.32 3.4 1.55 2.73 1.84

insura

nce

real

estate

postof

ficesa

mutua

lfundsshares

fixed

depos

deben

tures

provid

entbonds

0

0.5

1

1.5

2

2.5

3

3.5

4

Age wise analysis of Investmen Preferences

BELOW 25 3.44 2.94 3.56 2.11 2.39 4 2.17 2.56 2.33

25 TO 40 3.51 2.54 3.3 1.76 2.35 3.26 1.47 2.53 1.55

ABOVE 40 3.69 2.59 3.45 1.81 2.26 3.4 1.47 3.03 2.05

insur

ance

real

estat

e

post

offic

esav

mut

ualf

unds

shar

es

fixe

d

dep

deb

entu

res

prov

iden

t

bon

ds


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0

0.5

1

1.5

2

2.5

3

3.5

4

Income wise analysis of Investmen Preferences

0 to 10k 3.43 2.77 3.28 1.62 1.97 3.26 1.51 2.48 1.65

10k to 20K 3.67 2.62 3.41 1.87 2.54 3.52 1.6 2.81 1.76

20k and above 3.73 2.09 3.64 2.27 2.73 3.45 1.55 3.23 2.64

insur

ance

real

estat

post

offic

mutu

alfun

shar

es

fixed

depo

debe

ntur

provi

dent

bond

s


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0

0.5

1

1.5

2

2.5

3

3.5

4

Profession wise analysis of Investmen Preferences

business 3.62 2.66 3.13 1.86 2.27 3.06 1.68 1.9 1.92

service 3.53 2.56 3.62 1.78 2.37 3.71 1.44 3.47 1.77

insur

ance

real

estat

posto

ffices

mutu

alfun

share

s

fixed

depo

debe

nture

provi

dent

bond

s


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Question. 3.


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Analysis of respondents holding insurance

not holding

9%

holding

91%

not holding

holding

0

10

20

30

40

50

60

70

Age wise analysis of respondents holding insurance policy

BELOW 25 14 4

25 TO 40 68 6

ABOVE 40 54 4

holding not holding


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0

10

20

30

40

50

60

70

Income wise analysis of respondents holding insurance policy

0 to 10k 53 12

10k to 20K 62 1

20k and above 21 1

holding not holding

0

10

20

30

40

50

60

70

80

Profession wise analysis of respondents holding

insurance policy

business 65 6

service 71 8

holding not holding


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Market Share of Insurance Companies

lic79%

bsl

5%

icic

i

6%

bajajallianz

2%

HDFC

2%National

1%

TataAig

1%

Oriental

2%

Maxnewyork

2%

lic

bsl

icici

bajaj allianz

HDFC

National

Tata Aig

Oriental

Maxnewyork

Insurance

Co.

Market Share

LIC 79

Bsl 5

ICICI 6

HDFC 2

National 1

Max

Newyork

2

Tata AIG 1

1.1 Orienta

l

2

Bajaj Allianz 2

Question. 4.


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0

20

40

60

80

100

120

Reason for holding an insurance policy

overall 116 22 35 16

Protectio

nPension Savings

Investme

nt

Question. 5.


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0

10

20

30

40

50

6070

80

90

Overall Analysis of various media influencing purchasing

of Insurance policy

overall 21 86 35 20 25 15 28

print

mediaagents

relative

s

televisi

on

word of

mouthsociety

professi

on

0

10

20

30

40

50

Age wise analysis of various media influencing

purchasing of Insurance policy

BELOW 25 1 3 4 3 6 0 625 TO 40 9 48 18 5 11 9 8

ABOVE 40 11 35 13 12 8 6 14

print

media

agent

s

relativ

es

televis

ion

word

of

societ

y

profes

sion

Question. 6.


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0

10

20

30

40

Income wise analysis of various media influencing


0 to 10k 4 36 12 5 14 8 10

10k to 20K 10 38 15 6 9 3 13

20k and above 7 12 8 9 2 4 5

print

media

agent

s

relativ

es

televis

ion

word

of

societ

y

profes

sion

0

10

20

30

40

50

Profession wise analysis of various media influencing


business 10 41 14 6 7 5 14

service 11 45 21 14 18 10 14

print

mediaagents

relativ

es

televisi

on

word

ofsociety

profess

ion

Question.7.


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Satisfaction with current insurance policy

Satisfied

83%

Not Satisfied

17%

Satisfied

Not Satisfied

Reasons

- Should have more comprehensive cover

- Not satisfied with the services provided

- Low returns


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0

10

20

30

40

50

60

Age wise satisfaction with current insurance policy

Below 25 52 13

25 to 40 52 11

40 and above 20 2

satisfied not satisfied

0

10

20

30

40

50

60

Income wise satisfaction with current insurance policy

0 to 10k 52 13

10k to 20K 52 11

20k and above 20 2



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0

10

20

30

40

50

60

70

Profession wise satisfaction with current insurance policy

business 62 9

service 62 17



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Preference for insurance policy

offered by private co.

Prefer

43%

Not prefer

57%

PreferNot prefer

Question. 8.


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0

5

10

15

20

25

30

35

40

Age wise Preference for insurance by private co.

BELOW 25 9 4

25 TO 40 39 30

ABOVE 40 17 30

prefer pvt. not prefer

0

5

10

15

20

25

30

35

Income wise Preference for insurance by private co.

0 to 10k 25 29

10k to 20K 31 25

20k and above 9 10



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28

29

30

31

32

33

34

Profession wise Preference for insurance by private co.

business 33 34

service 32 30


Limitations of the study

Less number of respondents surveyed

Respondents were hesitant to give certain information.

In certain cases data is taken on the basis of observation and judgment.


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CONVERSION PROCESS OF A LIFE INSURANCE

POLICY

Fill up the proposal form

Check the form at local branch

Is

everything

ok ?No

Proposal form sent to HO

Yes

Approaching Prospectus

Check the form at local branchIs form

properly

filled up?

No

Proposal form back to FC

Proposal form back to local branch Yes

Is there any

further

/medical

Requirement?

Policy immediately accepted


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Is rate up

required?

Yes

No

Further required

documents/medical tests

report sent to HO

Corrective actions at localbranchreport sent to HO

Is the

prospectus

suitable?

Decline the policy

Is

postponement required?

Accept the policy

Yes

Postpone the policy