DISSERTATION REPORTS

on

“Comparison between the policy of HDFCSL and LIC”

Dissertation submitted
In Partial fulfillment for the
Post Graduate Programme in Business Management

Under the Guidance of:

Faculty of Finance

Submitted By : Submitted to:

 ACKNOWLEDGEMENT

I am sincerely thankful to all those people who have been giving me

any kind of assistance in the making of this project report.

I express my gratitude to Ms. , senior manager of .

I would hereby, make most of the opportunity by expressing my

sincerest thanks to all my faculties whose teaching gave me
conceptual understanding and clarity of comprehension, which
ultimately made my job more easy. Credit also goes to all my
friends whose encouragement kept me in good stead.
Their continuous support has given me the strength and confidence
to complete the project without any difficulty.

Last of all but not the least I would like to acknowledge my

gratitude to the respondents without whom this survey would have
been incomplete.

2
DATE:

PLACE:`

EXECUTIVE SUMMARY

HDFC Standard Life insurance is the oldest life insurance company in the
world. It is the largest insurer in the UK and is the 28 th largest company in the
world. In India, the company is marketing life insurance products and unit
linked investment plans. From my research at HDFC SLIC, I found that the
company has a lot of competition from other private insurers like ICICI,
Aviva, Birla Sun Life and Tata AIG. It also faces competition from LIC. To
compete effectively HDFC SLIC could launch cheaper and more reasonable
products with small premiums and short policy terms (the number of year’s
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.

HDFC must advertise regularly and create brand value for its products and
services. Most of its competitors like Aviva, ICICI, Max, 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

3
them if they Slinked 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 HDFC standard 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 HDFC. This training enables an advisor/sales
manager to market the policies better. HDFC 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, HDFC would be all set to
capture the insurance market in India as it has around the globe.

4
 TABLE OF CONTENTS

INTRODUCTION TO INSURANCE
7 COMPANY PROFILE OF HDFC SL
18
COMPANY PROFILE OF LIC
40
OBJECTIVES OF THE STUDY
63
RESEARCH METHODOLOGY
65
ANALYSIS AND INTERPRETATION
69
MAJOR PROBLEMS
89
FINDINGS AND SUGGESTIONS
92
CONCLUSION
95
5
 QUESTIONNAIRE
97

CHAPTER I
6
 INDIAN INSURANCE

INDUSTRY

“AN OVERVIEW ”

THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

With the largest number of life insurance policies in force in the world,
Insurance happens to be a mega opportunity in India. It’s a business growing

7
at the rate of 15-20 per cent annually and presently is of the order of Rs
1560.41 billion (for the financial year 2006 – 2007). Together with banking
services, it adds about 7% to the country’s Gross Domestic Product (GDP).
The gross premium collection is nearly 2% of GDP and funds available with
LIC for investments are 8% of the GDP.

Even so nearly 65% of the Indian population is without life insurance cover
while health insurance and non-life insurance continues to be below
international standards. A large part of our population is also subject to weak
social security and pension systems with hardly any old age income security.
This in itself is an indicator that growth potential for the insurance sector in
India is immense.

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

development as it provides long term funds for infrastructure development
and strengthens the risk taking ability of individuals. It is estimated that over
the next ten years India would require investments of the order of one trillion
US dollars. The Insurance sector, to some extent, can enable investments in
infrastructure development to sustain the economic growth of the country.
(Source: www.indiacore.com)

HISTORICAL PERSPECTIVE

The history of life insurance in India dates back to 1818 when it was
conceived as a means to provide for English Widows. Interestingly in those
days a higher premium was charged for Indian lives than the non - Indian
lives, as Indian lives were considered more risky to cover. The Bombay

8
Mutual Life Insurance Society started its business in 1870. It was the first
company to charge the same premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to Triton
Insurance Company Limited, the first general insurance company established
in the year 1850 in Calcutta by the British. Till the end of the nineteenth
century insurance business was almost entirely in the hands of overseas
companies.

Insurance regulation formally began in India with the passing of the Life
Insurance Companies Act of 1912 and the Provident Fund Act of 1912.
Several frauds during the 1920's and 1930's sullied insurance business in
India. By 1938 there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of
1938 that provided strict State Control over the insurance business. The
insurance business grew at a faster pace after independence. Indian companies
strengthened their hold on this business but despite the growth that was
witnessed, insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life
insurers and provident societies under one nationalized monopoly corporation
and Life Insurance Corporation (LIC) was born. Nationalization was justified
on the grounds that it would create the much needed funds for rapid
industrialization. This was in conformity with the Government's chosen path
of State led planning and development.

9
The non-life insurance business continued to thrive with the private sector till
1972. Their operations were restricted to organized trade and industry in large
cities. The general insurance industry was nationalized in 1972. With this,
nearly 107 insurers were amalgamated and grouped into four companies-
National Insurance Company, New India Assurance Company, Oriental
Insurance Company and United India Insurance Company. These were
subsidiaries of the General Insurance Company (GIC)

KEY MILESTONES

10
1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.

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

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

1956: 245 Indian and foreign insurers along with provident societies were
taken over by 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.

11
 INDUSTRY REFORMS

Reforms 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 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.

12
 PRESENT SCENARIO - LIFE INSURANCE
INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 47.38%, with

premium income at Rs. 1560.41 billion during the fiscal year 2008-2009.
Though the total volume of LIC's business increased in the last fiscal year
(2008-2009) compared to the previous one, its market share came down from
85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about
19% in a year's time. The figures for the first two months of the fiscal year
2007-08 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 company’s 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 19 private life
insurance companies have been granted licenses.

13
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.

14
 INSURANCE REGULATORY AND DEVELOPMENT

AUTHORITY

Reforms in the Insurance sector were initiated with the passes of the

IRDA Bill in Parliament in December 1999. The IRDA since its

incorporation as a statutory body in April 2000 has fastidiously such

to its schedule of framing regulations and registering the private

sector insurance companies.

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.

15
Section 14 of IRDA Act, 1999 lays down the duties, powers and

functions of IRDA..

(1) Subject to the provisions of this Act and any other law for the

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

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

insurance business.

(2) Without prejudice to the generality of the provisions contained

in sub-section (1), the powers and functions of the Authority shall

include,

(a) issue to the applicant a certificate of registration, renew, modify,

withdraw, suspend or cancel such registration;

(b) protection of the interests of the policy holders in matters

concerning assigning of policy, nomination by policy holders,

insurable interest, settlement of insurance claim, surrender value of

policy and other terms and conditions of contracts of insurance;

(c) specifying requisite qualifications, code of conduct and practical

training for intermediary or insurance intermediaries and agents;

(d) specifying the code of conduct for surveyors and loss assessors;
16
(e) promoting efficiency in the conduct of insurance business;

(f) promoting and regulating professional organisations connected

with the insurance and re-insurance business;

(g) levying fees and other charges for carrying out the purposes of

this Act;

(h) calling for information from, undertaking inspection of,

conducting enquiries and investigations including audit of the

insurance

(i) control and regulation of the rates, advantages, terms and

conditions that may be offered by insurers in respect of general

insurance business not so controlled and regulated by the Tariff

Advisory Committee under section 64U of the Insurance Act, 1938

(4 of 1938);

(j) specifying the form and manner in which books of account shall

be maintained and statement of accounts shall be rendered by

insurers and other insurance intermediaries;

(k) regulating investment of funds by insurance companies;

(l) regulating maintenance of margin of solvency;

17
(m) adjudication of disputes between insurers and intermediaries or

insurance intermediaries;

(n) supervising the functioning of the Tariff Advisory Committee;

(o) specifying the percentage of premium income of the insurer to

finance schemes for promoting and regulating professional

organisations referred to in clause

(p) specifying the percentage of life insurance business and general

insurance business to be undertaken by the insurer in the rural

socialsector; an(q) exercising such other powers as may be

prescribed

CHAPTER II

18
COMPANY PROFILE OF
HDFCSL

HDFC STANDARD LIFE INSURANCE

COMPANY LIMITED

INTRODUCTION

19
HDFC Incorporated in 1977 with a share capital of Rs 10 Crores, HDFC has
since emerged as the largest residential mortgage finance institution in the
country. The corporation has had a series of share issues raising its capital to
Rs. 119 Crores. The gross premium income for the year ending March 31,
2009 stood at Rs. 2,856 Crores and new business premium income at Rs.
1,624 Crores. The company has covered over 8,77,000 lives year ending
March 31, 2009.

HDFC operates through almost 450 locations throughout the country with its
corporate head quarters in Mumbai, India. HDFC also has an International
Office in Dubai, UAE with service associates in Kuwait, Oman and Qatar.
HDFC is the largest housing company in India for the last 27 years.

SNAPSHOT-I

• Incorporated in 1977 as the first specialized Mortgage Company in

India.

20
• Almost 90% of initial shareholding in the hands of domestic institutes
and retail investors. Current 77% of shares held by foreign institutional
investors.
• Besides the core business of mortgage HDFC has evolved into a
financial conglomerate with holdings In:
 HDFC Standard Life insurance Company- HDFC holds 78.07 %.
 HDFC Asset Management Company – HDFC holds 50.1%
 HDFC Bank- HDFC holds 22.25%.
 Intel net Global (Business Process Outsourcing) – HDFC holds
50%.
 HDFC Chubb General Insurance Company – HDFC holds 74%.

21
SNAPSHOT-II

Loan Approvals Rs. 805 billion

(up to Dec 2008) (US $ 18.30 bn.)

Loan Disbursements Rs.669 billion

(up to Dec. 2008) (US $ 15.20 bn)
Housing Units Financed 2.5 million.
Distribution
Offices 181

Outreach Programs

90

22
 KEY PLAYERS

Mr. H T Parekh is the Chairman of the Company. He is also the Executive

Chairman of Housing Development Finance Corporation Limited (HDFC
Limited). He joined HDFC Limited in a senior management position in 1978.
He was inducted as a whole-time director of HDFC Limited in 1985 and was
appointed as its Executive Chairman in 1993. He is the Chief Executive
Officer of HDFC Limited. Mr. Parekh is a Fellow of the Institute of Chartered
Accountants (England & Wales).

23
Mr. Deepak M Satwalekar is the Managing Director and CEO of the
Company since November, 2000. Prior to this, he was the Managing Director
of HDFC Limited since 1993. Mr. Satwalekar obtained a Bachelors Degree in
Technology from the Indian Institute of Technology, Bombay and a Masters
Degree in Business Administration from The American University,
Washington DC.

GROUP COMPANIES

HDFC Bank: World Class Indian Bank- among the top private banks in India.
HDFC AMC: One of the top 3 AMCs in India- Preferred investment
manager.
Intelenet Global: BPO services for international customers.
CIBIL: Credit Information Bureau India Limited.
HDFC Chubb: Upcoming Private companies in the field of General
Insurance.
HDFC Mutual Fund
HDFC reality.com: Helps to search properties in all major cities in India
HDFC securities
24
 STANDARD LIFE

Standard Life is Europe’s largest mutual life

assurance company. Standard Life, which has been in the life insurance
business for the past 175 years is a modern company surviving quite a few
changes since selling its first policy in 1825. The company expanded in the

25
19th century from kits original Edinburgh premises, opening offices in other
towns and acquitting other similar businesses.

Standard Life Currently has assets exceeding over £ 70 billion under its
management and has the distinction of being accorded “AAA” rating
consequently for the six years by Standard and Poor.

SNAPSHOT

• Founded in 1875, company supporting generation for last 179 years.

• Currently over 5 million Policy holders benefiting from the services
offered.
• Europe’s largest mutual life insurer.

JOINT VENTURE

HDFC Standard Life Insurance Company Limited was one of the first
companies to be granted license by the IRDA to operate in life insurance
sector. Reach of the JV player is highly rated and been conferred with many

26
awards. HDFC is rated ‘AAA ’ by both CRISIL and ICRA. Similarly,
Standard Life is rated ‘AAA’ both by Moody’s and Standard and Poor’s.
These reflect the efficiency with which HDFC and Standard Life manage
their asset base of Rs. 15,000 Cr and Rs. 600,000 Cr. respectively.

HDFC Standard Life Insurance Company Ltd was incorporated on 14th

August 2000. HDFC is the majority stakeholder in the insurance JV with
81.4% staple and Standard of as a staple 18.6% Mr. Deepak Satwalekar is the
MD and CEO of the venture.

HDFC Standard Life Insurance Company Ltd. Is one of India’s leading

Private Life Insurance Companies, which offers a range of individual and
group insurance solutions. It is a joint venture between Housing Development
Finance Corporation Limited (HDFC Ltd.) India’s leading housing finance
institution and the Standard Life Assurance Company, a leading provider of
financial services from the United Kingdom. Both the promoters are will
known for their ethical dealings and financial strength and are thus committed
to being a long-term player in the life insurance industry- all important factors
to consider when choosing your insurer.

BUSINESS GROWTH

Track Record so far

The gross premium income of HDFC, for the year ending March 31, 2007

27
stood at Rs. 2,856 crores and new business premium income at Rs. 1,624
crores.

The company has covered over 8,77,000 lives year ending March 31, 2007.
Company also declared our 5th consecutive bonus in as many years for our
‘with profit’ policyholders.

KEY STRENGTH

Financial Expertise
As a joint venture of leading financial services groups. HDFC standard Life
has the financial expertise required to manage long-term investments safely
and efficiently.

Range of Solutions
HDFC SLIC has a range of individual and group solutions, which can be
easily customized to specific needs. These group solutions have been
designed to offer complete flexibility combined with a low charging structure.

Strong Ethical Values:

HDFC SLIC is an ethical and Cultural Organization. False selling or false
commitment with the customers is not allowed.

Most respected Private Insurance Company

28
HDFC SLIC was awarded No-1 Private Insurance Company in 2004 by the
World Class Magazine Business World for Integrity, Innovation and
Customer Care.

PRODUCTS & SERVICES

The right investment strategies won't just help plan for a more comfortable
tomorrow -- they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life
insurance plans are created keeping in mind the changing needs of family. Its
life insurance plans are designed to provide you with flexible options that
meet both protection and savings needs. It offers a full range of transparent,
flexible and value for money products. HDFC SLIC products are modern and
contemporary unitized products that offer unique customer benefits like
flexibility to choose cover levels, indexation and partial withdrawals. (Source:
www.hdfcslic.com)

29
PLANS THAT ARE OFFERED BY HDFC STANDARDS
LIFE INSURANCE

Individual Products

Protection Plans

A person can protect his family against the loss of his income or the

burden of a loan in the event of his unfortunate demise, disability or sickness.

These plans offer valuable peace of mind at a small price. Protection range

includes our

Term Assurance Plan & Loan Cover Term Assurance Plan.

Investment Plans

HDFC SLIC’s Single Premium Whole of Life plan is well suited to meet long

term investment needs. This provides attractive long term returns through

regular bonuses.

Pension Plans

Pension Plans help to secure financial independence even after retirement.

Pension range includes Personal Pension Plan, Unit Linked Pension, Unit

Linked Pension Plus.

Savings Plans

30
Savings Plans offer a flexible option to build savings for future needs such as

buying a dream home or fulfilling your children’s immediate and future

needs.

Savings range includes Endowment Assurance Plan, Unit Linked

Endowment, Unit Linked Endowment Plus, Unit Linked Endowment Plus II,

Money Back,

Unit Linked Enhanced Life Protection II, Children's Plan, Unit Linked Young

Star, Unit Linked Young Star Plus, Unit Linked Young Star Plus II.

Group Products

One-stop shop for employee-benefit solutions

HDFC Standard Life has the most comprehensive list of products for

progressive employers who wish to provide the best and most innovative

employee benefit solutions to their employees. It offers different products for

different needs of employers ranging from term insurance plans for pure

protection to voluntary plans such as superannuation and leave encashment.

HDFC SLIC offers the following group products to esteemed corporate

clients:

A) Group Term Insurance

31
 B) Group Variable Term Insurance

C) Group Unit-Linked Plan

An investment solution that provides funding vehicle to manage corpuses

with Gratuity, Defined Benefit or Defined Contribution Superannuation or

Leave Encashment schemes of your company

Also suitable for other employee benefit schemes such as salary saving

schemes and wealth management schemes.

Social Product

Development Insurance Plan

Development Insurance plan is an insurance plan which provides life cover to

members of a Development Agency for a term of one year. On the death of

any member of the group insured during the year of cover, a lump sum is paid

to those member beneficiaries to help meet some of the immediate financial

needs following their loss.

Eligibility

Members of the development agency and their spouses with:

Minimum age at the start of the policy 18 years last birthday

Maximum age at the start of policy 50 years last birthday

32
Employees of the Development Agency are not eligible to join the group. The

group to be covered is only eligible if it contains more than 500 members.

Premium Payments

The premium to be paid will be quoted per member in the group and will be

the same for all members of the group.

The premium can only be paid by the Development Agency as a single lump

sum that includes all premiums for the group to be covered. Cover will not

start until the premium and all the member information in our specified

format has been received.

Benefits

On the death of each member covered by the policy during the year of cover a

lump sum equal to the sum assured will be paid to their beneficiaries or legal

heirs. Where the death is as a result of an accident, an additional lump sum

will be paid equal to half the sum assured. There are no benefits paid at the

end of the year of cover and there is no surrender value available at any time.

The role of the Development Agency

33
Due to the nature of the groups covered, HDFC Standard Life will be passing

certain administrative tasks onto the Development Agency. By passing on

these tasks the premium charged can be lower. These tasks would include:

Submission of member data in a specified computer format

Collection of premiums from group members

Recording changes in the details of group members

Disbursement of claim payments and the mortality rebate (if any) to

group members

These tasks would be in addition to the usual duties of a policyholder such as:

Payment of premiums

Reporting of claims

Keeping policy holder information up to date

Training and support will be available to give guidance on how to complete

the tasks appropriately. Since these additional tasks will impose a burden on

the Development Agency, the Development Agency may charge a Rs. 10

administration fee to their members.

Prohibition of rebates

Section 41 of the Insurance Act, 1938 states

34
No person shall allow or offer to allow, either directly or indirectly, as an

inducement to any person to take out or renew or continue an insurance in

respect of any kind of risk relating to lives or property in India, any rebate of

the whole or part of the commission payable or any rebate of the premium

shown on the policy, nor shall any person taking out or renewing or

continuing a policy accept any rebate, except such rebate as may be allowed

in accordance with the published prospectus or tables of the insurer

If any person fails to comply with sub regulation (previous point) above, he

shall be liable to payment of a fine which may extend to rupees five hundred

INTROUCTION TO UNIT LINKED FUNDS

Unit 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.

35
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 is found 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.

UNIT LINKED VERSUS OTHER FINANCIAL INSTRUMENTS

Parameters RBI Bonds Fixed Mutual Unit linked

Deposits Funds
Safety High High Medium High
Liquidity None High High High

Returns Low Low High High

36
 Life Cover 1 time 1 time 1 time 10 times

amount amount amount

Tax 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. HDFC SLIC 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.

Tax Benefits

INCOME GROSS HOW MUCH HDFC

TAX ANNUAL TAX CAN YOU STANDARD

SECTION SALARY SAVE? LIFE PLANS

37
Sec. 80C Across All income Upto Rs. 33,990 All the life

Slabs saved on insurance plans.

investment of

Rs. 1,00,000.
Sec. 80 CCC Across all income Upto Rs. 33,990 All the pension

slabs. saved on plans.

Investment of

Rs.1,00,000.
Sec. 80 D Across all income Upto Rs. 3,399 All the health

slabs saved on insurance riders

Investment of available with the

Rs. 10,000. conventional plans.

TOTAL

SAVINGS Rs37,389

POSSIBLE
Rs. 33,990 under Sec. 80C and under Sec. 80 CCC , Rs.3,399

under Sec. 80 D, calculated for a male with gross annual

income

exceeding Rs. 10,00,000.

38
Sec. 10 (10)D Under Sec. 10(10D), the benefits you receive are

completely tax-free, subject to the conditions laid down

therein.

Awards & Accolades

Sept, 2008

Received 2008 CIO Bold 100 and CIO Security Awards

HDFC Standard Life has received the 2008 CIO

Bold 100 Award. This annual award recognizes

organizations that exemplify the highest level of

operational and strategic excellence in

information technology. This year's award theme, ‘The Bold 100,’ recognized

those executives and organizations that embraced great risk for the sake of

great reward.

39
HDFC Standard Life has also been one of the five recipients of the Special

2008 CIO Security Award aimed at CIOs, whose pioneering implementations

have taken their enterprise security to the next

level. This award category identifies

innovative and groundbreaking deployment of

technologies aimed at creating a secure

business infrastructure.

The company received the 2008 CIO Bold Award for its mobile workforce

portal and the CIO Security Award for its initiatives for a secure computing

environment, including identity management.

May, 2008

Received PCQuest Best IT Implementation Award 2008

HDFC Standard Life received the PCQuest Best IT Implementation Award

2008 for Consultant Corner, the applications for its financial consultants,

providing centralized control over a vast geographical spread for key business

units such as inventory, training, licensing, etc. Read more about the

‘Consultant Corner’ tool in the ‘HDFCSL in News’ Section.

HDFC Standard Life has won the PCQuest Best IT Implementation Award

for two years consequently. Last year, the company received the award for

40
Wonders, its path-breaking implementation of an enterprise-wide workflow

system.

March, 2008

Silver Abby at Goafest 2008

HDFC Standard Life's radio spot for Pension Plans won a Silver Abby in the

radio writing craft category at the Goafest 2008 organised by the Advertising

Agencies Association of India (AAAI). The radio commercial ‘Pata nahin

chala’ touched several changes in life in the blink of an eye through an old

man’s perspective. The objective was drive awareness and ask people to

invest in a pension plan to live life to the fullest even after retirement, without

compromising on one’s self-respect

March, 2008

Unit Linked Savings Plan Tops Mint Best TV Ads Survey

The Unit Linked Savings Plan advertisement of HDFC Standard Life, one of

the leading private insurance companies in India, has topped Mint’s Top

Television Advertisement survey conducted, for February 2008. HDFC

Standard Life’s Unit Linked Savings Plan advertisement was ranked 4th in

terms of a combined score of ad awareness and brand recall and 3rd in terms

of ad diagnostic scores (likeability, enjoyment, believability, and claim). The

41
respondents were between 18 and 40 years. Mint’s exclusive report, ‘New

voices in a makeover’ outlines the survey in detail.

February, 2008

Deepak M Satwalekar Awarded QIMPRO Gold Standard Award 2007

Mr Deepak M Satwalekar, Managing Director and CEO, HDFC Standard

Life, received the QIMPRO Gold Standard Award 2007 in the business

category at the 18th annual Qimpro Awards function. The award celebrates

excellence in individual performance and highlights the quality achievements

of extraordinary individuals in an era of global competition and expectations.

January, 2008

Sar Utha Ke Jiyo Among India’s 60 Glorious Advertising Moments

HDFC Standard Life’s advertising slogan honoured as one of ‘60 Glorious

Advertising & Marketing Moments' over the last 60 years in India,’ by 4Ps

Business and Marketing magazine. The magazine said that HDFC Standard

Life is one of the first private insurers to break the ice using the idea of self

respect (Sar Utha Ke Jiyo) instead of 'death' to convey its brand proposition.

This was then, followed by others including ICCI Prudential, thus giving

HDFC Standard Life the credit of bringing up one such glorious

42
 CHAPTER III

COMPANY PROFILE OF

43
 LIC( life insurance
corporation of India)

Life Insurance Corporation of India

The Life Insurance Corporation of India (LIC)(hindi): भारतीय जीवन बीमा
िनगम) is the largest state-owned life insurance company in India, and also the
country's largest investor. It is fully owned by the Government of India. It
also funds close to 24.6% of the Indian Government's expenses. It has assets
estimated of 9.31 trillion (US$202.03 billion). It was founded in 1956 with
the merger of more than 200 insurance companies and provident societies

Headquartered in Mumbai, financial and commercial capital of India, the Life

Insurance Corporation of India currently has 8 zonal Offices and 101
divisional offices located in different parts of India, at least 2048 branches
located in different cities and towns of India along with satellite Offices
attached to about some 50 Branches, and has a network of around 1.2 million
agents for soliciting life insurance business from the public.

HISTORY

44
The Oriental Life Insurance Company, the first corporate entity in India
offering life insurance coverage, was established in Calcutta in 1818 by Bipin
Behari Dasgupta and others. Europeans in India were its primary target
market, and it charged Indians heftier premiums. The Bombay Mutual Life
Assurance Society, formed in 1870, was the first native insurance provider.
Other insurance companies established in the pre-independence era included

• Bharat Insurance Company (1896)

• United India (1906)
• National Indian (1906)
• National Insurance (1906)
• Co-operative Assurance (1906)
• Hindustan Co-operatives (1907)
• Indian Mercantile
• General Assurance
• Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It
witnessed, India's First War of Independence, adverse effects of the World
War I and World War II on the economy of India, and in between them the
period of world wide economic crises triggered by the Great depression. The
first half of the 20th century also saw a heightened struggle for India's
independence. The aggregate effect of these events led to a high rate of
bankruptcies and liquidation of life insurance companies in India. This had
adversely affected the faith of the general public in the utility of obtaining life
cover.

The Life Insurance Act and the Provident Fund Act were passed in 1912,
providing the first regulatory mechanisms in the Life Insurance industry. The
Indian Insurance Companies Act of 1928 authorized the government to obtain
statistical information from companies operating in both life and non-life
insurance areas. The subsequent Insurance Act of 1938 brought stricter state
control over an industry that had seen several financially unsound ventures
fail. A bill was also introduced in the Legislative Assembly in 1944 to
nationalize the insurance industry.

45
Nationalization

In 1955, parliamentarian Amol Barate raised the matter of insurance fraud by

owners of private insurance companies. In the ensuing investigations, one of
India's wealthiest businessmen, Ram Kishan Dalmia, owner of the Times of
India newspaper, was sent to prison for two years. Eventually, the Parliament
of India passed the Life Insurance of India Act on 1956-06-19, and the Life
Insurance Corporation of India was created on 1956-09-01, by consolidating
the life insurance business of 245 private life insurers and other entities
offering life insurance services. Nationalization of the life insurance business
in India was a result of the Industrial Policy Resolution of 1956, which had
created a policy framework for extending state control over at least seventeen
sectors of the economy, including the life insurance.

Current status

LIC building, at Connaught Place, New Delhi, designed by Charles Correa,

1986.

Over its existence of around 50 years, Life Insurance Corporation of India,

which commanded a monopoly of soliciting and selling life insurance in
India, created huge surpluses, and contributed around 7 % of India's GDP in
2006.

The Corporation, which started its business with around 300 offices, 5.6
million policies and a corpus of INR 459 million (US$ 92 million as per the
1959 exchange rate of roughly Rs. 5 for a US $ has grown to 25000 servicing
around 180 million policies and a corpus of over 8 trillion (US$173.6
billion).

46
The recent Economic Times Brand Equity Survey rated LIC as the No. 1
Service Brand of the Country.

Comparison between the share of LIC and other Private

Players in Indian Market

47
 22%

78%

lic other private firms

PLANS THAT ARE OFFERED BY LIFE INSURANCE CORPRATION

OF INDIA(LIC)

As individuals it is inherent to differ. Each individual�s insurance needs

and requirements are different from that of the others. LIC�s
Insurance Plans are policies that talk to you individually and give you the
most suitable options that can fit your requirement.

48
Endowment Plus

Jeevan Anurag Komal Jeevan

CDA Endowment Vesting At 21 Marriage Endowment Or
Educational Annuity
CDA Endowment Vesting At 18
Plan
Jeevan Kishore Jeevan Chhaya
Child Career Plan Child Future Plan
Child Fortune Plus

Jeevan Aadhar
Jeevan Vishwas

The Endowment Assurance Policy

The Endowment Assurance Policy-Limited Payment
Jeevan Mitra(Double Cover Endowment Plan)
Jeevan Mitra(Triple Cover Endowment Plan)
Jeevan Anand
New Janaraksha Plan
Jeevan Amrit

Jeevan Shree-I
Jeevan Pramukh

49
The Money Back Policy-20 Years
The Money Back Policy-25 Years
Jeevan Surabhi-15 Years
Jeevan Surabhi-20 Years
Jeevan Surabhi-25 Years
Bima Bachat

Jeevan Bharati - I

The Whole Life Policy

The Whole Life Policy- Limited Payment
The Whole Life Policy- Single Premium
Jeevan Anand
Jeevan Tarang

Two Year Temporary Assurance Policy

The Convertible Term Assurance Policy
Anmol Jeevan-I
Amulya Jeevan-I

Jeevan Saathi Plus

Jeevan Saathi

50
 Various types of ULIPs plans offered by Life insurance
corporation of India.

Unit Plans are the safest way to invest your money.

Get the Share Market benefit plus insurance benefit with UNIT plans.
51
Unit linked insurance plan (ULIP) is life insurance solution that provides
protection and flexibility in investment. The investment is denoted as units
and is represented by the value that it has attained called as Net Asset Value
(NAV). The policy value at any time varies according to the value of the
underlying assets at the time.

UNIT LINKED PLAN (ULIP)

Market Plus I

Profit Plus

Fortune Plus

Money Plus-I

Health Protection Plus

Child Fortune Plus

Jeevan Saathi Plus

LIC Wealth Plus

MARKET PLUS I – ULIP PLAN

Market Plus 1 (Table No 191) is a unit linked pension scheme (ULIP). Policy
holder can choose the plan with or without risk cover. This investment plan is

52
divided in four types of investment Funds namely Bond, Secured, Balanced
and Growth Fund. Market Plus 1 is primarily a Pension policy and the plan
has many attractive features and options that make it an ideal Retirement
solution for your future.

Features:

1. Option to pay one time premium

2. Critical illness benefit minimum Rs 50,000 and the maximum Rs 10 lakh
3. Accident benefit from Rs 25,000 upto a maximum of Rs 50 lakh.
4. Switch from one type of fund to another upto four times a year.
5. Premium top up.
6. Policy can be taken with or without risk cover.
6. Net Asset Value (NAV) declared on a daily basis.

Fund Types:
1. Bond Fund
2. Secured Fund
3. Balanced Fund
4. Growth Fund

Benefits:

A)- On Vesting:
On vesting of the policy, the Fund Value will be utilized to provide a pension
based on the then prevailing Annuity rates. An option to commute upto one
third of the payable benefit in a lump sum is available.

B) On Death:
In event of the unfortunate death of the policy holder the Fund Value along
with the Riders, if any, will be payable in a lump sum or as a pension.

Top-Up (Additional Premium)

The policy holder can pay additional premium in multiples of Rs.1,000/-
without any limit at anytime during the term of the policy.

53
Revival:
An attractive feature of the plan is that provided the premiums have been paid
for a minimum period of three years, all the riders under the policy will
continue for a period of two years from the due date of first unpaid premium
by deduction of relevant charges from the policy fund. This period of two
years is called the “Revival Period”. Further, if premiums have been paid for
a minimum period of three years, revival can be effected merely by paying
the arrears of premium, within the Revival Period.

Change in Fund Type:

The plan also allows a policy holder to switch from one type of fund to
another upto four times a year, free of charge.

PROFIT PLUS-ULIP PLAN

54
Summary:
LIC’s Profit Plus (Plan No.188) is a Unit Linked Endowment Insurance Plan.
Profit Plus (ULIP) is designed for common man to enhance their savings and
financial protection to their family. Four types of investment Funds are
offered in Profit Plus. The Policyholder has the option to choose any ONE out
of the following 4 funds. Bond, Secured, Balanced and Growth.

Features:

Payment of Premiums:
You may pay premiums regularly at yearly, half-yearly, quarterly or monthly
(ECS) intervals over the premium paying term of 3, 4 or 5 years. The
minimum premium will be Rs.10,000/-.

Single premium:
Single premium can be paid subject to a minimum of Rs.20,000/-.

Partial Withdrawals:
You may encash the units partially after the third policy anniversary subject
to certain conditions.

Switching of Funds:
You can switch between any fund types for the entire Fund Value during the
policy term subject to switching charges, if any.

Discontinuance of premiums:
If premiums are payable either yearly, half-yearly, quarterly or monthly
(ECS) and the same have not been duly paid within the days of grace under
the Policy, the Policy will lapse. A lapsed policy can be revived during the
period of two years from the due date of first unpaid premium.

Settlement Option:
When the policy comes for maturity, you may exercise “Settlement Option”
and may receive the policy money in installments spread over a period of not
more than five years from the date of maturity. There shall not be any life
cover during this period. The value of installment payable on the date
specified shall be subject to investment risk i.e. the NAV may go up or down
depending upon the performance of the fund.

55
FORTUNE PLUS-ULIP PLAN

Summary:
LIC’s Fortune Plus is a Unit Linked Plan (ULIP) where premium payment
term (PPT) is 5 years and the premium payable in the first year will be 50%
of total premium payable under the policy. Fortune Plus serves the purpose of
insurance-cum-investment. Four types of investment Funds are offered in
Fortune Plus. The Policyholder has the option to choose any ONE out of the
following 4 funds. Bond, Secured, Balanced and Growth.

Features:

Payment of Premiums:
You may pay premiums regularly at yearly, half-yearly, quarterly or monthly
(ECS) intervals for 5 years. The minimum First year premium will be
Rs.20,000/- and you may pay any amount exceeding it. From second year
onwards each year’s premium will be 25% of the first year premium.

Partial Withdrawals:
You may encash the units partially after the third policy anniversary subject
to certain conditions.

Switching of funds:
You can switch between any fund types for the entire Fund Value during the
policy term subject to switching charges, if any.

Discontinuance of premiums:
If premiums are payable either yearly, half-yearly, quarterly or monthly
(ECS) and the same have not been duly paid within the days of grace under
the Policy, the Policy will lapse. A lapsed policy can be revived during the
period of two years from the due date of first unpaid premium.

Settlement Option:
When the policy comes for maturity, you may exercise “Settlement Option”
and may receive the policy money in installments spread over a period of not
more than five years from the date of maturity. There shall not be any life
cover during this period. The value of installment payable on the date

56
specified shall be subject to investment risk i.e. the NAV may go up or down
depending upon the performance of the fund.

LIC Products:

Apart from the usual schemes such as money back plans, whole life plans,
and term assurance plans, the company offers several special insurance plans
for children, women, physically challenged dependants, and high net-worth
individuals.

The Life Insurance Corporation of India also offers several attractive pension
plans such as Jeevan Nidhi, Jeevan Akshay, Jeevan Dhara, and Jeevan
Suraksha. The company has 3 Unit plans - Market Plus, Profit Plus, and
Fortune Plus.

Group schemes are also offered by The Life Insurance Corporation of India
under plans such as Gratuity Plus, Group gratuity Scheme, and Group Leave
Encashment Scheme.

The Life Insurance Corporation of India is almost synonymous with the

concept of insurance in India in spite of the fact that the Indian government
has opened up the insurance market to private insurance companies. In 2005-
06 itself, LIC added as many as 100,00,000 policies to its already impressive
portfolio and grew by almost 17% during the given period.

57
TAX BENEFIT FOR LIC
INCOME-TAX AND TAX BENEFITS FROM LIFE INSURANCE

A] INCOME-TAX RATES FOR ASSESSMENT YEAR 2010-2011

(FINANCIAL YEAR 2009-2010)

Income Slabs Tax RatesNil

Individual
Individual & HUF Woman below age
above age of
below age of 65 years of 65 years
65 years
Income upto Income upto Income upto NIL
Rs.1,60,000 Rs.1,90,000 Rs.2,40,000
Rs.1,60,001 to Rs.1,90,001 to Rs.2,40,001 to 10%
Rs.3,00,000 Rs.3,00,000 Rs.3,00,000
Rs.3,00,001 to Rs.3,00,001 to Rs.3,00,001 20%
Rs.5,00,000 Rs.5,00,000 to Rs.5,00,000
Above Rs.5,00,001 Above Rs.5,00,001 Above 30%
Rs.5,00,001

Education Cess : An additional surcharge called as ‘Education Cess’ is

levied at the rate of 2% on the amount of Income tax and surcharge (if any)
in all cases shall be levied.
Secondary and Higher : An additional surcharge, called the “Secondary and
Higher Education Cess on income- tax” at the rate of 1% of income-tax and
surcharge (not including the “Education Cess on Income-tax”) in all cases
shall be levied.

58
B] SOME IMPORTANT INCOME TAX BENEFITS AVAILABLE
UNDER VARIOUS PLANS OF LIFE INSURANCE ARE
HIGHLIGHTED BELOW:

1) Deduction allowable from Income for payment of Life Insurance

Premium (Sec. 80C).

a) Life Insurance premia paid in order to effect or to keep in force an

insurance on the life of the assessee or on the life of the spouse or any child of
assessee & in the case of HUF, premium paid on the life of any member
thereof, Provided premium paid is not in excess of 20% of capital sum
assured.

b) Contribution to deferred annuity Plans in order to effect or to keep in force

a contract for deferred annuity, on his own life or the life of his spouse or any
child of such individual, provided such contract does not contain a provision
to exercise an option by the insured to receive a cash payment in lieu of the
payment of annuity is eligible for deduction.

c) Contribution to Pension/Annuity Plans - New Jeevan Dhara-I.

2) Jeevan Nidhi Plan & New Jeevan Suraksha - I Plan (U/s. 80CCC)

A deduction to an individual for any amount paid or deposited by him from

his taxable income in the above annuity plans for receiving pension (from the
fund set up by the Corporation under the Pension Scheme) is allowed.

NOTE: The premium can be paid upto Rs.1,00,000/- to avail deduction

u/s.80C, 80CCC & 80CCD. However, there is no sectoral cap i.e. the limit
of Rs.1,00,000/- can be exhausted by paying premium under of the said
sections.

3) Deduction under section 80D

1. Deduction allowable upto Rs.15,000/- if an amount is paid to keep in

force an insurance on health of assessee or his family (i.e. Spouse &
children)
2. Additional deduction upto Rs.15,000/- if an amount is paid to keep in
force an insurance on health of parents

59
 3. In case of HUF, deduction allowable upto Rs.15,000/- if an amount is
paid to keep in force an insurance on health of any member of that
HUF

Note: If the sum specified in (a) or (b) or (c) is paid to effect or keep in force
an insurance on the health of any person specified therein who is a senior
citizen, then the deduction available will be upto Rs.20,000/-. provided that
such insurance is in accordance with the scheme framed by
a) the General Insurance Corporation of India as approved by the Central
Government in this behalf or;
b) Any other insurer and approved by the Insurance Regulatory and
Development Authority.

4)Jeevan Aadhar Plan (Sec.80DD):

Deduction from total income upto Rs.50000/- allowable on amount deposited

with LIC under Jeevan Aadhar Plan for maintenance of an handicapped
dependent (Rs.1,00,000/- where handicapped dependent is suffering from
severe disability)

5)Exemption in respect of commutation of pension under Jeevan

Suraksha & Jeevan Nidhi Plans:

Under Section 10(10A) (iii) of the Income-tax Act, any payment received by
way of commutations of pension out of the Jeevan Suraksha & Jeevan Nidhi
Annuity plans is exempt from tax under clause (23AAB).

6)Income tax exemption on Maturity/Death Claims proceeds under

Section 10(10D)

Under the provisions of section 10(10D) of the Income-tax Act, 1961,

Maturity/Death claims proceeds of life insurance policy, including the sum
allocated by way of bonus on such policy (other than amount to be refunded
under Jeevan Aadhar Insurance Plan in case of handicapped dependent
predeceases the individual or amount received under a Keyman Insurance
Plan) is exempted from income-tax. However any sum (not including the
premium paid by the assessee) received under an insurance policy issued on

60
 or after the 1st day of April, 2003 in respect of which the premium payable
for any of the years during the term of the policy exceeds 20% of the actual
capital sum assured will no longer be exempted under this section.

Points of Parity

Funds available with ULIP Plans

General Description Nature of Investments Risk Category

Primarily invested in company
Equity Funds stocks with the general aim of High
capital appreciation
Invested in corporate bonds,
Income, Fixed Interest
government securities and other Medium
and Bond Funds
fixed income instruments
Cash Funds Sometimes known as Money Low
Market Funds — invested in

61
 cash, bank deposits and money
market instruments
Combining equity investment
Balanced Funds Medium
with fixed interest instruments

Generally all life insurance companies have three types of fund which are
Equity fund, Debt fund and Balance fund. These fund have different risk
profile. Equity fund has high risk but it gives high return, Debt fund has low
risk so it gives low return and Balanced fund is combination of both Equity
and Debt fund so risk is medium and return is also low.

Both HDFC SLIC and LIC have 7 types of funds based on combination of
Debt–Equity fund. These are liquid fund, stable managed fund, secure
managed fund, defensive managed fund, balanced managed fund, equity
managed fund, growth fund.

Indexation
You 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 select for this purpose). The base sum
assured and sum assured of any attached rider would also be increased by the
corresponding indexation increase.

Charges, Fees and Deductions in ULIP

62
 • Premium Allocation Charge

This is a premium-based charge. After deducting this charge from premiums,

the remainder is invested to buy units. The Allocation charges are guaranteed
for the entire duration of policy term.

• Mortality 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.

• Fund Management Charge

1% p.a. on With Profits Fund, 1% p.a. on Debt 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.

• Policy Administration Charge

Rs. 60 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.

63
 • Surrender Charge

This is the charge that applies when the policy is surrendered. It is equal to
50% of the difference between regular premiums expected and those paid in
the first year of the contract.

• Service Tax Deductions

12.36% service tax is applicable on the first premium of life insurance policy.

Tax Benefits

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.

Riders and Bonuses

HDFC Standard Life

LIC
Insurance
Free Look Period 15 days 15 days
Based on company's Based on company's
Reversionary Bonus
performance performance
Terminal Bonus Based on company's Based on company's

64
 performance performance
TOP UP Minimum Rs. 5000 Minimum Rs. 5000

Riders
Gives on diagnosis of anyone Gives on diagnosis of anyone
Critical Illness (CI) Benefit
of 6 critical illness of 12 critical illness
Additional Term Benefit
Provides Provides
(ATB)
Accidental Death Benefit
Provides Provides
(ADB)
Double Benefit Provides Does not provide
Triple Benefit Provides Does not provide
Payer Benefit Rider (PBR) Does not provide Provides

Points of Difference
HDFC Standard Life
LIC
Insurance
Grace Period 15 days 31 days
Policy Administration
Rs. 60 per month Rs. 55 per month
Charge
10% on sum-assured
Guaranteed Bonus Does not give
after 10 year
0.25% after every 4th
Loyalty Bonus 0.1% every year
year
Total 24 free switches in
4 free switches per
a policy
Fund Switching Charge year after this
after this Rs. 100 per
Rs. 250 per switch
Switch

65
 50% of all premium 30% of all premium
Guaranteed Surrender
paid excluding 1st paid excluding 1st
value
premium premium
Fund Management 0.80% per annum 1.75% per annum
Charge on the fund value on the fund value
First 2 Premium
Total 12 free Premium
Redirection in a
Redirection
Premium Redirection year is free after this
in a policy after this Rs.
Charge Rs. 1000
250 per Premium
per Premium
Redirection
Redirection
Last Year Return 42.70% 72%

We see that both the life insurance companies’ products are almost same.
They have same charges, fees and deductions. There is slightly difference in
charges and maximum limits of all charges are fixed by IRDA. Before buying
any life insurance policy one should check charges and fees on policy and
company’s overall performance and return given to its consumers.

66
CHAPTER IV

67
OBJECTIVES OF THE
STUDY

OBJECTIVES OF THE STUDY

 To analysis the product details of HDFC Standard life Insurance

Company limited and lic.

68
 To highlight ‘Points of Parity’ and ‘Points of Difference’ of HDFC

Standard Life Insurance Company Limited and lic

 To limelight the factors that influence customers to purchase

insurance policies and give suggestions for further improvement.

69
 CHAPTER V

RESEARCH
METHODOLOGY

RESEARCH DESIGN

70
INTRODUCTION

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

“To Comparison between the policies of HDFCSL and the

LIC”

71
 STATEMENT OF THE PROBLEM

This study was undertaken to identify which type of insurance plans HDFC
SLIC should market to beat LIC 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 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.

TYPE OF DATA COLLECTED

There 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.

72
PRIMARY SOURCES
These include the survey or questionnaire method, the personal interview
methods of data collection.

SECONDARY SOURCES
These include books, the internet, company brochures, product brochures, ,
newspaper articles etc
SAMPLING
Sampling 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.
SAMPLING TECHNIQUE

Random 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.

73
Percentages and averages have also been used to represent data clearly and
effectively.

74
 CHAPTER VI

ANALYSIS
&
INTERPRETATION

75
 ANALYSIS & INTERPRETATION

“A SURVEY ON THE LIFE INSURANCE INDUSTRY

IN INDIA”

AGE GROUP OF SURVEYED RESPONDENTS

TABLE 1:
Age group No. of Respondents
20 - 29 years 47
30 - 39 years 25
40 - 50 years 17
More than 50 years 11

76
CHART 1:

77
Analysis:

From the chart above we find that 47% of the respondents fall in the age
group of 20 – 29 years, 25% fall in the age group of 30 – 39 years and 17%
fall in the age group of 40 – 50 years, 11% fall in the age group of above 50
years.

Therefore most of the respondents are relatively young (below 29 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

78
family, spouse and children (in case the individual is married) who are
financially dependent on you.

GENDER CLASSIFICATION OF SURVEYED

RESPONDENTS
TABLE 2:
Particulars No. of Respondents
Male 71
Female 29

CHART 2:

79
 CUSTOMER PROFILE OF SURVEYED
RESPONDENTS
TABLE 3:
Customer profile No. of respondents
Student 23
80
 Housewife 2
Working Professional 43
Business 18
Self Employed 9
Government service employee 5
CHART 3:

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.

81
NO. OF RESPONDENTS WHO HAVE LIFE INSURANCE
POLICY IN THEIR NAME:
TABLE 4:
Person who have life insurance policy
Yes 38
No 62

CHART 4:

ANALYSIS:
This graph shows that out of total 100 respondents only 38 respondents have
life insurance policy in their name. Rest all don’t have a single policy in their
name. So there is a very big scope for life insurance companies to cover these
people. So in future business of life insurace will gro further.

82
MARKET SHARE OF LIFE INSURANCE COMPANIES
TABLE 5:
LIFE INSURER NUMBER OF POLICIES
HDFC STANDARD LIFE 2
BIRLA SUN LIFE 1
AVIVA LIFE INSURANCE 2
BAJAJ ALLIANZ 3
LIC 20
TATA AIG 2
ICICI PRUDENTIAL 4
ING VYSYA 2
BHARTI AXA 1
OTHERS 1

CHART 5:

83
Analysis:
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..

84
ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE
INSURANCE

TABLE 6:

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

Rs. 5000 - Rs. 15000 54%
Rs. 15001 - Rs. 35000 17%
Rs. 35001 - Rs. 60000 12%
Rs. 60001 - Rs. 100000 12%
Above Rs. 100000 5%
CHART 6:
ANNUAL PREMIUM PAID BY INDIVIDUALS FOR LIFE INSURANCE

85
 Analysis:

From the chart above we find that, 54% of the respondents surveyed pay an
annual premium less than Rs. 15000 towards life insurance. 17% of the
respondents pay an annual premium less than Rs. 35000 and 12% pay an
annual premium less than Rs. 60000. Hence we can safely say that HDFC
SLIC would be able to capture the market better if it introduced
products/plans where the minimum premium starts at Rs. 5000 per annum.
Only 17% of the respondents pay more than Rs. 60000 as premium and most
products sold by HDFC SLIC have Rs.12000 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.

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POPULAR LIFE INSURANCE PLANS
TABLE 7:
Type of Plan No. of Respondents
Term Insurance Plans 39%
Endowment Plans 45%
Pension Plans 6%
Child Plans 3%
Tax Saving Plans 7%
CHART 7:

POPULAR LIFE INSURANCE PLANS

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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.
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.

AWARENESS OF UNIT LINKED INSURANCE PLANS

TABLE 8:
Awareness of Unit Linked Plans No. of Respondents
Yes 57
No 43
CHART 8:
AWARENESS OF UNIT LINKED INSURANCE PLANS

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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.

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 CHART SHOWING IDEAL POLICY TERM
TABLE 9:
Ideal policy term No. of respondents
3 - 5 years 19
5- 15 years 50
15 – 25 years 25
25 – 30 years 2
More than 30 years 1
Whole life Policy 4

CHART 9:
CHART SHOWING IDEAL POLICY
TERM

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Analysis:
From the chart given above it can be seen that 50% of the respondents prefer
a policy term of 5 – 15 years, 19% prefer a term of 3 – 5 years and 25% prefer
a term of 15 – 25 years. This means that HDFC SLIC 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

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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 INSURANCE
TABLE 10:
Parameter No. of Respondents
Advertisements 13%
High returns 31%
Advice from friends 17%
Family responsibilities 33%
Others 6%

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CHART

Analysis:
From the chart above it can be seen that 33% of the respondents purchase life
insurance to secure their families, 31% 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

93
now a days 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 Percentage

Government Owned
Company 60%
Public Limited
Company 29%
Private Company 7%
Foreign Company 4%
CHART 11:
PREFERRED COMPANY TYPE OF THE RESPONDENTS

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Analysis:
From the graph above one finds that 60% of the respondents preferred to
purchase insurance from a government owned company, 29% of the
respondents preferred to purchase insurance from a public limited company
and only 4% of the respondents preferred a foreign based company. Heavy
advertising through television, newspapers, magazines and radio is required.

MINIMUM EXPECTED RETURN ON INVESTMENT

TABLE 12:
Expected Returns No. of respondents
Less than 5% 7%1
5% - 15% 31%
15% - 20% 18%
MORE THAN 20% 44%
CHART 12:

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Analysis:

From the chart above it can clearly been seen that 18% of the respondents
would like 16 – 20% returns, 31% would like returns between 5% – 15% and
7% would like returns of LESS THAN 5% on their investments. Therefore
the average return on investment should be at least 5% – 15%.

Most consumers are willing to adapt to some amount of risk but still want
some guaranteed returns. Therefore the bulk of investment should be made in
the balanced fund with 50% debt and 50% equity. The returns on the Secure
Fund are guaranteed as these involve investment is government securities and

96
the debt market. But the returns on these instruments are low (8 – 10%). If the
company invests in shares, returns are higher (39%) but correspondingly risk
borne by the policy holder is also higher. Therefore a good combination of the
two instruments is often a wise choice.

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 CHAPTER VII

MAJOR PROBLEMS AND

RECOMMENDATIONS

98
 MAJOR PROBLEMS

The old and out dated technique of telemarketing 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 (23 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

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 Some prospects have already invested and are not interested in further
investments
 Consumers don’t 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
 No money back plan present in the product portfolio

RECOMMENDATIONS

 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 HDFC SLIC as an Indian Company to build trust

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 HDFC SLIC 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

CHAPTER VIII

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 FINDINGS AND
SUGGESTIONS

FINDINGS

• 47% of the respondents fall in the age group of 20 – 29 years,

• The target market would be working individuals in the age group of 20
– 29 years having surplus income, interested in good returns on their
investment and saving income tax.
• Only 38% respondents have life insurance policy in their name, so there
is a very big scope for insurance sector.
• 43% of the respondents are working professionals, 23% are students and
18% are into business.

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• The largest life insurance company is Life Insurance Corporation of
India.
• 45% of the respondents hold endowment plans and 39% of the
respondents hold term insurance plans.
• 57% of the respondents are aware of unit linked life insurance plans.
• 50% of the respondents prefer a policy term of 5 – 15 years.
• 33% of the respondents purchase life insurance to secure their families,
31% took 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.
• 60% of the respondents preferred to purchase insurance from a
government owned company.

SUGGESTIONS

• Working professional could be induced to purchase insurance plans on

the basis of its tax saving nature and as an investment opportunity with
high returns.
• Because only 38% respondents have life policy, therefore there is a
very big scope for this.

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• The target market would be working individuals in the age group of 20
– 29 years having surplus income, interested in good returns on their
investment and saving income tax.
• The largest life insurance company is Life Insurance Corporation of
India.
• 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.
• Try to give good returns on short time life plan.
• A good combination of the two instruments debt and equity is a wise
choice

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CHAPTER IX
CONCLUSION

105
 CONCLUSION

HDFC standard life was registered on 23rd December 2000. It currently ranks
number 4 amongst the insurers in India (Source: annual premium provided by
the company)

The company faces a large amount of competition. To sustain itself it must

promote its products through advertising and improve its selling techniques.
Consumers must be aware of the new plans available at HDFC SLIC. The
medium of advertising used could be television since most of its competitors
use this tool to promote their products. The company must be promoted as an
Indian company since consumers seem to have more trust in investing in
Indian firms.

The unit linked concept must be specifically promoted. The general

perception of life insurance has to change in India before progress is made in
this field. People should not be afraid to invest money in insurance and must
use it as an effective tool for tax planning and long term savings.

HDFC SLIC could tap the rural markets with cheaper products and smaller
policy terms. There are individuals who are willing to pay small amounts
as premium but the plans do not accept premiums below a certain amount.
It was usually found that a large number of males were insured compared
to females. Individuals below the age of 30 (mostly male) were interested
in investment plans. This was a general conclusion drawn during
prospecting clients

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A SURVEY ON ‘INSURANCE INDUSTRY’
Dear Sir/Madam,
I am a student of NSB SCHOOL OF BUSINESS,NEW DELHI. As part of
the requirements for my MBA, I am required to do a research based
project. Kindly spend a few minutes of your valuable time and fill in this
questionnaire.
1. Do you know about insurance policies?
(1) Yes (2) No

2. Name 5 insurance company known to you.

(1)
(2)
(3)
(4)
(5)
3. Do you have a life insurance policy?
(1) Yes (2) No

4. (a)If yes which company’s insurance policies do you hold?

(1) HDFC SLIC (2) LIC
(3) LIC (4) Bajaj Allianz Life Insurance
(5) Others (Specify) __________________________________

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 (b) If no, why?
___________________________________________

5. What is the approximate premium paid by you annually (in Rupees)?

(1) Rs. 5,000 – Rs. 15,000 (2) Rs. 15,001 – Rs. 35,000
(3) Rs. 35,001 – Rs. 60,000 (4) Rs. 60,001 – Rs.100000
(5) Above Rs. 100000 (specify premium)

6. What kind of insurance policy would suit you best in your current stage of
life?
(1) Life Insurance (2) Life Insurance and Investment plans
(3) Pension Plans (4) Child Plans
(5) Tax saving plans

7. Are you aware of the new unit linked insurance plans (ULIP) in the market?
(1) Yes (2) No

8. Which according to you is an ideal policy term? (Number of years you would
be willing to pay premium)
(1) 3 to 5 years (2) 5 to 15 years
(3) 15 to 25 years (4) 25 to 30 years
(5) More than 30 years (6) Whole life policy

9. What motivates you to purchase insurance/investment plans?

(1) Advertisements (2) High Returns
(2) Advice from friends (4) Family responsibilities
(5) Others (specify) _________________________________________

10. In which kind of company would you prefer to make a purchase of insurance?
(1) Government owned company (2) Public Limited Company
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 (3) Private Company (4) Foreign based company

11. Typically what kind of returns would you look at from your investments?
( 11 Less than 5% (2) 5% - 15 %
( 11 16% - 20% (4) More than 20%

Personal Details :

NAME: SEX: (1) M (2) F

ADDRESS:

AGE: (1) 20-29 (2) 30-39 (3) 40-50 (4) Above 50

CONTACT NO. :

E MAIL ID: __________________________________________

PROFILE OF RESPONDENT:
(1)Student (2)Housewife
(3)Working Professional (4)Self – Employed
(5)Government Service Employee (6) Business

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INCOME (RS.): (1) LESS THAN 10000 (2) 10001-20,000
(3) 20,001-50,000 (4) ABOVE 50,000

QUALIFICATION: (1) 10+2 (2) GRADUATE

(3) P.G. (4) PROFESSIONAL

Date:

BIBLIOGRAPHY

 William Anthony, Pamela Perrewe & Michele Kacmar (1999)-HRM: A

Strategic Approach-3rd Ed.
 Cherrington, David J. (1995). The Management OF WORKING

CAPITAL. Prentice-Hall.

 The Hindustan times

 www.BANKING .COM

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